Just weeks since the United States announced it would grant new trade privileges that allow Cambodian-manufactured travel goods such as luggage and backpacks to enter the US market duty-free under its Generalised System of Preferences (GSP) scheme, a visiting American trade official hinted yesterday that the same privilege could be extended to the Kingdom’s regional competitors.
Speaking at an American Chamber of Commerce event yesterday, Erland Herfindahl, deputy assistant US trade representative for GSP, said that since the US signed off on the expansion of GSP products to include travel goods, Congress has been pushing for the body to consider the inclusion of neighbouring markets.
“At the same time that we announced that we were deferring a decision to grant this duty-free access to non-Least Developed Countries that receive GSP benefits, of which there are many in this region, including Indonesia, Thailand and the Philippines, we are getting a lot feedback that they would like to see us grant the same duty-free access to these countries,” he said.
Cambodia was one of just two countries in the Asia-Pacific region to be granted a tariff exemption on travel goods under an amendment to the GSP program that went into effect on July 1. The other country, Nepal, is not a major supplier of these products.
While Herfindahl explained that there was no immediate timeframe for broader inclusion, the US government is “studying” how the GSP would eventually be expanded. Factors that need to be considered for a country’s inclusion include the existing market share for travel goods currently being produced, something that for Indonesia, specifically, is “unclear”, he said.
He said American buyers are making a concerted effort to diversify away from the dominant supply flooding out of China. In this, the expanded GSP program is a “golden opportunity” for Cambodia, as it allows the country’s manufacturers to access the US market for imported travel goods – estimated at $10 billion a year – without paying US import tariffs, which can run as high as 20 per cent.
According to Herfindahl, Cambodia’s share of the travel-products market remains small, but has grown impressively in the last five years. Total exports were just $240,000 in 2011, but topped $48 million last year.
“We hope that Cambodia is able to take advantage of this GSP on travel goods,” he added.
Vann Sou Ieng, chairman and president of the Garment Manufacturers Association in Cambodia (GMAC), who previously stated that under the revised GSP exports of travel goods could grow to $200 million annually and create an additional 100,000 jobs for local workers, said this was an opportunity that could not be missed.
“It is only a matter of time before the Americans expand the GSP for travel goods to neighbouring countries, and if we don’t grab this opportunity now, it could be lost forever,” he said.
While he said GMAC was aggressively marketing the new trade potential, he noted that it was important that the government supports the industry, and trade unions prepare for additional training and adaption to new production lines.
“This is a crucial moment for Cambodia to climb up the value-added chain and to prove to the world we can produce and deliver on time while diversifying our manufacturing base,” he said.
“Our prices are acceptable for the moment, especially with GSP, but they will not be cheapest when the trade deal is expanded,” he added.