Thursday, February 25, 2016

US President Obama signs Nepal trade preferences bill, export not easy task

Nepali readymade garment has officially received duty-free facility in the US market as the US president Barack Obama yesterday signed a legislation.
The bill, which was endorsed by the US Senate in the second week of December, paves the way for some 66 types of Nepali exports, including manufactures of apparels, certain carpets, headgear, shawls, scarves, and travel goods, to enjoy duty-free market access in the US. According to a statement of the US embassy in Kathmandu, the legislation authorising special trade preferences for Nepal grants duty-free tariff benefits for up to 66 types of Nepali items.
Now that the bill has received the president’s seal, it is reported that a team of the US International Trade Commission (ITC) will visit Nepal by mid-March to review the status of infrastructure and capacity of the country to utilise preferences extended by the world’s largest economy. ITC is an independent agency of the US that provides trade expertise to both the legislative and executive branches.
The Nepal programme is authorised for 10 years and designed to help Nepal's economy recover from the effects of the earthquakes that struck the country in 2015, according to the statement. After the new law comes into effect, Nepal will be able to enjoy duty-free facility on export of garments till December 9, 2025.
The programme grants duty-free tariff benefits for Nepali exports not currently eligible for benefits under the General System of Preferences (GSP), the largest and oldest US trade preference programme that provides duty-free facility in the US market.
The Nepal Trade Preferences Legislation also outlines a trade capacity building programme, focused on helping Nepal implement the World Trade Organisation's Trade Facilitation Agreement (TFA).
"This is a tremendous opportunity for Nepali business to expand their imports to US markets," US ambassador to Nepal Alaina B Teplitz was quoted in the embassy statement, adding that the US is looking forward to learning more about Nepal's plans for implementing the TFA and how the US government could contribute to this goal.
Howwever, certain administrative steps need to be completed in the US for the new trade preference programme to go into effect, the statement further added.
First, the president must certify that Nepal meets the eligibility requirements of the programme, which are the same as those for African Growth and Opportunity Act countries.
Secondly, the US is also required to request a review by the US ITC of the products covered by the preference programme to ensure that an increase in imports of these products into the US market will not negatively affect the US economy. These statutorily-required reviews will take several months to complete, according to the embassy.
Meanwhile, Nepali garment manufacturers have welcomed the US government move, saying that it will provide an opportunity to revive the industry. But they have asked the government to update Nepal's labour laws, provide uninterrupted power, and solve transit problems while exporting through India, along with facilitating soft loan to exporters to benefit from the US move.
According to president of Garment Association of Nepal (GAN) Chandi Prasad Aryal, the US market used to make up 85 per cent of the total exports of garments from Nepal. "The move could benefit Nepal, if the government took it seriously and provided necessary facilities to boost exports," he said.
The garment industry has today been squeezed down to only Rs 5 billion," he said, adding that it used to export Rs 13 billion worth garments right until 2001. In the fiscal year 2000-01, Nepal’s garment exports reached an all-time high of Rs 13.12 billion, with exports to the US accounting for 86.49 per cent. But the exports plunged after the US scrapped the quota system in 2005 as per the agreement on Textiles and Clothing (ATC) of the WTO. The garment exports slumped to Rs 5.28 billion in 2014-15 and number of garment industries came down to around 50 from over 400 in 2000-01.
After the expiry of Multi Fibre Agreement (MFA), popularly known as quota phase out, in January 2005, the US government has been imposing around 17 per cent tariff on import of cotton apparels.
Aryal, however, said that the authorisation of Nepal Programme has addressed the demand of Nepali garment manufacturers, who had been lobbying for duty-free entry for Nepali products for over a decade. After the US move, the Nepali garments – that lost its ground after 2002 – will now be competitive in the US market.
According to Aryal, GAN has started homework to improve production capacity of domestic garment industry. But government facilitation is a key, he added.
Though, trade experts claim that only 40 per cent of the Nepali garments being exported to the US could be eligible for receiving the GSP, Nepali ready-made garment industry could reclaim its lost glory provided the government supports the industry wholeheartedly.

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