Industry experts and analysts said the European Union’s decision to partially suspend trade privileges afforded to Cambodia indicated the economic bloc’s frustration at the deteriorating democratic situation in the country, but was also an attempt to alleviate the impact on workers.
After a year-long withdrawal procedure, the EU Commission said on Wednesday it had decided to suspend the “Everything But Arms” (EBA) trade privileges on all travel goods and sugar exports, but imposed only a partial suspension on garment and footwear products.
The suspension would affect 20 percent of exports to the EU, amounting to $1.1 billion of exports annually, the Commission said.
“The withdrawal amounts to around one-fifth or €1 billion of Cambodia's yearly exports to the EU. Unless the European Parliament and the Council object, this will take effect on 12 August 2020,” the statement reads.
According to the list of export codes released by the Commission, products such as men’sand boy’s t-shirts and trousers, certain kinds of men’s underpants, briefs and pajamas, and women’s tracksuits, pantyhose and tights would be tariffed at standard EU tariffs.
But all sugarcane related products and travel goods, such as suitcases, leather gloves and rucksacks, would be fully tariffed starting August 12.
Cambodia exported 45 percent of its products to the EU in 2018, accounting for around $5.8 billion. It was also the second largest beneficiary of the EBA privileges, only second to Bangladesh.
Kaing Monika, deputy secretary general of the Garment Manufacturers Association in Cambodia, said the group was preparing a statement in response to the announcement. He said they were still calculating the exact impact specifically on garment exports.
But, he added, that they would continue to talk to buyer about the new tariffs and regretted the targeting of the garment sector.
“It is a regret for our garment sector,” he said. “We have good working condition and respect of workers ‘rights. We don’t just say it. We have reports recognized by the ILO.”
Government spokesperson Phay Siphan could not be reached for comment on Wednesday and the Foreign Ministry said it will issue a statement responding to the Commission’s decision.
Khun Tharo, program coordinator at labor rights group CENTRAL, said the EU was trying to find a balance in terms of its future approach to the Cambodian government.
While the Commission had to impose some tariffs to uphold its stand on human rights violations, he said, it was keeping the door open for the government to reverse its course.
“There is still a window open in the next six months for the government,” Khun Tharo said.
Stephen Higgins, managing partner of Mekong Strategic Partners, said the final decision was less harsh than feared, adding that it would have a modest impact on Cambodia’s economy.
He said this impact could also be offset by China, through a trade agreement. The two countries are currently in the nascent stages of negotiating a free trade agreement.
“They’ve clearly calibrated the suspension to minimise the impact on the workforce, while clearly sending a strong message to the Cambodian government,” he added.
The investigation into the EBA was launched following concerns raised by the EU over the human rights record of Cambodia. The Commission said on Wednesday that it saw “no significant progress” on improving the rights situation.
"The European Union will not stand and watch as democracy is eroded, human rights curtailed, and free debate silenced. Today's decision reflects our strong commitment to the Cambodian people, their rights, and the country's sustainable development," said Josep Borrell, Vice-President of the European Commission.
Human Rights Watch’s Phil Robertson said Prime Minister Hun Sen’s government did not give the economic bloc much choice on suspending some trade privileges.
“It’s his government’s failure to act to respect rights and fix problems identified by the EU that is driving this decision. PM Hun Sen should recognize this reality and come to the negotiating table now,” said the deputy director for Asia at Human Rights Watch.
Meanwhile, garment manufacturer H&M said it “strongly agrees” that human rights violations in Cambodia must be addressed, but it also warned that the EU’s decision to partially suspend EBA trade privileges to Cambodia would have “a negative impact” on workers.
“The partial withdrawal of the EBA will have a negative impact on the employment of the people in textile industry. The textile industry employed around 1,000,000 people and is a key driver for the Cambodian economy,” reads the statement.
The Cambodian government called the decision by the European Commission “unjust” and claimed that it is “politically driven,” failing to respect Cambodia’s sovereignty.
In a statement published on its website, the Cambodia’s Ministry of Foreign Affairs said the decision “failed to recognize and respect the fundamental issue of Cambodia’s sovereignty, which can’t neither be the subject of negotiation for trade preferences nor be a trade-off for any development assistance.”
But the government led by Prime Minister Hun Sen also expressed its commitment to continue to address concerns raised by EU with regards to land disputes, labor rights and press freedom in the country.
