Commitments in Four Main Areas

Basically, a country seeking to join WTO must take on commitments in four areas (i) it must negotiate with members a set of “bindings” or maximum levels of tariffs that it will apply on its imports of goods; (ii) it must negotiate with members conditions for access by foreign services suppliers to its services market; (iii) it must agree to limitations on those forms of support to agriculture that have an effect on international trade; and (iv) it must bring its laws and regulations governing international trade into conformity with WTO rules before it joins WTO. These negotiations are carried out bilaterally with the main trading partners of an acceding country.

WTO entry implies the introduction of a more liberal trade policy but not one of complete free trade. Within the rules and disciplines of the WTO, each country has scope as to how restrictive or liberal its trade regime will be. There are no specific rules as to the maximum level at which a country has to bind its tariffs, how many services it will liberalize, whether to establish antidumping legislation, or how fast to liberalize its agricultural trade. Countries thus have a strategic choice during the negotiations phase of how liberal their trade regime will be, consistent with overall WTO discipline. Cambodia chose to opt for a relatively liberal regime and shortly before negotiations with WTO began undertook a reform of its import tariffs. This reduced the number of tariff bands from 12 to 4, so that after the reform most goods were charged a duty of either 0, 7, 15, or 35 per cent. In the process, Cambodia eliminated most of the higher tariff rates that had previously been applied. These revised rates became the actual “applied” rates with which the maximum bound rates would be compared. Sensitive items were subject to high tariffs or “tariff peaks”, which provide support either for infant activities or those in need of transitional support whilst they restructure.

Cambodia agreed to implement its tariff offers largely upon accession. It bound 100 per cent of tariff lines, which effectively set ceilings on the tariff rates of all imported products. The agreed levels of the binding were in virtually all cases equal to or greater than the level of tariffs that were actually applied in 2003. Thus, no significant reductions in tariffs below those set in the unilateral trade reform were required because of WTO membership.

The overall average bound duty rate agreed to by Cambodia was 20 per cent. This compared with the average rate of duty actually applied in 2003 of 16.5 per cent. For agricultural products, Cambodia's simple-average bound rate was 30 per cent, as compared with the average of rates actually applied in 2003 of 19 per cent. Peak bound rates for the most sensitive agricultural products were 50–60 per cent and the lowest bound rates were 5 per cent. For industrial products, the average bound rate was 18 per cent. This compared with the rate applied in 2003 of 16 per cent. Peak bound rates were 50 per cent and minimal rates 0 per cent.

In addition to setting maximum tariffs Cambodia agreed that it would not apply quantitative restrictions or other non-tariff barriers on imports, apart from those that can be justified (for example for balance of payments reasons) under the provisions of the WTO.

In terms of subsidies Cambodia made a commitment to bind export subsidies in agriculture at zero and not to apply such subsidies in the future. This meant that Cambodia chose not to exercise its right to use agricultural export subsidies, as under the WTO Agreement on Agriculture LDC members are able to use this instrument. In principle under WTO rules for LDCs trade distorting measures in agriculture are allowed up to 10% of the value of output. However the government did not feel that the use of export subsidies to support the agricultural sector would be either a desirable or fiscally feasible policy. Cambodia did maintain the right to provide export subsidies for industrial goods, if it chose to exercise it.

The right to ensure access by exporters to imported inputs at world prices was an important negotiating objective for Cambodia, as this was extremely important for the garment industry. Cambodia was able to secure a commitment allowing it to continue to waive customs duties on imported inputs used by its export industries. Although waiving duties on inputs of export industries is not allowed by WTO rules, the commitment made by Cambodia allows it to continue its existing practice until 2013, after which time it will need to choose among other, WTO-consistent, means of ensuring that its export industries can secure inputs at competitive prices.

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