Nepal-EU joint commission meeting discuss graduation from LDC, GSP

The 15th meeting of the Joint Commission (JC) between Nepal and the European Union (EU) discussed gamut of bilateral issues including graduation from LDC, GSP and investment promotion, in Kathmandu today.

A broad range of issues of mutual interest were discussed during the meeting, according to a press note issued by the Foreign Ministry.

Nepal and the EU are also celebrating the 50th anniversary of their diplomatic relations this year.

The meeting was co-chaired by foreign secretary Sewa Lamsal and deputy managing director for Asia and the Pacific of the European External Affairs Service of the EU Paola Pampaloni.

The two sides reiterated their commitment to work together in upholding democracy and human rights, promoting good governance, realising Sustainable Development Goals (SDGs), promoting investment, and coping against global challenges such as climate change.

The Nepali side, on the occasion, highlighted achievements and bottlenecks in the realisation of SDGs.

Likewise, the EU welcomed Nepal’s transition strategy to graduate from LDC status and expressed their commitment to continue their cooperation through the Multi-Annual Indicative Programme (MIP).

Nepal welcomed the EU’s MIP for the term 2021-2027. The Nepali side also appreciated the MIP for aligning with the plans and priorities of Nepal.

Nepal and the EU also reviewed the progress of EU’s development cooperation in various sectors.

The meeting acknowledged the sub-commission meeting on development cooperation held on March 6.

On regional and multilateral processes, Nepal and the EU also discussed about SAARC and BIMSTEC. The two sides underlined the importance of effective multilateral cooperation.

The EU praised Nepal’s contributions to UN Peacekeeping Operations, the press note reads, adding that Nepal and the EU reaffirmed their commitments to cooperate within the United Nations (UN), World Trade Organisation (WTO), and other global fora to promote effective multilateralism and the rules-based international order. "Human rights including social inclusion were also discussed at the meeting."

The Nepali side reaffirmed its commitment to upholding human rights and concluding transitional justice as soon as possible.

The EU expressed hope on the early conclusion of Nepal’s peace process. 

The two sides unanimously agreed that corruption, including money laundering and financing of terrorism, is a major impediment to sustainable development.

The EU took note of Nepal’s ongoing legislative efforts and underlined the importance of compliance and enforcement, the press note adds.

The EU commended Nepal’s remarkable strides on inclusive participation and women empowerment. Both sides praised the EU flagship action 'Empowered Women, Prosperous Nepal', launched last year by the EU and the Ministry of Women, Children and Senior Citizens of Nepal.

The EU commended Nepal for the child grant schemes and encouraged its expansion.

The EU also appreciated the achievements made by Nepal in its socio-economic transformation. The two sides appraised the recent developments in upholding the democratic processes and institutions, and stressed the important role of civil society and media for strengthening democracy and good governance.

"The Nepali side underlined their multiple vulnerabilities of natural disasters, exacerbated by the impacts of climate change, and discussed climate adaptation finance," it reads, adding that the EU complimented Nepal for its position on Climate Change and the ‘Mountain Agenda’ during COP28 and also on its ambitious goal of reaching net zero carbon status by 2045.

"The Nepali side expressed gratitude for the EU's generous assistance following the Jajarkot earthquake, in post-earthquake resilient reconstruction and recovery efforts, and appreciated the cooperative partnership in disaster risk reduction."

The two sides exchanged their views on bilateral trade relations, including the criteria for acceding to the Generalised Scheme of Preferences Plus (GSP+).

Nepal, on the occasion, also expressed appreciation for the exchanges under the Erasmus+ programme, and the scholarships offered for Erasmus Mundus Joint Master Degree programmes, including people-to-people contacts. 

The EU and Nepal underlined that air safety remains a key priority area in their bilateral relations. Nepal assured of addressing all observations of the EU’s assessment visit in September 2023, while the EU will support Nepal in this process. Both sides agreed to follow-up at technical levels.

The next Joint Commission meeting will take place in Brussels next year.

US announces expansion of trade facilities for Nepal

Nepal received duty-free market access in the US for its travel goods like luggage, backpacks, handbags and wallets under the Generalised System of Preferences (GSP) programme. The United States Trade Representative's (USTR) Office has announced the Annual Product Review under the Generalised System of Preferences (GSP) Programme.
The measure adds new duty-free status for travel goods – like luggage, backpacks, handbags, and wallets – for Least Developed Beneficiary Developing Countries (LDBDCs), including Nepal.
According to a statement issued by the US Embassy in Kathmandu today, the new rule makes these products eligible for duty-free status beginning July 1. "US imports of travel and luggage goods products totaled almost $10 billion in 2015," it added.
"This is a tremendous opportunity for Nepali businesses to expand their exports to US markets,” US Ambassador Alaina B Teplitz is quoted in the statement. "A strong commitment to open-market policies, a stable and transparent legal environment that secures property rights, policies that foster dynamic entrepreneurial activity and strategic infrastructure investments will help Nepal make the most of this opportunity," she added.
In 2015, Nepal ranked second, after Cambodia, of all LDC exporters of luggage products to the US. Nepal's exports of these products have grown seven per cent since 2014, totaling $1.8 million in 2015.
US trade preference programmes provide opportunities for many of the world's poorest countries to use trade to grow their economies and climb out of poverty.  The 40-year old GSP is the largest and oldest US trade preference programme.
Under GSP, the US provides duty-free treatment for many imports from beneficiary developing countries, and additional products for LDBDCs. About 5,000 products from 122 beneficiary developing countries and territories, including 43 least-developed countries, are eligible for duty-free treatment when exported to the US under the GSP programme.
Nearly 1,500 of these products are reserved for duty-free treatment for LDBDCs only.
According to economic counsellor at the Nepali embassy in the US Kailash Raj Pokhrel, Nepal has received the duty-free facility for 27 items. These items are in addition to the 66 garment products that have received a similar facility under a separate Nepal-specific legislation.
Although the GSP facility covered 5,000 items from 127 countries, the list included only 5 per cent of Nepali products, including flags, caps, cigars and scarves of the total items exported to the US. Now, the new items have been added to the list of goods for which Nepal will get duty-free market access in the US.
Earlier, in February, US President Barak Obama signed legislation authorising special trade preference to Nepal providing duty-free market access to 66 types of garment items including certain carpets, headgears, shawls, scarves and travel goods. This is a new Nepal-specific tariff preference programme while the GSP is a 40-year-old trade preference programme, the oldest such programme.

'Nepal needs to boost competitiveness of its exportable items'

The US has asked Nepal to identify its needs for boosting competitiveness of exportable items so that Nepali products could stay competitive even after the expiry of trade preference programme.
"We will be taking Nepal government's input on what type of technical assistance it needs to stay competitive for longer time, even after the expiry of the trade preference programme by the end of 2025," deputy assistant US Trade Representative (USTR) for India and Nepal Dawn M Shackleford said.
The Nepal programme is authorised for ten years and is designed to help Nepal's economic recovery.
In addition to the duty-free tariff benefits from the trade preference programme, there is also a trade capacity building programme outlined in the legislation, focused on helping Nepal implement the World Trade Organisation's (WTO) Trade Facilitation Agreement (TFA), she added. "Thus, the US is ready to assist Nepal in trade facilitation under its technical assistance (TA)," Shackleford said without elaborating how much the assistance is worth.
Referring to her discussions with the Nepali authorities and private sector, she said that Nepal can take maximum advantage from the Trade Facilitation and Trade Enforcement Act. "Especially handicrafts can take advantage from the trade preference program," she added.
With a view to facilitating economic growth through trade, the US is establishing a new stand-alone trade preference program for Nepal. On February 24, US President Obama signed the Trade Facilitation and Trade Enforcement Act of 2015. The Act allowed the President to authorise special tariff preferences for Nepal to help support the country's economic recovery following the devastating earthquakes of 2015.
Under the Act, the US President will have the authority to grant duty-free tariff benefits for several products not currently eligible for benefits under existing trade agreements, including certain kinds of carpets, headgear, shawls and scarves, handbag, and suitcases. The exports of Nepali goods covered by the Act totaled $8 million in 2015.
However, she said that for the new preference program to go into effect, certain administrative steps need to be completed in the US. "First, the US President must certify that Nepal meets the country criteria and eligibility requirements of the programme which are the same as those for countries that participate in the GSP Programme and the African Growth and Opportunity Act," Shackleford, who is currently in Nepal to finalise the date for second TIFA meeting, said, adding that it might take few months. "In the first phase, the US looks at status of rule of law, anti corruption measures and human rights violation, and in the second the US administration is also required to request a review by the US International Trade Commission 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," she said, adding that these statutorily-required reviews will take several months to complete, but the administration is making efforts to complete the processes as soon as possible.
In 2015, total trade between Nepal and the US was worth $123 million. During the year, Nepal exported goods worth $87 million to the US. Of the exports, Nepal enjoyed access to duty-free treatment for eligible products under the Generalised System of Preferences (GSP) of approximately $5.8 million.

NEPAL NEEDS TO PUBLICISE REFORMS
Shackleford also suggested Nepal to publicise its economic reform efforts to attract foreign investments. "There are investment opportunities in Nepal, but the investors should be made aware of the opportunities it offer," she said, adding that foreign investors should know what reforms have Nepal made to ease doing business in Nepal. "Based on the new Trade Policy and comparative advantage in growing ICT, tourism and service sector, Nepal should exploit its opportunity," she added.

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.

Bilateral trade relations trigger regional development

Ambassador of Nepal to Pakistan Bharat Raj Paudyal said that improved regional trade will trigger pace of development in the whole SAARC region.

"Pakistan and Nepal should focus on the promotion of bilateral business relations ensuring continued partnership for progress," he said, addressing the members of Pakistan Textile Exporters Association (PTEA) in Islamabad.

"Economic ties between the two countries can be enhanced to the best possibility."

Nepal greatly valued its relations with Pakistan that were based on mutual respect, trust and shared perceptions on regional and international issues, he added.
Earlier chairman PTEA Sheikh Ilyas Mahmood welcomed him and said that current quantum of trade between Nepal and Pakistan is less than a quarter of the potential. "Due to trading restrictions and tariff measures, most of the indirect and unaccounted for trade is routed through the Gulf countries," he said, suggesting formal arrangements of greater direct trade for better result in lesser freight and shorter lead time.

He further suggested that frequent exchange of trade delegations, establishment of display centres in both countries would help to further strengthen the trade ties. With GSP Status granted to Pakistan by European Union, there might be increased trade for semi-finished products to have required value addition in Pakistan.

Further Pakistan is one of the highest per capita tea consuming countries in the world and Nepal is one of the finest tea and coffee producers that can create opportunity for bilateral trade between the two countries in these items.

Government preparing a new list of products for GSP facility

The government is preparing a new list of domestic products that it seeks for a duty-free facility in the US market.

The government has formed a team led by executive director of Trade and Export Promotion Center (TEPC) Iswori Ghimire – including private sector representatives – to suggest the list of products to be included in Generalised System of Preferences (GSP).

The US has requested Nepal to sent a new list of products to be added in the current list of GSP by October 4.

Though, the legal authorisation of GSP programme expired on July 31, the US Congress is considering a legislation that would extend the authorisation of GSP that is a programme designed to promote economic growth in the 127 countries of developing world by providing preferential duty-free entry for up to 5,000 products.

Manufactured items like different types of chemicals, minerals and building stone, jewelry, carpets and some agricultural and fishery products are some of the products eligible for duty-free treatment under GSP facility, whereas some textiles and apparel products, watches, footwear, handbags and luggage products are not eligible for duty-free treatment under GSP.
As the Readymade Garments (RMGs) exports to the US market witnessed a plunge after the US ended the Duty Free-Quota-Free facility in 2005, Nepal has been repeatedly asking the US government to provide GSP facility for 11 Readymade Garments (RMGs) and pashmina products.

Since the US has been imposing an average of 17 per cent customs duty on Nepali RMGs and pashmina products, it has made Nepali products less competitiveness –  compared to the products from other countries that are enjoying GSP facility – in the US market.
Likewise, Nepali hand-knitted carpet is getting limited access to the US market due to comparatively liberal customs duty compared to that for RMG and pashmina products.
However, Nepal is still in comfortable position in bilateral trade with the US as the export still surpasses imports, unlike with other countries. But the US is fast bridging its trade deficit with Nepal.

The data of Trade and Export Promotion Centre (TEPC) revealed that in the year 2012, Nepal exported Rs 5.13 billion and imported Rs 4.75 billion worth merchandise from the US. Likewise, a year ago, in 2011, the export stood at Rs 5.24 billion and import at Rs 4.58 billion.

TIFA bilateral forum talks on cards

KATHMANDU: The Ministry of  Commerce and Supplies is preparing to host Nepal-US bilateral trade talks under Trade and Investment Framework Agreement (TIFA) that has been repeatedly postponed since last three years. The bilateral agreement has envisages Nepal and the US Council on Trade and Investment – a commerce secretary level permanent mechanism – meeting once a year. Nepal and the US signed the bilateral agreement in Washington on April 16, 2010, setting up a bilateral forum for trade dialogue but could not meet even once since then.

EU revises GSP facility

The European Union (EU) has revised import preference scheme — popularly known as the Generalised System of Preferences (GSP) — for developing countries including Nepal with effect from January 1, 2014.

"Nepal will enjoy more opportunities to export as competitors exit the scheme," the EU said, adding that the new scheme will be focused on fewer beneficiaries — only 89 countries –– 49 LDCs in the 'Everything But Arms' scheme including Nepal, and 40 other low and lower-middle income partners — to ensure more impact on countries most in need.

Some 10 countries in Asia — Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Maldives (until end 2013 as they have exited the UN Least Developed Country list), Myanmar (preferences currently withdrawn), Nepal, Timor-Leste, Yemen — will get the facility.

"Due to GSP facility, EU has become one of Nepal's key export destinations in recent years," said Garment Association-Nepal's president Uday Raj Pandey. "The GSP facility has helped garment, carpet, pashmina and handicrafts sector to survive," he said, adding that Nepal has, however, not been able to take the maximum advantage of the facility.

Following an agreement with the Council of the European Union and European Parliament on Thursday, the scheme contains specific tariff preferences granted under GSP in the form of reduced or zero tariff rates and the final criteria for which developing countries will benefit.

By providing preferential access to the EU market, the scheme should assist developing countries in their efforts to reduce poverty and promote good governance and sustainable development by helping them generate additional revenue through international trade, which can then be reinvested for the benefit of their own development and, in addition, to diversify their economies, the EU added.

"The scheme’s tariff preferences should focus on helping developing countries having greater development, trade and financial needs."

TIFA meeting by end of October

The second joint council meeting of the Trade and Investment Framework Agreement (TIFA) with the US that has been postponed repeatedly since the start of this year, could take place by the end of October.

"We are planning to hold the second joint council meeting of TIFA by the end of October as the US has sent feelers about holding the meeting soon," said commerce and supplies secretary Lal Mani Joshi.

Earlier, the meeting was expected to take place by September. The government and the private sector have been preparing an agenda for a long time but the meeting has not taken place.

The first joint council meeting — that was held in Washington immediately after the TIFA was signed — had decided to hold the second meeting in Nepal in November. However, the meeting had been postponed for January 2012. The meeting was again postponed for March.

The first meeting was held in Washington, where the US and Nepal discussed and reviewed various issues.

US trade representative Ron Kirk, and then deputy prime minister and finance minister Bharat Mohan Adhikari had signed the Trade and Investment Framework Agreement on April 15, 2011 — to enhance trade and investment between the two countries — replacing the six-decade old bilateral trade and economic pact.

Aimed at providing a forum for bilateral talks to enhance trade and investment, discussing specific trade issues, and promoting more comprehensive trade agreements between the two countries, the TIFA is expected to be a better platform.

The TIFA meeting could be a better platform to discuss about the Generalised System of Preferences (GSP) facility for textiles, said deputy assistant US Trade Representative for GSP and chair of the GSP sub committee of the Trade Policy Staff Committee William D Jackson.

The framework agreement is also expected to help both the countries enter into a trade agreement besides the US-Nepal Council on Trade and Investment that will address a wide range of trade and investment issues like capacity building and technical assistance, intellectual property rights, workers’ rights, environmental protection, and removing barriers to bilateral trade.

The council is a permanent body that will hold meetings regularly involving the private sector and civil society.

The agreement is also expected to help Nepal not only attract US investment but also boost exports. Though Nepal does not have a trade deficit with the US, the gap is slowly closing.

"Though the US has been providing Generalised System of Preferences facility for some 4,975 products, it has excluded most textile and apparel products that is one of the key exports of Nepal to the US," said Garment Association of Nepal (GAN) president Uday Raj Pandey, asking the trade representative's help in providing GSP facility for Nepali textiles.

 

US closing trade deficit gap with Nepal

Fiscal Year – Nepal Exports – Nepal Imports

2005-06 – Rs 6.99 billion – Rs 1.67 billion

2006-07 – Rs 5.57 billion – Rs 4.25 billion

2007-08 – Rs 4.59 billion – Rs 3.71 billion

2008-09 – Rs 4.87 billion – Rs 3.80 billion

2009-10 – Rs 3.86 billion – Rs 5.38 billion

2010-11 – Rs 4.39 billion – Rs 3.93 billion

(Source: Trade and Export Promotion Centre)