| Nepal is a small landlocked country, stretched in an | | | | increasingly acute and severe deficit on current and |
| area of 1; 47,181 sq km. Nepal is also known as | | | | capital accounts have therefore led to a rapid |
| Himalayas with the highest pick of the world¾the | | | | depletion of their international monetary reserves, |
| Mount Everest. It is located between the two giant | | | | currency instability, and a slowdown in economic |
| nations, China in the north and India in the south, | | | | growth in most of the developing countries including |
| east, and west. Geographically, it is situated between | | | | Nepal. |
| 26° 22' north to 30° 27’ north latitude and | | | | Nepal has been pursuing its trade and foreign |
| 80° 4' east to 88° 12’ east longitude. Nepal is | | | | exchange policies in tandem with the global |
| 885 km in length from east to west and 193 km | | | | liberalization process and pushing its best to integrate |
| (Non-uniform) in width from north to south. It has a | | | | it with the changing world economic order. In this |
| population of 2,27,36,934 with an annual growth rate | | | | light, on 7 December 1995, Nepal entered into an |
| of 2.24 percent. | | | | agreement to enforce SAPTA and declared duty |
| International trade has often played a crucial role in | | | | exemption on imports of 14 various items from |
| the historical experience of the developing world | | | | SAARC countries. With globalization, the world today |
| including Nepal. Throughout the developing world, | | | | is becoming more and more integrated. Globalization |
| export of primary products has traditionally | | | | gives nations the opportunity to increase their |
| accounted for a sizable proportion of national income. | | | | productive efficiency and attain their comparative |
| In some small countries, up to 25 percent or more of | | | | advantage. This reward has been attractive to many |
| national income is derived from the overseas sales of | | | | nations and consequently membership in WTO is |
| agricultural and other primary products such as | | | | ever increasing. In this regard, Nepal has also pursued |
| coffee, grain, sugar, palm oil, etc. This is a serious | | | | membership in WTO for many years. Finally, it |
| problem because the markets and prices for these | | | | became the member of WTO on 11 September |
| products are often unstable. Dependency on primary | | | | 2003. Nepal subsequently notified WTO that the |
| product export carries with it a degree of risk and | | | | process of ratification and acceptance of the |
| uncertainty. This is an important issue because prices | | | | Protocol of Accession had completed in Parliament. |
| of primary products have been gradually falling during | | | | On 23 April 2004, Nepal became the 147th member |
| a decade of two. | | | | of the rule based international organization. |
| In addition, for most developing countries, import | | | | Membership in WTO entails both general and |
| demands have increasingly exceeded their capacity | | | | negotiated commitments, whose aim is for |
| to generate sufficient revenues from sales of export. | | | | transparency and stability of international trade. |
| This has led to chronic deficits on their balance of | | | | International trade has played a significant role in |
| payment (BOP) position. Such deficits in current | | | | economic development of Nepal. Despite various |
| accounts (an excess of import payments over | | | | strategies adopted by the government to promote |
| exports receipts for goods and services) are more | | | | international trade, Nepal has been facing increased |
| than compensated by a surplus on capital account (a | | | | trade deficit due to lack of import substituting |
| receipt of foreign private and public lending and | | | | industries and exportable goods. Most of Nepalese |
| investment in excess of repayment of principal and | | | | major exportable goods are primary products, herbal, |
| interest on former loans and investment). In recent | | | | handicraft, garments, carpets, etc. Among these |
| years, the debt burden of repaying earlier | | | | products, Pashmina is one of the new exportable |
| international loans and investments has become | | | | products. |