Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010The treaty was due for renewal in December 2001. Both parties agreed to extend it for an interim period ofthree months until March 2002 to provide more time for negotiations. Following several rounds of bilateraltalks between September 2001 and February 2002, the Indo-Nepal Trade Treaty was revised and renewed inMarch 2002 for a period of five years. The revised treaty strikes a balance between safeguarding the Indiandomestic industry and providing an impetus to the industrial growth and economic development of Nepal.Continued access to the Indian market is provided for Nepalese manufactured goods on a non-reciprocalduty-free basis. Important modifications were made with respect to the rules of origin and tariff rate quotasapplicable to a number of sensitive items. The Nepal-India Treaty of Trade was renewed again for five yearsin March 2007, without any change or modification.Nepal and India also signed a separate Treaty of Transit in 1991. This treaty was valid for seven years and hassubsequently been renewed in 1999 and thereafter in 2006 for seven years. This treaty provides transit facilityto Nepal via Kolkota and fifteen transit routes to Kolkota are designated from the Nepal-India border. Twentytwocrossings along the Nepal-India border are designated for bilateral trade.A cooperation agreement to control unauthorized trade was also signed between the two countries in 1991for five years and was extended together with the Treaty of Trade in 1996, 2002, and 2007 (the latter withvalidity until March 2012). Under this agreement, both countries agree to cooperate to prevent infringementand circumvention of laws of either country in regards to matters related to customs, narcotics, foreign trade,and foreign exchange. This agreement prohibits re-exportation of goods imported from either party to thirdcountries without manufacturing activity. The agreement also prohibits re-exporting goods imported fromthird countries to India without manufacturing activity.In general terms, these treaties and agreements have helped expand trade between Nepal and India.However, the deficit in trade in goods on Nepal’s side has been expanding dramatically every year. The tradeperformance for the period 2004-09 is shown in table 3.1.Table 3.1Trade in Goods Nepal-India 2004-09 (in millions of Nepali Rupees)Export from Nepal Import to Nepal Defi citYear (July-July)Total To India % Total From India % Total With India2004-05 58,706 38,917 66.29 149,474 88,676 59.33 90,768 49,7592005-06 60,234 40,715 67.59 173,780 107,143 61.65 113,546 66,4282006-07 59,383 41,729 70.27 194,695 115,872 59.51 135,312 74,1432007-08 59,267 38,556 65.05 221,938 142,376 64.15 162,671 103,8202008-09 66,444 40,080 60.32 264,033 150,103 56.85 197,589 110,023128NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT