Nepal has requested for preferential treatment of its primary products in bilateral trade with China to help address the widening trade deficit between the two countries. During the 15th meeting of the Bilateral Diplomatic Consultation Mechanism held in Beijing on Friday, Nepal's Foreign Secretary Bharat Raj Paudyal, who led the Nepali delegation, proposed preferential treatment of Nepal's primary products such as tea, coffee, herbal products, cooked buffalo meat, and other agricultural products. The leather, carpets and agricultural products are among the major exports of Nepal to China. Although China has granted the Duty-Free Quota-Free (DFQF) facility for more than 8,000 Nepali goods to enter its market, Nepali exporters have struggled to export these products due to non-tariff hurdles imposed by the Chinese authorities. In the past three years, China closed its border for the export of Nepali goods due to its strict zero COVID-19 policy, causing significant losses for Nepali exporters. It was not until late December 2022 that Beijing allowed Nepal's exports to pass through the Kerung-Rasuwagadhi border, one of the two international border points on the Nepal-China border, after keeping it shut to two-way traffic for three years.
Nepal’s trade deficit with China widens
While Chinese goods have been intermittently entering Nepal through Kerung, Nepal's exports to China have suffered significantly due to the border closure. Nepali exporters have long been complaining about the challenges they face when exporting to China, including lengthy and complex procedures, high transportation costs, and inadequate market access. In addition, the language problem and lack of banking networking between two countries have also been creating hurdles for the landlocked country to sell its products to the northern neighbor. Additionally, the issues of standardization and quality certification equally act as hurdles to export the products. While the DFQF facility is a positive step towards increasing trade between the two countries, more must be done to address these non-tariff barriers and facilitate the smooth operation of existing major border points for the cross-border movement of goods and people. Against this context, Nepal’s request to China for preferential treatment of its primary products in bilateral trade with China is a positive step forward to address the ballooning trade deficit between the two countries. It is heartening to note the two sides taking stock of the existing Nepal-China bilateral relations and cooperation and deliberating on ways to further expand and consolidate cooperation in various areas.
However, we believe that the smooth operation of the existing two major border points for the cross-border movement of goods and people is an important step towards addressing the ballooning trade deficit. It is equally important on the part of China to remove non-tariff barriers to facilitate exports from Nepal. The Tatopani and Rasuwagadhi border points between Nepal-China are crucial for Nepal's trade and economic development, and any disruption in their operation could have a significant impact on Nepal's economy. There are several reasons why Nepal has been unable to fully benefit from preferential treatment, beyond the reasons officially declared by the country. In addition to these, there are underlying weaknesses that need to be addressed. To maximize the benefits of preferential treatment, Nepal should focus on promoting the production of local goods on a larger scale, adopting higher production technologies, producing raw materials locally, and establishing testing labs with technical support from China. By addressing these weaknesses, Nepal can take full advantage of the preferential treatment offered by its northern neighbor. Needless to say, Nepal-China relations have the potential to deepen and expand in various areas, including economic cooperation, trade, investment, and tourism. However, to achieve this potential, both sides must work together to address the challenges and barriers that impede trade and economic cooperation. The relations between Nepal and China is marked by the common goal to achieve peace, stability and development in their respective countries and the region and the way forward could be through strengthening mutual political trust, dialogue, exchanges and understandings, and extending mutual support to each other's core concerns, sensitivities and interests. With continued efforts and mutual cooperation, we are optimistic that Nepal-China relations will further strengthen in the future.
