Cambodia: Getting ready for free trade with China

In fewer than 20 days the Cambodia-China Free-Trade Agreement (CC-FTA) comes into force after both countries signed the deal on Oct 12 during a two-day state visit by China’s Foreign Minister Wang Yi in Phnom Penh.

Now questions are being asked about how the Kingdom is preparing to export products to China when the agreement comes into effect in January 2021.

The private sector is ready to take advantage of the Chinese market, the second-largest economy in the world, said Pen Sovicheat, undersecretary of state at the Ministry of Commerce (MoC).

He added the ministry is working on and will soon release a full list of commodities that can be exported to China. This will help the private sector to be aware of what can be exported and what the criteria are that they need to fulfill,” Sovicheat added.
He said that the potential products are mostly agricultural, processed meat and livestock.

“I cannot say which products have a high potential and which products don’t. It is up to local production. However, we know we can export livestock, processed meat, fresh fruits, vegetables, rice, sesame, corn, bean, cooking ingredients and garments,” he added.

“The ability to expand our market is our key priority. Therefore, the government has to think about how to attract businesspeople from China or investors from other countries to invest in Cambodia and export to the Chinese market and other countries.”

Cambodia has listed around 340 more commodities for export to China under the CC-FTA, bringing the total to more than 10,000. Most are in addition to what Cambodia trades via the Asean-China FTA.

The 340 products include pepper, chilis, vegetables, fruit, fish, meat (including processed), grain, seafood and a variety of canned products, said the MoC.

According to the MoC, among the additional 340 commodities in the CC-FTA, 95 percent of them will be untaxed. Taxes will be dropped on the remaining 5 percent for at least 10 years.

China can list more than 9,500 products for export to Cambodia, according to the MoC.

The CC-FTA deal sends a powerful message to Cambodia’s friends that the nation has gained entry into a Chinese market of more than 1.3 billion people. Two-way trade value was $8 billion in 2019 up from more than $7 billion in 2018, thanks to the Asean-China FTA. With the new trade deal, there are hopes exports to China will increase by as much as 25 percent a year and reach $10 billion by 2023.

Longmate Agriculture Director Hun Lak said Cambodia has to strengthen its production lines to meet the quality and standards of the Chinese market.

“For the private sector, the CC-FTA is an opportunity. But we have to improve our processing production in response to market demand. The required quality and standards relate to sanitary and phyto-sanitary levels despite the lack of quota or tariffs. Meeting hygiene rules is a necessity for our products if we are to export them,” Lak said.

According to Lak, in recent years there has been a lot of investment in agro-processing such as in mango and banana production.

American Chamber of Commerce in Cambodia (AmCham) President Anthony Galliano, said the relevance of the agriculture sector in Cambodia is gaining traction given the current weakness in tourism and the garment industry.

“I expect trade will increase in this area [agriculture] as well as in construction.  China is the most important trade partner in infrastructure development and construction, which has contributed to the economy significantly in these challenging times,” Galliano said.

He noted the United States is the single largest importing country of goods from the Kingdom and therefore it is a very critical and strategic trading relationship.

Galliano said Cambodia benefits greatly from the Generalised System of Preferences (GSP) with the US, which, although not being a trade agreement, entitles it to benefits such as duty-free or tariff reductions on its exports sent there.

“The bilateral trade relationship with the US in 2019 surged to $6 billion, with Cambodia having a huge trade surplus of $5.5 billion. Trade with China is $8 billion, but China benefits from a trade surplus of $6 billion,” he added.

Minister of Agriculture, Forestry and Fisheries Veng Sakhon agreed that although the Cambodia-China FTA comes into force in January, Cambodia will not be able to freely send any of its products to the Chinese market without gaining sanitary and phytosanitary certificates (SPS), validating any quarantine requirements and being of a high standard.

“The FTA states trade will be tariff and quota free, but meeting the SPS demands is the main barrier, especially for Cambodian agricultural products. The export of meat, livestock and fishery products must also go through quarantine according to Chinese standards,” Sakhon added.

“To solve this issue, Cambodia and China have to sign protocols for each product. The protocol will include the role of the exporters, planting procedures, pest management, any fertiliser used, harvesting management procedures and clean and proper packaging.”

Regarding livestock exports to China, Sakhon said the Chinese will check what kind of feed was provided to the animals, how they were raised, the slaughtering procedure, the precise nature of the stock and movement arrangements.

“We still have to negotiate more on our agriculture products. We are discussing them one by one because China has not agreed to discuss groups of products,” Sakhon said.

“If we want to meet market demand, we have to know [for example] what kind of seedlings are being sold and the growing techniques used. They [the Chinese] will check onsite. We have to follow their standards and meet their demands. To do this, we need time.  Therefore, the private sector should play an important role in this job. We are pushing our local production. We are sharpening the procedure of our local production to meet the necessary standards so food is safe to eat,” he added.

Source: Khmer Times