It was at midnight on Friday, Jan 31, Brussels time, that the United Kingdom officially ended its membership of the European Union, one of the largest trading blocs in the world.
For the latest Cambodian Business news, visit Khmer Times Business
However, the Brexit story has not yet come to an end because the UK is now under what is now a nearly 10-month transition period. This means that during this time, the UK will continue to participate in the EU’s custom union and single market, maintaining EU laws and regulations even though the country is no longer a member state in the bloc.
Meanwhile, the Cambodian government and the UK’s high-ranking officials have both pledged that the Kingdom will continue to enjoy preferential trade status in the UK after the transition period ends on Dec 31.
Currently the Kingdom benefits from a preferential trade deal with the EU known as Everything but Arms (EBA). However, on Feb 12, the European Commission, which acts as the union’s civil servants, announced a 20 percent cut in the free trade agreement, costing Cambodia about $1.1 billion, owing to the “serious and systematic violations of the human rights enshrined in the International Covenant on Civil and Political Rights”. This has yet to be ratified by the EU parliament, which normally rubber stamps EC recommendations.
“The withdrawal of tariff preferences – and their replacement with the EU’s standard tariffs (most-favoured nation) – will affect selected garment and footwear products and all travel goods and sugar,” The EC said in the statement.
Cambodia’s yearly exports to the EU accounted for 45 percent of its total exports in 2018, reaching about $5.8 billion that year.
“Unless the European Parliament and the Council object, this will take effect in August 12,” the statement read.
However, Cambodia has high hopes over future trade relations with the UK.
The UK officially left the EU after nearly five decades of membership, meaning it is no longer part of the largest trading bloc in the world currently numbering 27 countries and is keen to find new trading partners.
Ky Sereyvuth, an economics professor, says he had learned the UK will seek to maintain a special trade privilege for Cambodia, citing that the official Brexit deal will give right the UK to do so – but possibly only after the transition period ends.
Ky expects that the two countries would likely begin discussing a free-trade agreement sometime this year.
Speaking during a graduation ceremony in early December last year, Cambodia’s Prime Minister Hun Sen said he is closely monitoring the situation in the UK and its relationship with the EU.
In his speech, the Cambodian premier pointed out that the UK is the largest market for Cambodian exports inside the European bloc.
“The UK has the largest share of our exports in the bloc and the UK has a special trade policy that will continue even after the country [fully] leaves the EU,” he said.
In addition to what Prime Minister Hun Sen announced over the move, Heather Wheeler, UK Minister of the Foreign and Commonwealth Office for Asia and the Pacific, said Cambodia is among 48 less-developed countries that will retain trade privileges in the UK market.
Wheeler said so during an official visit and meeting with Cambodian Minister of Foreign Affairs and International Cooperation Prak Sakhon last September in Phnom Penh, when she requested Cambodia’s support for the UK to become a dialogue partner of Asean after it leaves the EU.
“The fact the UK has pledged to continue a preferential trading arrangement for Cambodia means there are opportunities and potential for Cambodia to expand its exports to the UK, which is one of the largest economies in Europe and a key trading partner of Cambodia, said Chheang Vannarith, president of the Asian Vision Institute.
He noted the two trade-way between the countries is currently around $1 billion a year.
The Secretary-General of the Garments Manufacturers’ Association of Cambodia Ken Loo says, “It’s my understanding that, based on the information I have, the UK government has pledged to keep the benefits of EBA for Cambodia after [full] Brexit.
The Ministry of Commerce spokesman Seang Thay says with the UK leaving the EU, Cambodia would be in a better individual trading position with the country.
However, he noted the Kingdom has not yet set the timeframe for conducting a bilateral trade agreement with the UK after Brexit.