Senior officials on Wednesday said the government is prioritising its fight against Covid-19 over the EU’s withdrawal of its ‘Everything But Arms’ (EBA) scheme.
The remarks came as the European Commission (EC) officially withdrew 20 per cent of the EBA from Cambodia on Wednesday. The suspension affects one-fifth or €1 billion ($1.14 billion) of the Kingdom’s annual exports to the EU’s 27-nation bloc.
The EC said it will continue to monitor the human rights situation in the Kingdom before any further decision is made.
“The EU’s decision to partially withdraw Cambodia’s duty-free quota-free access to the EU market is now effective. The preferential treatment enjoyed by Cambodia under the “Everything But Arms” (EBA) – the EU’s trade arrangement for Least Developed Countries – is now temporarily lifted due to serious and systematic concerns related to human rights ascertained in the country.
“The EU enforces this measure while staying open to engage with Cambodia on the necessary reforms,” stated the EC press release on Wednesday.
Commissioner for Trade Phil Hogan said the EU’s EBA scheme has enabled the Kingdom to develop its export-oriented industry and generate jobs for thousands of Cambodians.
“Nonetheless, our continued support does not diminish the urgent need for Cambodia to respect human rights and labour rights. I stand ready to continue our engagement and to restore fully free access to the EU market for products from Cambodia, provided we see substantial improvement in that respect,” Hogan said.
With the EBA suspension, the EC said Cambodia’s exports will be subject to general tariffs applicable to any other members of the World Trade Organisation. Eighty per cent of the Kingdom’s exports will continue to enjoy duty-free, quota-free access to the EU market, it said.
The EU reiterated it will closely monitor the situation in Cambodia with a particular focus on what it considers restrictions on freedom of expression and civil and political rights, as well as land disputes and labour rights.
In its press release, the Commission urged Cambodian authorities to do more to restore political freedoms in the country, re-establish the necessary conditions for a credible, democratic opposition and initiate a process of national reconciliation through genuine and inclusive dialogue.
“If the government of Cambodia shows significant progress, particularly on civil and political rights, the Commission may review its decision and reinstate tariff preferences under the “Everything But Arms” arrangement, in line with the provisions of the EU Generalised Scheme of Preferences,” its press release said.
Responding to The Post on Wednesday, the EC also expressed its concerns on the recent arrest of prominent union leader Rong Chhun.
According to the EC, total trade between Cambodia and the EU was worth €5.6 billion last year, making it Cambodia’s second-biggest trading partner after China. Cambodia is also the EU’s 54th largest trading partner.
But senior government officials played down the withdrawal, saying Cambodia’s independence and sovereignty cannot be traded for the EBA scheme. They said the government had already begun to offset the EBA suspension’s impacts.
Ministry of Economy and Finance spokesman Meas Soksensan told The Post on Wednesday that Cambodia had been well-prepared for the withdrawal since last year, even before the Covid-19 crisis.
The government, he stressed, had earmarked $1.1 billion to deal with both the suspension and Covid-19.
The prepared budget in response to EBA, he said, focused on four main points – the absorption of damages, a solution to structural problems, the strengthening of resilience to a possible macroeconomic and public finance instability, and an increase in effectiveness and efficiency of public institutions.
Cambodia will create new jobs, facilitate job exchanges in the garment sector, provide short-term job training, increase competitiveness and encourage economic diversification.
The government will also guarantee financial stability, use the budget to drive growth, identify financial sources for intervention and continue to implement monetary and banking policies.
“We have made significant progress in reducing unnecessary logistics spending for all companies operating in Cambodia in terms of competitiveness. The unnecessary logistics spending is of course on the government charges,” he said.
Government spokesman Phay Siphan told The Post that Cambodia was prepared to promote trade diversification. Cambodia will soon sign a free trade agreement with China and is working towards signing free trade deals with South Korea and Japan.
“We have our budget ready to carry out reforms to increase competitiveness among businesses that are affected by the 20 per cent loss of EBA access.
“The loss doesn’t mean that we lose the European market. We still have other potentials and we have demonstrated our ability to pay taxes. We are looking for other markets,” he said.
GMAC deputy secretary-general Kaing Monika said the withdrawal was not a surprise, though GMAC expressed its regret over the EU’s decision.
In dealing with the suspension, he said GMAC had provided input to the government on development strategies for the garment, footwear and travel goods industries.
“Covid-19 is now a more pressing issue and overwhelms the EBA,” he said.