Nepal’s BoT with India, the US, Germany & Japan

Nepal's trade deficit with major trading partners (US$ million)
Year	Balance of Trade (BoT)	India		United States		Germany		Japan
		Total	% of BoT	Total	% of BoT	Total	% of BoT	Total	% of BoT
1990	-375	-44	12	36	-9	54	-14	-108	29
1991	-243	-68	28	54	-22	103	-43	-106	44
1992	-124	-59	48	75	-61	131	-105	-63	51
1993	-175	-66	38	94	-54	166	-95	-71	41
1994	-283	-80	28	109	-39	132	-47	-70	25
1995	-444	-93	21	88	-20	107	-24	-65	15
1996	-988	-375	38	89	-9	78	-8	-81	8
1997	-1244	-344	28	89	-7	114	-9	-68	5
1998	-990	-294	30	93	-9	86	-9	-42	4
1999	-624	3	-1	151	-24	75	-12	-24	4
2000	-850	-267	31	173	-20	87	-10	-32	4
2001	-813	-260	32	185	-23	61	-7	-27	3
2002	-785	-210	27	89	-11	31	-4	-22	3
2003	-954	-572	60	141	-15	16	-2	-18	2
2004	-1113	-650	58	112	-10	22	-2	-16	1
2005	-1257	-691	55	81	-6	22	-2	-28	2
2006	-1568	-919	59	74	-5	1	0	-19	1
2007	-1967	-1000	51	57	-3	-3	0	-41	2
2008	-2206	-1222	55	52	-2	7	0	-46	2
2009	-2121	-1079	51	21	-1	6	0	-40	2

Note: Numbers are rounded to the nearest whole number; For % of balance of trade (BoT), negative value means trade surplus as a percent of total trade balance, and vice versa. Source: Key Indicators for Asia and the Pacific 2010 (xls).

Total trade deficit as of 2009 was US$ 1079 million (US$ 1.079 billion). Trade deficit with India accounted for 51 percent of the total trade deficit; with the US 1 percent surplus of total trade deficit; and with Japan two percent of total trade deficit. Surprisingly, there was trade surplus of around US$ 3 million with India in 1999. With the US, there generally is trade surplus, which is decreasing continuously since 2003. The high trade deficit with India is partly because of a result of high petroleum and fuel imports. These figures slightly vary depending on which database (WB’s WDI, IMF’s DOTS, ADB’s Key indicators, and the GoN’s data) you use. But, the trend is pretty much the same. It looks like trade deficit is a permanent feature of Nepal’s performance in external trade.

In 2009, after two successive years of negative growth, exports increased by 13.5 percent. Meanwhile, imports have been increasing at a rapid pace, reaching 28.2 percent in 2009. Over the period 2005-2009, average exports, on an annual basis, increased by 4.7 percent, but imports surged by 16 percent. Total exports and total imports in 2009 amounted to US$ 698 million and US$ 2820 million, which means that total exports represented 25 percent of total imports.

India is by far the most important export and import destination, accounting for 60 percent of total exports and 53 percent of total imports. Trade deficit with India was around US$ 1079 million with the world (excluding India) was US$ 1042 million.

The other significant export destinations are the US, Germany, Bangladesh, the UK, France, Canada, Italy, Japan, and Turkey. Meanwhile, the other significant imports destinations are China, Singapore, Thailand, Japan, Saudi Arabia, Indonesia, Germany, Australia, and the US.

Costs of international trade in services

Fig: World aggregate trade costs indices for goods and services, 1995-2007 (1995=100).

Trade costs in construction services have increased markedly over the last decade, by nearly 20%. Construction is also the most insulated sector, with ad valorem equivalent trade costs of around 200%. Trade costs in transport services have remained approximately constant over the last decade. By contrast, trade costs in financial and computer services have fallen by more than 10%. This finding is perfectly consistent with the rise of outsourcing in those sectors over roughly the same time period: as trade costs fall, probably due to improved information and communications technologies, it becomes feasible for firms to have more of these kinds of tasks performed overseas. Sectors such as transport and construction, on the other hand, are largely immune to such developments because of the need for physical proximity between producer and consumer.

More here. Miroudot, Sauvage and Shepherd (2010) find that trade costs in services are much higher than in goods, perhaps a multiple of two or even three times. This makes a strong case for more liberalization in services trade. However, Hoekman and Matto argue that explicitly recognizing that services liberalization cannot – and should not be – divorced from services regulation will do much to help harness the potential that trade agreements have to expand services trade and investment.