Nepal and China have signed the draft protocol to the Transit and Transport Agreement in a bilateral meeting in Kathmandu on Thursday, paving the way to implement the transit agreement signed by two sides in 2016. The new agreement marks a new beginning for Nepal’s trade with third countries via Chinese ports and breaks Nepal’s absolute dependence on Indian ports for trade. As such, Thursday’s agreement could prove to be transformational for Nepal in the long run, if the terms of these agreements can be truly materialized. The government of KP Sharma Oli deserves appreciation for making it happen.  There was apprehension that the two countries were not giving much importance to the landmark 2016 deal which two years ago had generated a lot of hope among people who were then battling with five months-long economic blockade from the southern neighbor. One of the reasons Nepal had to suffer in those days was that we did not have the option of carrying out external trade through Chinese ports. This is why the new development has been welcomed by all sections of Nepali society. There is a hope the agreement can take a major departure in Nepal’s trade and transit dynamics. 

The Chinese side has given to Nepal four sea ports (Tianjin, Shenzhen, Lianyungang and Zhanjiang) and three dry ports (Lanzhou, Lhasa and Xigatse). Through these ports, Nepal can trade with various East-Asian countries which will be no small feat for our landlocked country. Now onwards, Nepal can diversify its trade that has remained overwhelmingly dependent on India for decades. Now Nepal can import goods through China as well, which could potentially make our import and overall trade more competitive. However, Nepal must be aware of the fact that the agreement in itself won’t result in anything concrete unless Nepal, together with China, develops necessary infrastructures to facilitate trade with China. First, Nepal needs to upgrade the Kathmandu-Rasuwagadhi route to ensure that it can operate round the year. As things stand, Arniko Highway, which served as major artery of Nepal’s trade and connectivity with China until 2015, is yet to be upgraded and Tatopani customs point yet to be reopened.  As a result, we are now depending on Kathmandu-Rasuwagadhi road, which is frequently disrupted. 

The first priority of the government should therefore be establishing road connectivity up to Chinese border through as many points as possible, including from Korala, Kimathanka and Olangchungola to ensure viable bilateral trade activities.  Nepal’s trade deficit with both India and China is ballooning, putting our economic future in danger. We need to create an environment where goods are produced in Nepal and exported to India, China and third countries. With the protocol agreement, we have laid the groundwork to realize this prospect but many things need to be done from our side. The agreement in itself is not going to make trade through China possible overnight. We need to develop infrastructure networks in such way the opportunities the new agreement has raised do not slip off our hands.  And given that the nation has suffered due to its dependence on trade through only one country, there is all the reason for Nepal not to miss out on this opportunity.

 
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