26 December 2022, NIICE Commentary 8451
Saroj Deo
Nepal and the US are geographically distant from each other, but their relationship remains close. For the US, Nepal is geopolitically critical as Nepal shares a border with two aggressively growing Asian power in the world i.e., China and India, who are trying to prove themselves as the global power. The relationship between Nepal and the US over seven decades has grown smoothly, covering a wide range of cooperation and engagement. Both the countries have exchanged high level visits which has further strengthen their ties.
Nepal-US Bilateral Engagement
The diplomatic relationship between Nepal and the United States started on April 25, 1947, when both countries signed the Agreement of Commerce and Friendship. The US is the second country to establish diplomatic relations with Nepal after the United Kingdom. Nepal established its embassy in Washington on February 3, 1958, and the US embassy was set up in Kathmandu on August 6, 1959. Number of Nepal’s honorary consuls have been appointed in various US cities. Initially, the US objectives in relation to Nepal included: strengthening good governance, democratic values, and security and stability; supporting inclusive, equitable economic growth and clean, resilient energy; and helping Nepal become more self-reliant, independent, and resilient as it comforts global challenges. However, currently, the interest of the US has increased enormously towards Nepal due to China and India’s increasing influence in Nepal.
Economic Relations
The Government of Nepal and the United States of America entered into the enactment of the Trade and Investment Framework Agreement (TIFA) on April 15, 2011. The major objectives of this agreement included the expansion of trade, investment, and technical cooperation, and the strengthening of economic relations between the two countries. Nepal became one of the few countries in the world with a single-country trade preference program with the United States in 2016. According to tradingeconomics.com, the major products that Nepal exports to the US include carpets, felt products, dog food, handicrafts, jewelry, and various apparel, and imports from the US include pharmaceuticals products, agricultural products, aircraft parts, optical and medical instruments, and machinery. In 2021, when the nation’s crisis was felt due to the pandemic, the US made very crucial exports such as vaccines and face marks in significant amounts. The US is a huge market for Nepal’s carpet and tourism industries. The total bilateral trade amounts to USD 300 million, makes the US one of its top trade partners in Nepal. Nepal has a huge trade deficit with the US. In 2019/2020 it was NRS 14 billion deficit. According to the tradeeconomics.com Nepal has deficit of 165.61 Million during 2021.
US Assistance to Nepal
Nepal instated its acquaintance with the outside world long back when its initiation for development was at a very nascent stage. The period was marked by an extremely low literacy rate, and high infant and maternal mortality rate, with the basic infrastructure of health, public transport, and other facilities. On 23rd January 1951, after signing the IV Point Agreement, the USA has been one of the highest donors in Nepal since the establishment of bilateral relations. High-level officials from Nepal and the United States meet regularly at the highest diplomatic levels to discuss several issues that included security and defence cooperation, humanitarian assistance and disaster response, Millennium Challenge Corporation (MCC), coordination and implementation, and assistance provided by the United States Agency for International Development (USAID). The US assistance primarily implemented through USAID supports a wide area in infrastructure development, and reconstruction of infrastructure which were destroyed and affected in the 2015 earthquake such as schools, hospitals, and homes. In addition, the US also helps in disaster management and humanitarian sectors. For instance, USAID is also a partner of Nepal to implement its new disaster management law and helped establish the National Disaster Risk Reduction Management Authority.
People-to-People Contacts
People-to-people is a dynamic element for Nepal-US relations. It connects both countries in a comprehensive way and connects different sectors such as business, education, culture, migration, tourism, and so on. There has been a significant rise in the Nepali population living in the US. The US universities and colleges have been one of the major destinations for Nepali students for higher studies. Many scholarship programs have been provided to the Nepali students in the US like Fulbright and likes, as well as merit and need-based scholarships offered by many institutions. The International Visitors Programme is another avenue that provides journalists, parliamentarians, government leaders, academics, and civil society leaders with study tours of democratic institutions in the United States. There are many organizations in the US that have been working in Nepal for people-to-people connections such as Peace Crops, USAID, and so forth. Peace crops began its operations in Nepal from 1962 and has over 3800 volunteers served in Nepal since then. Similarly, Lincoln school has been serving as an international school teaching foreign and Nepali students under the American School Curriculum. Recently, the US Ambassador and Mayor of Kathmandu Metropolitan City have agreed to foster their relationship through the promotion of cultural heritage in each other’s countries which could be new avenues in the people-to-people connection between both countries. The US is one of the largest sources of visitors in Nepal. The number was close to one hundred thousand in 2018 and 2019. Both countries are committed to democracy and rule of law and human rights are the foundation of both the countries.
Nepal’s Inevitable Geopolitical Dilemma
After China’s takeover of Tibet in 1949 and after the uprising in Tibet in 1959, the US concern increased in Nepal. Moreover, after the Araniko highway was built under the Chinese Government assistance, on an older yak track in 1960 which connects Kathmandu with Kodari, 112.83 kilometers, the US had high concerns about the Araniko highway and that was perhaps the times of great geopolitical dilemma for Nepal.
The founder of modern Nepal, the late King Prithvi Narayan Shah, once said that Nepal is a yam between two boulders. Nepal is situated in a geostrategic hot spot between two giants and powerful countries with different political systems. The emergence of the Indo-Pacific in the region pulled the eye of all global powers. Thus, Nepal became one of the central points of world politics where China, India, and the US have great interest. In recent years, the active visit of officials from China and the US became frequent. The sensitivity of geopolitics in Nepal has impacts on its domestic politics as well. Recently developed ties between Nepal and the US, from Millennium Challenge Corporation (MMC) to the latest State Partnership Programme (SPP) issue, the relationship between these countries has made remarkable progress in the past two years. This development also brought Nepal into a more sensitive geopolitical game. Although Nepal received valuable aid from the US, the consensus among the political parties is weak and often internally splits into different fractions.
Conclusion
Nepal always sticks to non-align and neutrality. Moreover, Nepal should also stick with its long-standing policy i.e., not allow its territory to be used against its neighbors and friends. Stepping in both values, it is crucial for Nepal and the US to make their relation more stronger in the coming days. Both countries have much room to work out to make bilateral relations stronger. It could be done through high official visits from both countries, investments, cultural exchange, and so on. Visit from high-level officials from the US including the sitting US president, Prime Minister, and other officials are much needed in order to enhance bilateral ties. As the US has massive investment in all around the world, Nepal should also convince the US to invest which would help in economic growth and generate employment for many people. Moreover, Nepal should also work towards bringing a large number of tourists from the US through diplomacy, promotion, and scheme and policy. Nepal should focus more on export as Nepal has a high deficit in bilateral trade.
Saroj Deo is a Research Associate at NIICE.
