Logo of Phnom Penh Post newspaper Phnom Penh Post - Cambodia has sole objective for US

Cambodia has sole objective for US

Shoes on display at a shop in Phnom Penh in 2010.
Shoes on display at a shop in Phnom Penh in 2010. Pha Lina

Cambodia has sole objective for US

Cambodia intends to submit a petition to the United States government to extend the duty-free privileges of its Generalised System of Preferences (GSP) scheme to include footwear, giving local manufacturers a competitive advantage in the world’s biggest consumer market. But hopes are dimming as the submission deadline approaches and a bill proposing the exemption fails to make traction in the US Congress.

The GSP Footwear Act of 2017, which was introduced to the US House of Representatives in May, proposes broadening the annual renewal of the GSP programme to include footwear for the first time since the trade privilege scheme was introduced in 1976. If passed, the act would allow certain footwear products from selected countries with Least Developed Country (LDC) status to enter the United States duty-free.

However, support for the bill has been limited, with sponsorship from just three Democrats and two Republicans in the 435-member House and no recorded action since June. LDCs have been given until October 17 to submit petitions that could help sway Congressional support for the bill, which will expire at the end of the year if it is not passed.

Kaing Monika, deputy secretary-general of the Garment Manufacturers Association of in Cambodia (GMAC), said the industry body was working feverishly with the government to draft and submit a petition ahead of the October 17 deadline.

“[The petition] is still a work in progress, but together with the Ministry of Commerce we will have it submitted in October,” he said. “If the US passes the law it would open up a whole new market.”

According to Monika, footwear accounts for just $700 million of Cambodia’s $6.5 billion garment and footwear industry, with the vast majority of locally produced shoes, boots and slippers shipped to the European and Japanese markets. Purchases by US buyers amount to less than 10 percent of Cambodia’s footwear exports.

While this suggests enormous potential to increase exports to the US market, which imported $123 billion worth of footwear last year, local producers would need to adjust production to benefit from the bill’s proposed duty-free exemptions.

According to Monika, very few of Cambodia’s 59 dedicated footwear manufacturers currently fit the bill’s proposed GSP eligibility criteria, which include tariff exemptions on 17 product categories such as golf shoes, steel-toed boots and weather-proof leather knee-high boots.

“It is true that we don’t currently manufacture a considerable amount of footwear that would meet the bill’s GSP requirements, but if the US makes it a new law we would expect tremendous growth in the sector with new investors and orders coming in,” he said.

Shoemakers at work inside a shoe workshop in Phnom Penh's Tuol Sleng.
Shoemakers at work inside a shoe workshop in Phnom Penh's Tuol Sleng. Post Staff

While the trade-weighted average for US footwear import duties is 10.8 percent, tariffs on footwear imports from LDCs including Cambodia vary from 8 to 38 percent depending on the product category.

Monika declined to predict how much Cambodia’s footwear industry stood to gain if the bill passed. However, when the US revised its GSP scheme last year to include travel goods manufactured in Cambodia, one GMAC representative forecast that the preferential trade treatment would boost the Kingdom’s exports of travel goods to the US market fourfold to $200 million a year.

The gains could be even bigger for the significantly larger and more established footwear industry, which Cambodian customs data show exported goods valued at $127 million to the US market last year.

Soeng Sophary, spokesperson for the Ministry of Commerce, said the inclusion of footwear in the GSP scheme would increase the competitiveness of Cambodia as a low-cost production base.

“If the footwear GSP were granted, Cambodia could become more attractive to the investors who are interested in this product sector, and could retain our existing factories manufacturing footwear products,” she said. “[This] would eventually reinforce our export capacity, and ultimately benefit the existing workers and expand employment opportunities to absorb much more labour available in the country.”

Sophary confirmed that the Ministry of Commerce was working alongside GMAC to submit a petition, pointing out that while Cambodia does not have much lobbying clout in Washington, if other LDCs also submit petitions it could sway US lawmakers to pass the bill.

“Cambodia is just one LDC among [many] in the world that could benefit from the GSP if the bill were passed,” she said. “[The bill] is a package for LDCs.”

However, Miguel Chanco, lead Asean analyst for the Economist Intelligence Unit, said the chance of the bill passing was remote. He added that even if the bill did pass, it was questionable whether Cambodia would be included given its political currents and the increasingly anti-American rhetoric of its ruling party.

“The deterioration in Cambodia’s democracy over the past few months will make it harder to convince US lawmakers to grant the country deeper market access in the near term,” he said, adding that the US domestic political climate was currently not conducive for broadening trade access.

“The Trump administration has gone after countries that run a merchandise trade surplus with the US – such as South Korea,” he said. “Crucially, Cambodia is one of the many countries in Asia that runs a trade surplus with the US.”

MOST VIEWED

  • Hong Kong firm done buying Coke Cambodia

    Swire Coca-Cola Ltd, a wholly-owned subsidiary of Hong Kong-listed Swire Pacific Ltd, on November 25 announced that it had completed the acquisition of The Coca-Cola Co’s bottling business in Cambodia, as part of its ambitions to expand into the Southeast Asian market. Swire Coca-Cola affirmed

  • Cambodia's Bokator now officially in World Heritage List

    UNESCO has officially inscribed Cambodia’s “Kun Lbokator”, commonly known as Bokator, on the World Heritage List, according to Minister of Culture and Fine Arts Phoeurng Sackona in her brief report to Prime Minister Hun Sen on the night of November 29. Her report, which was

  • NagaWorld union leader arrested at airport after Australia trip

    Chhim Sithar, head of the Labour Rights Supported Union of Khmer Employees at NagaWorld integrated casino resort, was arrested on November 26 at Phnom Penh International Airport and placed in pre-trial detention after returning from a 12-day trip to Australia. Phnom Penh Municipal Court Investigating Judge

  • Sub-Decree approves $30M for mine clearance

    The Cambodian government established the ‘Mine-Free Cambodia 2025 Foundation’, and released an initial budget of $30 million. Based on the progress of the foundation in 2023, 2024 and 2025, more funds will be added from the national budget and other sources. In a sub-decree signed by Prime Minister Hun Sen

  • Two senior GDP officials defect to CPP

    Two senior officials of the Grassroots Democratic Party (GDP) have asked to join the Cambodian People’s Party (CPP), after apparently failing to forge a political alliance in the run-up to the 2023 general election. Yang Saing Koma, chairman of the GDP board, and Lek Sothear,

  • Cambodia's poverty cut in half from 2009 to 2019: World Bank report

    A report published by the World Bank on November 28 states that Cambodia’s national poverty rate fell by almost half between 2009 and 2019, but the Covid-19 pandemic recently reversed some of the poverty reduction progress. Cambodia’s poverty rate dropped from 33.8 to 17.8 per cent over the 10