Nepal-US trade ties Need for rejuvenation

A Nepalese government delegation is slated to visit the United States in the near future for special bilateral trading arrangement, seeking zero-tariff facility for Nepal’s key exports and support for infrastructure development. The team will mainly discuss on Trade and Investment Framework Agreement (TIFA) — a pact that US Trade Representative (USTR) Office has prescribed for Nepal to win special market access facility in the world’s largest economy. It will also push for zero-duty for Nepal’s dying readymade garment industry, apprise investors and officials there about investment avenues and opportunities here and seek assistance for trade related infrastructure development. The main purpose of the visit is to get a tangible and formal public and private links established so that economic engagements between the two countries could be rejuvenated.

Nepal’s economic ties with the USA strengthened after the diplomatic relations on 25th April 1947. Exchange of high level visits has also significantly contributed to strengthen the Nepal-US relations. USA has always been very cooperative to develop the socio-economic status of Nepal. The Commerce and Friendship agreement signed in 1947, General Agreement for Technical Cooperation signed in 1951 have contributed to consolidate bilateral ties between the two countries.

Recently, the US has shown interest in investments in Nepal. It has been learnt that US wants to enter into a bilateral trade agreement with Nepal that promises to boost Nepalese in a significant manner. Just to recapitulate, the draft proposal was presented by a team of US Trade Representatives (USTR) to the Ministry of Commerce and Supplies of the Government of Nepal some time back..

The trade treaty between Nepal and the US is likely to give a new lease of life to the export of Readymade Garment (RMG) export from Nepal. It will not only facilitate duty-free access of Nepali RMG in the US market but also help boost trade. Lack of proper initiative in economic diplomacy by erstwhile governments was the primary reason behind the nation’s slackening grip over the US market, which once used to be the largest buyer of Nepal RMG.

As per the Garment Association of Nepal’s latest data, the total garment export plunged by 81 per cent. Nepal should take the issue unilaterally. Currently, Nepal’s trade with the US is comfortable, but could not be in the future.

The US has a total GDP of $13 trillion in which its import stands at $3 trillion. Therefore, it is not such a big deal for it to grant duty free access to Nepali readymade garments. The RMG sector requires lobbying. With the end of the Multi Fiber Agreement (MFA) along with quota phase-out, Nepali RMG is observing a great decline in the US market. The Nepali RMG industry is now seeking preferential treatment abroad to reform the industry as a whole. The industry is in need of quick relief for its existence domestically.

Nepal has always regarded US market as an important market for Nepalese products. Handicraft, paper products, jewellery, gems, stones are exported to US. For the last decade, US had been the major importer of Nepali readymade garments. But, after the MFA phase out, there has been a drastic decline in readymade garment exports. The recent bill on the opening of the import from 14 LDCs in the US market has opened new avenues for the development of the readymade garment sector in Nepal.

As US is really interested in the development of Nepal, Nepali entrepreneurs are of the view that US import Nepalese products especially readymade garments, handicrafts, pashmina and other NTFP products. As regards joint venture projects also, Nepal would like to request for mega projects from US which could transform the living standard of the Nepalese. With a view to promote and increase bilateral relations there is a need of increased exchange of trade delegations between Nepal and the US.

At a time when the government and the private sector of Nepal are trying to diversify products in the international market, around five hundred commodities that are subject to enjoy facilities under the US Generalized System of Preference can bring drastic change in Nepal-US trade volume.

The fact that neither the government nor the private sector of our country has completely identified the commodity subject to the GSP facility is unfortunate at a time when we are talking about the goods of comparative and competitive advantages to utilize the international and regional trade bodies such as the WTO, SAFTA and BIMSTEC.

Nepal views that US Africa Growth and Opportunity Act (AGOA) for African and Sub-Saharan LDCs, which was publicized in October 2000, claims to move Africans from “Poverty to Prosperity” by increasing their economic opportunities. AGOA provides

African countries with preferential access in readymade garments, but with unreasonably demanding rules of origin. As such, there is no provision in AGOA for Asian LDCs like Nepal. Nepal should also seeks similar type of arrangements be made for quota free access to USA.