US-China trade war could impact developing nations
Kathmandu, July 8
The trade war between the two largest economies of the world - the United States and China - could have an adverse impact on the exports of the developing and also the least developed countries (LDCs). As both nations are competing to raise tariffs on imports of each other's country, this will affect the products being exported to the US and China that are not included under the duty free, quota free (DFQF) facility, according to Purushottam Ojha, former commerce secretary.
As a least developed country, Nepal has been granted tariff free, quota free facility to export to the United States under the Generalised System of Preference facility. Similarly, China has granted duty free, quota free facility to 8,030 products for LDCs.
“Though Nepal's export base is weak and its exports to the United States and China are being carried out under the duty free facility, tariffs raised by the US and China to discourage imports from each other's country will adversely affect the exports from the developing and least developed countries as the products cannot be competitive in the US and Chinese markets due to high tariff walls,” mentioned Ojha.
Industries that are in the production linkages with the developing countries can be affected if the export of the goods produced from those production linkages slides, according to Shankar Sharma, former vice-chairman of National Planning Commission and also former ambassador to the United States of America. “As Nepal's trade concentration is with India and its exports to the US, China and the European Union are under the tariff free, quota free facility the country will not face a direct impact of the US-China trade war.”
However, protectionist policy adopted by the developed countries will have long-term impact on global trade and investments.
As Nepal's annual export is expected to hover around Rs 80 billion in this fiscal, there will not be significant impact of the trade war between the two economic giants, according to experts.
Nepal has high trade concentration with India and the United States and China both have not increased duty on imports from India. Nepal's trade dependence with India is rising as 66 per cent of total imports and 57 per cent of exports take place with India.
Experts have said that sliding purchasing power of Nepali rupee vis-à-vis US dollar has further increased the trade concentration with India as imports will be relatively cheaper in India due to fixed exchange rate regime compared to other countries.
Similarly, around 13 per cent of total imports and four per cent of total exports are carried out with northern neighbour China. The private sector has said there is no need to worry because Nepal's export to the northern neighbour is weak as the country has not been able to exploit the duty free, quota free facility extended to Nepal and linkages of the Nepali industries in the production network of China is also weak.
As per international media reports, due to the tariff hike by the Trump administration, Chinese goods have become dearer in the US. The price of household appliances and cell phones imported from China surged by eight per cent over the past year, the Washington Post reported.