The European Union has just revoked some of Cambodia’s trade preferences, and the move could make the country’s garment sector less competitive.
In December, the EU gave Cambodia a one-month deadline to respond to the human rights violations it uncovered, ultimately deciding Wednesday to revoke a portion of its tariff preferences under the Everything But Arms (EBA) trade scheme. The December warning came after the EU launched the EBA withdrawal procedure in February last year. Since then, according to the Commission, “with regard to civil and political rights, there has been no significant progress.”
The penalty will impact made-in-Cambodia garments, and its manufacturing sector at large, particularly as the EU is Cambodia’s largest trading partner, accounting for 45 percent of its exports in 2018—reaching 5.4 billion euro ($5.8 billion) that year—the Commission noted.
“The withdrawal of tariff preferences—and their replacement with the EU’s standard tariffs (most favored nation, or MFN)—will affect selected garment and footwear products, and all travel goods and sugar,” the European Commission said in a statement. The changes, which are expected to take effect on Aug. 12, will impact roughly one-fifth or 1 billion euro ($1.08 billion) worth of yearly exports to the EU.
T-shirts, underwear and hosiery are among the items expected to take a hit as a result of the revocation. With a 12 percent standard tariff on clothing for MFN exports to the EU, prices for Cambodia-made garments could rise for EU brands and retailers.
But Cambodia, according to the EU, hasn’t been able to keep its rights to freedom of expression and association in check.
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“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,” Josep Borrell, vice president of the European Commission and high representative for foreign affairs and security policy, said. “For the trade preferences to be reinstated, the Cambodian authorities need to take the necessary measures.”
Those measures include the Cambodian government re-opening the political space in the country, creating necessary conditions to re-establish a credible opposition and initiate a democratic process of “national reconciliation.”
In an effort to ensure it still provides some support to the country, the Commission said all emerging industries in Cambodia will still enjoy duty-free, quota-free access to the EU market, while the country works to rectify its rights violations and restore its trade preferences.
“High value-added garments and certain types of footwear will also continue to enjoy duty-free, quota-free access to the EU market,” the Commission said.