Nepali goods receive preferences from two windows at the entrance of the United States market. The first is the Generalised System of Preferences (GSP) and the second is the Nepal Trade Preference Programme (NTPP). The GSP complies with the World Trade Organisation’s enabling clause which permits developed countries to offer trading preferences to developing countries. According to the Office of the US Trade Representative, almost 119 countries are beneficiaries of the GSP. The GSP expired in December 2020.

The NTPP is the flagship programme of the Trade Facilitation and Trade Enforcement Act (TFTEA) of 2015. Section 915 of the act empowers the US president to set forth a new Nepal specific preference programme to help it recover from the devastating earthquakes of 2015. The NTPP went into effect in 2016 granting Nepal non-reciprocal preferential trade benefits.

What is offered?

A total of 77 eight-digit tariff lines in the US Harmonised Tariff Schedule fall in the offer list for Nepal. For these tariff lines, Nepali products are exempted from customs duties. The tariff lines cover 56 textile-related tariff lines, 10 leather and footwear tariff lines, nine clothing tariff lines, and two for other manufactured products. This coverage is on top of the GSP, which by itself covers approximately 5,000 products. Nepal is the only country receiving this particular trade preference under the TFTEA.

Nepal needs to meet a slew of conditions in the NTPP. The requirements attached to the African Growth and Opportunity Act (AGOA), which provides eligible sub-Saharan African countries with duty-free access to the US market for over 1,800 products, apply to the NTPP. They include making continual progress toward establishing the following: market-based economies; the rule of law and political pluralism; elimination of barriers to US trade and investment; protection of intellectual property; efforts to combat corruption and others.

The 2022 USTR Annual Report to Congress on the Implementation of the NTPP reveals that Nepal's exports under the NTPP in 2017 amounted to $2,368 million which grew slightly to $3,199 million in 2018. The year 2019 saw exports slipping to $3,180 million and further in the following year 2020 to $2,465 million. In the fifth year 2021, exports rebounded to $3,939 million. During these five years, Nepal exported goods worth $15,151 million through the window which is far below its huge potential.

Every year, the US Congress discusses Nepal's utilisation of the NTPP, and it is ironic that in Nepal neither Parliament nor any national body discusses its performance. This shows an indifferent attitude towards soul-searching on the part of the beneficiary with respect to making good use of the preferences. Second, capacity enhancement, mainly of entrepreneurs and their products, has been a largely neglected agenda. This looks crucial against the backdrop of the deadline of December 2025 for the NTPP. One more point to be noticed in this regard is that trade facilitation and capacity building programmes for Nepal are included in the NTPP. Nepal accordingly put forward its concerns during the Trade and Investment Framework Agreement (TIFA) Council meetings. Despite this, the desired results are yet to appear. It is a pleasure to see that Nepal's concerns have been incorporated in the recent reports submitted to Congress.

Future pathway

Nepal needs to follow a two-pronged approach. First, optimisation of the existing privileges. Just like US Congress discusses the implementation of the NTPP, a high-level Nepali body has to do the same to maximise gains. Similarly, enhancing the technical capacity of Nepali entrepreneurs is an already delayed agenda. Activities such as holding trade fairs and B2B meetings between US importers and Nepali exporters should be intensified. Likewise, bilateral platforms like the TIFA Council should be utilised to their fullest so that the available opportunities can be tapped and arising issues sorted out in a timely manner. Nepal's trade diplomacy noticeably remains poor. This has to be corrected, then only will Nepali traders realise the intended benefits.

Maximising the NTPP is mainly the government's job. The government of Nepal must explore additional opportunities by going the extra mile. It should continue to demand the expansion of additional tariff lines where the country possesses a better comparative position. The expansion may include readymade garments, footwear and other items from the GSP in the offer list. While dealing with this, the AGOA list will be helpful as it provides duty-free market access to goods from the Sub-Saharan countries for more than 1,500 products.

In comparison to the AGOA, the NTPP package looks smaller. Next, the biggest thing that Nepal needs to do is extend the NTPP after December 2025. The country must demand that the preference be extended for at least the next 10 years, given the uncertainties following its graduation from the status of a least developed country.