Pre-LDC graduation Cambodia should chase FTAs, trade reforms: ADB blog

Cambodia met the graduation criteria for the first time in 2021. Graduation means the loss of trade benefits enjoyed by LDCs, including duty-free status and favorable ‘rules of origin’.

Cambodia is one of the few LDCs that has dramatically increased its exports to the European Union (EU) through preferential treatment and lenient rules of origin, allowing its products to enter Europe duty-free.

If not carefully managed, the loss of these preferences may hurt Cambodia's export performance, the blog by economic consultant Gerald Pascua; Pramila Crivelli, economist with ADB’s economic research and regional cooperation department; and Stefano Inama, chief of technical assistance at the UN Conference on Trade and Development (UNCTAD), noted.

Cambodia must work to ensure that alternative market access is available after graduation and further improve its competitiveness, the authors said.

An FTA with the EU would avoid falling back on the Generalised Scheme of Preferences by 2031, while expanding ‘extended cumulation’ would facilitate compliance with rules of origin, they wrote.

As maintaining market access in Japan is also critical, consultations for an FTA with business-friendly rules of origin should start as soon as possible, they said.

At the regional level, discussions within the Regional Comprehensive Economic Partnership (RCEP) Secretariat, RCEP Joint Committee, ASEAN, and ASEAN+1 dialogue partners should focus on deepening RCEP tariff cuts, clarifying the functioning of RCEP tariff differentials, and achieving convergence on product-specific rules of origin in Asia and the Pacific, they said.

Cambodia should also use the ‘specific trade concerns’ mechanism of the World Trade Organisation to raise critical sanitary and phytosanitary measures imposed by its trading partners on agricultural exports, they said.

The country may consider entering digital economy agreements and negotiating FTAs with enabling provisions on e-commerce and digital trade to increase its digital trade participation further, they added.

Nevertheless, the lack of digital skills and affordability, which inhibit using digital tools and platforms, remain major obstacles limiting Cambodia's digital trade prospects, the authors noted.

Fibre2Fashion News Desk (DS)