India, China, Bangladesh, and the USA are Nepal’s key trading partners. Clothing, carpets, handicrafts, leather and jute items, vegetables, and cereals are exported. Nepal imports gasoline, machinery, and electronics.
NEPAL – US
For more than a decade, Nepal and the United States have traded. The United States is a significant trade partner for Nepal. It is also one of Nepal’s key sources of foreign cash, primarily from garment and carpet exports as well as tourism revenues. After the Multi-fibre Agreement’s (MFA) quota system expired in 2004, the export of Nepali readymade garments to the United States of America declined dramatically.
In terms of total commerce, the United States is Nepal’s third-largest trading partner and second-largest export destination. Despite the negligible bilateral trade volume, the trade deficit with Nepal continues to expand. For 77 products (6 digit Harmonized code), Nepal has duty-free and quota-free access to the United States. The Nepalese government is encouraging businesses to expand their exports to the United States. On April 15, 2011, Nepal and the United States signed a Trade and Investment Framework Agreement (TIFA). Every year, the TIFA Council Meeting alternates between Nepal and the United States of America. On December 15, 2020, the fifth such council meeting was held virtually. So far, five TIFA council meetings have been completed since the TIFA agreement.
NEPAL – UK
In 1816, Nepal and the United Kingdom established diplomatic ties. The United Kingdom and Nepal signed a Treaty of Friendship in 1923, further formalizing their connections. Friendship, mutual understanding, cordiality, cooperation, and respect for each other’s national interests and aspirations have defined the relationship between the two countries since their diplomatic relations began. Nepal’s diplomatic relations with the United Kingdom were established for the first time around the globe. The United Kingdom was the first country in the world to open an embassy in Nepal’s capital, Kathmandu. This is the country where Nepal’s first diplomatic mission was founded (Legation). Nepal established its diplomatic representation in London in 1934, making it the first Nepalese diplomatic post outside of Nepal. In 1947 A.D., it was promoted to Ambassador status.
The United Kingdom remains one of Nepal’s most important development partners, with annual British aid on the rise. The key features of bilateral relations remained tourism, trade, education, and the British Gurkha link.
SAFTA
The South Asian Association for Regional Cooperation (SAARC) Agreement on a South Asian Free Trade Area has been ratified by Nepal (SAFTA). SAFTA commits the eight SAARC countries (Nepal, Bhutan, India, Bangladesh, Pakistan, Sri Lanka, Maldives, and Afghanistan) to lower tariffs on a product-by-product basis, with over 5,000 commodities eligible for preferential duty treatment in the participating countries. However, SAFTA’s influence on regional commerce has been limited due to the extensive “negative list” of commodities that are not eligible for favorable duty treatment.
NEPAL – INDIA
The bilateral framework for commerce and transit is provided by the Nepal-India Treaty of Trade (2009), the Agreement of Cooperation to Control Unauthorized Trade (2009), the Treaty of Transit (1999), and the Rail Services Agreement (2004).
Except for a small negative list, duty-free access to the Indian market for all Nepali-manufactured items is allowed on a non-reciprocal basis under the Treaty of Trade (including cigarettes, alcohol, and cosmetics). However, to enjoy duty-free market access, export commodities must meet the conditions of a 30% domestic value addition and a four-digit change in HS classification during course processing in Nepal.
BIMSTEC
Nepal joined the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation in February 2004. (BIMSTEC). Bangladesh, Bhutan, India, Myanmar, Sri Lanka, and Thailand are among the other members. BIMSTEC aims to create a more complete free-trade zone by expanding service sector coverage and establishing an open and competitive investment regime. The regional group serves as a link between South and Southeast Asia and helps to strengthen ties between these countries. Additionally, BIMSTEC established a forum for intra-regional collaboration between SAARC and ASEAN countries.
