Cambodia to reap huge trade benefits if India rejoins RCEP

Cambodia to reap huge trade benefits if India rejoins RCEP

India’s joining RCEP could create a new Foreign Direct Investment (FDI) channel, and Cambodia can reap multifarious benefits. The primary benefit of such an arrangement will speed up the establishment of the Free Trade Agreement (FTA) between the two countries, says an expert.

Cambodia will benefit in terms of exports and investments if India rejoins the Regional Comprehensive Economic Partnership (RCEP), believe experts.

The Regional Comprehensive Economic Partnership (RCEP) is the world’s largest free trade agreement in GDP. It encompasses 15 countries, including all 10 Asean nations, Australia, China, Japan, South Korea and New Zealand.

The grouping has been aiming to reduce tariffs, streamline customs procedures, and facilitate trade and investment within the region.

Local Indian media have been reporting that New Delhi is likely to make a return to the RCEP amid mounting trade tensions with the United States and recuperating relations with China.

India is currently weighing the possibility of joining the trade group, which comprises 15 countries, two senior government officials aware of the matter told Mint, on the condition of anonymity.

Back in November 2019, New Delhi left the bloc citing concerns over market access, widening trade deficits, and risks to farmers, domestic manufacturing, and small businesses.

According to one of the officials quoted, internal discussions on the matter have begun in the Indian government. “The Centre is reassessing the costs and benefits of RCEP membership in light of global supply chain realignments, tariff wars, and the urgency of diversifying export markets.”

Another top New Delhi official said, “The fresh rethink is being explored as part of a broader strategy to deepen India’s trade engagement with neighbouring countries, especially after strained trade talks with the US.”

Earlier, India’s opposition towards RCEP was built on the basis of key concerns like unfavourable trade balance with China, fears that Chinese goods would flood Indian markets through third countries, as well as New Zealand’s plan to supply milk and milk products to India that would hurt India’s small farmers and dairy cooperatives.

Speaking to Khmer Times, Vikas Reddy, an economist, international relations expert and digital economy specialist at Ohio University, said Cambodia can reap multifarious benefits if India rejoins RCEP.

“The primary benefit is that it will speed up the establishment of the Free Trade Agreement (FTA) between the two countries. As far as I understand, both countries are close to a deal. The development comes as Cambodia is trying to switch its export patterns, and India offers the best answer.

“India, which is soon expected to become the third-largest economy in the world, has one of the strongest consumer bases in the world. Once India becomes a member of RCEP it will be much easier for Cambodian exporters to find distributors for their products in the country.

“There is a huge scope to double or even triple the trade numbers between the two nations, considering how big the Indian market is.”

According to the latest trade data (from January to July 2025) released by the General Department of Customs and Excise, Cambodian exports to India stood at $82 million, while Cambodian imports from India were valued at $140 million. The total trade number – $222 million – reflects a 3.9 percent increase on a year-on-year basis.

Vikas said that India’s joining RCEP could also create a new Foreign Direct Investment (FDI) channel. “With the economic axis gradually shifting from the West to the East, India will overtake many of the Western nations to become one of the largest sources of origin for the FDIs in the near future. RCEP membership may facilitate a new platform for Indian investors to explore Cambodian opportunities.”

Vichet Lor, Vice-President of Cambodia Chinese Commerce Association, told Khmer Times that US President Donald Trump’s recent reciprocal tariffs on India has put pressure and limited India’s strategic economic autonomy.

“Consequently, India has to diversify its trade partners and export destinations to mitigate risks of relying on exports to America. India reconsidering joining RCEP comes at a pivotal moment as it weighs alternative options to expand its trade routes to drive growth in its economy amid mounting pressure from the US.”

He further pointed out that, considering RCEP accounted for 33 percent of global trade, being a member of RCEP will provide India with a huge opportunity to expand its exports and investment portfolio.

When asked about the development’s implications on Cambodia’s planned FTA with India, Vichet said: “India is considered a critical partner in Cambodia’s plans for FTA expansion to access wider markets for its products.

“While specific recent developments on the drafting status are not readily available, the process is active and involves technical work and consultations to gauge feasibility and benefits.”

He added that each country can use a better tariff rate. “When applying general RCEP rates among members, if tariffs are lower than bilateral FTAs for certain products, both countries can use RCEP tariffs accordingly and vice versa.

“This is the reason why each RCEP member will negotiate with another member for an FTA should they find it necessary to export their individual category export product to the respective country with a better rate.”

Vichet said Cambodia and India can negotiate for a bilateral FTA for mutual interests and benefits at a better rate before India officially becomes a member of RCEP.

“RCEP and bilateral FTAs with other member countries have driven Cambodia trade growth simultaneously, notably Cambodia’s bilateral FTAs with China and South Korea, which are also RCEP members.”

khmertimeskh