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Lesson Trade Diversification in Nepal
8.7

FACTS Trade diversification can bring benefits by allowing
to Understand countries to exploit their comparative advantage,
reap the benefits of scale economics and ensure
competition, greater variety and potentiality, more
stable markets and prices.

The process of expanding trade of different items to different countries by not being
limited only with the specific goods and country is called trade diversification. In other
words trade diversification means not only limiting the trade of the country to certain
places and countries but finding out the newer places and countries to trade with. It
also means that to do trade and business with many countries instead of one country.
The growth of a country is seen if trade is practiced with diversification. It helps to
increase economic growth of not only country but also an individual. Consumers get
goods of their choice in cheaper rate. It allows the varieties of products and services
to get benefits in international market.
There are two types of trade diversification.

1. Diversification of Place

The supplying and selling the goods produced in any region or a country to
another region or a country is called diversification of trade on the basis of place.

Nepal has started to trade with many countries following the diversification policy
in trade. It helps in reducing trade deficit. In the past, as we have laready learnt in
previous chapter, Nepal’s trade relation was maintained with India, Tibet and China
only but slowly and gradually it started having trade with overseas countries too. It
th
became possible after the adaptation of liberal policy of trade. The 4 Five-year Plan
(BS 2027-2032) adopted the trade diversification policy. The main objective was to gain
economic gain as well as to maintain the trade relationship with many countries.

It is very effective with foreign trade. Nepal's foreign trade is not much effective.
So Nepal should diversify its trade more by looking towards expanding trade
opportunities mostly in exports, producing better qualities of diversified products
to ensure the development of trade and industries. To involve itself into the 'global
production network' Nepal needs to dismantle the trade obstacles, reduce trade costs
and improve supply, capacity of diverse goods in diverse countries in the world.

2. Diversification of Commodities or the Products

It is the process of including different items for export. If a country needs to get
promotion in foreign trade, it has to concentrate on its commodities or goods. Foreign
trade should not be limited only to little production of goods and their sales to the

307 Dynamic Social Studies - Book IX