As per the Trade and Export Promotion Centre (TEPC), Nepal’s Trade deficit increased to NPR 454.47 billion in the first four months of the present fiscal as the export on tariff-targeted goods was unsuccessful in balancing trade.

Commerce Secretary Chandra Kumar Ghimire pointed that there is no such issue in accessing international markets.

“However, Nepal has failed to improve its products’ quantity and quality to meet the growing demand in the global markets,” Ghimire said in a press meet on November 29, 2018.

Ghimire with a team will be attending the Trade Policy Review (TPR), a mandatory component for WTO members in Geneva on December 13, 2018.

According to the protocol, all member countries need to revisit their trade policy at specific intervals. For least developed countries such as Nepal, the review period is every six years. While developed and developing countries have to review their policy every two and four years.

Nepal is reviewing its trade policy for the second time since it became a WTO member in 2004.

During the first TPR in 2014, Nepal implemented ASYCUDA World (Automated System for Customs Data) at 11 border crossings as part of the customs reforms program.

Likewise, Nepal has endorsed the following:

• Nepal Electricity Regulatory Commission Act
• Power Purchase Guideline
• Guidelines for Development of Grid Connected Alternative Energy
• Trade Policy 2015
• Foreign Investment and One-Window Policy 2015
• National Tourism Strategy 2016-25 among others
• Companies Act 2017

Nepal is among 36 Least Developed Countries listed by the WTO. These countries are provided the following privileges:

• Duty-free access under the Generalized System of Preference
• Permission to export products with a minimum of 25 percent value addition
• Increase tariff temporarily to safeguard domestic industries in case of an import stage

“On the other hand, Nepal should come up with setting its own norms on import items, to check the growing imports,” he said.

Ghimire also stressed the need to comply with standards and regulations mandated by importing countries to boost local products exports.

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The Nepal Government seeks to use this opportunity to attract Indian investments that are crucial for addressing Nepal’s increasing trade deficit.

This meeting scheduled between Aug 9-10, 2018 will also touch upon promotion of Nepal exports and trade facilitation between the two countries.

The Background:
During the first 11 months Fiscal Year 2017-18, Nepal’s exports to India totaled to Rs 42.34 billion as compared with Nepal’s imports to India which stood at Rs 731 billion!

Nepal’s trade deficit was majorly affected with the revision of the Nepal-India Trade Treaty 2002 that deprived Nepal of invectives on its products, provisioned in the Trade Treaty 1996.

Nepal Commerce Ministry officials seconded this saying that the inclusion of the following additional provisions during 2002 Trade Treaty-renewal widened the trade imbalance between the two countries:

• Incorporating preferences of duty exemption on primary products
• A number of qualifying criteria on Rule of Origin
• Change in classification of tariff heading
• Inclusion of fixed quota for select Nepali products upon entry to India
• India’s Duty-Free Tariff Preference (DFTP)

The officials said that during the upcoming Nepal-India Trade Treaty meeting, the two countries will discuss the required areas that need to be added and revise points from the previous treaty.

“Then a study would be conducted on economic possibilities and the impact after holding discussions with the concerned stakeholders,” said Rabi Shankar Sainju, Joint-Secretary, Ministry of Industry, Commerce & Supplies and Chairman, Nepal Trade Treaty Review Technical Committee.

Nepal’s Dependence on Indian Investments:
The Himalayan country has not received any major investments after the 1990s. During that period, Nepal’s manufacturing sector received huge investments from Indian producers like Dabur and Unilever, who joined hands with Nepal to commence JVs.

Till date, India’s investments in Nepal’s manufacturing makes up for 20% of the total Indian investments. Following this, Nepal’s energy sector has been one of the largest hubs for Indian investments in the last ten years.

What Government Officials have to say?
Nepal government officials are of the opinion that if the Himalayan nation receives more Indian investments, the country’s trade deficits with India will be addressed.

Furthermore, without Indian investments, Nepal will not be able to substitute its imports and reduce the widening trade deficit with India.

“Nepal needs to be plugged into Indian value chain in order to reduce the huge trade deficit, create employment and ensure sustainable growth,” said Rameshore Khanal, Former Nepal Finance Secretary.

“Indian investment in Nepal will also allow us to get easy access to Indian value chain and market,” said Sainju.

Conclusion:
The Nepal-India Trade Treaty 2018 comes as a result of the discussions held during the India-Nepal Inter Government Committee (IGC) on Trade, Transit and Co-operation in April 2018.

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