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EU, Cambodia should rethink their approaches to EBA

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EU Ambassador to Cambodia George Edgar and Minister of Foreign Affairs and International Cooperation Prak Sokhonn hold a meeting . Photo supplied

EU, Cambodia should rethink their approaches to EBA

The EU and Cambodia are speaking different languages on the issue of human rights and democracy in the Kingdom.

While the EU urges Cambodia to reverse the perceived deterioration of human and labour rights in the country if the latter wishes to continue to enjoy trade privileges under the EU’s Everything But Arms (EBA) scheme, Cambodia sees such demands as “acts of interference” into its internal affairs.

Both sides appear to be sticking to their own terms and not engaging in various channels of dialogue effectively.

The EU as the world’s largest trading bloc has been criticised for using “double standards” with Cambodia.

The bloc also seems to fail to understand the Cambodian situation and, in the Cambodian government’s words, the EU “takes the risk of negating 20 years’ worth of development efforts” with the Kingdom.

It has been argued that the EU should try to understand Cambodia.

The EU’s “scare tactics” or coercive measures may not produce the intended results – instead, it may result in a lose-lose scenario for both sides.

Not only will the EU’s EBA threat damage Cambodia-EU relations, but it will also force the Kingdom to further embrace China, a situation that the EU itself would not want to see.

For Cambodia, a loss of EBA would mean a 12 per cent tax for its garment exports and 16 per cent for footwear exports to the EU, which would result in a loss of up to $676 million in taxes.

Major barrier

According to a recent World Bank report, Cambodian exports to the EU may decline up to $654 million per annum if the Kingdom’s EBA status is withdrawn.

In fact, a withdrawal of EBA is in no one’s interests.

Although Cambodia sees the EU’s strong measures as a pretext for interference into its domestic affairs, the EU may see otherwise.

The bloc may consider its coercive action as the moral responsibility of an intergovernmental institution that advocates human rights and democratic principles.

The difference in their thinking is a major barrier which prevents successful negotiations to resolve the EBA issue.

Since the EU has already started a six-month period of intensive monitoring and engagement which would result in the suspension of Cambodia’s preferential access to the EU market, the key to preventing the loss of EBA seems to rely on Cambodia’s responses to the EU’s demands.

However, the Cambodian government is of the view that the EU’s measures are politically motivated and that the EU unfairly treats Cambodia.

This line of thinking seems valid but not helpful.

Accusing the EU of using double standards and claiming that EU measures are politically biased will not help solve the problem.

It will only exacerbate what is an already precarious situation.

And it is Cambodia that will be disadvantaged if its EBA status is removed.

Although Prime Minister Hun Sen and his government have promulgated that there would be “no impact from EBA withdrawal”, there is reason to believe such claims are unfounded.

How can Cambodia’s export-driven economy not be affected when the country can no longer enjoy its duty-free and quota-free access to the EU market?

How is paying 12 per cent export tax not an additional burden for the garment industry?

These are not rhetorical questions, but ones that show the impact of EBA revocation on the Kingdom’s economy.

Concerns over the negative effect of the withdrawal of EBA scheme have been raised by industry associations, local businesses, and international buyers.

Even though China has pledged to help Cambodia in the event that the EBA is withdrawn, there is doubt regarding the extent to which China can offset the loss.

The EU is a large market for Cambodia, particularly for the garment industry.

It is almost impossible to imagine how China would be a substitute market for the Kingdom’s garment exports.

China can, however, help Cambodia by injecting more aid and loans in addition to the unprecedented inflow of investment, but this is a risky scenario which may cause another problem – China’s debt trap.

Currently, Cambodia’s outstanding debt to China is estimated to be $4.6 billion.

Channels of dialogue

Although the risk of falling into the Chinese debt trap is still low, with less effective debt management capacity, the issue of the debt trap should not be overlooked.

The way forward for Cambodia is to engage in channels of dialogue with the EU to find common ground.

The Cambodian government should reconsider its approach to the EBA issue.

Rather than rejecting the EU’s demands and reiterating that the bloc is unjust in its treatment of Cambodia, the Kingdom’s leaders should clarify with the European Commission what it exactly wants and continue to try to resolve the EBA issue through dialogue and negotiation, not confrontation.

For the EU, rather than threatening to withdraw EBA from Cambodia, it may opt for an alternative or any other form of action that directly targets the elite politicians, not the economy.

The EU will fail if it cannot reverse Cambodia’s democratic drift.

Its coercive approach will also fail if it results in Cambodia falling completely into China’s camp and becoming a real vassal or client state of China.

It is therefore important that both sides reconsider their approach to EBA.

Kimkong Heng is a doctoral candidate at the University of Queensland and an Australia Awards scholar.

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