Process of reviewing Nepal-India trade treaty comprehensively begin

Kathmandu, July 31

Nepal and India have initiated the process for comprehensive review of the Nepal-India Trade Treaty, which was last revised in October of 2009.

The government has formed a committee led by Joint Secretary at the Ministry of Industry, Commerce and Supplies Ravi Shanker Sainju, comprising Joint Secretary at the Ministry of Foreign Affairs Bhrigu Dhungana and representatives from the Ministry of Finance, Ministry of Law, Justice and Parliamentary Affairs for the talks with the Indian government for a comprehensive review of bilateral trade treaty.

The committee, led by Sainju, will start first round of discussions in New Delhi on August 9 and 10.

The Nepali delegation led by Sainju will talk with the team led by his counterpart Bhupinder Singh Bhalla on the new provisions to balance trade between the two countries, as well as remove provisions that are not contextual in the current scenario. The bilateral trade treaty, which was reviewed in October 2016, was renewed for seven years without any changes.

As per the provision of the current trade treaty, it will be renewed every seven years and for the revision, one of the contracting parties must give a prior notice of three months. Officials have argued that there was not sufficient time for the groundwork to review the treaty in 2016 as the country was shattered by the earthquake and there were tensions due to trade disruptions in the southern belt.

In recent years, the trade gap between the two countries has widened significantly. Nepal has been seeking favour from India to narrow down the widening trade deficit as two-thirds of the country's trade takes place with the southern neighbour. Simplification of rules of origin criteria for Nepali goods, removal of non-tariff measures enforced by India on imports of Nepali goods, removal of quota system on export of some Nepali products governed by the Nepal-India Trade Treaty, control of unauthorised trade and other issues will be discussed during the meeting, as per officials.

Another important provision is that Nepal needs to grant similar treatment to India that is granted to any other country. As a result, Nepal's negotiation with Bangladesh for preferential market access for Nepali goods in Bangladeshi market and vice versa has not been properly implemented as Nepal needs to provide similar treatment to Indian goods also. Consequently, Nepal's imports and exports have remained concentrated with India.

“Unilateral dependence with India in trade is risky for Nepal and the country needs to diversify its trade,” according to trade economists.

Some of the provisions barred by multilateral trade arrangement are included in the existing Nepal-India Trade Treaty, like tariff rate quota and rules of origin criteria. India has set tariff rate quota on export of four Nepali products - vegetable ghee, zinc oxide, copper wire and acrylic yarn - since 2002. Similarly, India has agreed to simplify rules of origin criteria for least developed countries (LDCs). As per the agreement in World Trade Organisation (WTO), LDCs can export goods with 25 per cent value addition in goods produced with 75 per cent imported raw materials. However, the requirement of originating material is 30 per cent while exporting goods in India. India - as a signatory of WTO trade agreements - cannot enforce quota system in the present context, according to former commerce secretary Purusottam Ojha.

The private sector has also hailed the government's initiative to review the Nepal-India Trade Treaty after a long time. However, they have urged the government to negotiate with India for favourable and liberal provisions to promote Nepal's exports to India.