Decision due Wednesday could hurt nation’s $9.5bn apparel sector

SHAUN TURTON, Contributing writer, Nikkei Rewiew Japan

FEBRUARY 09, 2020 12:42 JST

Cambodian Prime Minister Hun Sen’s human rights record has been criticized by the European Union, which is set to announce its decision Wednesday on removing trade privileges on some Cambodian exports. (Nikkei montage/Reuters)

PHNOM PENH — The European Union is set to withdraw trade privileges on some Cambodian exports after a yearlong review of the Southeast Asian nation’s widely-condemned human rights record, according to a document uploaded to the European Parliament’s website.

An official announcement on whether Cambodia will retain its duty-free access to the bloc under the Everything But Arms scheme for least developed countries is due on Wednesday.

But in what appears an inadvertent disclosure of the widely anticipated decision, details were included in a file uploaded to the European Parliament website.

The document — submitted by Italian MEP Danilo Oscar Lancini on behalf of the far-right Identity and Democracy Party — appeared to point to a partial suspension of Cambodia’s EBA privileges.

It did not specify which products had lost their duty-free access, but noted rice was not among them.

Lancini, who did not respond to a request for comment, is a member of the parliament’s Committee on International Trade.

His submission details proposed amendments to a resolution about the EU’s free trade agreement with Vietnam. It was in this context that Cambodia’s EBA status was referenced. Among the proposed revisions, which express concern about the impact of Vietnamese rice imports on the bloc’s market, the ID Party also pointed to Cambodia as a threat.

They expressed “worry” that the commission had “decided through a delegated act to withdraw Cambodia’s EBA status on some products” but “rice is not listed among these products.”

“Past evidence shows that massive rice imports have distorted the European market and led to the launch of safeguard measures,” they wrote.

The EU last year imposed safeguard tariffs on rice from Cambodia and Myanmar for three years to protect EU producers. Cambodia has challenged the decision.

The country’s most vital industry, however, is its $9.5 billion apparel export sector, which employs some 750,000 workers and stands to be damaged if its products are withdrawn from the scheme.

Asked about the document, the European Commission’s press officer for trade Kinga Malinowska referred enquiries to the European Parliament.

But she added: “From our side, all we can say at this point in time is that the European Commission is indeed in the process of making proposals regarding Cambodia’s preferential access to the EU market under the Everything But Arms (EBA) trade scheme.”

The European Parliament did not respond to emails seeking comment as of publication time of this story, including questions about whether Lancini had learned of the commission’s decision via his role with the International Trade Commission.

Malinowska did not directly address a question about when MEPs were informed about the decision. However, she said the process was “conducted in close consultation with the European Parliament and EU Member States.”

“The Commission will take a final decision by the deadline in mid-February,” she said.

Meas Soksensan, a spokesman for Cambodia’s Ministry of Economy and Finance, says the ministry had not been informed about the EU’s decision.

Koy Kuong, spokesman for Cambodia’s Ministry of Foreign Affairs, declined to comment.

Cambodia exported 4.6 billion euro ($5 billion) of garments, footwear and other apparel to the EU in the first 11 months of last year. Losing EBA privileges would add a 12% tariff to Cambodian apparel exports to the EU and between 8% and 17% for shoes.

International brands sourcing from the country, including H&M, have reportedly discussed exit strategies should the privilege be lost.

Soksensan said the ministry’s forecast, including the loss of the EBA and other factors, saw the country’s 2020 growth fall to between 6.5% and 6.1%. In a recent economic analysis, the World Bank recorded the country’s growth last year at 7%.

The EU began reviewing Cambodia’s EBA privileges last year following a government crackdown on political opponents, critics and labor rights advocates.

In an open letter last month, major clothing companies and associations urged the government to make “immediate” reforms and warned the credibility of the apparel sector was at stake.