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20% of EBA withdrawal effect

Uch Leang / Share:
KT/Siv Channa

On Aug 12, the European Union (EU) decision to partially withdraw Cambodia’s duty-free quota-free access to its market became effective. The preferential treatment enjoyed by Cambodia under “Everything But Arms” (EBA) – the EU’s trade arrangement for 48 Least Developed Countries in the world including four from Asean (Cambodia, Laos, Myanmar and Vietnam) is now temporarily lifted after the EU concluded that Cambodia had not upheld its EBA requirements, because of “the serious and systematic violations of the human rights principles enshrined in the International Covenant on Civil and Political Rights”. The EU enforces this measure while staying open to engage with Cambodia on the necessary reforms.

It is worth recalling that, the Kingdom’s garment manufacturing sector has been one of the main beneficiaries of the agreement since its inception in 2001. In February 2019, the European Commission (the EU’s “civil service”) opened a procedure for a withdrawal of the EBA preferences granted to Cambodia. On Nov 12, 2019, the Commission submitted to Cambodia a report demonstrating serious and systematic violations of key principles of the International Covenant on Civil and Political Rights (ICCPR) linked to political participation, freedom of expression and freedom of association in Cambodia. At the same time, despite remaining serious concerns, the report underlined tangible progress in solving land disputes in the sugar sector and with respect to labour rights. Following a period for comments, on Feb 12, the Commission adopted a Delegated Regulation on a temporary and partial withdrawal of tariff preferences granted to Cambodia under the EBA. The Regulation entered into force on April 25 after being endorsed by the EU and took effect as of Aug 12.

The EBA arrangement is part of the EU’s Generalised Scheme of Preferences (GSP). This allows vulnerable developing countries to benefit from lower duties or duty-free exports to the EU, and hence stimulate their economic growth. It is a one-way arrangement: It does not require reciprocity vis-a-vis EU exports. Through the EBA arrangement, the EU grants duty-free and quota-free access to its market for all products – except arms and ammunition – from Least Developed Countries (as defined by the United Nations). Under the GSP Regulation, tariff preferences may be suspended in the case of “serious and systematic violation of principles” laid down in the international human rights and labour rights conventions listed in an annex to the GSP Regulation.

The withdrawal of preferential access to the EU market affects selected garments and footwear products, all travel goods and sugar sectors that account for $1.08 billion with 40 products, approximately 20 percent of Cambodia’s annual exports to the EU. Cambodia may still export those products to the EU but they will be subject to general tariffs applicable to any other member of the World Trade Organization. The remaining 80 percent of Cambodia’s exports continue to enjoy preferential (duty-free, quota-free) access to the EU market.

The EBA has played an important role in Cambodia’s economic growth and development for years. According to the official website of the EU, its bilateral trade volume with Cambodia in 2018 was worth to the Kingdom about $8 billion in the garment and textile sector and this will now see the partial loss of a preferential zero-tax trade deal provided by the EU. Accounting for 17.3 percent of Cambodia’s total trade, the EU ranked the second largest trade partner of Cambodia after China. The suspension affects one-fifth ($1.08 billion) of Cambodia’s annual exports to the EU’s 27-nation bloc after the UK’s exit and was accepted by the EU.

Obviously, Cambodia did not want to lose the EBA deal. A special Cambodian envoy was sent to discuss the issue with the EC and the Ministry of Foreign Affairs and International Cooperation has worked hard to coordinate responses to the EU. However, there is not much Cambodia can do more to change minds.

The withdrawal of 20 percent of EBA exports to the EU came into effect because the EU doesn’t think that Cambodia can comply with the its rigid demands for the unconditional dropping of all charges against former opposition leader Kem Sokha along with his party activists, restoration of the Cambodian National Recue Party (CNRP), media freedom, restrictive action against civil society organisations and unions and economic land concessions for sugar cane production, among other aspects.

Apart from Cambodia’s internal reasons, the EU decision is politically motivated. It had already set a plan to put pressure on the Cambodian government even as the government was making progress in meeting the EU’s demands because now Cambodia seems to be a Chinese link needed to connect China to other countries, so putting pressure on Cambodia is also a hindrance to China’s ambitions.

The Cambodian Government remains firm in its principled position in rejecting any attempt by external parties in their use of trade and development assistance as pretexts
to justify their interference in Cambodia’s internal affairs.

Prime Minister Hun Sen said the Kingdom “must not bow our heads to such pressure”.

“I will not exchange the Kingdom’s independence and sovereignty for any aid or preferential trade scheme,” he said. “Cambodia must be a peaceful country. Every citizen must stand up and fight for peace, sovereignty and stability.”

The partial withdrawal not good, but it is time for Cambodia stand up and show the world that Cambodia can develop itself without assistance and can have a competitive edge over similar countries in the Asian region such as China, India, Thailand, Indonesia and the Philippines, all with a large textile export market, but none receiving the EBA trade deal, by using the potential of Cambodia such as its natural resources, human resources and geographical factors. Besides the EBA benefit from free-trade agreement (FTA) negotiations with the EU, Cambodia will official sign FTAs with China at the end of this month and has started to negotiate other FTAs with South Korea and with India. This does not mean the loss of the EBA has not affected Cambodia’s economy or not caused it regret. But it remains a fact the EU has decided to withdraw 20 percent of a tariff-free deal and may also continue to withdraw more in the future.

 

The author is senior researcher of Asian, African and Middle East Studies at the International Relation Institute of Cambodia

 

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