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Exports to US bounce back on revised GSP

Garment factory workers produce items of apparel at a warehouse in Kandal province last year.
Garment factory workers produce items of apparel at a warehouse in Kandal province last year. Heng Chivoan

Exports to US bounce back on revised GSP

Exports to the US saw a modest rebound during the first half of the year, benefitting in part from new trade privileges that allow Cambodian-made travel goods to enter the world’s biggest consumer market duty-free, a Garment Manufacturers Association in Cambodia (GMAC) representative said yesterday.

The latest US government census trade data show Cambodian exports to the US from January through June totalled $1.36 billion, an increase of 4.5 percent compared to the same period in 2016, which saw the first negative growth in five years.

During the first half of 2016 Cambodian exports to the US declined by almost 13 percent, down from nearly $1.5 billion, prompting concerns that the Kingdom’s pivotal garment industry was losing its competitive edge. Exports finished the year at $2.8 billion, down 7 percent from $3 billion in 2015.

While the census trade data do not break down individual export products, GMAC Deputy Secretary-General Kaing Monika said there was little mystery as to which sector was shaping these trends. He said the vast majority of Cambodia’s exports to the US were garment and footwear products.

Monika speculated that the trade privileges granted last year that allow Cambodian-manufactured travel goods duty-free access to the US had helped the local garment industry regain its footing.

“Since we received duty-free export for travel goods. This has helped to accelerate the export of these products to the US market,” he said.

The US is one of the world’s largest markets for travel goods, importing more than $10 billion in products in 2015. An amendment to the US Generalised System of Preferences (GSP) that went into effect in July 2016 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 percent, now enter the US duty-free under the expanded programme.

Monika said the revised GSP programme had effectively doubled the size of travel goods exports in just over a year.

“Right now, the value of Cambodia’s exports of travel goods could be over $100 million, with the majority exported to the US,” he said.

Soeng Sophary, spokesperson for the Ministry of Commerce, said that while Cambodia has not yet collected its own data on US trade for the first half of the year, the US data looked positive for the garment sector. However, she said it could take years before the country sees the full benefits of the duty-free privilege as the government tries to attract new investors.

“It will take some time because we cannot attract a group of investors to establish production in our country immediately after receiving this trade privilege,” she said. “In the near future, I am optimistic that exports of travel goods will see a significant increase and will contribute a larger export value to US.”

According to Monika, GMAC plans to submit a GSP duty-free exemption application for Cambodia’s $700 million footwear industry later this year, that if accepted would reduce the trade-weighted average for footwear export duties that sits at 10.8 percent globally. However, since the GSP scheme was launched in 1976, both garments and footwear have never been included.

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