Soaring shipping costs make Nepali products less competitive in USNepal's main exports to the US are woollen carpets, woollen felt goods, readymade garments, handicrafts and Himalayan dog chews.
Shipping costs to the United States have more than tripled since the pandemic, taking away the ability of Nepali products to compete with goods from neighbouring countries in the American market, traders said.
Kiran Prakash Saakha, president of the Nepal-USA Chamber of Commerce and Industry, said that freight charges have increased at a faster rate than in other countries, making life hard for domestic exporters.
“Because of the high costs, Nepali products cannot compete with those produced in neighbouring countries, so the government should closely monitor the rates and look for solutions to bring prices back to where they were before the pandemic,” he said.
Speaking at a virtual interaction programme organised by the Nepal-USA Chamber of Commerce and Industry, most exporters said they were worried that if cargo costs remained on the high side even after the pandemic, it may become impossible for them to compete in the global market.
"Online business is booming in the US, but domestic traders are not able to make payments online for lack of an international payment gateway. This is one of the biggest obstacles to trading with the US," said Saakha, who is also the executive director of Saakha Steel.
Online shopping has taken off all over the world because of movement restrictions resulting from the pandemic, but this has not happened in Nepal because domestic sellers still cannot accept international online payments, the report of the virtual interaction programme said.
According to the Trade and Export Promotion Centre, Nepal's exports to the US in the last fiscal year 2020-21 were worth Rs13.79 billion, a 46.1 percent jump from Rs9.44 billion in the previous fiscal year. The US accounted for 9.8 percent of Nepal's total exports.
Nepal had a trade deficit of Rs5.70 billion with the US in fiscal 2020-21.
Imports from the US amounted to Rs19.50 billion in 2020-21, down 17.2 percent from Rs23.54 billion in 2019-20.
In the fiscal year 2018-19, Nepal bought Rs13.42 billion worth of goods from the US while exports were valued at Rs10.84 billion.
Nepal sent woollen carpets, woollen felt goods, readymade garments, handicraft items and Himalayan dog chews to the US.
"Foreign direct investment from the US in Nepal has been declining because of the lack of a compensation law which is the number one priority for American investors," Saakha said.
“We even appealed to the government to pass a compensation law two years ago, but it did not listen to us,” he said. "As duplicate products are easily available in the market, US investors fear putting money in the country."
Saakha added, "American financiers are also very particular about intellectual property rights, but the government does not seem to be serious about it, due to which they are not keen to invest in Nepal."
According to the Department of Industry, Nepal received investment commitments for seven projects worth Rs1.67 billion from the US in the fiscal year 2020-20. There were four investment pledges valued at Rs4.53 billion from the US in the fiscal year 2019-20.
Saakha said that there was a huge potential market for woollen carpets from Nepal in the US, but Nepal had not been able to market them at major platforms like big trade fairs.
"Nepal needs to hold government-to-government talks so that Nepali products get exposure at big trade fairs in the US because exporting is one of the main ways to bring foreign exchange into the country," he said.
For Nepal to compete in the international market, technical assistance from the US government could be a huge support, the report said. However, it is the responsibility of the business community to conduct research on what kind of technical assistance Nepal can receive under the Trade and Investment Framework Agreement (TIFA), and how it can be used to make Nepal more competitive.
Although the US has granted preferential treatment to 77 Nepali products, like carpets, pashmina and travel goods, Nepal has not been able to take advantage of the facility. The country has not been able to produce them on a large scale, properly market them, enhance the quality and ensure assurance of the standard of the products.
According to the Nepal-US Trade and Investment Framework Agreement signed in 2011, Nepal is entitled to receive technical assistance. However, the Nepal government has not been able to explore the various kinds of technical assistance it can receive from the US government.
“It has been a decade since the deal was concluded, but Nepal has not been able to obtain technical assistance from experts which is intended to increase exports to the US market. The Trade and Export Promotion Centre and the Ministry of Industry, Commerce and Supply do not seem to be doing anything to benefit from the facilities provided by the US,” Saakha told the Post.
During the fifth virtual meeting on the Trade and Investment Framework Agreement held in December last year, the US had agreed to provide technical support for capacity building of Nepali producers in order to increase the volume of exportable goods.
The Trade and Investment Framework Agreement signed in April 2011 between Nepal and the US is a bilateral pact aimed at expanding trade, increasing investment and technical cooperation and strengthening economic ties.
Due to disruptions caused by the pandemic, many sectors including small, medium, and large stakeholders in Nepal-US trade have been affected, the report said.
Even domestic production has been hit with the transportation of raw materials being compromised due to travel restrictions, and imports being stuck at the border or somewhere between the border and the factory, the report said.
The government should look into the reasons behind Nepal’s raw material imports and cargo still being stuck at various border points like on the Nepal-China border, and find the best way to clear customs and forward consignments to their destinations at the earliest.
The report suggested that it would be best if the US Embassy brought better clarity in its communication system targeted at the affected businesses, and came up with a plan to alleviate the problem of inadequate visa interview dates.
“Overall exports to the US have increased in recent years despite various problems, but it is believed that they can swell even more if the Trade and Export Promotion Centre and the government of Nepal seriously considers the above-mentioned problems and solutions provided by the association heads of various export oriented businesses,” the report concluded.