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As a small, landlocked country wedged between two much larger and far stronger powers, Nepal seeks good relations with both India and China. Nepal formally established relations with China in 1956, and since then their bilateral relations have generally been very good. Because of strong cultural, religious, linguistic, and economic ties, Nepal's association with India traditionally has been close. India and Nepal restored trade relations in 1990 after a break caused by India's security concerns over Nepal's relations with China. A bilateral trade treaty signed in 1991 is renewed every five years. The most recent renewal on March 5, 2002 shall remain in force until March 5, 2007. However, a transit treaty with India, which allows Nepal to trade with other countries through the Calcutta/Haldia ports, expired on January 5, 2006. To allow time for the review of the seven-year-old transit treaty, India extended the treaty for a period of three months, until April 5, 2006. Nepal has played an active role in the formation of the economic development-oriented South Asian Association for Regional Cooperation (SAARC) and is the site of its secretariat. Nepal is also a signatory of the agreement on South Asian Free Trade Area (SAFTA), which came into force on January 1, 2006, and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation Free Trade Agreement (BIMSTEC-FTA), which will come into force on July 1, 2006. On international issues, Nepal follows a non-aligned policy and often votes with the Non-Aligned Movement in the United Nations. Nepal participates in a number of UN specialized agencies and is a member of the World Trade Organization, World Bank, International Monetary Fund, Colombo Plan, and Asian Development Bank. |
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