Why Trade Costs Matter: Cambodia's Trade Journey from 1993 to 2019

Trade barriers can be a big obstacle for countries trying to trade more freely. This study looks into how much it costs for Cambodia to trade with its top 30 partners from 1993 to 2019. Using a special way to measure trade costs, we found that Cambodia's trade costs dropped by 35. 43% over this time. Even after joining the World Trade Organization (WTO) in 2004, costs didn't drop steadily until 2014. Since then, they've been falling faster. Cambodia's trade costs are lower with neighbors in Southeast and East Asia compared to places like South Asia, Oceania, Europe, and North America. It's also cheaper to trade with developing and emerging economies than with developed ones. From 2014 to 2019, trade costs with countries along the Belt and Road Initiative (BRI) fell by 34. 78%, twice as fast as with other partners. The growth in Cambodia's trade was driven by three things: income increase (59. 65%), trade cost reduction (56. 69%), and less resistance to trade (16. 34%). This study shows that Cambodia can boost trade by focusing on partners with high growth potential and lower trade costs.