Cambodia’s garment manufacturers association has brought up a case against the European Commission at the EU court of justice following the withdrawal of duty-free and quota-free access to the EU market over the summer.
According to the plaintiffs, the EU executive “failed to properly assess the proportionality” of the move for the garments, footwear and travel goods sectors, and has violated the industry’s “right to good administration” under the EU treaties.
Despite intensive lobbying, the Commission pressed ahead with a decision to withdraw the “Everything But Arms” (EBA) preferences which came into force on 12 August, affecting about one fifth of Cambodia’s exports to the EU.
Garments, footwear and travel goods sectors totalling €1.1 billion in exports are now subject to general World Trade Organisation tariffs, in a move aimed at putting economic weight behind the EU’s calls for an improvement of the human rights situation in the country.
The European Commission began the procedure to partially withdraw Cambodia’s preferential access to the single market in 2018. The EU’s decision came after the dissolution in November 2017 of the only viable opposition party in the country, the Cambodia National Rescue Party (CNRP), accompanied by treason charges brought against its leader, Kem Sokha.
Cambodia’s Prime Minister, Hun Sen, has ruled for more than 35 years and his party won every single seat in the parliamentary elections of 2018.
The EU said that “authorities should take action to restore political freedoms in the country, to re-establish the necessary conditions for a credible, democratic opposition and to initiate a process of national reconciliation” as steps to restore access.
The Commission has so far maintained that “there has not been any significant progress made on the issues of concern” but said it may review its decision “if the government of Cambodia shows significant progress, particularly on civil and political rights”.
Chairman of the European Chamber of Commerce in Cambodia, Tassilo Brinzer, said they were not involved in the case but added that the suspension is unlikely to be withdrawn.
“We just think we should move forward now and try to support the garment industry,” Brinzer recently told local media outlet VOD, adding that EuroCham member businesses had yet to see an impact from the suspension.
“COVID had a larger impact for sure,” Brinzer said.
In June, EuroCham, which represents European business interests in the country, co-signed a letter asking for a postponement of EBA withdrawal because of the impact COVID-19 had on the industry.
The trade sanctions affect about €770 million worth of exports in clothing garment, €210 million in footwear and €120 million in travel goods. The withdrawal of preferential access to the EU market concerns approximately 20% of Cambodia’s exports to the EU.
According to a membership survey, footwear manufacturers saw an average 20-40% decline in production volumes per factory in the first half of the year.
Before the withdrawal, the union reported 30,000-40,000 layoffs, from the 150,000 people employed by the industry at the beginning of the year. The organisation said the numbers represent a “crushing impact of the pandemic on global demand for footwear.”
Cambodia’s garment manufacturing association also said factory closures approached 400 by mid-summer, with more than 150,000 layoffs.
Cheunboran Chanborey of the Asian Vision Institute think tank based in the country’s capital Phnom Penh said the withdrawal was perceived as “immoral” because of the economic hardship from the pandemic’s fallout. According to him, the move demonstrated the EU’s “hypocrisy” because the bloc turns a blind eye on other countries with problematic rights records.
The European Commission, for its part, remained steadfast in its decision, saying that “even in the context of the COVID-19 crisis, the EU is bound to comply with the Union law’s requirements.”
“Moreover, the COVID-19 crisis does not waive the urgent need for Cambodia to respect human rights and labour rights,” a Commission spokesperson told EURACTIV in emailed comments this summer.
“Respect for all human rights must remain at the heart of fighting the pandemic and supporting global recovery,” the spokesperson added.
In June, the EU pledged €443 million in grants and loans to work with Cambodia in fighting the global COVID-19 pandemic, the executive pointed out.
Some individual EU countries have also signalled a willingness to reevaluate their relation with Phnom Penh.
Sweden said it would phase out bilateral development funding to Cambodia by mid-2021and channel support instead to civil society and human rights organisations.
Cambodia announced a trade deal with China this July, focused on agricultural products, but the date of the signing remains unclear.
“The trade sanctions will not restore real democracy to Cambodia but may well moderate its government’s behaviour. Cambodia relies on European aid much less than in the past, but EU and US export markets are still crucial to its economy,” said John D. Ciorciari, a global south scholar at the University of Michigan.
“Cambodia’s rising trade with China does provide an economic cushion, but Cambodian leaders have to be wary of putting too many eggs in a Chinese basket,” he told EURACTIV.
“Cambodia’s interest in diversified economic ties will help the EU maintain some leverage even as China’s economic footprint expands,” he added.
Meanwhile, at least eight human rights and environmental activists have been detained in Cambodia in September with dozens of others in the previous months, prompting the United Nations’ human rights office and international watchdogs to call for their release.
The European Parliament has also called for withdrawal of similar trade perks from the Philippines following reports of “widespread and systematic” extrajudicial killings there.
“Given the seriousness of the human rights violations in the country, [the Parliament] calls on the European Commission, in the absence of any substantial improvement and willingness to cooperate on the part of the Philippine authorities, to immediately initiate the procedure which could lead to the temporary withdrawal of GSP+ preferences,” lawmakers said last week.
(Edited by Frédéric Simon)