High customs tariff likely to have negative impact on WTO review
Kathmandu, June 25
Going against its commitment made at the World Trade Organisation, the government has kept the customs tariff rate on around 40 tariff lines comparatively high, which could have negative repercussions on the trade policy review report.
Nepal’s trade policy review is going on and the WTO mission will arrive for the second round of meeting in July. During the first round of meeting with the WTO mission in March, the Ministry of Industry, Commerce and Supplies was asked to bring down the applied rate to the level of the country’s commitment made during Nepal’s accession to the multilateral trade regime in 2004.
The MoICS has drawn the attention of the Ministry of Finance to the need to revise customs duty to the level pledged at the WTO. “However, the MoF has not considered bringing down the tariff to the pledged level for even those imports that have negligible weightage on the total imports, and whose tariff adjustment will not have any major impact on the government’s revenue,” a high-level official of the MoICS told THT.
The mission, scheduled to arrive in July, will prepare a report based on the recent financial act and submit it by the year-end to the WTO. Discussions on the report will be held from early next year. Nepal has been receiving ‘aid for trade’ and technical support from the WTO to develop its trade capacity and a negative report regarding compliance with the self-committed level could adversely affect cooperation from WTO, according to officials.
Nepal has maintained high duty on automobiles, liquor and tobacco products. The country had made a commitment to bring down customs tariff to 60 per cent, while the tariff is at 80 per cent. Automobiles and spare parts are the major sources of customs revenue and import is the major source of revenue for Nepal.
Shishir Kumar Dhungana, revenue secretary, insisted that the WTO should consider the revenue needs of least developed countries such as Nepal. Citing Nepal’s weak negotiation during the accession to WTO, officials of the finance ministry have said that a few countries have been imposing 200 to 300 per cent customs duty on liquor, whereas Nepal has committed to 100 per cent. Likewise, Nepal has made commitment of upper bound and lower bound of tariff rate with a difference of five to 10 percentage points. However, WTO mission has been asking the country to bring down the tariff rates based on the lower bound rates.
“The government plans to bring down the tariff rates, but we are not in a position to bring them down to the level pledged at the WTO, as some products are sensitive from the perspective of revenue,” said an official of MoF seeking anonymity.
The MoF has also tried to explore alternatives like raising excise duty on imported products. But as per the most favoured nation agreement, the country has to impose the same quantum of excise on domestic products and the local products will lose competitiveness if high excise rate is imposed.
The WTO reviews the trade policy of developed member nations every two years, of developing nations every four years and of least developed member nations every six years.