Nepal should consider adopting non-tariff measures such as sanitary and phytosanitary regulations, anti-dumping measures, countervailing duties, safeguards and quality standards as measures for trade protection, a study report said.

Tariff and non-tariff measures are two broad categories of trade protection policy. Tariffs, also called customs duties, are taxes imposed on goods and services when they are imported or exported. Non-tariff measures include quotas, subsidies and standardisation.

Nepal needs to compile a list of sensitive goods and promote industries that can achieve self-sufficiency within Nepal, said the study report entitled Trade Protection Measures in Nepal published by the Ministry of Industry, Commerce and Supplies.

The report added that import control can be achieved by imposing non-tariff measures on goods.

“Government agencies should raise public awareness to encourage the use of domestically produced goods that can meet the country's demand. By implementing sanitary and phytosanitary measures, Nepal can achieve self-sufficiency in products such as vegetables, fruits, wood, furniture, milk, fish and meat.”

Additionally, increasing the production of items such as shoes, slippers, tea, zinc plates, paints, garments, textiles and medicines can contribute to self-sufficiency. Nepal should apply anti-dumping and safeguard protection measures; just as other countries have imposed safeguards on the import of Nepali goods.

Nepal should prioritise the efficient augmentation of its capability to utilise trade protection measures. To bolster production capacity, it is imperative for the government to allocate subsidies to industries, bolster infrastructure development, and fortify its regulatory framework, the report said.

“As Nepal is graduating from its least developed country (LDC) status, it is crucial for the government of Nepal to develop strategies that can protect and safeguard trade and ensure a smoother transition, allowing Nepal to maintain its economic sustainability even in the absence of the aforementioned trade preferences,” the report said.

Inefficiency in policy implementation, inability to penetrate the international market, unawareness among stakeholders, inability to catch the opportunity, and revival of sick industries are the barriers to trade protection, the report said.

Former commerce secretary Purushottam Ojha said that trade protection measures are adopted in the legitimate interest of the country to protect public health, security and morale, and secondly, to protect domestic industries.

Anti-dumping duties are imposed when foreign goods are imported at prices lower than the market price, causing harm to domestic industry while countervailing measures are adopted when goods are available in the market at a low rate due to subsidies. Safeguards are adopted when imported goods threaten domestic industry.

"The government can also adopt legitimate measures to maintain the balance of payments, prevent economic crisis and conserve foreign currency," Ojha said.

"For countries with an import-based economy like Nepal, imposing trade protection measures on imports can raise the price of goods and hurt consumers. But at the same time, imports of sub-standard or imitation goods are also increasing in the country, and it has become important to control their import," he said.

“So it has become important to apply trade protection measures on specific goods by conducting studies. But for this, an investigative study needs to be done by establishing a separate organisation," Ojha added.

“Imports are done based on a country's requirements. The international market is importing goods based on their market preference and the people's wants. In the context of Nepal, there is no mechanism to study the market preferences of the people,” said trade expert Rajan Sharma.

"Countries have determined mandatory minimum requirements such as sanitary and phytosanitary, material content, chemical content and compliance with food hygiene, among others. Does any product of Nepal comply with these measures?” said Sharma.

“For instance, I am doing a study on exporting Nepali coffee to Germany and other countries in Europe. These countries are looking for minimum requirements for authorised consumer protection such as roasting of the coffee, beans size, phytosanitary certificate, traceability, backward linkage of the product, value to the farmers, good agriculture practice and hazard analysis compliance," Sharma said.

"The products of countries that satisfy all these requiremnts will be allowed entry," he said. "But when importing goods into Nepal, there are no strict standards or measures."

Nepal's major trading partners, such as India, China, Bangladesh and the United States, are controlling imports through anti-dumping, countervailing and safeguard measures. Trade agreements also contain provisions to protect domestic industry through such measures.

Many countries of the world protect trade through tools such as subsidies on domestic production, quotas on the import of sensitive goods, health protection of humans, animals and plants (sanitary and phytosanitary) standards, and standardisation, among others.

The import of Nepali tea has been obstructed in various countries because of low quality. In Europe, Nepali hard cheese is now subject to control based on sanitary standards. The same standards are also hindering the export of pork to China. Every country maintains its own quality standards and requires quality certification as a non-tariff barrier.

Anti-dumping duties are extensively applied in countries such as India, China, the US, and the United Kingdom. For instance, India has imposed anti-dumping duties on imported jute from Nepal and Bangladesh.

Following allegations by the Indian Jute Mill Association that Nepali and Bangladeshi jute had caused damage to the domestic jute industry, anti-dumping duties ranging from $6.30 to $351.72 per tonne have been levied since January 2017. Recently, this tax has been extended for five years.

In May 2020, anti-dumping duties were imposed on yarn imported from Nepal, Indonesia, China and Vietnam. The duty imposed on Nepali polyester yarn was lifted in August 2021.

Bangladesh also created transportation issues by imposing a non-tariff barrier on Nepali yarn. China initiated an anti-dumping duty on wine imported from Australia starting in 2020.

After Nepal graduates from LDC, it will no longer have access to the generalised system of preferences and duty-free quota-free facilities. Nepal will no longer have access to the European Union System of Preferences either.

The US grants special treatment to Nepal through its generalised system of preferences facility for LDCs and the Nepal Trade Preference Programme. Approximately 5,000 different products from Nepal are eligible for duty-free entry into the US under the generalised system of preferences programme.

A significant amount of resources is needed to meet the strict criteria established by developed countries. For instance, Nepal is confronted with the challenge of having to send its tea to Kolkata for food testing in order to meet the required standards, resulting in significant costs in terms of time, finances and management, the report said.

According to the report, it is also evident in Nepal that a body related to trade remedies should be established within the department to work towards trade protection.