“US and Nepal have reached a point where both countries will see increase in bilateral trade and investment”

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“US and Nepal have reached a point where both countries will see increase in bilateral trade and investment”

Kevin C Price
Economic and Commercial Officer
US Embassy in Nepal

The third meeting of Nepal-United States Trade and Investment Framework Agreement (TIFA) Council was held on April 20 in Kathmandu. Signed by Nepal and United States in April 2011, TIFA aims to expand trade, increase investment and technical cooperation and bolster economic ties between the two countries. Despite the 69-year-long diplomatic relations and active US engagement in development activities in Nepal, the trade volume between the two nations has remained relatively small with the two-way trade increasing marginally to USD 129 million in 2016 from USD 123 million in 2015. Nepal’s exports to US amounted to USD 89 million last year which was 87 million in 2015. Following the 2015 earthquakes, the US enacted the Nepal Trade Preferences Programme (NTPP) granting duty-free market access to Nepali products under a 66 Harmonised Tariff Schedule which was later expanded to 77. The products enjoy preferential treatment in US till the end of 2025. Apart from those under NTPP, a number of other Nepali products to have been receiving zero-tariff access to US under the Generalised System of Preferences (GSP). Meanwhile, US has also stepped up to make the Nepali producers aware of such facilities. The US Embassy in Nepal on April 21 organised an event titled “Max Trade USA” in the capital in this regard. Kevin C Price, Economic and Commercial Officer at the US Embassy in Nepal, in an interview with Sanjeev Sharma and Aashiyana Adhikari of New Business Age, he explained the issues discussed at the TIFA meeting, ways to further increase the access of Nepali products to US market, current situation of Nepal-US bilateral trade and investment opportunities. Excerpts:

Nepal and US have just finished the third meeting of Trade and Investment Framework Agreement (TIFA) council. What issues were discussed at the meeting?

We discussed on a wide range of issues. It is for the first time the TIFA meeting has been held in Nepal. The meet in this regard has significance and we really looked at ways in which we could advance the economic relationship between the two countries. The meeting focused on ways to increase the bilateral trade, getting more American investments in Nepal and increasing the access of Nepali products to the US market. Similarly, intellectual property rights, optimally utilising the new trade preferences programme, improving standards and quality of Nepali products so that more items are eligible for export to US and making certifications required for the export of agro products were also discussed. The talks were very wide ranging and very productive. Mark Linscott, the assistant trade representative from the United States Trade Representative Office who chaired the US delegation told me that he was very impressed with the preparations of the Nepali delegation regarding the third TIFA meeting. The representatives from Nepal very well presented the details and challenges of the bilateral trade between the two countries. 

It’s been over six years since Nepal and US signed TIFA. How do you evaluate this period for the bilateral trade between the two countries?

There has been a bit of a delay in having subsequent talks.  But we have got a good momentum now. We had talks in Washington DC last year in June and this time the government of Nepal hosted the TIFA meeting. I think the sense of momentum is very important because now the different US government agencies that help formulate trade and investment policies are aware of Nepal. They are well aware of opportunities and challenges in the bilateral trade between the two countries. We are hopeful that the trade talks will continue on an annual basis as they are designed to do so and we will explore new ways to further build on our economic partnership.

What challenges would you like to highlight in Nepal-US trade relations?

There are both opportunities and challenges in front of us.  For instance, Nepal can have huge advantage by formulating and implementing IPR law. The Government of Nepal has approved a new IPR Policy and we have found it to be strong.  We have a representative from the United States Patent and Trademark Office who has been working with Nepali officials in this regard. If Nepal continues to build the policy and pass a new IPR legislation, it could really become the leader in the South Asia region in intellectual property rights. This is going to be a huge advantage for Nepal to attract investments because other countries in the region are struggling with IPR related issues. 

Talking about the challenges, the trade level between United States and Nepal is relatively small at present. There are not many US companies coming to Nepal. But I think the Government of Nepal recognises that and it has become proactive in terms of improving the investment climate to attract the additional investments. Despite the small trade volume, United States is the second largest export destination for Nepali goods. 

How is TIFA helping to increase the bilateral trade between Nepal and US?

I think there is still room for improvement. Both countries need to engage more in this regard. As noted by Ambassador Aliana B Teplitz in today’s event, the talks are focused to overcome challenges in trade and investment. Because of these programmes, United States and Nepal are at a point now where both countries will see increase in bilateral trade and investment. 

How does US evaluate the policy reform initiatives taken by the Government of Nepal in the recent years?

We have seen several encouraging steps. In the last 7-8 months a series of new economic Bills have been endorsed by the Legislature-Parliament. Similarly, Nepal has ratified the WTO’s Trade Facilitation Agreement which is an important step. There are a couple more pending bills including the Foreign Investment and Technology Transfer Act (FITTA) and update of the Labour Act, etc. All these will hopefully improve the business environment making it easier for American companies to invest and do business in Nepal.

US recently added 11 items to the list of goods eligible for export to US from Nepal under the NTPP from the existing 66. However, some major exportable items such as RMG products have not being covered. Are there plans to expand the list to include such items?

The products covered by the NTPP were sub-divided into 77 tariff lines. The products were chosen based on what Nepal has already been producing and exporting to the United States. The sub-division of the tariff lines was also done with an eye towards getting approval from the WTO which is a requirement to get this programme up and running. I don’t think it is probably likely that new products will be added to the NTPP. But the United States conducts an annual review as part of its Generalised System of Preferences (GSP) which is another programme where Nepali products can get a duty-free access to the US market.  

One major problem is lack of awareness among the Nepali exporters about the benefits TIFA provides. What do you think should be done to encourage the exporters to harness the available opportunities?

An event like the “Max Trade USA” can be a viable platform where people can learn about the facilities provided by the United States. 400 people participated in today’s event. It was organised with a purpose to bring, exporters, manufacturers and travellers together so that they are aware of these duty free programmes. This is a start and from here we will be reaching out to the people of the different regions in Nepal. We want people living outside Kathmandu Valley who are producing and exporting to know about the duty free facilities and be able to take advantage of it. This is a time limited programme and we want Nepal to have maximum benefit from it. We have partnered with the Nepali private sector body Federation of Nepalese Chambers of Commerce and Industry (FNCCI) for today’s event. We will be looking further to extend this cooperation. We are working with them to help get the information out to entrepreneurs across Nepal.

Meanwhile, we will also raise the awareness through the online platform. Starting from today, there is a special section on our website which has all materials including short instructional videos with Nepali language resources  for the people who are interested in the programme. 

How are US agencies in Nepal engaged in terms of capacity enhancement of producers and government officials to boost bilateral trade? 

As part of the NTPP, there is a requirement for capacity building for trade facilitation. USAID is developing some programmes focusing mostly on training of government officials so that they can do better in trade analysis, trade projections and better analysis of data. It will help them understand the market trends and the products that are being sold. We will continue the trainings for the next couple of years.

The level of utilization of GSP facilities by importers in US to import Nepali products has mostly remained low for many years. How can it be increased? 

We are not quite sure if they (importers in US) have not been utisiling the GSP facilities or if it’s just the matter that they haven’t found the producers in Nepal. We will be looking into it in the coming months and see how we can connect the American buyers with the Nepali producers so that the GSP facilities are utilised and exports from the Nepal to US are increased. 

US investors have invested in industrial infrastructures in countries such as Bangladesh and Cambodia. How can Nepal too receive such investments?

A lot of Asian countries are attracting American investment. And in many ways Nepal has to compete for investment and that’s where improving the business climate is so important. It is because there is a limited amount of Dollars that the US private sector is willing to invest when you are competing with countries such as Bangladesh, Cambodia and Laos. So, making the environment as friendly as possible for investors has become so critical. 

Apart from the products listed in NTPP and GSP, Nepal has some major products with competitive and comparative advantage including the Himalayan Cardamom, ginger, tea and medicines that are listed in the Nepal Trade Integration Strategy 2016. Is US willing to facilitate the import of such products from Nepal?

United States is very much willing to help Nepal to export the products. The export facilities are not limited to the products under the NTPP. Nepal can manufacture quality products and there will certainly be a market in the United States. And I think that it is really encouraging that the government has thought about the strategic advantages and what Nepal can offer to United States and the rest of the world. 

Export related problems for Nepali exporters are also due to some overlapping between the NTPP and the duty US free status for LDCs. How can it be resolved?

The important thing to realise is that the NTPP has been active only for about three or four months now. There are certainly some overlaps as new products were added to the GSP list of eligible items for duty-free treatment in June last year. But in the same time, the NTPP is one of the few programmes designed exclusively for Nepal. So, this gives Nepal a huge economic advantage and opportunity as many products of the country are eligible for duty-free treatment in US where other LDCs are not. 

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