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The EU’s tax free status partially withdrawn

Sorn Sarath / Khmer Times Share:
The EU will now tax more Cambodian goods, including shoes and clothes. AFP

THE Kingdom’s annual $7 billion garment and textile sector will see the partial loss of a preferential zero-tax trade deal provided by the European Union (EU) from today as the Cambodia-China free-trade agreement (FTA) is on its way for final signing.

The move follows the EU decision made in February even though the government and private sector has been trying to lobby the bloc not to implement or at least delay the withdrawal.

The Garment Manufacturers Association of Cambodia (GMAC) and the Cambodia Footwear Association (CFA) together with the European chamber of commerce have called again and again for the European Union to postpone its partial withdrawal of what is known as the Everything but Arms (EBA) trade deal, because of the devastating effect of COVID-19 on the industries.

However, Van Sou Ieng, chairman of GMAC, told Khmer Times yesterday that the GMAC together with relevant parties kept asking the EU to reconsider or delay the withdrawal.

“The EU may announce their decision tomorrow [today] but, as the private sector, we still continue our    job by continuing to ask the EU to delay the withdrawal,” he said, adding that the GMAC has asked for this ever since the EU’s decision.

“We are a bit disappointed because we still did not get the result [we wanted] but we won’t stop here.

We will continue until the end because it is the GMAC’s obligation,” he said.

“When the withdrawal is implemented, they still have right to change it and even we cannot predict what the result will be. We still insist the EU changes its decision.”

The EU is Cambodia’s largest trading partner and in, February, its administrative arm, the European Commission, recommended the partial withdrawal of the EBA scheme from August, citing a serious and systematic violation by Cambodia of principles in four core human and labour rights.

The suspension affects one-fifth ($1.08 billion) of Cambodia’s annual exports to the EU’s 27-nation bloc and was accepted by the EU.

Sok Sopheak, secretary of state at the Ministry of Commerce, said that today there will be no change in the EU’ decision but it would not be a big concern even though it affects some part of garment sector.

“While 20 percent is related to sugar, we have not exported sugar to the EU and if we talk about travel goods it just a small amount to the EU market compared with hundreds of millions of US dollars to the US market,” he said.

“In term of clothes [T-shirts] and footwear, we have enough to compete with other countries such as Laos, Bangladesh, and Myanmar so our competitiveness is good enough,” he added.

But the big concern is COVID-19 and that countries around the world are locked down, affecting the import and exports of goods.” Sopheak provided an example of Cambodia’s milled rice exports to the EU’s markets, which have been under a tariff imposed by the EU since early 2019.

“What I am saying is that the EU has already imposed tax on our rice since 2019 but we can still export to the market and the important thing is that we need to diversify our export destinations,” he said.

However, Sopheak said the government and private sector will still work with the EU to resolve the issue.

Cambodia hopes to sign an FTA with China this month, expecting to help mitigate the Kingdom’s partial loss from the EBA.

However, Sopheak, who is also the head of Cambodia’s negotiating team, declined to comment on the exact date the FTA will be signed.

Hong Vannak, a business researcher at the Royal Academy of Cambodia, told Khmer Times last week that it will take time to replace the loss caused by the 20 percent EBA deal withdrawal despite the existing huge volume of bilateral trade between Cambodia and China.

 

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