Nepal’s duty-free access to US at risk, exporters urge action

Kathmandu, June 12: Nepal's exports to the USA that enjoyed zero-tariff facility until now will face at least 10 per cent duties following the latter's new policy to hike tariff. But it has not yet responded to the USA's recent policy to negotiate the tariff rates, primarily on the basis of reciprocity. 

However, producers and exporters are seeking government's pro-active role in it.

About 70 countries have shown their willingness to talk with the White House to negotiate the tariff rates. Following his entry to the White House, US President Donald Trump has pushed a policy for reciprocal tariff with its trade partners regardless of the size of their economy. 

If the new tariff policies are fully implemented, Nepal's zero-duty products like carpets, dog/cat food, shawls, essential oils and antiques will face at least 10 per cent duty. 

Exporters of carpet, one of the top exports of Nepal to the USA, are particularly worried as they have been sending their products without any tariff but if the new policies are implemented by the US, they will face at least 10 per cent duties in export.

Speaking at an interaction on 'Nepal-US trade: Opportunities and challenges' jointly organised by Garment Association of Nepal (GAN), Nepal-USA Chamber of Commerce and Industry (NUSACCI), and Nepal Carpet Manufacturers and Exporters' Association (NCMEA) in Kathmandu on Wednesday, the exporters sought government interventions in moving forward with negotiations with the USA – Nepal's second largest goods export market.

This 10 per cent duty would be felt as 30 per cent for duties for China as Nepal's cost of production is significantly high which makes Nepali products less competitive in the international markets. 

Nepal's trade with the USA was in deficit from 2019 to 2022 and witnessed surplus in 2023. 

Reliable trade partner

Nepal's exports to the USA have been stable. In 10 months of the current Fiscal Year 2024/25 (by mid-May), Nepal exported goods worth Rs. 14.43 billion and imported merchandise worth Rs. 22.31 billion. The USA is the second largest export market for Nepal while it’s the sixth largest source for imports which makes it a market of advantage. 

In the last FY 2023/24, Nepal exported goods worth Rs. 17.31 billion and imported goods of Rs. 19.48 billion. 

The Nepal Trade Preference Programme (NTPP) – that allowed the zero-duty entry of 77 Nepali goods to the USA – is a sympathetic bill that could have massively contributed to the development of business and industries in Nepal but the country largely failed to benefit from it. Entrepreneurs said that it’s a failure on Nepal's part. 

The USA has also sought above 60 per cent value addition to export goods to the former. But Nepal's handicraft and products like dog-chew have enough value addition to be eligible for the export.

Trade of preference

Dr. Paras Kharel, an economist, said that Nepal's growing export to the USA is identical to garments export – it went up when garment export increased and dropped when its export decreased. 

According to him, in 2022, only about 2 per cent goods from Nepal reached the US beyond the preferential categories like NTPP, LDC, Generalised System of Preference (GSP), Most Favoured Nation (MFN) Zero and MFN Positive. 

Pashupati Dev Pandey, President of GAN, stressed on pro-active approach both on the part of the private sector and government to sustain the export of Nepali goods. 

President of Federation of Exporters Entrepreneurs of Nepal (FEEN) Govinda Ghimire suggested to create a collective trademark of Nepali garment products to create an identity of the country and products. 

Participation in the trade fair in the USA and business to business meetings should be promoted and the government should support the entrepreneurs in such activities. "However, reducing cost of production and enhancing quality should be our focus," said Birendra Pandey, vice-president of the Confederation of Nepalese Industries (CNI). 

Kiran Sakha, President of NUSACCI, said that the entrepreneurs must be clear about the rationale behind every demand that we put to the government of Nepal as well as that of the USA. "Especially in the wake of the tariff-row between the USA and its large trade partners like the China, Canada and USA, we must rationalise out demand of seeking zero-tariff entry of made in Nepal goods," he said.  

Dr. Yuba Raj Khatiwada, Economic Advisor to the Prime Minister and former Finance Minister, said that Nepal needs to argue that its bilateral trade relations should be non-reciprocal as the country is graduating to a 'developing country' from the Least Developed Country (LDC). 

"We need to convince the USA as well as other large trade partners/economies about Nepal's situation and need for favourable treatment to our goods," he said. 

'Promote economic diplomacy'

Minister for Industry, Commerce and Supplies, Damodar Bhandari said Nepal should boost activities at the front of economic diplomacy, trade and investment promotion, and market identification for Nepali products. 

"Promotion of the export of Nepali goods would create multiple opportunities in several sectors. The government has expressed its intentions to promote industries that export goods or substitute imports," he said. 

Dr. Prakash Shrestha, Member of the National Planning Commission (NPC), said that Nepal needs long-term vision and plan to promote export trade. 

"All stakeholders should sit together and design their part of actions in the strategy. I see lapses on the part of the government in enhancing the capacity of the producers and exporters," 

he said.