Utilisation of trade preference facilities of US stressed

By A Staff Reporter,Kathmandu, July 21: Government and private sector stakeholders have stressed the need for utilising the Nepal Trade Preferential Programme (NTPP) and Trade and Investment Framework Agreement (TIFA) facilities offered by the United States of America to Nepal. 

Despite being granted duty-free access to 77 products by the US, Nepal’s export performance in those select products is dismal. Limited utilisation of trade preferences necessitates a careful examination of the constraints faced by exporters if Nepal aims at improving export performance through such facilities, experts said at a roundtable discussion on ‘Unpacking Nepal-US Trade’ organised by South Asia Watch on Trade, Economics and Environment (SAWTEE) in the Capital on Thursday. 

The US is Nepal’s second-largest merchandise export destination. The US has provided Nepal with duty-free access to many products through schemes under the Generalised System of Preferences. 

A SAWTEE study on Nepal-US trade, presented at the event, finds that Nepal’s merchandise exports to the US in 202 at only US$108.3 million were lower than what they were at their peak in the late 1990s even in nominal terms.

The US granted duty-free access to Nepal on an additional 77 products under the NTPP, introduced through legislation and enforced from December-end 2016. The scheme was unveiled to help Nepal recover from the devastating earthquakes of 2015. It will last till  December 31, 2025.

As per the study, while total goods exports to the US have been on an upward trend since 2012, exports of NTPP products have been on a downward trend, the study said. 

Exports of NTPP products in 2021 were U$8.47 million and had a share of 7.8 per cent in total exports to the US compared to 14 per cent in 2012, said Dr. Paras Kharel, Executive Director of SAWTEE. 

The utilisation of NTPP remains low, at under 50 per cent, compared to another duty-free scheme of the US, the Generalised System of Preferences, which Nepal also benefits from.

Dr. Kharel added that it was crucial to address productive capacity and supply-side constraints, highlighting that even if the available preferences were fully utilised, it would not lead to a dramatic increase in exports of these products without resolving the underlying constraints in production and supply.

Madhu Kumar Marasini, Secretary of the Ministry of Industry, Commerce and Supplies (MoICS), pointed out that Nepal needs to think outside the conventional approaches and explore new products to export to the US in which Nepal has a comparative advantage. 

He said the government was proposing that more products of export interest to Nepal be included in the US’s trade preferences for Nepal. Marasini also highlighted the importance of services trade, such as IT exports, for which government intends to ease the process.

Kiran Saakha, President of Nepal-USA Chamber of Commerce and Industry, pointed out that the end of global quotas on textiles and clothing in the early 2000s dealt a severe blow to Nepal’s exports to the US as exports of readymade garments, which accounted for over 80 per cent of Nepal’s exports to the US at that time, plunged.

He highlighted the existing export potential with respect to the US market, citing the example of Nepali hand-knotted carpets, which he said were being bought to American consumers despite being significantly more expensive than their competition on account of their high quality. 

Purushottam Ojha, former Secretary of the MoICS, said Nepal’s Commerce Policy and Nepal Trade Integration Strategy, which have identified priority products, should be the basis for negotiating an extension to the trade preferences provided by the US.

Likewise, Shankar Prasad Pandey, President of the Federation of Export Entrepreneurs Nepal (FEEN), said precise items of export interest to Nepal should be identified when seeking an extension of the US trade preference programme for Nepal. He expressed concern over the underutilisation of the provision for technical assistance and capacity building under the TIFA. 

Vidushi Rana, Executive Director of Goldstar Shoes, highlighted the huge potential and demand for Nepali footwear in the US and the prohibitively high tariff it faces there, and urged the US government to include footwear in the list of preference-granted products, given the industry’s role in inclusive growth and job creation.