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Pressure on Cambodia Grows; Country Could Lose Duty Free Export Status

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BRUSSELS, Belgium – The EU formally informed Cambodia on February 11 it had begun a process that could result in the country losing its preferential trading terms because of its poor record on human rights and rule of law. Since then pressure on Cambodia has been ramped up further through a recent letter by various associations including the World Federation of the Sporting Goods Industry (WFSGI) representing (among others) the bike industry. Cambodia is EU’s biggest bike supplier.

Pressure on Cambodia Grows; Country Could Lose Duty Free Export Status
Strongman is one of the main bike producers in Cambodia supplying (among others) ZEG’s Bulls bikes. – Photo Bike Europe

Already last November EU Commissioner for Trade Cecilia Malmström warned Cambodia that it risked losing preferential access to the EU market under the Generalized System of Preferences (GSP) Plus arrangement. All this comes after the elections that took place in the country in July 2018. The Cambodian People’s Party led by longstanding Prime Minister Hun Sen won these elections after he arrested Kem Sokha, the leader of the now-dissolved Cambodia National Rescue Party (CNRP), on accounts of treason.

14 percent import duty edge

Currently Cambodia is EU’s biggest bicycle supplying country. Import from the country that benefits from the EU’s GSP import duty free status (allowing for a 14 percent import duty edge on countries that do not hold such GSP status) grew in the first half of 2018. Import from Cambodia was up by close to 7 percent to some 870,000 regular bicycles.

Increasing concerns

That import is in serious jeopardy as Cambodia’s Prime Minister Hun Sen is not responding on the warnings and actions of the European Union. Due to that various associations representing the international garment, footwear, bike, and travel goods buyers wrote on April 4 to the Prime Minister to express their increasing concerns regarding the labor and human rights situation in Cambodia which threatens the country’s GSP Plus status. Their letter says “We remain deeply concerned with the lack of progress that has been made in

addressing these important issues. Criminal charges and convictions remain in place against many labour leaders.

“The very real threat of withdrawal from EU and U.S. trade benefits will severely damage the Cambodian industry, and the millions of Cambodians who work in the industry. Further, it will undermine the decades of effort your government has put into developing a successful industry, which has brought about enormous benefits both to the Cambodian economy and the Cambodian people.”

Sales to Europe and the United States combined in 2018 reached USD 8.5 billion, or 38 percent of Cambodia’s total Gross Domestic Product (GDP) and accounting for over 80 percent of Cambodia’s total exports.

12 months to decide on GSP withdrawal

Since mid-February the EU started “a period of intensive monitoring and engagement”. The European Commission now has 12 months to decide whether to withdraw tariff preferences as well as the scope and duration of the withdrawal. EU’s High Representative for Foreign Affairs Federica Mogherini said that while Cambodia has recently released some political figures, civil society activists and journalists from jail “Without more conclusive action from the government, the situation on the ground calls Cambodia’s participation in the GSP scheme into question”.

A government spokesperson commented that Cambodia cannot accept any interference in its sovereignty.

In 2017 Cambodia exported 1.4 million regular bicycles to the EU. Main bike makers in the country are Strongman, A&J and Asama.

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