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As decision deadline looms, farmers fearful of EU tariffs

Chea Vannak / Khmer Times Share:
The European Commission has been tasked with making a final decision on the tax in early January. KT/Chor Sokunthea

It is the beginning of the harvest season, and a rice farmer in Takeo province walks to his field, located just behind his house, ready to inspect the rented machinery he will use to collect the crop.

Over the next few weeks, 60-year-old Yun Yorn will use the rented rice harvester in his 4.5 hectare farm, expecting to collect around 10 tonnes of paddy rice for the season.

With him is his wife and two grandchildren, all looking forward to a busy day at the farm.

“This harvest season, production is higher because there is plenty of water since it rained a lot this year … The price that I am being offered is really high,’ Mr Yorn says while carrying sacks to the machine, now parked in a corner of the rice field, after finishing work for the day.

Mr Yorn is upbeat: he says this year he will be able to sell his rice at a higher price than last year. He is surprised to find out that the situation may change in the near future, as the European Union considers triggering a safeguard clause that will impose tariffs on Cambodian rice.

Sickle in hand, Mr Yorn says he does not know whether the rice he is collecting will be sold in Cambodia or exported to another country, explaining that his main preoccupation is always his farming work.

“I don’t know exactly what countries buy our milled rice,” he said, adding that, “I am concern about the market for my rice: if demand abroad decreases, my income may decrease as well.”

Harvesting twice in a year, Mr Yorn earns a yearly income of around $3,000 from selling his rice, but spends about $1,000 on fertilizers, gasoline, and renting machinery.

Earlier this year, Italy and Spain, along with five other European Union countries, filed a request to activate a ‘safeguard clause’ that allows EU member states to impose barriers to protect against trade imbalances.

In March, the European Commission launched a safeguard investigation to see if the volume with or without prices of imports of semi-milled and milled Indica rice from Cambodia and Myanmar resulted in serious difficulties to EU producers of similar or competing products.

Later, in December, the European bloc failed to come to a consensus on taxing Cambodia fragrant and white rice.

The vote, hailed as a positive sign for Cambodia, failed to deliver a decision on the regressive rice tariff imposition that is expected to start from Jan 1 next year, with 15 of 28 member states either rejecting the proposal or abstaining from the vote.

As a result, the EC has been tasked with making a final decision in early January.

If the clause is activated, Cambodian rice will be hit with taxes equal to 175 euros per ton in the first year, 150 euros in the second year, and 125 euros in the last year.

To express their dissatisfaction with the situation, the Cambodian Ministry of Commerce and the Cambodia Rice Federation asked EU officials to ensure that the investigation into the matter is in-depth and accurate, and demanded that the European bloc reconsiders its position.

“Imposing tariffs on Cambodian rice would impact EU’s effort to alleviate poverty in least developed, and developing countries. In addition, the tariffs would affect EU importers and its own consumers,” Song Saran, CEO of Amru Rice, a leading rice exporter, says.

Farmers put paddy rice in sacks in Takeo province’s Bati district. KT/Chor Sokunthea

Mr Saran says the evidence used in the March investigation is outdated, with data that goes back as far as four years, when Cambodian rice exports to the EU were made up mostly of white rice.

“We’re really shocked because the data they are using does not reflect the current reality. It’s totally different from what’s happening now. They are looking at data from the years 2013, 2014, 2015 and 2016,’ Mr Saran says.

“Cambodia exported a lot of Indica rice in the past, and that’s what they are focusing on. But this is not fair, because they are not looking at the present or at years to come. According to the law, you have to look at data from the current and coming years to see the impact in the market.”

Mr Saran explains that if the investigation is carried out properly, the EU cannot possibly impose the tariffs.

“They should listen to our complaints and to the voices of Cambodian farmers. If they followed developments in the Cambodian rice sector, they would know that we have transitioned to fragrant rice. Cambodia’s fragrant rice has, indeed, achieved fame around the world,’ Mr Saran says.

The proposed tariffs will make local rice less competitive in its main market, the European Union, and this will have a particularly negative effect on the farmers, Mr Saran says, adding that these farmers will be forced to change crops to survive.

Chim Yoab, also a farmer in Takeo, has no plans yet to diversify her farming into new crops, explaining that if the price of rice decreases drastically, she will use it for personal consumption.

“It worries me that the price of paddy may plummet. If this happens, I would not sell it. Instead, I will store it in the house and wait for the price to surge. I would also keep it for my family to eat,” Ms Yoab, who owns 2.5 hectares of farmland in Bati district, says

Pak Pum, meanwhile, another rice farmer in Bati district, expects his Romdul rice to fetch a high price this year.

Walking into his farm to check whether the rice is ready for harvesting, Mr Pum says the price rice fetches depends on quality and variety.

“When demand for our rice abroad is high, there will be many brokers coming to buy from farmers. When there are not many brokers, the price they offer is lower,” he says. “However, if your product is high quality, it will fetch a higher price.”

CRF vice president Hun Lak said early this month that he does not expected the safeguard clause to be activated, as it would harm local farmers.

“It was a positive result that the majority of EU member countries did not vote for the tariffs, with some countries voting against them. The countries that voted against them obviously feel that it will impact the livelihoods of farmers,’ Mr Lak said.

“Better be safe than sorry,” Amru Rice’s Mr Saran says, explaining that farmers must prepare for the worst.

If the tariffs are put in place, it would be a “disaster” for Cambodian farmers, he says, adding the best way for farmers to secure their livelihoods is to diversify their farming into new crops.

He says Cambodia must also strive to find new markets and become less reliant on the European market.

“We must not depend on just one market,” Mr Saran says. “We are a free-market economy. If they impose the tariffs, we will look into other markets, particularly in Asia and Africa.

“We will find new markets, but we will also try to keep selling to the EU, which will always be an important market.”

Cambodia produces every year around 10 million tonnes of paddy rice. Around 5 million is used domestically, for human consumption, animal feed and other activities. The rest is exported.

As he places a sack of paddy rice over his shoulder to carry it home, Mr Yorn says tariffs in the EU affecting the price of his rice is not his only concern. He says the next few seasons may come with severe droughts, which could hurt production severely.

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