 |
Kathmandu Tuesday February 19, 2002 Falgun 07, 2058.
|
Troubled
trade talks
The two-day talks
between Nepal and India on their trade treaty, which was extended by three months, is
expected to finalize the treaty renewal process. The bilateral treaty of 1996 would have
been automatically renewed last December had India not objected to an export surge in five
Nepali items. India has since demanded fifty percent mandatory value addition on material
and labour content in Nepali exports to that country. Going for a mandatory 50 per cent
value addition on material and labour content in Nepali exports means backtracking on what
has been achieved. The 1991 Trade Treaty initially required 55 per cent value addition,
which was later scaled down to 50 per cent, and subsequently scrapped in the 1996 Treaty.
India’s imports of
Nepali products amount to less than one percent, and no fluctuation in that flow can make
much difference to the mammoth Indian economy. But any attempt to curb Nepali exports will
hurt the economy. Furthermore, India has shown that it is quite capable of pulling a
surprise to make life difficult for this country any time it chooses. It has become
increasingly apparent since this latest trade stand-off started that these matters are
determined as much by the tone and tenor of the Nepal-India relations at a given time, and
by other Indian priorities, as by the facts and figures of trade alone. The exigencies of
Indian internal politics may also have a bearing on the issue, and India has just gone
through key local elections. With the benefit of hindsight we are beginning to realise now
that the easy trade terms we won from New Delhi back in 1996 were probably conceded only
to facilitate passage of the Mahakali treaty.
Data for the last five
months on the status of Nepal’s foreign trade shows that Nepal’s exports
declined by 8 percent. Similarly, imports also went down by 6 percent. However, imports of
Indian goods increased by 27 percent. This indicates that Nepal is getting more dependent
on Indian raw materials than on any third country source. Increasing imports of Indian
products have meanwhile led to the closure of a number of Nepali textile, sugar and
plastic industries in recent years. Since last December, India has imposed anti-dumping
duties on some Nepali products, citing re-export of the products and other similar but
irrelevant matters. Prior to that, in the last Indian budget, the base for charging the
countervailing duty on Nepali goods in the Indian markets was changed, which directly hit
the competitiveness of Nepali products causing a decline in their exports lately. Also,
some neighbouring Indian states imposed their own duties and a plant quarantine. These
have affected even the export of agro-products to India.
Given these troubled
trade relations, it is increasingly clear India does not consider Nepal growing
economically strong to be in its interest. India is only too aware that as a land locked
country Nepal needs Indian support to develop its economy. Whatever India’s motives,
what concerns Nepal most is lack of a reciprocal approach on the part of its big neighbour
that also takes into account the great disparity between the two countries. |
