U.S., Cambodia Renew Textile Pact

January 9, 2002

The United States and Cambodia have agreed to extend their Bilateral Textile Agreement for an additional three years, through Dec. 31, 2004. The quota for most textile exports from Cambodia in 2002 will be 15% higher than in 2001, a 9% increase "in recognition of Cambodia's progress in reforming labor conditions in textile factories over the last three years, in addition to the normal increase in quotas of 6%," according to the U.S Trade Representative's office. The new Agreement includes additional incentives for continuing improvements in labor conditions.

U.S. Ambassador Kent Wiedemann and Cambodian Commerce Minister Cham Prasidh signed a memorandum of understanding in Phnom Penh, putting the new terms into effect as of Dec. 31. Zoellick noted that studies by both the World Bank and the Brookings Institution document a positive relationship among trade, economic growth and labor standards. For example, Gary Burtless in a Fall 2001 Brookings Review article comments that opening markets is "the most reliable way to improve the condition of third-world workers...."

The memorandum of understanding increases Cambodia's quota for textile imports by 9% in addition to a 6% increase that is normal for most textile import quotas - a total increase of 15%. The 9% increase for 2002 reflects Cambodia's progress towards ensuring that working conditions in its garment sector are in "substantial compliance" with internationally recognized labor standards and provisions of Cambodia's labor law and follows recent formal U.S.- Cambodian labor consultations. The International Labor Organization (ILO) also has two projects underway assisting Cambodia with the implementation of its labor law

As in the original agreement, Cambodia will be eligible for future additional quota increases if working conditions in the garment industry substantially comply with internationally recognized core labor standards. The U.S. and Cambodian governments agreed to increase this potential quota reward for full compliance from 14% to 18%. The United States and Cambodia will keep working conditions in the Cambodian garment sector under ongoing review and will conduct two rounds of labor consultations in 2002, as provided for in the agreement.

Should it be determined that Cambodia has made further, substantial progress towards achieving this benchmark of "substantial compliance," the 2002 annual quota bonus level could be increased further. In the first 10 months of 2001, total U.S. imports from Cambodia were $826.7 million, of which $818.2 million were textiles and apparel. During the same period, U.S. companies increased textile and apparel exports to Cambodia by 225%. Exports were valued at $652,000.