The European Union, Cambodia’s largest export market, is making preparations for the country’s expulsion from a preferential trade scheme that guarantees tariff-free access to EU markets for Cambodian goods, according to the EU ambassador.
George Edgar, EU ambassador, said in an email on Tuesday that starting the procedure for removing Cambodia from the Everything But Arms (EBA) scheme reflected the concerns in Brussels over the deterioration of human rights and basic freedoms.
“The formal withdrawal procedure for the Everything But Arms arrangement in relation to Cambodia has not yet launched. Preparations are being made for the formal decision by the European Commission that would launch the procedure,” he wrote in an email.
He added that once the decision is formally made, there will be a six-month period during which the EU will study the issue further, followed by a further six month decision-making process.
Edgar declined to comment on the possible impact on the garment industry in Cambodia, which supports some 800,000 jobs in Cambodia and whose largest export market is the EU, with about 46 percent of Cambodian textile exports going to Europe. Garment exporters in Cambodia have appealed to the EU not to remove Cambodia from the scheme.
The World Bank has warned that Cambodia’s economy will face increased risks if the EU presses ahead with Cambodia’s expulsion from the scheme.
Moody’s credit rating agency has estimated that the potential loss to the Cambodian economy from the cancellation of the EBA would negatively affect the country’s credit rating and would harm Cambodia’s competitiveness.
Phay Siphan, government spokesman, said the country’s strong growth would counter the potential loss as a result of its removal from the EBA scheme.
“We are ready for the tax increase,” he said. “Wages are guaranteed by the law in Cambodia.”
