REVISED TREATY
OF TRADE BETWEEN INDIA AND NEPAL (GOODS)
Note
on the meeting of 29 MARCH 2021
Chairman: H.E. Dr.
Muhammad Mujtaba Piracha (Pakistan)
1. The 13th Dedicated
Session on Regional Trade Agreements (RTAs) of the Committee on Trade and Development (CTD) was convened in document WTO/AIR/COMTD/RTA/8/Rev.1
of 19 March 2021. Under item C
(I) of the agenda, the Committee considered the Revised Treaty of Trade
between India and Nepal (Goods) (WT/COMTD/RTA18/N/1, WT/COMTD/RTA18/1). The
present document contains the minutes relating to the consideration of this
agreement.[1]
2. The Chairman said that the Revised Treaty of
Trade between India and Nepal was notified under paragraph 4(a) of the Enabling
Clause on 2 August 2010. The notification was originally circulated on 3 August
2010 in document WT/COMTD/N/34, and then re-circulated on 14 December 2020 in
document WT/COMTD/RTA18/N/1, in accordance with the new symbols for
notifications and subsequent documentation relating to RTAs agreed to by the
CTD at its 108th Regular Session on 5 April 2019. The
factual presentation on the Revised Treaty of Trade between India and Nepal – document
WT/COMTD/RTA18/1 dated 15 December 2020 – was prepared by the Secretariat on
its own responsibility, and in full consultation with the parties. No
written questions were received on this agreement before the present meeting. As
per the usual practice, he wished to organize the consideration of the
agreement by first inviting the parties to make their introductory remarks. The
floor would then be opened for interventions by other Members, including on the
factual presentation. The parties could provide responses at any time during
the discussion to any questions raised. Members would also have the opportunity
to ask follow-up written questions after the meeting was concluded. He would
remind Members of the timeframes for follow-up questions and responses at the
end of the discussion on the agreement.
3. The representative of India
expressed gratitude for the comprehensive and detailed factual presentation
prepared by the Secretariat. She said that the Revised Treaty of Trade between
India and Nepal came into force in 2009. The agreement aimed to expand trade
and encourage collaboration in economic development for the mutual benefit of
the two countries. The factual presentation noted that India was Nepal's
largest export destination in 2018, comprising 58.9% of Nepal’s exports. Nepal
was India's eighth largest export destination, comprising 2.3% of Indian exports.
Under the agreement, India had agreed to promote the industrial development of
Nepal through the granting, on a non-reciprocal basis, of special favourable treatment
to industrial products manufactured in Nepal and exported to India – in respect
of customs duties and quantitative restrictions which were normally applicable
to these products. Prior to the entry into force of the agreement in 2009, 2%
of India's tariff lines – which amounted to 228 tariff lines – were duty-free
on a most-favoured-nation (MFN) basis. This corresponded to 0.2% of India's
total imports from Nepal during the 2006-2008 period. Upon entry into force of
the agreement, an additional 94.7% of India’s tariff lines – a total of 10,748
tariff lines – became duty-free. This corresponded to 80.1% of India's imports
from Nepal. She also noted that Nepal’s duty-free tariffs for Indian imports had
increased by an additional 8.9% of tariff lines upon the entry into force of
the agreement. The liberalized tariff lines corresponded to 5.7% of
Nepal's imports from India. Around 93% of Indian imports into Nepal remained
dutiable. Total bilateral trade between the two countries reached USD 8.27 billion
in the 2018-2019 period, and had been steadily increasing over the years. In closing,
she thanked Members for their interest in the transparency and monitoring
exercise.
4. The representative of Nepal
said that the Chairman could count on Nepal's support and cooperation during his
tenure. Appreciation was also expressed for the contributions of the previous
Chairman. He additionally thanked the Secretariat for the preparation of the
factual presentation. He went on to say that Nepal and India were close neighbours,
and that their ties had further strengthened over time through increased
interactions and close cooperation. The countries had enjoyed longstanding and
intensive trade relations, and Nepal’s partnership with India in trade and
transit was a matter of utmost importance to Nepal. The parties had formally signed
the Treaty of Trade and Commerce in 1950, and had subsequently updated
their trade relations in different time periods. The Revised Treaty of Trade
was the accumulated outcome of the parties' longstanding experiences, and
aimed to further strengthen their trade relations in a more transparent,
predictable and rule-based manner. The agreement was signed by the parties on 27 October
2009, and came into force on the same day. It superseded its predecessor – the
Treaty of Trade signed in 1991 and its amendments thereafter – and covered only
trade in goods. The factual presentation on this agreement was the first on a Nepal-India
Trade Treaty to be discussed in the CTD. His delegation believed that the
factual presentation would contribute to ensuring transparency for RTAs, as per
the spirit of WTO law. Though the size and composition of Nepal's and
India's economies were significantly different, the agreement had become instrumental
in facilitating bilateral trade relations. The agreement was initially to
remain in force for a period of seven years, and was to be automatically
extended for a further period of seven years unless a written notice of
intention to terminate the agreement was given by any party in advance. In this
regard, he indicated that the agreement had already been extended for seven more
years. The agreement could also be amended through mutual agreement. Under the
terms of the agreement, each party was to accord to goods, of the other party,
treatment no less favourable than what it accorded to the goods of a non-party.
This was with respect to customs duties and charges of any kind imposed on, or
in connection with, importation and exportation – as well as with respect to import
regulations, including quantitative restrictions. The agreement additionally ensured
national treatment to each other's goods, and had the objective to explore and
undertake all measures – including technical cooperation – to promote,
facilitate, expand and diversify trade between the two countries.
5. Some of the major aspects of the
agreement included trade through mutually agreed trade routes; the simplification,
standardization and harmonization of customs, transport and other related
procedures; the development of border infrastructure; no provisions of export
duties and charges; and India’s best endeavour to assist Nepal to increase its
capacity to trade through improvement in technical standards, quarantine and
testing facilities, and related human resources. Other important features of
the agreement included the adoption of necessary measures to reduce or
eliminate non‑tariff, para-tariff and other barriers; exchanging trade data;
and undertaking all necessary measures for the free and unhampered flow of
goods. He also pointed to reciprocal duty-free market access for primary
products; duty-free market access to Indian markets for Nepal’s industrial
products qualifying though the rules of origin criterion; provisions for the invocation
of safeguard measures in some situations; and quantitative restrictions for
preferential access to Indian markets for vegetable fats, acrylic yarn, copper
products, and zinc oxides produced in Nepal. In addition, there were provisions
concerning the granting of a margin of preference by Nepal to imports of
industrial products from India, and the favourable treatment by India to Nepalese
goods produced by small-scale enterprises. He indicated that the agreement
established bilateral consultation mechanisms, ranging from the
Intergovernmental Committee (IGC) at the Commerce Secretary level to the working
level at border points, so as to facilitate implementation and resolve issues
affecting the operation of the agreement. The IGC had met in December 2020 and had
discussed a wide range of issues of mutual interest concerning trade, transit,
investment, and greater economic integration between the two countries. Trade
data revealed a significant increase in the volume of bilateral trade over the
years, which was dominated by manufactured goods. India remained the largest
trade partner of Nepal, both in terms of imports and exports of goods. Trade
with India accounted for about 62.2% of Nepal’s total trade in the fiscal year 2019-2020,
and comprised exports of 70 billion Nepalese rupees (NPR) and imports of NPR 735
billion. Similarly, Nepal was the second largest trading partner of India in
South Asia, and was one of the top 10 export destinations of Indian goods in
the world market. Nepal's trade deficit had widened significantly over the
period, mainly due to rising imports, while exports had remained relatively
stable.[2]
6. The representative of the European
Union expressed her delegation’s appreciation to the parties for the transparency
provided.
7. The representative of the United
States thanked India and Nepal for participating in the transparency
exercise. She noted that both parties had non-notified agreements that were in
force, and urged the parties to notify these agreements promptly.
8. The Chairman said that
oral discussion of the Revised Treaty of Trade between India and Nepal could be
concluded in accordance with paragraph 11 of the Transparency Mechanism for
RTAs (RTA TM). Follow-up questions by Members would need to be submitted in
writing to the Secretariat within one week, by 5 April 2021. The parties would
then be given two weeks to submit written replies, by no later than 19 April
2021. In accordance with paragraph 13 of the RTA TM, all written submissions as
well as the minutes of the present meeting would be circulated promptly in all
WTO official languages, and would be made available on the WTO website.
9. The representative of the United
States thanked the Chairman for providing the deadline for the submission
of follow-up questions. In light of the connection problems experienced when
the representative of Nepal was delivering his statement, she asked whether it
would be possible for Members to review Nepal's statement prior to this
deadline.
10. A representative of the Development
Division said that he would follow up with the delegation of Nepal after
the present meeting. If there were no objections by Nepal, the statement would
be shared with Members.
11. The Committee took note of
all interventions.
__________
[1] The general minutes of the CTD's 13th Dedicated Session
on RTAs are contained in document WT/COMTD/RTA/M/13.
[2] The intervention by Nepal is reflected in this Note at the point
when the Chairman invited the delegation of Nepal to take the floor to
introduce the agreement. However, connection problems were experienced during
the remote delivery of this intervention by Nepal, and the statement was
delivered through several attempts over the course of the meeting.