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Kathmandu Tuesday August 07, 2001 Shrawan 23, 2058.
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Trade snag
The four-day Nepal-India inter-governmental
secretary level talks concluded the other day without reaching any settlement on export
surge although there was general agreement on most other points on the agenda. The
difficulty over export surge was more than expected since the Indian delegation was acting
at the behest of the Indian business community. And it would have been suicidal for Nepal
to succumb to Indian demands that seek to curtail Nepali exports to India. The widening
trade deficit in favour of India has long been a matter of serious concern. For some
years, the Indian business community had been apprehensive of Nepali exports as they could
not compete with these. Last year, when India saw a surge in the Nepali export, Indian
businessmen even accused Nepal of dumping low quality imported goods in the Indian market.
Consequently, India proposed to impose anti-dumping duties on Nepal’s exports of Zinc
Oxide and Acrylic Yarn.
Historically, India has tended to see Nepal as a
captive market for Indian products rather than recognizing it as a sovereign country with
trade rights and interests like any other. So, Nepal is not just physically landlocked but
appears economically more and more India-locked. That India has just proposed quantitative
restrictions on Nepalese exports to that country or at least a 30 percent value addition
requirement on five products clearly indicates this traditional attitude. Before the trade
treaty of 1996 India had imposed an almost 50 percent value addition requirement on Nepali
products bound for India. The automatic renewal of the 1996 trade treaty requires that
neither side notifies the other of its wish to terminate it. Chances of India seeking a
review are now real in view of the difficulty over export surge. India’s objection to
the surge, as it calls it, will not only undermine Nepali products but also prevent Nepal
from industrialization. In the past too India created complications with a Duty Refundable
Process (DRP) and then it imposed a Central VAT (CENVAT) on goods. This apart, India even
went a step further to impose a Special Additional Duty (SAD) of 4 percent on items being
exported to India from Nepal. India has at times violated the spirit of the trade treaty
and not fulfilled
its commitment.
The Nepali proposal to impose higher export
duties on items bound for India should be taken seriously. But Nepal must identify and
impose such duties on items that generate and carry genuine revenue value. India is a huge
market and Nepali products have captured less than one percent of the total share. The
Indian restriction on Nepali products means backtracking from our earlier gains. Such a
move will only cost the country in terms of economic growth and industrialization. In the
past also India had imposed a value addition requirement of up to 85 percent on Nepali
products citing labour and raw material factors. This was in fact nothing but an attempt
to discourage Nepali exports to India. And while the wording of India’s objection to
export surge might be technically correct, any such phenomenon should be seen against the
background of India’s immense trade surplus with Nepal and the fact that strict
reciprocity in trade volume or in any other spheres is not always practicable in view of
the great disparity in size between the two countries and the two economies.
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