Cambodia concluded its bilateral free trade agreement with China.

The Cambodia-China Free Trade Agreement was officially signed during the official visit of the Chinese Foreign Minister, Wang Yi, on 11 and 12 October at the Peace Palace.

The agreement was signed by Cambodia’s Commerce Minister, Pan Sorasak, and the Chinese Commerce Minister Zhong Shan, and was witnessed by Cambodia’s Prime Minister Samdech Hun Sen and Wang Yi.

Cambodia and China had their first round of negotiations earlier in the year at Beijing, China.

The FTA signed will come into effect in early 2021.

What is the free trade agreement?

A free trade agreement (FTA) is an agreement between two or more countries to reduce import and export barriers and tariffs.

How will the FTA with China benefit Cambodia?

In 2018, trade between Cambodia and China was valued at approximately USD 7.4 billion; however, with the FTA concluded, the goal is to boost the bilateral trade to USD 10 billion by 2023.

According to the senior official of the Ministry of Commerce, more than 340 items will be able to be exported to China duty-free, which most of the items related to the agriculture and processing industry. However, for machinery and vehicles, China will continue to impose tariffs. Cambodia’s export to China will increase by approximately 25% or more every year.

The president of the Asian Vision Institute, Chheang Vannarith, said Cambodia will be able to boost its export to the Chinese market and strengthen Cambodia’s value chain. The agreement will also attract medium-size Chinese manufacturers to invest in Cambodia.

Goods that will be taxed at zero when the agreement enters into force include pepper, dried peppers, meat, fish, vegetables, fruits, pearls, grains, processed canned goods and so on.

China has set a quota on rice exports, which if Cambodia exports rice of more than 400,000 tons, some taxed will be levied. The same will apply to rubber exports if the quota is met.

Through this agreement, Prime Minister Hun Sen expects that Cambodia will become a destination for American companies that are seeking a position in production in Southeast Asia.