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Cambodia invests hopes in WTO membership

20-Oct-2004

Cambodia became the World Trade Organisation (WTO)'s 148th member this month, a move that should help the poorest country in the A-P region improve its food production sector, writes Anthony Fletcher.

The country is the second least-developed country to join the WTO through the full working party negotiation process after Nepal, and brings the current number of least-developed countries in the WTO to 32.

If all goes well, membership of the WTO should improve market access, and also sends a strong signal to trade and investment partners about Cambodia's future direction.

Food production in Cambodia is slowly improving. Between 1980 and 1996, farmers almost doubled the area on which they were growing crops. Yields of rice, Cambodia's main staple food, shot up by 64 per cent, while pork, beef and poultry production expanded rapidly.

But despite this recent progress, Cambodia remains a very poor country, and many of its people still suffer from food insecurity. Even after a 21 per cent jump since 1980, Cambodians' average food intake in 1996 is scarcely enough to meet the minimum daily requirement.

More than one-third of all households fall below the poverty line. The country's poverty is reflected in the lack of diversity in people's diets. Almost 80 percent of the average daily calorie intake comes from rice.

By joining WTO, Cambodia hopes to kick-start trade with the outside world in order to bring some working capital into the food production industry. As a member, the country will be treated by all members as a most-favoured nation, and cannot be discriminated against unfairly according to the principles and rules underlying the trading system.

This, says the WTO, provides superior market access in a wide range of products and a wide range of countries - an achievement that would be impossibly time consuming on a bilateral or even regional basis.

The WTO of course is firmly in favour of further global integration. It points out that those with the highest trade to GDP ratios grew their GDPs on average 3.5 per cent per year in the 1980s and 5.0 per cent per year in the 1990s, while non-integrated countries grew just 0.8 per cent in the 1980s and 1.5 per cent in the 1990s.

However, leveraging the benefits of market access will require substantial reforms. The WTO has indicated that these go far beyond what Cambodia' has committed during its negotiations.

Indeed, Cambodian domestic producers face a number of impediments beyond tariffs that tend to undermine the benefits of market access. Rice, the nation's most abundant foodstuff, is a case in point. Open international markets will do little for producers if they cannot sell their crop because of lack of access to working capital, electricity, or decent transport.

Reforms therefore need to be carried out throughout the value chain and inside the border.

But Cambodia, like much of the A-P region, faces other difficulties. Many developed countries maintain high tariff peaks or non-tariff barriers - protectionist policies - that close markets for products Cambodia would like to export.

In addition, Cambodia will no longer have the freedom to selectively offer access to its markets to a narrow set of countries at the expense of all other WTO members, or to offer high tariff protection beyond what was negotiated.

The good news is that Cambodian private sector is "young"and dynamic, and by establishing a competitive environment now, the authorities might well have ensured that it does not grow with many of the inefficiencies other countries are struggling to address.

The country is still desperately poor and crippled by the Khmer Rouge genocide that saw over 2 million perish in the late 1970s. But membership of the WTO at least offers the hope that the country's economy is at last on the right tracks.

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