Nepal's Recent Trade Policy

Abstract

The last ministerial conference of the FAO in Rome noted that financial contributions from the so-called rich countries, however important, have not been sufficient to speed up the improvement of the developing countries' living standards, and that the countries aided had received less through economic aid than they lost through decrease in the prices of the goods they sell. In general, aid from outside affects balance of payments since, with the exception of grants-in-aid, it is paid off gradually. Even if in the initial stages of economic growth the developing countries have to depend on foreign aid, this should be replaced as quickly as possible by trade. This aspect has become more pertinent today with the emergence of regional economic groups such as the European Common Market. Apart from other considerations, the solution is to improve the conditions of international trade for developing countries. During the last few years Nepal, which was virtually isolated from the outside world before 1951, has been seeking a realistic approach to the development of trade and commerce with as many countries as possible. The purpose of this essay is to analyze the pattern of Nepal's trade policy, particularly in connection with its efforts to expand economic relations with various countries. Nepal is a land-locked country bordered on the west, south and east by India and on the north by Tibet. Its frontiers are not very distant from East Pakistan, for at one point only sixteen miles of Indian territory intervenes. Geographically, trade routes to India and further overseas through India, are both natural and convenient; the Himalayan range, which forms the border between Nepal and Tibet, has made trade with China more complex, however. Although Nepal's economy is basically agrarian, with about 88% of the population dependent on agriculture, only one-fourth of the country's total land area is either cultivated or cultivable. Thus, there is very little surplus production available for export after meeting domestic needs, even of commercial crops. Again, difficulties emanating from the lack of an integrated transportation system have resulted in frequent local shortages of foodstuffs. Even in good crop years there are substantial price differences between one part of the country and another. In fact, lack of transport has divided the surplus and deficit areas into rather tight regional compartments. As a result, only goods of high value are generally worth transporting. Again, the sub-