Prime Minister Hun Sen urged policymakers in Washington to expand its preferential treatment of goods imported from least-developed countries (LDCs) including Cambodia by increasing the amount of goods permitted duty- and quota-free access to the US market.
“Cambodia would like to request that the US provide Generalized System of Preferences to at least 97 per cent of its total commodities, with tariff exemptions and quota-free [access], to LDC member states, in accordance with the previous agreement under the WTO framework,” Hun Sen said during the 3rd ASEAN-US Summit in Kuala Lumpur on Saturday.
The prime minister’s request refers to a 2005 ministerial meeting of the World Trade Organisation (WTO) in which developing nations pledged to provide extend duty-free and quota-free status to “at least 97 per cent of products originating from LDCs, defined at the tariff line level”.
“The request is just to remind rich countries such as the US to implement the [WTO] agreement under a broad framework, which may not have been legal binding,” said economist Srey Chanthy.
Many developed economies, including Australia, Canada and the EU, have enacted special programs that extend duty- and quota-free treatment to all imports from LDCs with the exception of arms.
The US government currently provides duty-free status to over 5,000 types of products produced in Cambodia as part of its Generalized System of Preferences (GSP) Program.
The program, first implemented by the US in 1976, waives duties on over 3,500 types of products from over 122 countries, and provides duty- and quota-free status to an additional 1,500 products from LDCs.
Washington granted Cambodia GSP trade privileges in 1996, along with Most Favoured Nation (MFN) status, which reduces tariffs on eligible products.
The combination of GSP and MFN status has allowed many Cambodian products to access the US market, making them more price competitive against the products of countries that do not enjoy the privileges.
While the WTO decision to grant duty-free and quota-free access to 97 per cent of products originating in LDCs appears potentially crippling to US domestic industries, the requirement is based on tariff lines and not on a trade-weighted basis. This loophole has allowed the US to exclude many of the chief export commodities of LDCs, such as sugar, cocoa and tobacco.
Ho Sivyong, director of the export-import department at the Ministry of Commerce, said the US government’s GSP program covers most of the items that Cambodia exports, but excludes its largest export category by value: garments.
“Garments and textiles exported to the US are not eligible for the GSP scheme,” he said.
“However, they are covered under the MFN scheme, which requires importers to pay a tariff of around 10-15 per cent.”
The Kingdom’s garment and footwear exports to the US reached $1.8 billion in 2014, according to the Garment Manufacturers Association in Cambodia, representing about 63 per cent of total exports to the United States.
While Sivyong said he did not know how many of Cambodia’s tariff lines were covered by the GSP, he expects the US will continue to find ways to exclude garments from the programme.
“If the US were to extend its GSP scheme to cover 97 per cent of all commodities, it could help Cambodia to export more agricultural and other products to the US,” he said.
“But I think garments and textiles are in the remaining 3 per cent that the US will not include in the GSP.”