Cambodia and the United States are scheduled to hold bilateral trade talks on May 14-15, 2025, in Washington, D.C. This is a crucial step toward deepening their economic ties, with both countries aiming to enhance trade and investment. The Royal Government Spokesperson Unit of Cambodia made the announcement, noting that the talks will be led by Cambodia’s Deputy Prime Minister Sun Chanthol and Minister of Commerce Cham Nimul, alongside Sarah Ellerman, Assistant U.S. Trade Representative (USTR) for Southeast Asia and the Pacific.
Bilateral Trade Context
In 2023, Cambodia’s total trade with the U.S. reached approximately $4.5 billion, with $3.8 billion in exports to the U.S. The major exports include garments, footwear, and agricultural products, particularly rice, cashews, and seafood. The U.S. has been one of Cambodia’s largest trading partners, contributing significantly to the growth of Cambodia’s export sector.
The primary objective of these talks is to formalize a trade agreement that addresses both tariff and non-tariff barriers, promoting greater access to each other’s markets. A focus will also be placed on increasing foreign direct investment (FDI) from the U.S., which will likely target Cambodia’s manufacturing, infrastructure, and technology sectors.
Bilateral Trade Context
In 2023, Cambodia’s total trade with the U.S. reached approximately $4.5 billion, with $3.8 billion in exports to the U.S. The major exports include garments, footwear, and agricultural products, particularly rice, cashews, and seafood. The U.S. has been one of Cambodia’s largest trading partners, contributing significantly to the growth of Cambodia’s export sector.
The primary objective of these talks is to formalize a trade agreement that addresses both tariff and non-tariff barriers, promoting greater access to each other’s markets. A focus will also be placed on increasing foreign direct investment (FDI) from the U.S., which will likely target Cambodia’s manufacturing, infrastructure, and technology sectors.
Key Goals of the Bilateral Trade Agreement
Increase in Exports: Cambodia’s exports to the U.S. are dominated by textiles, which account for nearly 80% of the total trade volume. A more favorable trade agreement could result in reduced tariffs on Cambodian goods, thus boosting exports, especially in sectors like garments, footwear, and agriculture.
FDI Growth: The U.S. is a significant source of foreign investment in Cambodia, especially in manufacturing, textiles, and infrastructure. The Cambodian government aims to increase U.S. FDI by 10-15% annually, focusing on sectors that align with the country’s development goals, such as sustainable agriculture, digital infrastructure, and manufacturing.
Improved Regulatory Environment: Cambodia is working to streamline its regulations, reduce red tape, and enhance the ease of doing business. The government aims to reduce the time required for business registration by 30% in the next two years. These efforts will complement the trade negotiations and attract further foreign investment, particularly from the U.S.
Preparatory Virtual Meetings and Discussions
Ahead of the face-to-face talks, Sun Chanthol and Cham Nimul led a virtual meeting with Sarah Ellerman of the USTR office. The meeting focused on the progress of the preparatory work and ensured alignment on key issues for the upcoming negotiations. Cambodia has also set up an Ad Hoc Cambodia-U.S. Bilateral Relations Coordination Working Group, which has been actively engaging with U.S. officials to ensure smooth negotiations.
Strategic Importance of the U.S.-Cambodia Trade Relationship
The trade talks are of strategic importance for Cambodia for several reasons:
Diversification of Trade Partners: While Cambodia has historically maintained strong economic ties with China, the U.S. represents a key opportunity for economic diversification. Strengthening ties with the U.S. allows Cambodia to balance its trade relationships in the region and reduce over-dependence on any single country.
U.S. Role in Southeast Asia: The U.S. has been increasing its engagement in Southeast Asia as part of its Indo-Pacific strategy. By enhancing economic ties with Cambodia, the U.S. can ensure greater stability and influence in the region, particularly amid growing Chinese investments and influence.
Cambodia’s Geopolitical Importance: As a member of ASEAN and a recipient of U.S. assistance through various programs, Cambodia’s role as a stable partner in Southeast Asia makes it an attractive target for U.S. trade and investment.
Cambodia’s Economic Outlook and Readiness for Negotiations
Under Prime Minister Hun Manet’s leadership, Cambodia has made significant progress in improving its business climate. The country’s GDP growth rate was around 5.2% in 2023, despite global economic challenges. The Cambodian government is focusing on enhancing infrastructure, creating a more favorable investment environment, and aligning its economic policies with international standards.
As part of its efforts to attract more foreign investment, Cambodia has improved its Ease of Doing Business ranking, climbing to 144th out of 190 countries in 2020, up from 150th in 2019. The goal is to improve this ranking further by 10-15 positions over the next few years.
Expected Outcomes from the Trade Talks
The outcomes of the Cambodia-U.S. trade talks are expected to focus on:
Tariff Reduction: A key component of the trade agreement will likely involve the reduction or elimination of tariffs on key export products like garments and agricultural products. This will help Cambodia’s exports remain competitive in the U.S. market.
Investment Promotion: The trade talks are expected to lead to a framework that encourages U.S. companies to invest more in Cambodia. Potential sectors for increased FDI include infrastructure (roads, ports, energy), technology (IT, e-commerce), and green energy (solar, wind).
Regulatory Cooperation: Both parties are likely to discuss aligning regulations on intellectual property, digital trade, and product standards. This would facilitate smoother trade and provide greater protection for businesses in both countries.
The bilateral trade talks between Cambodia and the U.S. set for May 2025 represent a critical opportunity for both nations to solidify and expand their economic relationship. With trade valued at $4.5 billion in 2023, a formalized agreement could pave the way for even greater economic growth and cooperation. By focusing on reducing tariffs, promoting investment, and improving regulatory cooperation, both countries stand to benefit from enhanced trade, stronger economic ties, and a more diversified investment landscape.
