Give the Trade Policy a Chance

This article is written by Purushottam Ojha.

Agriculture has remained the mainstay of Nepali economy as it contributes 33 percent to Gross Domestic Product and provides livelihood to 80 percent of the population. Agricultural trade still occupies an important place in the total exports of Nepal. Pulses, tea, coffee, large cardamom, ginger, Niger seeds and medicinal herbs and extracts are some of the important products being exported to India and to the third countries. However, the export process is becoming difficult over time due to application of non-tariff barriers by the importing countries mainly related to quarantine regulations, stringent quality parameters, pesticides residue monitoring, grading, packaging and others.

Agriculture is at the forefront of the trade and development debate of Doha Round of World Trade Organization (WTO). High tariff wall in market entry and trade distorting subsidies are the major bones of contention between developed and developing countries and the issue still remain unresolved. The developing countries, particularly the least developed ones, are unable to provide subsidies to farmers and their investment in agriculture sector has remained low due to paucity of resources. At the same time, increasing output in agriculture has become a baffling task due to degradation of resources, climate change and urban expansion. Nepal runs an additional risk of losing agriculture production due to the movement of the labor force to outside the country as migrant workers.

Nepal bought out a new Trade Policy in 2009 that replaced the policy of 1992. Agriculture has remained a priority sector of the economy as reflected in the current periodic plan and given its role in poverty alleviation, the trade policy aims at promoting exports of agricultural products and creating a win-win situation for farmers, exporters and importers. The new trade policy aims at supporting the economic development and poverty alleviation initiatives through the enhanced contribution of trade sector to the national economy. The policy and strategies has given focus on development of agriculture and non-timber forest products, mainly comprising of tea, coffee, large cardamom, ginger, lentils, honey, cut flowers, fruits, vegetables, processed leathers, medicinal herbs and handmade papers. The policy has outlined measures for development of these products along the value chain in a bid to optimize benefits from exports.
Transporting agriculture inputs and harvested products is still a nightmare and thus there is a need for increasing investment in road construction. We must pay particular attention to link rural roads with national highways.
The trade policy has outlined general cross-cutting and product-specific measures in order to support and facilitate trade right from production to market in a farm-to-fork approach. The main cross-cutting measures as outlined in the policy includes creating a product development fund to provide support for production, transportation and storage, establishing integrated services centers for providing technical support to the producers, providing bonded warehouse facility to imports of packaging materials, creating export trading houses, and waiver of fees and local taxes on transportation.

One of the key issues related to product development and export relates to protection of intellectual property rights of Nepali products. Agricultural products like tea, coffee and medicinal herbs (eg, taxus baccata) can be protected by registering the Geographical Indication (GI) while bio-diversity mapping and registration of trade marks and patent based on such mapping would be essential to protect indigenous products. This requires enhancing institutional, legal and human resources capacity at the national level to harness benefit from the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement of WTO.

Contract farming and commercialization of agriculture are important steps to achieve economies of scale and enhance productive capacity of the sector. Suitable legislation is a precondition to this, which can be carefully carved out without undermining the interest of small farmers. The trade policy suggests insulating the small farmers from the vulnerability of competition by adopting cooperative farming. Foreign importers may be encouraged to invest in the production process by investing in agriculture production and contract farming. Creating adequate quality infrastructures for test and certification and their accreditation are important steps in addressing the issues of non-tariff barriers and require redoubling efforts from what is put at present.

Lack of transport facilities is impeding the growth of the potential products as many pocket areas in the hills and mountains are still not connected to road network. Transporting agriculture inputs and harvested products is still a nightmare and thus there is a need for increasing investment in road construction. We must pay particular attention to link rural roads with national highways. Additional infrastructures like cold warehouse and creation of cold supply chain are essential to encourage the trade of green and perishable items.

Availability of capital and technology at the farm level is very important to boost production. The policy assures the availability of soft loan and extension services to the farmers as an incentive for production. The agriculture extension services in Nepal have ceased to be effective since late 1990s due to conflict in the country. The revival of extension services should focus on export potential products as a quick win solution. Promotion of organic farming and implementation of organic certification scheme are equally important for utilization of market access opportunities as there is greater demand of organic foods in the international markets. Support to producers on post-harvest management such as sorting, grading, packing and storing are significant in order to minimize post-harvest losses of crops.

Sales of value-added products are of paramount importance to the growers and producers as they entail more income and employment opportunities. Nepal is committed to providing adequate support and incentives in import and installation of processing equipment and machineries. Promotion of Nepali products in the international market has been considered as an effective tool of marketing and the government will take a two-pronged approach—first providing support to the private sector for effective participation in international trade fairs and second, mobilizing Nepali missions abroad in disseminating information on Nepali products and services.

The trade policy has also emphasized on coordinated implementation by the government and private sector agencies for improving the competitive capacity of the export potential products on a sector-wide basis. The focus will be to move to higher value chain of each product right from the production to market and improvement in logistics ensuring that the benefits of exports reach to the farmers at the grassroot level.

The trade policy has clearly indicated the path of reducing poverty and achieving sustainable economic growth by promoting agriculture trade, instilling the idea of inclusive development. The notion of welfare promoting development process can be taken forward with the implementation of the policy. However, it requires a strong coordination mechanism, enhanced institutional capacity and adequate resources and most importantly a strong political commitment.

(Writer is Secretary, Ministry of Commerce and Supplies.)