April 4, 2017
(as prepared for delivery)
Your Excellency Pan Sorasak, Minister of Commerce and other colleagues from the Ministry;
Senior representatives of other Royal Government of Cambodia Ministries;
Fellow development partners and representatives of the private sector;
Ladies and Gentlemen.
Good morning. I am delighted to join you today in this public stakeholder workshop on implementing the WTO Trade Facilitation Agreement. This workshop results from a year-long collaboration between the United States and the Royal Government of Cambodia, and gives us an opportunity to talk about a subject that is near and dear to my heart—how we can all work together to strengthen Cambodia’s competitiveness, increase its exports, and grow its economy.
I am particularly pleased to share the stage with my good friend, His Excellency Pan Sorasak the Minister of Commerce and also to recognize the critical role his ministry plays in leading Cambodia’s participation in the WTO. Mr. Minister, you have played a central role in Cambodia’s ratification and implementation of the Trade Facilitation Agreement, both as Secretary of State and now as Minister.
The Trade Facilitation Agreement is the first multilateral agreement successfully negotiated at the WTO since its founding two decades ago, and its entry into force last month signaled a major milestone for the global trading system. But why is the TFA – its ratification, entry into force, and implementation – such a big deal, particularly for developing countries like Cambodia?
One frequently referenced report by the Peterson Institute estimates that implementing the trade facilitation reforms in the TFA would expand global trade by as much as $1 trillion annually!
And the OECD estimates, that because their regulatory and logistical systems are still a work in progress, developing countries like stand to gain the most from implementing the TFA’s provisions. Reducing the costs of importing and exporting goods and services, and easing the flow of commerce across Cambodia’s international borders, will directly boost Cambodia’s global and regional competitiveness and continued economic growth.
We all know that Cambodia is already a very successful trading country. Its export sector has grown from 25 percent of GDP in 1996 to 62 percent of GDP in 2015. This is a remarkable achievement in a short period of time, and a testament to Cambodia’s commitment to participating in the global rules-based economic system.
However, as the report we are about to discuss makes clear, Cambodia faces significant challenges in order to get its fair share of that $1 trillion in global trade expansion.
But what should the priorities be for TFA implementation? What reforms will have the most impact, and should therefore be the top priority? That is a decision for the Government to make – hopefully based on detailed consultations with the private sector, as well as a careful review of the report we will discuss at this conference. But I do have a couple of suggestions based on conversations I’ve had with dozens of companies engaged in international trade since I arrived a year and a half ago.
First, the most successful trading countries recognize the private sector as the key engine of economic growth and find ways to actively incorporate it in decisions that affect its functioning, particularly in the area of customs operations.
The TFA requires the establishment of a national public-private committee to facilitate the implementation of the agreement and to advocate for, monitor, promote, and report on the measures Cambodia puts in place to ensure compliance with the TFA.
My recommendation would be to take this a step further. Of course, we hope Cambodia will establish an empowered and accountable National Trade Facilitation Committee, as required by the TFA. But many other government decisions and regulations also impact on companies, so why not reinvigorate the Public Private Forum and make it into a deeper, ongoing set of consultations between the government and private sector?
Second, although Cambodia has implemented a number of important reforms in the past ten years, businesses continue to have concerns about government bureaucracy, often excessive paper work, lack of transparency in decision-making, and a sometimes inconsistent application of regulations. These issues affect in particular small and medium-sized enterprises – especially in new and rapidly growing like technology – which lack the resources, time, and expertise to overcome them quickly.
The problem with this is that we know from both the United States’ experience, as well as the experiences of other successful developing countries around the world, that SMEs are particularly important drivers of growth, critical sources of innovation, and important creators of jobs. So we need to do all we can to help them reach new markets and unlock their full potential.
Once again, why not seize on the provisions in the TFA that require members to remove complex, non-transparent and burdensome procedures to drive a reform program aimed at making business operations as simple and inexpensive as possible for Cambodian entrepreneurs.
Finally, let’s not forget the strategic importance of agriculture for Cambodia’s economy. Our two governments have partnered for many years to raise agricultural productivity, improve health and nutrition outcomes, and reduce extreme poverty in Cambodia. But to scale up these programs so that they have national effect, we need to take a close look at market systems for agriculture, and analyze carefully the challenges and opportunities in agriculture trade.
Let me give one example. Despite good production conditions and large, nearby markets, Cambodia exports very few horticultural products. In fact, roughly 70 percent of fresh vegetables and fruits in Cambodia are imported. A major reason for this is the global system of sanitary and phytosanitary standards, which can create real challenges for all exporters, but particularly developing countries.
The TFA offers a very concrete path forward on these issues as well. Creating the systems to comply with the TFA’s articles on food safety, testing and handling of perishable goods, and overall sanitary and phytosanitary standards, would serve as a powerful incentive for private sector engagement and investment in agriculture trade. Private companies would know that if they invested, they would be able to access profitable markets around the world.
So why not make acquiring the skills, regulations, and systems needed to implement SPS systems – perhaps done on a product-by-product basis – one of the top priorities of Cambodia’s TFA implementation? If Cambodia took this course, they would find a lot of assistance available.
These are only three suggestions based on my review of a very detailed and comprehensive report. I’m aware that there are many other factors the government will need to factor in when it considers how to move forward with TFA implementation. You may well reach different conclusions.
But I hope you will look at the TFA as an opportunity to drive the reforms to make Cambodia an even more prosperous, middle income trading country, and not as a difficult new obligation to implement. Successful implementation of the TFA will require collaboration in all directions: between the public and private-sectors, within the Royal Government of Cambodia, and between and Cambodia and its development partners.
I thank you all again on behalf of the U.S. government and wish you the best of luck. I also want to thank our trade facilitation experts, who are here today to their findings as well as their experiences helping countries around the globe to implement trade facilitation reforms. I hope that all of you take this opportunity to have a very lively discussion with them, and to learn from, and with one another.
Thank you very much.