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Cablegate: Engagement On Cambodian Trade Reform Gets a Boost From

VZCZCXRO2197
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #1151/01 2530134
ZNR UUUUU ZZH
R 100134Z SEP 07
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC 8922
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGV/USMISSION GENEVA 1629
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 PHNOM PENH 001151

SIPDIS

SIPDIS

BANGKOK FOR FCS--ANN BACHER, JIM GOLSEN; FAS--GARY MEYER AND COREY
PICKELSIMER; AND USAID/RDMA--SKIP KISSINGER
COMMERCE FOR OTEXA- D'ANDREA, DOUGLAS; MAC-MIKALIS, PHO
HO CHI MINH CITY FOR FCS--MARSHAK, LE
GENEVA FOR ESA AND USTR
STATE FOR EAP/MLS, EEB/TPP/ABT--GARY CLEMENTS, AND EEB/TPP/MTA
STATE PLEASE PASS TO USTR FOR DAVID BISBEE

E.O. 12958: N/A
TAGS: ETRD ELAB KIPR CB
SUBJECT: ENGAGEMENT ON CAMBODIAN TRADE REFORM GETS A BOOST FROM
TIFA

REF: PHNOM PENH 345

1. Summary. Cambodian government officials once again displayed
open and engaged attitudes during recent trade consultations with
U.S. Trade Representative (USTR) official David Bisbee. Commerce
Minister Cham Prasidh highlighted the recent passage of legislation
on key economic topics and agreed to speak out in favor of a
successful conclusion to the Doha round of the World Trade
Organization. Prasidh also appealed for greater trade preferences
for Cambodian garments and other LDC products. Commerce ministry
officials asked for technical assistance on a variety of topics from
E-Commerce laws to intellectual property enforcement. A Ministry of
Labor official reported that a key USG concern surrounding
Cambodia's groundbreaking Arbitration Council had been resolved, and
pledged to take concrete steps to certify more unions as most
representative. End Summary.

2. In February 2007, the U.S. and Cambodia held their first Trade
and Investment Framework Agreement (TIFA) Joint Council meeting in
Siem Reap, a very successful event which exceeded USG expectations
(reftel). David Bisbee, USTR Director for Southeast Asia, returned
to Cambodia July 5-6 to discuss progress on issues raised in the
TIFA Joint Council and other trade issues.

Commerce Officials Tout TIFA Progress, Request Assistance
--------------------------------------------- ----------

3. Two top Ministry of Commerce officials, Minister Cham Prasidh
and Secretary of State Pan Sorasak, highlighted progress Cambodia
has made in implementing the TIFA action plan. The action plan was
developed by USTR in consultation with the Cambodian government
following the February 2007 TIFA Joint Council meeting. It tracks
and supports fulfillment of Cambodia's WTO commitments and its
broader trade facilitation and economic reform program. In the past
six months, the National Assembly has passed the Customs Law, Civil
Code, and Secured Transactions Law--all action plan items. In
addition, other donors are also supporting trade reform efforts in
Cambodia via the Enhanced Integrated Framework, a multi-agency,
multi-donor World Trade Organization initiative to help least
developed countries use the multilateral trading system to their
advantage to increase market access and ultimately reduce poverty.

4. Encouraging the government to speed up vetting of the large
number of draft laws awaiting ministerial review and parliamentary
action is another important element of the action plan. Both
Prasidh and Sorasak saw value in the U.S. suggestion to use the TIFA
or consider other ways to better engage the RGC law-making machinery
in economic and trade reform. Both sides agreed to develop specific
proposals for discussion at a later date.

5. Prasidh expressed his desire to see more capacity building work
being carried out under the TIFA. Cambodia is interested in
additional USG assistance in a number of trade-related areas,
including: creating a legal framework for E-Commerce; additional
practical training in intellectual property enforcement and
administration; capacity building to meet sanitary and
phyto-sanitary standards and other technical standards in key export
markets; and assistance with broader reforms in the banking sector
and judiciary.

Commerce Minister on Trade Preferences, Doha Conclusion
--------------------------------------------- --------

6. Prasidh also encouraged the United States to extend greater
trade preferences to Asian LDCs, particularly for garments and
apparel. Cambodia has established a thriving garment sector but
struggles to compete with China and with other LDCs that have
preferential access to the U.S. market. (Note: Minister Prasidh and
representatives from the Garment Manufacturers Association of
Cambodia traveled to Washington in mid-July to meet with
Administration and Congressional leaders on this topic, including
Rep. Jim McDermott, sponsor of an LDC trade preferences bill. End
Note.)

7. Prasidh also agreed to advocate for a successful outcome to the
Doha negotiations on behalf of Cambodia and other LDCs. As a
recently acceded WTO member, Cambodia has undertaken greater trade
liberalization commitments than many older WTO members and hopes
that the round will lead to greater market access in developing
countries as well as in developed ones. Cambodian trade officials
admit that market access barriers in India and China inhibit
meaningful increases in exports to those markets, which if addressed

PHNOM PENH 00001151 002 OF 002


could reduce Cambodia's dependence on the U.S. and EU markets.

Progress on IPR Legal Framework
-------------------------------

8. Var Roth San, Director of the Intellectual Property Department
of the Ministry of Commerce, thanked the USG for its comments on
Cambodia's intellectual property laws. He explained that Cambodia
was working to reconcile the EU technical assistance on the draft
law on geographical indicators with the U.S. comments provided on
the draft, noting the different approaches taken by the U.S. and EU.
Var also requested U.S. assistance in creating the necessary legal
framework to combat optical media piracy, indicating that he would
like to consider drafting an optical media law.

Labor Concerns Focus on Most Representative Unions
--------------------------------------------- -----

9. Seng Sakda, Director General at the Ministry of Labor and
Vocational Training, was pleased to report that one of the key
labor-related issues discussed in the February TIFA meeting--the
continued operation of Cambodia's innovative Arbitration
Council--has been resolved.

10. Another key concern raised in February's TIFA discussion was
the proliferation of multiple unions at each garment factory, a
situation which fuels inter-union rivalry, harassment, and violence,
and hampers collective bargaining. USTR Director and Econoff
encouraged Sakda to take the first step towards certifying more
unions as most representative by auditing the existing, out-of-date
unofficial list of most representative unions and creating an
updated authoritative version. They conveyed the American Center
for International Labor Solidarity's willingness to assist in this
effort, and both sides agreed that an updated list would be
completed by late August. This list is still outstanding.

COMMENT
-------

11. The productive discussions and proactive engagement by
Cambodian officials during USTR Director Bisbee's visit demonstrate
Cambodia's commitment to the TIFA process and its effort to
strengthen the economic partnership with the United States.
Cambodian officials are aware of current global trade dynamics and
are ambitious and relatively sophisticated in their approach to
making the best of their situation given very real capacity
constraints.

12. Although the United States is Cambodia's most important trading
partner, many other actors are far more involved in helping Cambodia
shape its economic future through technical assistance, training,
and economic partnerships. While it is a small economy, Cambodia's
growth rates have been among the world's highest over the past two
years--13.5 percent in 2005 and 10.8 percent in 2006. Cambodia's
booming economy and trading potential demonstrate that requests for
technical assistance warrant serious consideration by Washington
agencies.

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