Much of the case for free trade agreements is based on improving economic efficiency, which enables each signatory State to engage in the economic activity in which it has specialized, to participate in international trade and to do better than would be the case through the exploitation of a more independent economy. The details of the Cambodia-China free trade agreement are still secret, but Cambodia`s export statistics indicate that the agreement would only compensate for part of the damage caused by preferential trade status with the European Union, which was Cambodia`s second-largest trading partner in 2019. The Cambodian government must ensure that its free trade agreement with China focuses on the interests of its people, writes Heimkhemra Suy. Although Canada established its economic relationship with China, its approach was inconsistent, even as China aggressively partners with other Western countries. Canada risks being excluded from China`s economic growth plans, to the detriment of Canadian producers and exporters. The analysis of this study suggests that a Canada-China free trade agreement would generate significant economic benefits for Canada, help diversify its export markets, and make it a more attractive location in North America for global investment. China also provides about 40 percent of Cambodia`s foreign direct investment and holds half of Cambodia`s public external debt, estimated at $7 billion in 2018. When the European Union announced in February that Cambodia`s “Everything But Arms” (ABE) preferential trade status would be partially removed by Cambodian law this month, some analysts worried that China`s economic influence would become even stronger in the country. Cambodian politicians must do two things to make the most of this free trade agreement. First, they should encourage potential Chinese investors to contribute to local development and create local jobs. Secondly, important local products need to be identified and supported in order to enable Cambodian producers to compete with Chinese companies.
Cambodia will then be ready to experience not only the risks, but also the benefits of freer trade with China. The Cambodian government will also lose some tax-free import revenue on Chinese goods as a result of the free trade agreement, although free trade proponents argue that this loss could be offset by the benefits of Cambodia`s increased exports to China. In search of a new source of tax revenue, Cambodia could then be pushed to collect domestic excise duties, which would shift the tax burden onto Cambodian consumers. Under this agreement, Cambodia is ready to operate and develop its rice industry, in exchange for China`s economic efficiency in production. . . .