Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010It is not clear what amount of re-exports of Nepalese exports by Indian importers may be taking place. Thismay well be the case with tea, for example. That being said, all sectors, excepting green tea, show increasedvalue of exports during the 2007/09 period. An analysis is necessary to determine how much Nepal’s exporttrade patterns are affected by SPS compliance before looking at how these constraints may be addressed.Looking at all export sectors that are SPS-sensitive to varying degrees and aggregating the data by trading bloc,the following results are returned for the year 2007/08 (Table 8.2):Table 8.2Pattern of Trade of Nepalese Exports to Main Regions of the World in 2007/08*SPS-sensitivityEuropean Union/EuropeNorth and SouthAmericaHighly sensitive 1.0 1.1 97.8Fairly sensitive 1.1 0.5 98.4Relatively insensitive 1.8 2.1 96.0Average 1.3 1.2 97.4* An Index of SPS-sensitivity based on the various SPS subcategories (IPPC, OIE, CODEX, and TPC) aswell as the difficulty of compliance has been compiled by the author and is used as a preliminarytool to determine the economic case for SPS interventions.AsiaAs seen in Table 8.2, despite the fact that the EU/European and American markets are each larger than theAsian markets in terms of GDP, they are currently insignificant in terms of Nepalese exports. The situation forthe group of potential agro-food exports identified in Chapter 2 is similar, and if so, indicates that Nepal wouldappear to have largely exited from trade with America and Europe. Even within the Asian trading bloc Indiais the dominant trading partner and there is comparatively little in the way of exports to China, the Republicof Korea, and Japan. The reasons for this could be partially SPS related, but it is important to note that Nepalhas other structural impediments to trade—such as trade facilitation, cost of transport, and others--that arenot specific to SPS-sensitivity.Economic Impact of SPS and Food Quality Standards on Nepal’s Exports 1Table 8.3 shows that, in recent years, there have been several SPS-related trade incidents for Nepalese exportsthat have had a sizeable impact on formal trade (the approximate value of lost exports described in Table 8.3exceeds US$24 million). The calculated negative effects from all the bans have been assumed by the WorldBank to equate to an economic loss equivalent to a third of the approximate value of exports lost described inTable 8.1, or around US$l0 million over the five-year period used.These incidents are sufficiently frequent to point to a lack of capacity within the Nepalese SPS support structure.Nepalese officials tend to blame abrupt changes in the policies, regulations, and enforcement level of majortrading partners, such as India. While those are factors, they cannot account for all difficulties encounteredby Nepalese exporters. Those may also explain Nepal’s inability to participate in the lucrative European andAmerican markets (Table 8.2).1This section is derived in part from Annex 11: Safeguard Policy Issues of World Bank Source Report 48346. However, many of the assertions inthe World Bank report were independently verified and/or updated.188NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT