Ministry of Commerce And Supplies - Enhanced Integrated ...
Ministry of Commerce And Supplies - Enhanced Integrated ... Ministry of Commerce And Supplies - Enhanced Integrated ...
N T I S2010Most issues reported above relate to infrastructural, regulatory, institutional or geographical weaknesses and‘bottlenecks’. With respect to such impediments, it is difficult to see a truly protectionist or WTO-illegal‘hidden agenda’ on India’s part. The lack of adequate control, certification and inspection facilities at allborder checkpoints and customs entry points is a deficiency that must be addressed by both countries, ifnecessary with recourse to international donors’ programmes and dedicated capacity-building projects.Some issues, however, are matters for which Nepal should demand effective and immediate cooperation byIndian authorities. For example, import duties must be systematically applied in a non-discriminatory fashionby Indian customs authorities at all points of entry. The applicable import and customs rules and proceduresmust be published, notified, interpreted, and applied in a consistent and transparent manner. These are clearobligations and commitments that India has undertaken to implement and comply with within the frameworkof both the WTO system and the bilateral treaties. To date, Nepal seems to lack a more formal system torecord such issues as they arise and to ensure they are duly brought to the attention of government officialsfor prompt negotiation and resolution with Indian authorities.Standards-related Measures The lack of adequate quality, metrology, and inspection/certification facilities at the border or atthe airport leading to issues in certifying the weight, safety, and quality of products, stands out as apowerful non-tariff barrier; Testing facilities are missing at border crossings and quarantine is often required. This places exportcrops from Nepal, such as ginger, at a comparative disadvantage; Fumigation of pallets and wood products, as well as the heat treatment to deal with possible pests inexported products, are trade impediments in terms of both costs and time consumption; It takes an average of four o five days, sometimes seven days, to clear agricultural produce throughcustoms and get the necessary SPS certification at the Indian border, with resulting high costs of truckretentionat customs and storage.These issues may be unfortunate from the point of view of Nepalese exporters, but are legitimate prerogativesof India, as of all other WTO members. The frustration of Nepalese exporters largely reflects the weak stateof the current standard and SPS infrastructures in Nepal and the weak ‘culture’ of standards among producersand exporters. This issue is addressed more fully in Chapters 7 and 8 of this report.Anti-competitive Conduct of State-owned or Private Firms Nepalese exporters point to the deleterious effect of Indian Railways’ monopoly. Indian Railways chargethe same fees for containers transported by rail to Kolkata than those charged by Indian truckers eventhough operating costs are much lower. This affects the competitiveness of Nepalese products andencourages widespread corruption at the border.The suggestion is for the GoN to address such issues bilaterally with Indian authorities and/or that Indianimporters of the affected Nepalese products consider a legal recourse in front of the Indian CompetitionAuthority. This latter course of action might not be easy and might not guarantee a positive outcome, but itmight be considered in one of the high potential exports, in order to create a precedent and act as a ‘pilot’project.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT131
N T I S2010Government Procurement Restrictions, Export Subsidies, Intellectual PropertyProtection, Barriers to Trade in Services, Restrictions Affecting ElectronicCommerce, and Investment BarriersNo significant issues were identified in those six areas by Nepalese exporters through discussions withstakeholders and informed parties.Sector-specific IssuesWith respect to the export potential products and services reviewed in Chapter 2, the critical NTBs affectingagricultural commodities or semi-processed agro-food products exported from Nepal appear to be related tothe application of and compliance with Indian standards and technical regulations. In addition, traders find itdifficult to comply with a wealth of import regulation permits and licences.In regards to selected garments and handicrafts, the key trade obstacle appears to be the application of erraticand discriminatory duties at Indian central level or at Indian state level. These instruments do seem to placeNepalese goods, often effectively, at a competitive disadvantage vis-à-vis competing Indian products.A number of other constraints affect negatively Nepal’s export performance in those key sectors, but largely asa result of domestic Nepalese shortcomings and self-inflicted deficiencies, whether in relation to infrastructure,regulatory framework, law and order, political stability, investment-friendly policies, etc. These are reviewedin greater detail below and must also be the object of urgent and well-planned actions if real progress is to beachieved on the export performance front. The resolution of India’s NTBs and trade impediments alone willnot make a real difference without effective and long-lasting improvements on the domestic front.With respect to the potential service exports reviewed in Chapter 2, it would seem that the great majority oftrade impediments are the result of domestic shortcomings on the Nepalese side in such areas as the lack oftailor-made policies, weak infrastructural facilities, political stability conducive to development and attractionof necessary foreign investment, and others. Most are discussed in greater detail in Chapter 10.3.4 Other Impediments to Nepal-India TradeAs indicated above, it appears that many impediments that affect Nepal’s export performance to Indianegatively are either Nepalese domestic in nature or Indian issues that do not fit within the traditionalcategories of NTBs. Nevertheless, both sets of issues are critical to Nepal’s ability to trade and must beaddressed for Nepalese exports to be competitive. These are addressed below.It must be noted again that, in addition to formal trade, there is a large volume of informal and ‘unauthorized’trade between Nepal and India, 35 to 40 per cent of formal trade by some estimates. One of the reasons forsuch a large volume of informal trade does reflect attempts by traders to bypass constraints arising from NTBsor some of the ‘other’ impediments discussed herein. While informal trade does not fall directly within thescope of this report, it is clear that such phenomenon must be taken into account when corrective measuresare being considered and implemented to reduce the impact of NTBs and trade impediments.132NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT
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N T I S2010Government Procurement Restrictions, Export Subsidies, Intellectual PropertyProtection, Barriers to Trade in Services, Restrictions Affecting Electronic<strong>Commerce</strong>, and Investment BarriersNo significant issues were identified in those six areas by Nepalese exporters through discussions withstakeholders and informed parties.Sector-specific IssuesWith respect to the export potential products and services reviewed in Chapter 2, the critical NTBs affectingagricultural commodities or semi-processed agro-food products exported from Nepal appear to be related tothe application <strong>of</strong> and compliance with Indian standards and technical regulations. In addition, traders find itdifficult to comply with a wealth <strong>of</strong> import regulation permits and licences.In regards to selected garments and handicrafts, the key trade obstacle appears to be the application <strong>of</strong> erraticand discriminatory duties at Indian central level or at Indian state level. These instruments do seem to placeNepalese goods, <strong>of</strong>ten effectively, at a competitive disadvantage vis-à-vis competing Indian products.A number <strong>of</strong> other constraints affect negatively Nepal’s export performance in those key sectors, but largely asa result <strong>of</strong> domestic Nepalese shortcomings and self-inflicted deficiencies, whether in relation to infrastructure,regulatory framework, law and order, political stability, investment-friendly policies, etc. These are reviewedin greater detail below and must also be the object <strong>of</strong> urgent and well-planned actions if real progress is to beachieved on the export performance front. The resolution <strong>of</strong> India’s NTBs and trade impediments alone willnot make a real difference without effective and long-lasting improvements on the domestic front.With respect to the potential service exports reviewed in Chapter 2, it would seem that the great majority <strong>of</strong>trade impediments are the result <strong>of</strong> domestic shortcomings on the Nepalese side in such areas as the lack <strong>of</strong>tailor-made policies, weak infrastructural facilities, political stability conducive to development and attraction<strong>of</strong> necessary foreign investment, and others. Most are discussed in greater detail in Chapter 10.3.4 Other Impediments to Nepal-India TradeAs indicated above, it appears that many impediments that affect Nepal’s export performance to Indianegatively are either Nepalese domestic in nature or Indian issues that do not fit within the traditionalcategories <strong>of</strong> NTBs. Nevertheless, both sets <strong>of</strong> issues are critical to Nepal’s ability to trade and must beaddressed for Nepalese exports to be competitive. These are addressed below.It must be noted again that, in addition to formal trade, there is a large volume <strong>of</strong> informal and ‘unauthorized’trade between Nepal and India, 35 to 40 per cent <strong>of</strong> formal trade by some estimates. One <strong>of</strong> the reasons forsuch a large volume <strong>of</strong> informal trade does reflect attempts by traders to bypass constraints arising from NTBsor some <strong>of</strong> the ‘other’ impediments discussed herein. While informal trade does not fall directly within thescope <strong>of</strong> this report, it is clear that such phenomenon must be taken into account when corrective measuresare being considered and implemented to reduce the impact <strong>of</strong> NTBs and trade impediments.132NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT
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