GRADE 12 ECONOMICS

Nepal’s Foreign Trade

In the past, Nepal’s trade relations were mainly limited to India and China. At present, Nepal conducts foreign trade with many countries of the world.

Growth and Trend of Nepalese Foreign Trade

Foreign trade consists of export and import.

• When exports exceed imports, it is called trade surplus.
• When imports exceed exports, it is called trade deficit.
• In Nepal, both exports and imports are increasing, but imports grow faster, resulting in a rising trade deficit.

Composition of Nepalese Foreign Trade

Major exports:

• Jute and jute products
• Pulses
• Oilseeds
• Ginger
• Live animals
• Food items
• Carpets
• Readymade garments
• Handicrafts
• Herbs

Major imports:

• Finished and semi-finished goods
• Industrial raw materials
• Machinery and equipment
• Chemical fertilizers
• Petroleum products
• Consumer goods

Nepal imports mainly from India, China, and other overseas countries.

Direction of Foreign Trade

Earlier, Nepal’s foreign trade was confined to India and Tibet. At present, Nepal trades with many overseas countries, though the trade deficit continues to increase.

Problems of Nepalese Foreign Trade

• Landlockedness
• Poor transportation and transit facilities
• Low export and high import
• Production of low-quality goods
• Improper trade policy
• High cost of production
• Lack of publicity and advertisement
• Low level of production
• Slow industrial development
• Lack of trade diversification
• Tough competition from foreign goods

World Trade Organization (WTO)

The World Trade Organization (WTO) was established on 1 January 1995. Nepal became the 147th member on 23 April 2004.

Objectives of WTO

• Raising the standard of living of people
• Ensuring sustainable development
• Expanding world trade
• Providing a better share of growth in trade to member countries

Principles of WTO

• Free trade
• Trade without discrimination (Most Favoured Nation principle)
• Predictability through binding and transparency
• Promotion of fair competition
• Encouraging development and economic reform

South Asian Free Trade Area (SAFTA)

SAFTA is a trade agreement among SAARC countries: Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. It came into effect on 1 January 2006.

Objectives of SAFTA

• Eliminating trade barriers
• Promoting fair competition
• Creating an effective mechanism for trade cooperation
• Establishing a framework for regional economic cooperation

Principles of SAFTA

• Governed by the provisions of the agreement
• Compatibility with WTO and other treaties
• Reciprocity and mutuality of advantages
• Free movement of goods among member countries
• Trade facilitation
• Special preference to least developed countries (LDCs)

Foreign Employment and Remittances in Nepal

Working abroad for earning income is called foreign employment. Labor migration has increased rapidly due to globalization. Nepalese economy is highly dependent on remittance income.

Major Destination Countries

Malaysia, Qatar, Saudi Arabia, Kuwait, UAE, South Korea, Hong Kong, Japan, etc. Contribution of remittance to GDP: 25.42%

Advantages of Foreign Employment

• Solves the problem of unemployment
• Increases remittance income
• Produces skilled and trained manpower
• Raises standard of living
• Helps in poverty reduction
• Promotes human resource development

Disadvantages of Foreign Employment

• Shortage of manpower in the country
• Brain drain
• Family mismanagement and social problems
• Creates economic dependency
• High human and social costs
• Increase in trade deficit