The effects of a 2002 agreement between China and Asean to reduce tariffs, which had been scheduled to start here in January, will be delayed because the agreement has not been ratified by the National Assembly, officials said Tuesday.
The delay will likely have little effect on Cambodian producers as there are so few, experts said.
When the treaty is implemented, experts said, there could in fact be great risk for Cambodia in the form of a flood of cheap Chinese imports.
“The new tariff lines cannot be implemented because the framework agreement has not been ratified,” said Huy Sambath, the director of the Department of Economic Integration and Asean at the Ministry of Finance.
He added that King Norodom Sihamoni must sign the agreement before its implementation can proceed.
“Cambodia’s exports to China are not much,” Huy Sambath said. “The Chinese are very eager to have this agreement implemented because it benefits Chinese interests.”
On Nov 4, 2002, Prime Minister Hun Sen signed the framework agreement, which commits Asean nations to reducing tariffs on each other’s goods to between zero and 5-percent by 2015.
According to the treaty, by January 2006, Cambodia and China must reduce tariffs on a first wave of “Early Harvest” products to between zero and 20 percent. By 2010 tariffs on all these products are supposed to stand at zero.
“Early Harvest” refers to 2,000 products specified in the treaty, most of which are agricultural, but rice included.
A later provision of the treaty covers an additional 10,000 industrial goods, which are expected to get tariff reductions by 2015, if the agreement is ratified.
Huy Sambath said Cambodia is studying how to export rice into China.
“There are many regulations imposed on the export of rice,” he said, adding that palm oil, another Cambodian product with export potential, is also not an “Early Harvest” product.
Although the agreement has not been ratified, China has already lowered tariffs on 297 products such as sesame oil and shellfish, Huy Sambath said.
Neak Samsen, a trade researcher at the Economic Institute of Cambodia, also said the implementation of the agreement with China could jeopardize local producers with a flood of Chinese imports.
But he added that the promise of being able to export goods to China with little or no tariffs could encourage local people to invest in agro-industry.
Bahn Lean, the managing director of Kompong Cham-based Cashew Nuts Cambodia, said he is a long way from being able to ship his products to China, regardless of tariff agreements.
“We can’t sell with a low price in China, because we have to contend with our cashews being smuggled through Vietnam,” he said.
Thon Virak, the deputy director of the Commerce Ministry’s Foreign Trade Department, said Cambodia is not yet ready to benefit from access to China, because there are not yet enough large scale farms.
China’s “market needs thousands of tons of beans, but we don’t have enough for them,” he said, adding that small producers cannot profit from shipping goods to China because they don’t produce enough goods to fill containers at the port.
To make transportation easier, China and Asean have agreed to develop a rail link from Singapore to Kunming, in order to facilitate trade.
Neak Samsen said that for maximum benefit, rice should be included in the treaty.
Dourng Kakada, another EIC researcher, said China has banned all rice imports from Cambodia for purely protectionist reasons.
“It is a sensitive product,” he said.