2 September 2015
PHNOM PENH (Khmer Times) – Cambodia officially became a member of the World Trade Organization in 2004, after almost a decade of membership negotiation. Expectations that Cambodia would benefit from trade liberalisation were high. Through its membership, Cambodia would expand its export markets to the world, in particular its textile and agricultural products, the two areas where Cambodia has a strong comparative advantage.
Dr. Sok Siphana, former Secretary of State of the Ministry of Commerce and now government advisor, wrote in 2005: “Cambodia has, from the outset, made its position clear that it looked to the process of WTO accession as a positive externality to stimulate and make irreversible substantial trade liberalisation and more broadly based reforms.”
However, the failure of the Doha trade negotiation round of the WTO disappointed WTO members, particularly developing countries. It derailed prospects for lowering trade barriers and facilitating global trade.
Some members focused on deepening regional trade liberalisation. In the Asia Pacific, there are three mega regional free trade areas under negotiation: the Regional Comprehensive Economic Partnership (RCEP), the Trans-Pacific Partnership (TPP), and the Free Trade Area of the Asia-Pacific (FTAAP).
The conclusion of trade facilitation negotiations in Bali in December 2013 was a significant milestone in restoring the image and relevance of the WTO. The main goals of the Trade Facilitation Agreement (TFA) are to expedite the movement and clearance of goods, including goods in transit. It sets out measures for effective cooperation between customs and other authorities for trade facilitation and customs compliance.
TFA also contains special provisions for developing and least-developed countries. These are aimed at helping them to implement the agreement. Cambodia should conduct studies on areas where it needs support from international donors to implement TFA. Technical assistance and public awareness programs need to be promoted.
The expected benefits of TFA are cost reductions, more trade flow, more investment flow, better allocation of limited resources, and the lock-in of reforms. This gives the WTO members a common direction for lowering trade barriers. Developing and least developed countries will largely benefit from trade facilitation.
But, there are procedures required to put TFA into force.
First, it calls on members to draw up a protocol of amendment to insert the TFA into Annex 1A of the WTO Agreement. Second, it has to mandate a protocol to enter into force in accordance with Article X:3 of the WTO Agreement. Article X:3 requires acceptance by two-thirds of all WTO Members for the Agreement to enter into force.
The main challenge now is to encourage WTO Members to ratify TFA before the end of this year. So far only 12 out of 161 WTO Members have ratified TFA. From ASEAN, only Singapore and Malaysia ratified TFA. It would be a setback in Cambodia’s foreign trade policy if it fails to ratify TFA before December.
Consultations among legislators, the Royal Government, business leaders, and civil society leaders should be conducted to exchange views on the opportunities and challenges of TFA and to develop action plans to increase Cambodia’s export capacities and opportunities under TFA.
It is believed that the political support from both the ruling Cambodian People’s Party and the opposition Cambodia National Rescue Party is not a problem. But, there are legislative hurdles. A concerted push in the National Assembly is needed to discuss and ratify TFA in upcoming parliamentary sessions.