Declining Nepali Exports to the US Despite Trade Preferences: An Analysis

Declining Nepali Exports to the US Despite Trade Preferences: An Analysis
Credit goes to Kathmandu Post

Despite the United States granting trade preferential treatment to Nepal, the nation's exports to the US are experiencing a decline. Experts attribute this to a lack of awareness among traders about how to leverage these benefits.

Parash Kharel, executive director of South Asia Watch of Trade, Economics and Environment (SAWTEE), noted that there is no conclusive evidence that the introduction of US trade preference has increased Nepal's exports. In fact, exports to the US are lower than they were two decades ago.

The Role of Technical Assistance

Experts suggest that the lack of technical assistance from the US is a significant factor preventing traders from capitalizing on the preferential treatment. The US has provided Nepal with duty-free access to additional products under the Generalised System of Preferences, a scheme introduced after the devastating earthquakes in 2015. However, despite the US being Nepal's second-largest export destination, the share of exports to the US has been declining.

The State of Nepal-US Trade

The data reveals a concerning trend in Nepal-US trade. In the fiscal year 2001-02, Nepal exported goods valued at $229.5 million to the US, while imports totalled $35 million. Fast forward two decades to 2021-22, exports had more than halved to $107 million, but imports had increased to $196 million.

The Impact of the Multifibre Arrangement

The phase-out of the Multifibre Arrangement and quota privilege has significantly impacted apparel exports, which once accounted for 80 percent of Nepal's exports to the US. This share has now shrunk to 20 percent.

The Role of the Nepal Trade Preferential Programme

The Nepal Trade Preferential Programme of the US currently applies to a total of 77 tariff lines. However, exports of many of these items are either zero or valued at less than $10,000. Experts suggest that Nepal has not been able to fully utilise the tariff preference in the programme.

The Need for Technical Assistance

Experts argue that Nepal needs to lobby for the extension of the Nepal Trade Preferential Programme products and coverage. One of the biggest trade barriers for Nepal in the US is the standardisation of exported products. To address this problem, Nepal can seek technical assistance from the US.

The Future of Nepal-US Trade

As Nepal's exports to the US continue to decline, it is clear that more needs to be done to reverse this trend. The government needs to take a more active role in promoting Nepali goods in the international market. Additionally, Nepal needs to ensure the quality of its exports, such as the increasingly popular dog chew, to maintain and increase its market share.

While the US has granted trade preferential treatment to Nepal, the lack of technical assistance and awareness among traders has limited its impact. As Nepal looks to the future, it will need to address these issues to fully leverage the benefits of the preferential treatment and boost its exports to the US.