Cambodia Trans-Pacific Partnership Readiness Assessment
This study, requested by USAID/Cambodia in early July 2016, was designed to (1) outline the principal costs and benefits of potential TPP membership and non-membership for Cambodia; (2) provide tailored policy advice through a trade impact assessment; and (3) offer guidance on policies for mitigating trade distortions in the immediate term. Analysis indicated that if Cambodia were to remain outside of the TPP, the impact on Cambodia’s economy would likely be negative overall, though some negative impact may be mitigated through domestic reforms to liberalize trade and investment. At the same time, gains from trading with more advanced partners (through technology transfer, efficiency, and productivity) are much greater than from trading with another developing country, narrowly defined, or from trading within a small regional trade bloc. Regional arrangements are reshaping the global trade landscape, and joining the TPP would put Cambodia on a more level playing field with insiders such as Vietnam and Malaysia. Another key advantage of a high standard agreement, such as the TPP, is that domestic reforms that would have to be initiated are often easier for special interests to digest if they are accompanied by prospects, such as greater market access, that TPP membership would create. The TPP is also expressly designed to foster value chains, which would enable Cambodia to better exploit its comparative advantages. Whether or not it joins the TPP, Cambodia, like others, would benefit from a combination of negotiated bilateral trade agreements and unilateral steps to rationalize its trade regime and open the markets of negotiating partners as well as Cambodia; these can also provide a strong political impetus for trade liberalization in Cambodia. Unilateral reforms to Cambodia’s trade regime hold the promise of faster and even greater gains, for instance, by adopting “open regionalism” (simultaneous reduction of most-favored nation tariffs along with regional and bilateral agreements) that brings down external barriers, both tariffs and non-tariff barriers, and removing distortions that prevent resources from moving into new export sectors.