US-Cambodia Bilateral Agreement? Parasites? Or Real Deal? Haolun Huang

As the United States pulled back its troops in Afghanistan and Iraq, and announced that it will move its focus back to East Asia in the future. The world’s only one super power-the United States is mustering up countries like Cambodia with trade agreement offers to sustain its super power.

The human rights situation in Cambodia has been worsening in recent year after singing the bilateral agreement which aim at improving workers right. America’s brands of clothing like American eagle, the Gap are paying poverty-level wages to its workers in Cambodia. Tens of thousands of garment workers went on strike in December, demanding a raise from their current salary of $95 a month. But the question remains whether the bilateral agreement involves too little public benefit considerations, and preventing Cambodia enjoying the real benefits from the agreement?

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                                                              Images from nydailynews.com

A Cambodian activist runs as military police disperse a protest inPhnom Penh.

On January 20, 1999, the United States and Cambodia signed the Bilateral Textile Trade Agreement targeting at expanding textile and apparel trade. The United States lifted the tariff and quotas to Cambodia garments, however, demanding Cambodia government to standardize Cambodia workers to enjoy the same benefits as American workers do.

Whether the bilateral agreement has really been a new tool to exploit, or a real deal to the workers in Cambodia is unclear, but the economy outcome has been outstanding for the over past 20 more years. Cambodia’s GDP has been 4 times high right now than it was in 1999, and the GDP per capita moved as the same pattern. What’s more, the foreign direct investment net inflows is 6 time more at the corresponding period.

In 2012, President Barack Obama paid a history making trip to Cambodia, became the first American president ever visited its long time enemies. These ice breaking trip has been the significant sign from the United States that cherishes Cambodia and the bilateral agreement which was signed in 1999.

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Foxnews image from Associated Press

“You are the legend hero of our world,” warm welcomed by one banner in Cambodia when President Obama visited Cambodia

Before 1999, price of textile and garment producing is significantly lower than the US domestic products. Even though Cambodia has such huge comparative advantages in producing garment, Cambodia is exporting zero amount of garment production to the United States because the Quota items limit. Right after the bilateral agreement was effective, Cambodia sold 433 million dollars of garment to the United States in 1999. And ever since then, the number has been growing at above 10% annually.

The productivity of the workers was lower at any given price due to unfair labor standard. However, producer still has the incentive to produce more because the overall production cost is considerably low at a minimum wage of 45 dollars a month. After the bilateral agreement, Cambodia essentially increased its labor standard by forming 11 national labor federations and over 300 registered factory-level unions by 2002. In consequence, Cambodia was exporting garments to EU at an annual rate of 40% after 1999. This is not the result of quota increases, but the result of improvement in productivity.

Recently, Cambodia’s rice exporters are eager to sell more of their goods in the United States and tap into the world’s largest economy. “We are going to export to the US, of course, 100 per cent, because the US is a very big market and has potential for Cambodia,” Speaking at the International Export Market Research for Cambodian Rice seminar in Phnom Penh yesterday, Song Saran, CEO of Amru Rice Cambodia.

Despite the huge country development, Cambodian are still suffering poverty. Apparently, the wealth distribution system is dysfunction. The big brands from the United States enjoy a very low cost in Cambodia- an obsession wage system with minimum cost of production to maximize profits for investors. On the other hand, these big brands exported 5.06 billion garments and footwear through the first 11 months in 2013. Keynesian multiplier here is less than one, perhaps even worse for these blooded factories’ parasite effects.

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                                                Images from nkornitankwa.com

Big brands and Cambodia government act like bloodsucking animals.

There is little doubt that trade is good for both Cambodia and the United States. But in order to let Cambodians enjoy the benefits from trade agreement, Cambodia government and American big brands need to sit down and negotiate. They need to redistribute the huge profits they gain to the society.

Increasing wages to workers could also be a win-win game.

Reference

http://www.foxnews.com/politics/2012/11/19/obama-becomes-first-us-president-to-go-to-cambodia/

http://www.phnompenhpost.com/business/us-turns-cambodia-rice-market

http://www.youtube.com/watch?v=AtzyYPY_6Is

http://www.bangkokpost.com/opinion/opinion/389122/big-brands-must-act-on-cambodia-pay-crisis

http://www.nydailynews.com/news/world/cambodian-protests-turn-violent-article-1.1593670

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