PHNOM PENH: After years of negotiations , Cambodia officially became a member of the World Trade Organization ( WTO) on October 13, 2004, becoming the 148th member of the World Trade Organization in 2004. WTO currently has 166 members, including Timor-Leste and Comoros, which became full members in 2024.
What are the economic and trade benefits of Cambodia in its 20 years of membership in the World Trade Organization ( WTO) ?
Cambodia has received enormous trade-related benefits that have supported economic growth and integration into the global economy as follows:
Global Market Access
Cambodia has benefited significantly from improved access to international markets since joining the World Trade Organization (WTO). The Most Favored Nation (MFN) principle ensures that all WTO members treat Cambodia equally in terms of trade interests, including tariff reductions.
As a result of WTO membership, Cambodia’s economy has experienced substantial growth. Gross Domestic Product (GDP) has increased from approximately $5.3 billion in 2004 to $29.61 billion in 2022. Foreign direct investment has also surged, rising from $110 million in 2000 to $4.9 billion by 2023.
Cambodia’s trade volume has expanded dramatically over the past two decades. It rose from around $4.5 billion in 2004 to $46.82 billion in 2023, with total exports reaching $22.64 billion. Key trading partners include China, the United States, the European Union, Japan, Thailand, Vietnam, and South Korea. These trade relationships are facilitated by multilateral and bilateral free trade agreements, as well as through ASEAN, which promotes regional economic integration in Southeast Asia.
Improving Trade Policy and Reform
Cambodia has made significant strides in reforming its trade policies, laws, and regulations to align with its WTO commitments. The Royal Government of Cambodia has enacted numerous laws and amendments related to trade, including those on the origin of goods, electronic commerce, commercial aid, consumer protection, competition, food safety, trade rules, business registration, and investment.
Diversification of Exports
WTO membership has enabled Cambodia to diversify its export base beyond traditional sectors like garments and textiles. The country has expanded into new areas such as electronics, rice, rubber, cashew nuts, bananas, solar panels, bicycles, and other products.
Technical Assistance and Capacity Building
Cambodia has benefited from technical assistance and capacity-building programs provided by the WTO and international organizations. These initiatives have helped strengthen trade policies and institutions, improving the country’s ability to participate effectively in international trade negotiations and implement WTO agreements.
Participation in Global Trade Policy
WTO membership has granted Cambodia a seat at the table for global trade policy discussions and negotiations. This participation has given the country a voice in shaping international trade rules that promote economic development.
Special and Differential Treatment
As a least developed country, Cambodia benefits from Special and Differential Treatment (SDT) provisions, which offer additional flexibility in implementing certain trade agreements.
Furthermore, Cambodia has access to the Duty-Free Quota-Free market and the European Union’s Everything But Arms (EBA) program, allowing it to export all products duty-free, except for weapons and equipment. Additionally, Cambodia enjoys the Generalized System of Preferences (GSP) from the United States.
Poverty Reduction
Poverty rates in Cambodia have declined significantly from 60% in 2000 to 16% in 2022.
Graduation from Least Developed Country Status
The United Nations Development Policy Committee has recommended that Cambodia graduate from Least Developed Country status by 2029. This marks a significant milestone since Cambodia attained this designation in 1991.
In conclusion, Cambodia’s membership in the WTO has contributed to economic growth by expanding trade opportunities, promoting investment, and supporting development through integration into the global trading system.
As a member of the World Trade Organization, what plans does Cambodia have for further expansion of trade ?
As a member of the WTO, Cambodia continues to develop the following plans and policies to expand trade and further integrate into the global economy:
Trade Facilitation and Infrastructure Development
Improving customs procedures: Cambodia is working to streamline its customs procedures to reduce delays and costs associated with exports and imports. Implementing trade facilitation measures aligned with the WTO Trade Facilitation Agreement (WTO TFA) will enhance the efficiency of cross-border trade.
Infrastructure investment: The government is investing in infrastructure, such as transport networks, ports, and logistics centers, to improve connectivity, facilitate trade flows, and lower shipping costs.
Export Diversification
Expansion: Cambodia aims to diversify its export base beyond textiles and garments. Key sectors for export expansion include agriculture (rice, rubber, and cassava), electronics, auto parts, and footwear.
Value-added goods: Cambodia seeks to transition from exporting raw materials to manufacturing and exporting high-value-added goods, particularly in agriculture and manufacturing. Examples include processed agricultural products and electronics.
Attracting Foreign Direct Investment
Improving the investment climate: Cambodia is continuously implementing reforms to make it more attractive for foreign businesses to operate. These reforms include tax incentives, reducing administrative burdens, and protecting investors.
Special economic zones: Cambodia has established numerous special economic zones to attract foreign investment in production and exports. These zones offer convenient tax incentives and regulatory procedures for companies setting up production facilities for export.
Capacity Building and Skills Development
Strengthening the workforce: Cambodia needs to invest in developing its workforce skills, particularly in technology and high-value skills that are essential for participating in the global value chain and competing in modern industries.
Capacity building: Seeking technical assistance and capacity building from international organizations will help improve trade governance, competitiveness, and participation in international trade negotiations.
Bilateral and Regional Trade Agreements
Negotiation: Cambodia should continue to negotiate bilateral and multilateral trade agreements to open up new markets and explore international e-commerce agreements.
Taking Advantage of Digital Commerce
Promoting e-commerce: Cambodia should promote e-commerce and digital business through initiatives like online marketing nurseries and digital business policies.
Strengthening Trade Relations
Key partners: Cambodia needs to strengthen relationships with key partners such as the United States, Europe, and China by actively participating in trade diplomacy activities and ensuring compliance with international trade standards. This will boost exports and gain access to preferential markets.
Development partnerships: Working with development partners to implement a detailed impact study project on Cambodia’s trade strategy will be crucial for a smooth transition out of Least Developed Country status. Developing roadmaps and action plans to mitigate potential impacts will promote sustainable economic growth, environmental sustainability, and resilience.
Strengthening Cooperation with Relevant Institutions
Inter-institutional collaboration: Enhancing cooperation and coordination among ministries, public institutions, and development organizations is crucial for increasing competitiveness, industrial and commercial capacity, and aligning with regional and global trends. This includes integrating production at the district level with international product markets.
Establishing a Policy Framework
Strategic framework: Establishing a strategic framework for a smooth exit from least developed country status and a policy-oriented framework for long-term strategic economic integration is essential. Continuing negotiations for other trade preferences during the transition period will ensure the stability of export markets and facilitate access to new markets for Cambodian products. (Minister of Commerce)
Conclusion:
Cambodia’s membership in the World Trade Organization (WTO) has yielded significant economic and trade benefits over the past two decades. By expanding market access, improving trade policies, diversifying exports, and benefiting from technical assistance, Cambodia has experienced substantial economic growth, poverty reduction, and increased investment.
As Cambodia transitions out of least developed country status, it is essential to continue implementing strategic policies that support sustainable economic growth, enhance trade competitiveness, and strengthen regional and global trade relationships. By effectively leveraging its WTO membership and addressing ongoing challenges, Cambodia can further solidify its position as a dynamic and prosperous nation in the global economy.