TFTEA signed by President Obama

President Barack Obama signed the Trade Facilitation and Trade Enforcement Act (2015) on December 18, 2016. With his signing, the act has become the law, according to which the US starts implementing trade preferential program (TPP) from December 30, 2016 (http://www.myrepublica.com/news/11274). The law will last for 10 years, and it allows about 63 different Nepali products (textiles and apparel products) a tariff free entry in the US markets.

As noted in previous posts, it is a good opportunity for Nepali businesses that are involved in producing and marketing the specified products, and also for those who are interested to enter into the market. The law also includes components of local capacity building in developing and marketing the products as part of the US government's local capacity development effort. Given this, local businesses should not hesitate to ask for training and capacity development assistance from the related government institutions.

The US market is a very competitive, and consumers' expectations are very high on quality standards. Trade fairs among the producers and suppliers  within country could help facilitate in producing improved goods and services to the demanding US consumers. Regular participation of the Nepalese businesses in such trade fairs in the US would greatly help promote goods among the US consumers. The TPP can only help to the effort of exporting goods in the US markets by making them less expensive with no tariffs at the US side, but what may be more important is the quality of the products, and promotion of those products in the foreign consumer markets.

Nepal's trade with the US increased by 0.17% in 2015

US imported about US$ 86.4 million worth of goods from Nepal in 2015, according to US Census Bureau (https://www.census.gov/foreign-trade/balance/c5360.html). Total exports from the US for the same period was US $36.5 million. With a total of US$ 123.1 million compared to US$ 122.9 million in 2014, total amount of US-Nepal trades increased by 0.17%. With this, Nepal now ranks 159th among the top trading partners of the US. In 2014, Nepal ranked 163rd and in 2013 it ranked 164th. As these numbers show, overall trade is improving but in a very small level.

With enforcement of the the Trade Facilitation and Trade Enforcement Act (TFTEA) recently signed by the President Obama next month, Nepal's trade with the US is expected to improve this year onward provided that the political and macro economic situation remain under control in Nepal. In 2015, carpets and textile floor coverings made the biggest share of Nepal's exports to the US (Table 1). With the TFTEA in action, the opportunity to improving the trade of such products with the US has opened up, one more time.

Table 1. Total 10 imports to US from Nepal, 2015
Rank	Commodity	Total
1	Carpets, other textile floor coverings, knotted	$31,110,177
2	Carpets & Other Text Floor Cover, Woven	$6,327,023
3	Antiques	$5,731,358
4	Shawls, Scarves, Mufflers, Mantillas, Veils E 6214	$3,009,605
5	Preparations for animal feeding	$2,951,607
6	Travel goods, including handbags, wallets, jewelry	$2,225,655
7	Women's or girls' overcoats, knit or crochet	$2,117,947
8	Misc. articles made from textile materials	$1,834,792
9	Hats, headgear, knit, lace	$1,754,664
10	Men's or boys' suits, not knit	$1,555,168

Source: http://ustradenumbers.com/countries/nepal/

We will be closely monitoring and reporting the trade numbers to continuously gauge the effect of the TFTEA and overall trade situations between the two countries. Its an important that Nepal uses this new opportunity to expand the locally made products to the US markets, and builds a foundation of a robust global-local economy.

Great news for the Nepalese garment industry: USA's Nepal Trade Preferential Act, 2016

There is a very welcoming news for the Nepalese garment industry this week: thanks to the US senator US Senator Dianne Feinstein, who introduced the Nepal Trade Preferential Act in the congress, and President Obama who signed it today. The bill, which has now become a legislation with the president's signature, authorizes duty-free tariff benefits for up to 66 types of items, including certain carpets, headgear, shawls, scarves, and travel goods made in Nepal. This legislation will remain valid for next 10 years. It aims to boost the Nepalese textile and apparel industry which has been severely impacted since 2005 when the global garment quota was eliminated. There are some specifics in the legislation which are targeted to promote the textile, garments, and carpet products made in Nepal utilizing local traditions and cultures:

1. The legislation covered products should not be import-sensitive (i.e., should not be competitive to other similar types of import products in the US). Also, 35% of these products value must be derived from Nepal, in that it can't be just shipped via Nepal. 
2. The textiles and apparel products should be assembled in Nepal. These products can be hand loomed, handmade, folklore articles and ethnic printed fabrics;
3. Nepalese industry should be mindful that there is a limit in the total quantity of exports. The total volume of duty-free imports should not be 1.5% of total U.S. textile and apparel imports.

More analysis on this topic will be forthcoming in this blog. To know more about the legislation, please visit:

1. http://nepal.usembassy.gov/pr-02-25-2016.html
2. http://www.feinstein.senate.gov/public/index.cfm/files/serve/?File_id=7ade3fba-fdd1-44a7-8157-6b658b15110e
3. http://www.feinstein.senate.gov/public/index.cfm/textonly/press-releases?ID=8B3656CA-DBF2-4EE8-BDC6-329B31CCBD9B

Exports trend of Nepal, India, China and USA from 2006-2015/2016

This post presents trends of total exports of Nepal and its two bordering countries- India and China between 2006 and 2015. Export trend of USA for the same period is also included at the bottom just for a quick comparison purpose. Graph source: http://www.tradingeconomics.com/united-states/exports. 

These graphs speak for themselves. The exports trend line for Nepal is more flat than it is for India, China and USA. The data for Nepal are less up to date. Nepal's exports volume is too small (presented in Nepali Rupees), relative to other countries which are presented in US dollars. 

It should be noted that India, China and USA are not strictly comparable to Nepal in many respects- size of the country, geography, populations, etc. Neither the attempt here is to strictly compare the export numbers of these countries. Instead, the goal is to have a quick visual observation how Nepal's exports look like vis-a-vis other countries in the last 10 years. 

Nepal's total exports may not ever be at part of China and India due to country's size and economic potentials. However, the exports most certainly need to grow more robustly in coming years to lift the country from economic destitutions. 

Nepal-US Trade: One of the Weakest in South Asia

US-Nepal trade is weakest among the major South Asian economies.  Although the US exports less to Nepal than it imports, the overall trade is still minimal. The only country in South Asia where US exports less compared to its imports, before Nepal, is Afghanistan. That is likely due to post war and low demand situation there. India is the highest exporter to the US followed by Bangladesh, Sri Lanka, Pakistan and Nepal (see Figure 1).

Source: https://www.census.gov/foreign-trade/balance/c5360.html 

The trading gap between the US and the South Asian countries was not huge in 1992. Although India was still the biggest net exporter even then, Bangladesh and Sri Lanka were similar in trading with the US. Nepal, Pakistan and Afghanistan were not too different from each other. Fast forward in 2015, the net imports by the US from India sky rocketed, reaching a total net import of US $20,000 million in 2015 from US $1,800 million in 1992, Bangladesh US $4,500 (US $600 million in 1992), Sri Lanka US $2,100 (US $600 million in 1992) and Pakistan $1,500 million (US $ -62 million in 1992) respectively (Figure 1).

Interestingly, the overall trend of Nepal-US trade hasn’t changed much since 1992. The net US import slightly declined in 2015 (US $62 million in 1992, US $41 million in 2015). While the decline in Nepal's exports to the US is not good in itself, Figure 1 puts the US-Nepal trade into a perspective. Nepal’s trade with US today is very similar to what it was back in 1992, while its neighboring countries have moved on. Greater exports to the US- the world’s greatest economy- can indicate many things for a developing country like Nepal—improved trade relations, better flow of goods and services between the countries, improved markets and efficiencies, and countries’ mutual political reach and influence. All major South Asian countries, except Nepal, seem to be moving in that direction. In contrast, Nepal’s trade is increasingly concentrated to India instead. In 1990, the total share of Nepal’s trade with India was only 34%. In 2015, that percentage grew almost double and reached 64%.

Nepal is rich in nature and culture. The arts and antique products and carpets have found consumers in the US market to some extent. Nonetheless, the trade of these products is still very minimal. According to the Office of the United States Trade Representative’s 2013 data, Nepal was 125^th largest supplier of goods to the US. The key items exported to US include textile floor coverings, woven apparel, arts and antiques, knit apparel and leather. There is a market in the US, but that market needs to be studied well and Nepalese products should be specialized to meet the need of the market. Harnessing the richest market in the planet and reducing excessive dependency on one market (India) can be beneficial for Nepalese economy in the long run.