Nepal became a member of the World Trade Organization (WTO) about one and a half decades ago through a negotiation process rather than a separate multilateral trade arrangement (MTA). Upon accession, Nepal committed to reforms in trade in goods and services, intellectual property (TRIPS), and legislative and adjudicative frameworks.
Many of these commitments remain unfulfilled—particularly those related to legislation and adjudication—making it difficult to fully assess the facilities provided by the WTO.
Opportunities under the WTO arrangement include secure market access, uniform border rules, fair trade through elimination of quotas, a predictable trading environment, protection against unfair trade practices, and access to a dispute settlement body.
Negative impacts include market access constraints and adverse effects on domestic businesses. Poor countries still face tariff barriers and declining commodity prices, while domestic industries are threatened by free imports. Other challenges include government revenue loss, erosion of SMEs’ privileges, farmers’ rights to seeds (patent issues), and reduced food security due to low productivity.
The South Asian Free Trade Agreement (SAFTA) has been in effect since 2006. By 2015, customs duties were expected to be reduced to 0–5 percent, but implementation has not matched SAFTA’s letter and spirit. Many exportable products remain on sensitive lists, though Nepal has reduced its list from 1,295 to about 1,000 items. Intra-South Asian trade remains below 5 percent, making overall impact difficult to evaluate. Goods have rarely been exported under SAFTA provisions, revenue compensation mechanisms are unimplemented, and reducing customs duty on non-sensitive items remains a challenge.
Cooperation for trade
Weak transport networks, poor port access, difficulty in applying rules of origin, inadequate trade facilitation, inconsistent TBT-SPS provisions, and documentation issues across SAARC countries have further limited SAFTA’s effectiveness. Still, SAFTA holds potential for larger market access, preferential facilities, and transit benefits. Nepal’s trade with SAARC members is insignificant if India is excluded, but Nepal views SAFTA as a positive step toward regional development.
Alongside SAFTA, bilateral agreements such as the India-Sri Lanka FTA (1998) and Pakistan-Sri Lanka FTA (2002) exist to enhance trade. Nepal has bilateral trade agreements with Bangladesh, India, Pakistan, and Sri Lanka. These agreements are expected to complement SAFTA provisions. Addressing supply-side constraints—such as lack of infrastructure, standard labs, trained manpower, and coordination—can further increase trade volumes.
Nevertheless, intra-SAARC trade figures remain very low, reflecting the limited impact of both SAFTA and bilateral arrangements. Greater effectiveness could come from integrating SAFTA with a proposed South Asian Regional Investment and Trade Agreement (SARITA). The slow implementation, especially between India and Pakistan, illustrates how political relations dominate trade commitments in the region.
Trade liberalization at the South Asian level could lower product costs along value and supply chains, directly benefiting consumers. Yet consumer welfare considerations are often neglected in policy and poorly addressed in practice. Full implementation of SAFTA would provide direct benefits to consumers, but the current intra-regional trade stands at only 4.8 percent of total trade. While SAFTA was supposed to be fully implemented by 2015, substantial growth in intra-regional trade is expected only after 2024.
For SAARC members, WTO commitments must be adjusted within SAFTA and bilateral agreements to ensure integration. Political relations heavily influence economic relations in South Asia, and economic policies often follow party ideologies. Without complementarity in production and consumption, and without consumer awareness, regional cooperation has not delivered its expected benefits.
Consumer welfare impact analysis should be central to trade policy, as it reflects how implementation affects quality, price, and delivery. Networking among producers and consumers remains a low priority, as does building trust across borders. Dialogue is mostly limited to politicians and consumers at the national level, while true cooperation requires engagement among politicians, producers, and consumers, as well as civil society initiatives. Greater participation of civil society could make SAARC more effective and reduce distrust.
The broader benefits of regional cooperation include faster economic development, competitiveness, resource mobilization, and regional integration. However, these can only be realized if political will aligns with economic opportunity and if SAFTA and related agreements are practically and fully implemented.
The author is former Deputy Executive Director of TEPC.
