US trade deal with neighbours and higher wages could rip into Cambodia's garment exports

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By Gavin van Marle 25/07/2016

Cambodia’s garment exports could take a hit from the inclusion of neighbouring Vietnam in the controversial Trans-Pacific Partnership (TPP) trade agreement. “The TPP can be a low-light for Cambodia’s export industry, as factory owners are looking for other countries to manufacture their products,” said Marco Civardi, area managing director for Vietnam & Cambodia at Damco. “It is therefore foreseeable that some low-end garment production will shift to Vietnam as factories rightfully want to benefit from TPP’s reductions in duty and taxes.”

He added that, following the decision to increase minimum wages in the textile sector, “it seems that Cambodia has at least partly out-priced itself as a low-labour market”. Cambodia’s government has not ruled out joining the US-led TPP, which aims to lower trade barriers between 12 Pacific Rim nations, accounting for 40% of the global economy. Recent comments from Commerce Minister Sun Chanthol indicated future interest.

Crucially, the trade agreement is yet to be ratified in the US, and with Presidential candidates Donald Trump and Hilary Clinton both voicing opposition to the TPP in its current form, it is unclear when, or indeed if, the agreement will become law. Meanwhile, garment production continues to be a key driver for Cambodia’s logistics industry. According to Mr Civardi, the industry represents the largest portion of Cambodia’s manufacturing sector, making up 80% of exports, while the number of operating factories reached a record 640 last year. But poor infrastructure and congested seaports have seen Cambodia’s logistics costs remain stubbornly high, making air cargo a preferred transport option.

read more https://theloadstar.co.uk/us-trade-deal-neighbours-higher-wages-rip-cambodias-garment-exports/

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Cambodia’s government has not ruled out joining the US-led TPP

That may be. But Cambodia's economic sponsor China might have other ideas.

Cambodia has already show that it is willing to forgo its soveriegn independence for cash grants from China over the ASEAN statement regardingChina's claim to the South China Sea.