The development of information and communication technology at an unprecedented rate and the leadership of America to bring these advancements have put them at the forefront of innovation and the countries around the world were following the suits largely facilitating their modernization and economic development process.
USA basically trades in high end products such as aircraft, motor vehicles, industrial equipments and machinery among many more, which have improved its terms of trade over the years. American companies and establishments are also the source of innovative ideas and technologies from under franchising or licensing to other forms of authorization. Thus, USA has its inherent advantage to be a pioneer in propounding the intellectual property rights under the international trading system.
Nepal, as one of the least developed countries of the world, mostly trades low value and labor intensive products like agricultural and forest products, carpet, readymade garments, pashmina and handicrafts. These products seem to be equally important for Nepal, as quick switchover to high end products is not possible due to lack of infrastructure and low level of skills, knowledge and human resource development. This has necessarily given rise to the review and revision in the trade and investment policy to enhance the capacity to trade. Thus, the Trade Policy 2009 and the Nepal Trade Integration Strategy 2010 has gone for identification of the niche products that are of comparative and competitive advantages to Nepal and can impact positively in eradication of poverty of the rural masses. However, development of these products along the value chains would require dedicated effort for enhancing quality production, removal of supply side barriers and garnering support in productivity enhancement and enlarging the market access opportunities.
The April 15th trade and investment framework agreement signed between the Government of Nepal (GoN) and the Government of USA is a step forward in a direction of addressing challenges of trade, development and sustainability in the wake of liberalization. The engagement at the regional and multilateral trade processes has taken Nepal to competition in the destination markets as the fall outs are obvious in the form of decreased export and increased import. The double whammy caused due to loss in domestic production on one side, and increasing flow of remittances at the other has also resulted in the increasing prices of commodities in the domestic market and the consumers are bearing the brunt of it.
However, opportunities of trade development do not translate into actions automatically. This would require adoption of appropriate policy and strategic measures that contribute to the growth of productive capacity of the different sectors of economy, right from agriculture to forest and mineral resources.
Aligning with the international trading system has been a compulsion for the least developed and developing countries. There are costs and benefits in becoming or not becoming a part of the world trading system. If the cost of remaining outside the community is higher than cost of joining it, one must prefer to join it. This is the case for many developing and land-locked countries including Nepal. The decision to join the World Trade Organization (WTO) and other regional trading arrangements are based on these perceptions. The accession to international trading system has exposed the country with the challenges of optimizing benefits of market access on one side and minimizing the risk of exclusion and marginalization at the other.
However, opportunities of trade development do not translate into actions automatically. This would require adoption of appropriate policy and strategic measures that contribute to the growth of productive capacity of the different sectors of economy, right from agriculture to forest and mineral resources, development of infrastructures like road, rail, electricity and communications, and manufacturing activities including development of micro, small and medium enterprises. Besides, service sector has a lot of potentials to grow for creating employment opportunities, increasing government revenue and promoting overall welfare of the economy. Thus, it is equally important to explore the possibilities of promoting all modes of services with a right mix of development policies to benefit from liberalization of services.
The bilateral agreement on trade and investment could lay a ground to work further in all these possible areas of trade expansions. Traditionally, our focus has remained on trade in goods and a notion that export is good and import is bad. This perception does not cover the whole ambit of trade but only reflects the passing comments on trade performances. With the advent of WTO, trade has become a complex and complicated process as various international rules like General Agreement on Tariff and Trade (GATT), General Agreement on Trade in Services (GATS) Intellectual Property Rights (IPR), agreement on agriculture, textile, rules of origin, anti-dumping and trade remedy measures, among others, govern the international trade processes. Although the tariff barriers are being lowered, the non-tariff barriers are being raised by many importing countries in the name of plant and animal quarantine, food safety, environmental and labor standards. Besides, private standards are being imposed particularly by the multinational companies, with their foothold in the developed countries, requiring special packaging, labeling and transportation arrangements. This has added onus to the exporters in the third world countries bearing extra burden of complying with the requirements of exporters.
Such a situation demands for a coherent approach and collaboration among the stakeholders of trade on both ends of export and import. It will help create a better understanding on related issues and also resolve any matters that impede the trade. The Nepal-US trade and investment agreement has its foundation on consideration of existing issues of bilateral trade development, particularly from the perspective of increasing export capacity of Nepal. The agreement basically provides two fundamental grounds: the formation of a bilateral mechanism of trade and investment council that deals with the overall issues on trade and investment, the second is the terms of reference for the council, which covers a wide range of pertinent areas. The main objectives of the agreement as manifested in the preamble stipulates are: Enhancing the bond of spirit and cooperation between Nepal and USA, strengthening trade cooperation in trade in services, reducing trade barriers and facilitating trade, promoting contacts between the private sector, persuading open and liberal trade policies and strengthening the multilateral trading system.
The agreement outlines the areas of cooperation. It is a blissful coincidence that the Government of USA has recently launched the Nepal Economy Agriculture and Trade (NEAT) project with a sizable investment. The underlining objective of the project is to help enhancing the production and productivity of the agriculture sector that has bearing on trade development. The project also intends to build the capacity of the private sector as outlined in its development objectives. Thus, there is prominent expectation from this project to be an important instrument for the trade capacity building of Nepal.
The trade and investment agreement can be a useful instrument to trigger the growth of the economy, provided that right kind of policies and strategies are pursued to achieve the objectives. A constant vigilance from both sides is required to monitor the progress of trade development agenda. This necessitates in devising a time bound action plan in sectors related to trade development and forging greater collaboration between the two governments and between the government and private sectors. It is high time that business entities and (GoN) strove together in harnessing the benefits from the agreement in the interest of people at large.
Writer is a secretary in Ministry of Commerce and Supplies, Government of Nepal
puruojha@gmail.com
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