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.