A year ago, the European Union offered Cambodia the option of using a unique Harmonised Systems Code (HS Code) for its Jasmine fragrant rice and white rice to differentiate it from other Indica rice, a move that could have saved the nation from the conundrum it now finds itself in.
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But this did not materialise because of what some have described as a powerful combination of apathy and arrogance that led key players to believe that Cambodia could not be harmed so long as she is shielded by the Everything-but -arms (EBA) privileges rendered to Least Developed Countries (LDCs).
Then the ball dropped. EU launched a safeguard inquiry to determine whether imports of semi-milled and milled Indica rice from Cambodia and Myanmar resulted in “serious difficulties to EU producers of like or competing products”.
On Nov 5, the Directorate-General for Trade of the European Commission (EC) confirmed that a significant surge of rice imports from Cambodia and Myanmar caused economic damage to the rice sector in Europe.
The bloc is also in the midst of classifying semi-milled and milled Indica rice from Cambodia and Myanmar with commodity codes that are similar to EU Indica rice.
This is already hurting the Cambodian rice sector, and though the local Customs Department is working on its own code, the effort is seen as too little too late as EU presses ahead with the tax regime.
On Tuesday, EU member states failed to unanimously agree on the imposition of a regressive tax that would have started Jan 1, but now the ball is in the EC’s court to either vote or strike out the tariff.
While criticism is rife that the government and the Cambodia Rice Federation (CRF) could have scuttled the entire classification process with a forceful and united front against the EU, there is also the long-standing quandary of whether Cambodian rice is of the Indica variety or not.
The truth is that Cambodia produces Jasmine fragrant rice and white rice for the EU market, which fall squarely under the Indica rice classification.
“In the tropics, where Cambodia lies, the type of rice planted – fragrant rice and white rice – is of the traditional Indica rice species. In temperate regions like Japan and Korea, Spain and Italy, it is Japonica rice that is grown.
“However, Spain also has a Mediterranean climate, so it can grow white rice,” Buyung Hadi, Cambodia representative of the International Rice Research Institute (IRRI), told Khmer Times.
White rice is high yielding and matures fast but it is generally of low quality, and is traded at a lower price compared to fragrant rice, which is photosensitive, meaning it takes a longer time to grow and can be planted for a limited period of time. This results in lesser supply, pushing up prices.
According to the UN’s Food and Agriculture Organisation (FAO), rice production in Cambodia is expected to rise marginally this year to reach 10.7 million tonnes. Exports of milled rice are projected to expand to nearly 1.5 million tonnes from 1.4 million last year.
75 percent of rice produced in the EU is Japonica and 25 percent Indica (long grain white rice), whereas 55 percent of Cambodia’s rice exports to EU is fragrant rice, seemingly cancelling out the competition with EU’s white rice.
Arguing that there is lack of competition with EU’s rice sector, Mr Buyung is baffled as to why the safeguard targets white rice.
“Within the Indica species, there is a variety of qualities that is relevant to trade. Why is the safeguard targeting the white rice? If that is the case, it is misplaced because most of Cambodia’s rice exports consist of fragrant rice,” he said.
So where does that leave this debate?
Critics opine that Cambodia is ‘crying’ because not only did the letters sent by major rice exporters Amru Rice and Signatures of Asia lack exposure in the EU and were a tad emotional, but also the entire move to safe the nation from the tariffs was allegedly devoid of a united front.
They also alleged that the cartels in CRF made up of rice exporters were more interested in sustaining a profit margin than fighting for the sake of rice farmers, which they fervently claim to do.
According to a source close to the issue, exporters and millers, who largely make up CRF, are said to buy rice from farmers at low rates, often below market prices.
“It is common knowledge that not a single farmer has a better life in Cambodia because of the EBA privilege status. From EU’s standpoint, it is exporters who become richer,” said the source.
CRF secretary-general Moul Sarith told Khmer Times that discussions with members started in March with documents that were sent to the EU as a response to the bloc’s proposal submitted to the Directorate General for Trade.
“We were given three weeks from November 5 to submit the documents and evidence to back our argument before negotiations on November 26. Our leaders went to Brussels to speak with the Directorate General for Trade,” said Mr Sarith.
At press time, intense negotiations are ongoing at the EU.
In the absence of a favourable outcome, the CRF expects to work with its lawyers on the next course of action.
Nevertheless, a source close to the issue pointed out that Cambodia would be able to sustain its rice business on the off-chance the tax system is implemented.
“Cambodian jasmine rice is still $200 cheaper than Thai’s. If Thailand can market its rice, Cambodia should have no problem doing the same. Vietnam can also be seen as a key market for local rice exports, as claimed by Cambodian exporters,” the source said.
However, Vietnamese millers usually deal directly with rice farmers in paddy to be reprocessed in Vietnam and exported at cheaper prices. Cambodian millers and exporters may end up having less milled rice to export to end buyers, which occurred frequently when the price of paddy was pushed up by Vietnamese or Thai brokers sent to procure paddy from farmers.
Hopefully, the silver lining here is that some nine million Cambodian rice farmers might finally see justice done to their crop and efforts.