RESTRICTED WT/TPR/S/381 8 October 2018 (18-6175) Page: 1/117 Trade Policy Review Body TRADE POLICY REVIEW REPORT BY THE SECRETARIAT NEPAL This report, prepared for the second Trade Policy Review of Nepal, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Nepal on its trade policies and practices. Any technical questions arising from this report may be addressed to John Finn (tel. 022 739 5081), Ricardo Barba Viniegra (tel. 022 739 5088) and Thakur Parajuli (tel. 022 739 5473). Document WT/TPR/G/381 contains the policy statement submitted by Nepal. Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Nepal. This report was drafted in English. WT/TPR/S/381 • Nepal - 2 - CONTENTS SUMMARY ....................................................................................................................... 6 1 ECONOMIC ENVIRONMENT ....................................................................................... 10 1.1 Main Features of the Economy ................................................................................... 10 1.2 Recent Economic Developments ................................................................................. 11 1.3 Developments in Trade and Investment ...................................................................... 14 1.3.1 Trends and patterns in merchandise and services trade .............................................. 14 1.3.2 Trends and patterns in FDI ..................................................................................... 18 2 TRADE AND INVESTMENT REGIMES.......................................................................... 20 2.1 General Framework .................................................................................................. 20 2.2 Trade Policy Formulation and Objectives ...................................................................... 20 2.3 Trade Agreements and Arrangements ......................................................................... 25 2.3.1 WTO .................................................................................................................... 25 2.3.2 Regional and preferential agreements ...................................................................... 26 2.3.2.1 South Asian Free Trade Area (SAFTA) and South Asian Association for Regional Cooperation (SAARC) Agreement on Trade in Services (SATIS) ............................................. 27 2.3.2.2 Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) ...................................................................................................................... 28 2.3.2.3 Bilateral agreements ........................................................................................... 29 2.3.2.3.1 Bilateral agreement between India and Nepal ...................................................... 29 2.3.2.3.2 Other agreements ............................................................................................ 29 2.4 Investment Regime .................................................................................................. 30 3 TRADE POLICIES AND PRACTICES BY MEASURE ....................................................... 34 3.1 Measures Directly Affecting Imports ............................................................................ 34 3.1.1 Customs procedures, valuation, and requirements ..................................................... 34 3.1.2 Rules of origin ....................................................................................................... 38 3.1.3 Tariffs .................................................................................................................. 39 3.1.3.1 Structure ........................................................................................................... 39 3.1.3.2 Applied tariff ...................................................................................................... 40 3.1.3.3 Tariff bindings .................................................................................................... 42 3.1.3.4 Tariff preferences ................................................................................................ 43 3.1.3.5 Tariff exemptions ................................................................................................ 44 3.1.4 Other duties and charges affecting imports ............................................................... 45 3.1.5 Import prohibitions, restrictions, and licensing .......................................................... 45 3.1.6 Anti-dumping, countervailing, and safeguard measures .............................................. 47 3.1.7 Other measures affecting imports ............................................................................ 47 3.2 Measures Directly Affecting Exports ............................................................................ 47 3.2.1 Customs procedures and requirements ..................................................................... 47 3.2.2 Taxes, charges, and levies ...................................................................................... 48 3.2.3 Export prohibitions, restrictions, and licensing ........................................................... 48 3.2.4 Export support and promotion ................................................................................. 49 WT/TPR/S/381 • Nepal - 3 - 3.2.5 Export finance, insurance, and guarantees ................................................................ 50 3.3 Measures Affecting Production and Trade ..................................................................... 50 3.3.1 Taxes and incentives .............................................................................................. 50 3.3.2 Standards and other technical requirements ............................................................. 53 3.3.2.1 Standards and technical regulations ...................................................................... 53 3.3.3 Sanitary and phytosanitary requirements .................................................................. 55 3.3.4 Competition policy and price controls ....................................................................... 56 3.3.4.1 Competition policy .............................................................................................. 56 3.3.4.2 Price controls...................................................................................................... 57 3.3.5 State trading, state-owned enterprises, and privatization ........................................... 58 3.3.6 Government procurement ....................................................................................... 60 3.3.7 Intellectual property rights ...................................................................................... 62 3.3.7.1 Copyright ........................................................................................................... 64 3.3.7.2 Trademarks ........................................................................................................ 64 3.3.7.3 Industrial designs ............................................................................................... 65 3.3.7.4 Patents .............................................................................................................. 65 3.3.7.5 Enforcement ....................................................................................................... 66 4 TRADE POLICIES BY SECTOR .................................................................................... 67 4.1 Agriculture and Fisheries ........................................................................................... 67 4.1.1 Agriculture ............................................................................................................ 67 4.1.1.1 Features ............................................................................................................ 67 4.1.2 Trade ................................................................................................................... 69 4.1.3 Agriculture policies ................................................................................................. 71 4.2 Mining and Energy .................................................................................................... 77 4.3 Manufacturing .......................................................................................................... 84 4.4 Services .................................................................................................................. 87 4.4.1 Financial Services .................................................................................................. 87 4.4.2 Banking ................................................................................................................ 90 4.4.3 Insurance ............................................................................................................. 90 4.4.4 Securities ............................................................................................................. 91 4.5 Telecommunications and Postal Services ....................................................................