World Trade Organization (WTO) precedents say, India, as a country providing transit facility to Nepal, can halt transit facility if it perceives security threats, trade expert Posharaj Pandey said. The current economic crisis should be resolved by using all diplomatic channels between the two governments and even with different leaders of political parties in the two countries, he added.Former commerce secretary Purushottam Ojha also said the government should initiate diplomatic efforts to address the problem.
As it is not an official blockade, it is too early to invoke multilateral agreements, Pandey said. Ojha, however, said not permitting transit right to a landlocked country like Nepal is a breach of freedom of transit rights of landlocked countries.
Meanwhile, the government has assured Indian authorities that it will address security issues raised by India.
Article V of General Agreement on Tariffs and Trade 1994 states that there shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties. Likewise, Nepal can have access to sea routes according to UN Convention on Law of Sea. Both Nepal and India are the signatory parties of both the agreements.
As Nepal's economic engagement with India, both in trade and investment, is large, the impact of blockade on Nepali economy will be far more than the impact made by the Indian economic blockade of 1988. The impact on industrial production will be huge as supply of raw material has already been affected. Shortage of petroleum products will hit the transport sector severely.
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