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US review of GSP scheme expected to be smooth

Workers stitch clothes at a garment factory in Sihanoukville’s Special Economic Zone.
Workers stitch clothes at a garment factory in Sihanoukville’s Special Economic Zone. Sahiba Chawdhary

US review of GSP scheme expected to be smooth

With the recent launch of a new US initiative to ensure that developing countries benefiting from duty-free access are in compliance with the eligibility requirements of the Generalized System of Preferences (GSP) scheme, a representative of the industry body representing Cambodia’s garment sector said yesterday improvements in working conditions should keep the Kingdom above scrutiny.

This comes after a recent announcement by US Trade Representative Robert Lighthizer that the Trump administration would first target countries in Asia by examining 15 criteria that include combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection, and providing the US with equitable and reasonable market access.

If a country fails to meet the criteria, the US could trigger a full review and strip a country of its status, thus ending duty-free access to the world’s largest consumer market.

Kaing Monika, secretary-general of Garment Manufacturers Association in Cambodia (GMAC), said that the Kingdom should not be concerned by a US review.

“So far, Cambodia has always met the criteria for the GSP scheme and secured its eligibility because of improvements in working conditions, especially in the garment industry that has seen higher wages,” he said. “It will not be a problem for us to meet the requirements.”

According to a Facebook post by the US Embassy yesterday, Cambodia has benefited from the GSP scheme since 1997, with a total value of duty-free exports amounting to $179 million over the last two decades. In July of last year, the US expanded GSP preferences to the Kingdom by allowing Cambodian-made travel goods to enter the US market duty-free. Meanwhile, GMAC has filed a petition hoping that footwear exports are accepted into the GSP scheme, a long shot seeing that footwear has never been included in the scheme since it was established in 1976.

Miguel Chanco, lead Asean analyst for the Economist Intelligence Unit, said that Cambodia’s deteriorating political climate, which yesterday saw the dissolution of the main opposition party, had no bearing on the US decision to scrutinise the scheme.

“The US’s decision to scrutinize the GSP eligibility of countries in Asia is very much in line with the Trump administration’s protectionist bias towards trade, and is consistent with a few of his other ambitions to reshape America’s existing trade frameworks to its advantage,” he said in an email.

He added that even in the unlikely event that the scheme was rolled back for Cambodia, it would be little to no threat to the economy, seeing that the Kingdom’s chief export, garments, has never been included.

However, Paul Chambers, a lecturer at Thailand’s Naresuan University, said that Cambodia’s GSP status could be reviewed if Prime Minister Hun Sen draws the ire of the Trump administration and Washington because of its growing economic, political and military tilt towards China.

“In the past, the US has excluded some countries from GSP coverage because they supported terrorism, for example Libya, [or] were communist, [like] Vietnam, or were deemed to be facilitating intellectual property piracy,” he said. “In the case of Cambodia, Hun Sen’s intensifying ties with China and the fact that Cambodia still relies on the US as a major export destination [could] be behind reasons for Washington’s choice [to] re-evaluate Cambodia’s GSP trade eligibility.”

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