Nepal is planning to sign a trade agreement with Bhutan hoping to expand trade between the two countries.
According to the Ministry of Industry, Commerce and Supplies, Kathmandu and Thimpu are holding a series of joint secretary-level meetings starting from August 29 to discuss a trade protocol, after a Bhutanese delegation arrives in Kathmandu.
Though, both the countries are members of various multilateral trade regimes including South Asian Association for Regional Cooperation (SAARC), Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation (BIMST-EC) and Bangladesh-Bhutan-India-Nepal (BBIN), they have not yet signed any bilateral trade agreement till date.
They will discuss ways to simplify trade barriers and finalise the rules of origin (RoO) before signing the trade protocol, according to the ministry. “Nepal will ask Bhutan to provide duty-free access to local products with a value addition of 25 per cent and above under the rules of origin,” the ministry informed. But Nepal is, currently, receiving preferential treatment from a number of countries on exportable goods that have a minimum 30 per cent to 40 per cent value addition.
Nepal has signed trade agreements with 17 countries including India, China, Bangladesh, South Korea, Pakistan, Sri Lanka, the US and Mongolia. And Nepal has also signed bilateral preferential treatment arrangement with India while it receives preferential treatment from China, the US and European countries.
China provides duty-free, quota-free access to more than 8,000 Nepali products, though Nepal does not produces most of the products in the list. Likewise, the US also offers access to 77 tariff lines under the Trade Preference Programme (TPP), while the European Union (EU) provides duty-free access to products imported from the least developed countries (LDCs) including Nepal under the ‘Everything but Arms’ scheme. But Nepal has very few products to export to these countries, as the country is import-based economy and has never promoted exports.
Nepal has not been able to exploit the preferential treatments from trading partners also due to lack of exportable items. Thus, signing the trade agreement with Bhutan also seems not beneficial to Nepal as Nepal has not much to offer to Bhutan either.
Likewise, Bhutan is a small market dependent on imports from India and Bangladesh. Nepal will have to compete with Indian and Bangladeshi products in the Bhutanese market. Nepali products have been not able to compete with Indian, and thus the Nepal-Bhutan trade agreement could not bear much expected benefit for Nepal. “If Nepal needs to take advantage, Nepal and Bhutan must enter into a transport agreement first to benefit from bilateral trade,” according to trade experts.
Nepal will also have to provide similar facility to Bhutanese products on a reciprocal basis after signing a trade agreement with Bhutan, which might not be in Nepal's favour as it has been facing a widening trade deficit even with this SAARC member country.
Nepal has been facing a growing trade deficit with Bhutan, according to the Trade and Export Promotion Centre (TEPC). “Nepal exported goods worth Rs 162 million to Bhutan against imports of Rs 1.67 billion, resulting in a trade deficit of Rs 1.51 billion,” the TEPC data revealed, adding that the trade deficit with Bhutan stood at Rs 284.41 million in the fiscal year 2014-15.
Nepal imports gypsum, coal, heavy equipment, boring machinery, juice and industrial equipment, among others, from Bhutan, whereas it exports iron rods and alloy of aluminium, transformer, snack, soap, furniture, woollen carpet, farm products, jute bag and cooking appliances to Bhutan.
According to the Ministry of Industry, Commerce and Supplies, Kathmandu and Thimpu are holding a series of joint secretary-level meetings starting from August 29 to discuss a trade protocol, after a Bhutanese delegation arrives in Kathmandu.
Though, both the countries are members of various multilateral trade regimes including South Asian Association for Regional Cooperation (SAARC), Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation (BIMST-EC) and Bangladesh-Bhutan-India-Nepal (BBIN), they have not yet signed any bilateral trade agreement till date.
They will discuss ways to simplify trade barriers and finalise the rules of origin (RoO) before signing the trade protocol, according to the ministry. “Nepal will ask Bhutan to provide duty-free access to local products with a value addition of 25 per cent and above under the rules of origin,” the ministry informed. But Nepal is, currently, receiving preferential treatment from a number of countries on exportable goods that have a minimum 30 per cent to 40 per cent value addition.
Nepal has signed trade agreements with 17 countries including India, China, Bangladesh, South Korea, Pakistan, Sri Lanka, the US and Mongolia. And Nepal has also signed bilateral preferential treatment arrangement with India while it receives preferential treatment from China, the US and European countries.
China provides duty-free, quota-free access to more than 8,000 Nepali products, though Nepal does not produces most of the products in the list. Likewise, the US also offers access to 77 tariff lines under the Trade Preference Programme (TPP), while the European Union (EU) provides duty-free access to products imported from the least developed countries (LDCs) including Nepal under the ‘Everything but Arms’ scheme. But Nepal has very few products to export to these countries, as the country is import-based economy and has never promoted exports.
Nepal has not been able to exploit the preferential treatments from trading partners also due to lack of exportable items. Thus, signing the trade agreement with Bhutan also seems not beneficial to Nepal as Nepal has not much to offer to Bhutan either.
Likewise, Bhutan is a small market dependent on imports from India and Bangladesh. Nepal will have to compete with Indian and Bangladeshi products in the Bhutanese market. Nepali products have been not able to compete with Indian, and thus the Nepal-Bhutan trade agreement could not bear much expected benefit for Nepal. “If Nepal needs to take advantage, Nepal and Bhutan must enter into a transport agreement first to benefit from bilateral trade,” according to trade experts.
Nepal will also have to provide similar facility to Bhutanese products on a reciprocal basis after signing a trade agreement with Bhutan, which might not be in Nepal's favour as it has been facing a widening trade deficit even with this SAARC member country.
Nepal has been facing a growing trade deficit with Bhutan, according to the Trade and Export Promotion Centre (TEPC). “Nepal exported goods worth Rs 162 million to Bhutan against imports of Rs 1.67 billion, resulting in a trade deficit of Rs 1.51 billion,” the TEPC data revealed, adding that the trade deficit with Bhutan stood at Rs 284.41 million in the fiscal year 2014-15.
Nepal imports gypsum, coal, heavy equipment, boring machinery, juice and industrial equipment, among others, from Bhutan, whereas it exports iron rods and alloy of aluminium, transformer, snack, soap, furniture, woollen carpet, farm products, jute bag and cooking appliances to Bhutan.
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