Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010Two trade treaties govern trade between Nepal and China, including the Tibet Autonomous Region (TAR): The 1981 Trade and Payment Agreement between Nepal and China PRC; and The 2002 Agreement on Trade and Other Related Matters between Nepal and TAR.The Trade and Payment Agreement lasts three years with automatic renewal at the end of the period. The2002 Agreement between Nepal and China PRC on trade-related matters between Nepal and TAR is valid forten years and is subject to renewal. The applicable trade policy states that all products, except for the goodsof archaeological and religious importance, explosive materials, goods relating to environment and wildlifeconservation, and other goods prohibited by various international treaties and conventions, shall be openedfor export.There are differences in border crossings in the Agreements of 1981 and 2002. The Agreement of 1981 listsKodari, Yari, and Rasuwagadi on the Nepalese side and Nyalan, Kyerong, and Purang on the Chinese side.Two crossings were added in the 2002 Agreement. They are Olangchung Gola on the Nepalese side and Rinoon the Chinese side. Rasuwagadi (Timure) traditionally is a much used entry point for Nepalese and Tibetantraders. The Chinese government is constructing a 17 km road between Syafrubesi and Rasuwagadi road.Also, the Chinese government is developing Kerung town as a trade centre 25 km from the border.The 2002 Agreement deals mainly with the movement of residents of the border districts with tourism andtrading practices. Residents of border districts are allowed to carry on traditional trade on barter underprovisions of Article 8 of the Trade and Payment Agreement of 1981. Following the introduction of a newtrade treaty between Nepal and India, there is a perceived need to bring changes to the Nepal-China treaties,too. For instance, there is a need for dedicated provisions regarding trade in services (in core sectors such astourism, health, IT, or education).In 2005, the GoN and the Government of the People’s Republic of China (GPRC) signed a Memorandumof Understanding (MoU) on the formation and operation of an Inter-Governmental Trade CooperationCommittee (IGTCC). The IGTCC includes senior government officials and border authorities from the twocountries. It meets at least once a year alternately in Kathmandu and Lhasa. The IGTCC has the authority andresponsibility for facilitating trade, investment, and matters of mutual interest, for facilitating transportation,resolving problems that may arise, and making policy recommendations to the respective governments forstrengthening bilateral trade and economic cooperation. The MoU is set to remain in force for a periodof five years, with automatic extension of another five years if no party decides to terminate it. The MoUalso provides a forum for addressing issues that may arise from the implementation of the 1981 Trade andPayment Agreement and the 2002 Agreement on trade-related matters between Nepal and Tibet.4.3 Tariff BarriersNepalese exports to China are subject to tariff and non-tariff regimes. As of 2007, tariff rates are as follows: The average applied MFN tariff rate for all goods is 9.7 per cent. The average applied MFN tariff ratefor agricultural products is 15.3 per cent and 8.8 per cent for non-agricultural products. The preferential tariff rate applied under the bilateral free trade agreement ranged from 3.5 per centto 9.1 per cent. As of 2007, China unilaterally applied preferential tariff rates to 37 LDCs that ranged from 9 per cent to9.5 per cent, depending on the origin of goods. China’s preferential rules of origin for LDCs state that138NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT