New Trade Treaty to be Signed on Tuesday

Nepal and India are finally signing the new bilateral trade treaty on Tuesday.

Commerce Minister Rajendra Mahato and his Indian counterpart Ananda Sharma are inking the revised treaty amid a function on Tuesday. The signing will bring the new bilateral trading provisions into enforcement with instant effect.

• No non-tariff barriers and extra-customs duty on Nepali exports
• India to recognize Nepali standard certification
• DRP, channeling agency on vegetable ghee exports to be annulled
• Trade via air to be recognized
• Five new trading routes to be opened up, including TIA
• Treaty will last for seven years
  

The revised treaty is the outcome of two years long negotiations between the technical committees of the two countries. While carrying forward the unilateral tariff preferences on Nepali exports to India, the new treaty also provides non-tariff and other preferences for Nepal. This, traders said, will give impetus to country´s export trade with the largest trading partner. Mainly, they believed it will support the export of agricultural and primary goods, which otherwise were facing different impediments in the past.

What´s in the new treaty?

The new trade treaty promises to exempt Nepali exports to India from all forms of non-tariff barriers, something which had been seriously dampening growth prospect of Nepali primary goods and discouraging exporters.

The treaty also binds India to recognize Nepal´s standard certification. It also puts the responsibility of upgrading Nepal´s laboratory on India´s shoulder, a provision which officials said will ensure enforcement of standard accreditation provision. Once that happens, exporters of Nepali tea, cardamom, ginger and other agricultural produces will no longer need to produce quality certification from Indian laboratories in Kolkata or Patna for entering their produces to India.

This will prevent traders from losses they incurred while waiting for a week for certification to come, and thus will boost the export of primary goods.

In the new treaty, India has for the first time formally agreed not to impose extra-customs duty on Nepali goods. This provision will free Nepali exports from 4 percent special additional duty (SAD) and other countervailing measures that India has been imposing in the past.

Once into effect, this provision will enable Nepal´s readymade garment and dozens other commodities to be free from SAD that the Indian government has imposed at present. “For the purpose, Nepal will have to formally make a request, highlighting the case of SAD imposition. On receiving the request, India will complete its internal procedures and issue notification on its exemption on Nepali exports,” said the source.

Traders stated that this provision will lay down predictable trading environment and hence will boost Nepal´s export to India and also help Nepal get more investment than in the past.

Imposition of non-tariff barriers, certification problems and extra-customs duties, which debilitated Nepal´s competitiveness, have been badly affecting Nepal on the exports front. Sharp rise in consumption, on the other hand, has caused its trade deficit to widen to more than Rs 108 billion.

The new treaty will be valid for next seven years, contrary to previous arrangements of five years.

The new treaty will also annul duty-refund procedure and the system of exporting vegetable ghee through a channeling agency. It will enable traders dealing on Indian currency to enjoy excise and all other facilities as enjoyed by traders dealing on convertible currency.

The new treaty will, for the first time open, bilateral trade via air route as well. For the purpose, Tribhuvan International Airport (TIA) will be used as the official port for exports and airports in Delhi, Mumbai, Kolkata, Bangalore and Chennai will be ports for imports.

It will also add four new land routes, namely, Maheshpur (Nawalparasi), Sikta (Parsa) Gulariya (Bardiya) and Laukahi (Siraha) for bilateral trade.

The treaty also provisions setting up a new mechanism including local customs, government and chamber´s officials to instantly address trade related problems.