The possibility of a partial suspension of the Everything But Arms (EBA) preferential trade access that might target certain industries surfaced in the buzzing aftermath of the EU beginning its review process.
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One of the concerns raised by the EU delegation was the displacement of people across the country because of land disputes with sugar companies. A likely outcome could see the sugar industry withdrawn from preferential trade access to the EU while other industries, like the garment sector that employs hundreds of thousand, mostly female workers, being able to keep its access.
Market analysts are in agreement that a complete suspension of the EBA would be an existential threat mainly to the garment industry. The rise of the minimum wage to $250 in 2023 and forecasts by the International Monetary Fund that the Kingdom’s growth will slow to 5.9 percent in 2019 have all but seen garment companies ready to pack their bags to cheaper, greener pastures in Vietnam and Bangladesh.
The European Chamber of Commerce, representing major multinational brands like Adidas, and Marks & Spencer, sent out an almost exasperated statement after an informal question and answer session with EU ambassador George Edgar this week.
“We are very concerned that this investigation will send wrong signals about the prospects of the market to potential manufacturing investors in 2019.
“And that a possible withdrawal in 2020 will have a terrible impact on the employment of hundreds of thousands–often women–and many more of their dependents,” the statement reads.
Another aspect of the EBA withdrawal process that’s not been discussed is the possibility of its reinstatement.
There is some historical precedent of a country losing a variant of the Generalised Scheme of Preferences (GSP) where the EBA is granted the best arrangement of duty free access to the European bloc.
In 2010, Sri Lanka lost its EU concession, the GSP Plus, over concerns of human rights abuses during targeted operations against the Tamil insurgency. The effects of the regime loss were immediate and Sri Lanka soon lost its dominant position in the garment industry to its Southeast Asian counterparts.
The Sri Lankan government was formally reinstated in May 2017. The granting of the scheme did not mean the government had implemented the 27 conventions outlined in the special arrangement, far from it. EU Trade Commissioner Cecilia Malmström even said at the time of Sri Lanka that “no one is pretending that the situation is perfect.”
“If preferences were to be suspended, that suspension can be lifted if the issues that led to it are effectively addressed,” Edgar tells Capital Cambodia via email.
“In case the Commission decides for a temporary withdrawal, the final decision will be reflected in a Commission Regulation adopted after seeking the opinion of the European Parliament and member states,” he adds.
One step forward, two steps back
There were indications in November last year that Prime Minister Hun Sen was willing to make concessions. Speaking to 20,000 garment workers in Kandal province, he urged the courts to expedite union activists cases.
“Cases that should be handled, handle them quickly. Cases that are not being handled, drop them (or) finish them, so that those union leaders don’t feel like hostages,” he was quoted as saying.
But things turned gloomy again last December when Hun Sen and opposition leader Sam Rainsy exchanged heated words which ended in a stalemate.
In the meantime, the US Embassy in Phnom Penh has echoed EU’s concern and urges the Kingdom to “allow independent trade unions, media organisations, and other elements of civil society to operate without undue restrictions”.
“Cambodian leaders still have an opportunity to avoid the negative economic consequences of EBA withdrawal,” it adds. CapCam
Donald Jae Lee
Business Writer, Capital Cambodia