New trade privileges that allow Cambodian-manufactured travel goods duty-free access to the United States for the first time could see exports of these items increase by over 400 per cent in the coming years, industry experts said yesterday.
An amendment to the US Generalised System of Preferences (GSP) effective July 1 removed US customs tariffs on Cambodian-made travel products such as luggage, backpacks, handbags and wallets.
The items, which previously faced tariffs of between 4.5 and 20 per cent, can now enter the US duty-free under the expanded program, which grants tariff exemptions to the products of developing countries.
Vann Sou Ieng, chairman and president of the Garment Manufacturers Association in Cambodia (GMAC), said the inclusion of travel goods under the GSP program will make Cambodian factories more competitive and encourage new investment in the $6.3-billion garment industry, which employs roughly 700,000 workers.
“This [new trade privilege] gives us a real competitive edge and will attract more capital investment to Cambodia,” he said.
Sou Ieng stressed that the Kingdom was one of just two countries in the Asia-Pacific region to be granted a GSP tariff exemption on travel goods. The other country, Nepal, is not a major supplier of these products.
According to Sou Ieng, there are currently 15 manufacturers in Cambodia producing the eligible travel goods. Together they exported products worth $48.3 million to the US last year.
“By my estimation, we can achieve at least $200 million in exports because from 20 per cent to zero duty is not a small amount,” he said, estimating that increased orders could create another 100,000 jobs for local workers.
“I also dare to believe we could reach $500 million if we prepare and do good marketing,” he added.
The United States is one of the world’s largest markets for travel goods, importing more than $10 billion in products last year.
China, which exported goods worth $6.4 billion, was the largest supplier to the US market. Vietnam with $944 million and the Philippines with $224 million were the top suppliers in the ASEAN region.
William Heidt, US ambassador to Cambodia, said the extension of the GSP program to include Cambodian-made travel goods would help diversify the country’s economic base and alleviate poverty.
“This is the rare opportunity for Cambodia to build a world-class new export industry from the ground up and to develop Cambodia’s reputation as a world-class supplier of travel goods,” he said.
Heidt added that it was important that Cambodia ensure protective working conditions for its garment factory workers to minimise labour issues in the industry.
According to the Office of the US Trade Representative (USTR), a country’s GSP privileges can be limited or withdrawn if it is found to be in violation of internationally recognised standards for worker rights, among other things.
However, Cambodian Minister of Commerce Pan Sorasak said the government would not let that happen.
“We will ensure that [travel goods] manufacturers show a high level of responsibility for the benefit of our citizens,” he said. “It will be an industry that exhibits good corporate social responsibility.”
Cambodia is one of 122 developing countries that benefits from duty-free access to the US market under the GSP program. Approximately 5,000 products are eligible for the preferential treatment.
Kung Phoak, president of the Cambodian Institute for Strategic Studies, said the Kingdom needs to negotiate more special trade privileges to boost its international competitiveness. The target should be to reduce trade tariffs as low as possible, he said.
“For many countries, the development of skilled labour and technology has already passed its saturation point,” Phoak said. “I don’t see them having a big margin to improve this kind of competitiveness.”
As such, he said bilateral and regional trade agreements are becoming increasingly important as a way for countries to strengthen their trade competitiveness. Cambodia will require low tariffs or duty-free access to its major export markets if it is to compete.