The European Chamber of Commerce estimates that 90,000 jobs in Cambodia would be at risk if the EU suspends its special trade preferences (EBA agreement with the Cambodian government)over Cambodia’s record on democracy and human rights. According to Reuters.
The garment industry is Cambodia’s largest employer and generates $7 billion annually, but it faces uncertainty after the European Union (EU) this year began a process that could see tariffs reintroduced next August.
Cambodia benefits from the EU’s “Everything But Arms” (EBA) trade programme, which allows the world’s least-developed nations to export most goods to the EU free of duties. The bloc is Cambodia’s largest trading partner, accounting for 45 per cent of its exports in 2018. Clothing factories in the country employ 700,000 workers, and garments make up a large share of exports to the EU, worth about $5.5 billion.
Labor activists also warned that the biggest fashion brands doing business in the country may downsize, causing a mass layoff that could be devastating to the affected workers who rely on the Cambodian garments sector.
A sourcing manager at Britain’s Primark said last week that European companies would “pull out of production” in Cambodia if trade preferences ended, while the head of production at Sweden’s H&M warned of a “substantial backlash”. Workers who lose their jobs – mainly women – would likely end up in the entertainment or service industries, at bars and massage parlours, and be exposed to sexual exploitation.
Khun Tharo of the Center for Alliance of Human and Labor Rights argued that if displaced female workers decide to migrate to Thailand like many other Cambodians, there is the threat of being dragged into modern-day slavery.
Secretary-general at the Garment Manufacturers Association of Cambodia (GMAC), Ken Loo, added that the EBA deal has not even been withdrawn officially but the impact of the withdrawal threat is already being felt around the country.
As proof of the EBA issue’s effects, Cambodian exports to the bloc slumped by around $600 million during the first half of this year. Koo said he believes there will be mass job losses by the second quarter of next year once Cambodia’s trade preferences to Europe are revoked.
Several garments and clothing companies have already expressed doubts about surviving in Cambodia should the EBA deal be revoked. Fears for the fate of the country’s garment sector increase as the days pass despite Prime Minister Hun Sen’s backing from several European countries.
Former Singaporean Minister of Foreign Affairs, George Yeo, wrote in a recent op-ed that the European Union, as well as the United States, should not give up easily on Cambodia, especially at this time.
Yeo noted that while there may be different views in terms of last year’s election results as well as issues with labor and human rights, Cambodia has expressed willingness to implement reforms and promote peace.
Cambodia was also recognized as a link between the ASEAN region and Europe before the EBA withdrawal process started. While the kingdom is small and considered a late bloomer in economic ascent, it has retained good trade relations with the EU in the past.
Some economists noted that Cambodia can reach an upper-middle-income economy if it continues the road towards economic growth and if it retains steady GDP development. However, the EBA’s withdrawal can prove to be a huge challenge and stumbling block.