Cambodia: EU partially withdraws trade preferences over rights concerns; stakeholders respond

In February 2020, the European Commission decided to withdraw part of the tariff preferences granted to Cambodia under the European Union's Everything But Arms' (EBA) trade scheme because of serious concerns over violations of human rights and fundamental freedoms. 

Business & Human Rights Resource Centre follows this story, with updates on statements made by various stakeholders in response to the recent decision.

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Article
27 March 2020

Cambodia: Govt. issues an income tax exemptions directive for factories producing textile & garment, footwear and luggage after EC's EBA decision

Author: SoK Chan, Khmer Times

"Government permits tax exemptions on specific goods", 27 March 2020

The government has issued income tax exemptions for the textile and garment, footwear and luggage sectors that produced export goods hit by the European Union’s 20 percent Everything but Arms (EBA) tariff-free status...

The move was announced in a directive from the Ministry of Economy and Finance.

The cut will last six months for those factories and enterprises suffering a 20 to 39 percent loss in income. They will receive an annual 50 percent tax cut.

Companies that will be hit by between 40 to 100 percent by the EBA trade deal withdrawal will get a year’s tax exemption of 100 percent...

“To receive the income tax exemption, all the factories and manufacturers operating in the textile, garments, shoe and travelling bag and hat sectors must submit supporting documents on the actual impact from the EBA trade-free withdrawal to the tax administration offices during their annual tax declaration,” said the directive...

“The withdrawal of tariff preferences – and their replacement with the EU’s standard tariffs – will affect selected garment and footwear products and all travel goods and sugar,” according to the statement by the European Commission, the EU’s civil service...

Kaing Monika, Deputy Secretary-General of Garment Manufacturing Association of Cambodia (GMAC), told ... that the exemption of tax on profits is not to release the burden on the industries, especially because some main buyers have suspended orders from Cambodia because of the Novel Coronavirus (COVID-19) pandemic.

Supplies and supply routes have been affected negatively...

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Article
27 February 2020

Cambodia: Some garment factories cancel overtime work amid uncertainty over impacts of EBA decision and the Covid-19

Author: Sovuthy Khy, CamboJA

"Garment factories cut overtime hours for workers", 27 February 2020

Garment factory workers are seeing their working hours cut amid China’s coronavirus scare and the EU’s announcement that it will partially withdraw Cambodia’s trade privileges.

Factories have previously said that they are running out of raw materials imported from China due to coronavirus quarantine measures in place there, while the EU … announced it was suspending its “Everything But Arms” deal for several categories of products due to “serious and systematic” human rights violations in Cambodia…

Luy Eng, 40, a worker at Eastex Garment in Phnom Penh, said overtime was canceled at her factory since January. About 3,000 workers at the factory now must leave at 4 p.m., whereas they had previously earned more by staying on as late as 9 p.m., she said…

At Akeentex, a factory in Phnom Penh’s Pur Senchey district, workers have been ordered to leave work at 3 p.m., said Yang Samean, 27.

“This factory does not stop workers from their work, but the factory has reduced work hours,” Samean said…

Preap Monysovann, secretary-general of the Collective Union of Movement of Workers, said five factories where his union had members had begun to reduce their workforces…

Yang Sophorn, president of the Cambodian Alliance of Trade Unions (CATU), said her union members had reported that working hours were being reduced at two factories in Kampong Chhnang and Kampong Speu provinces…

Cambodia Footwear Association deputy secretary-general Nguon Chnnara said in a statement … that “suspending EBA benefits for Cambodian footwear products will result in large job losses across the industry ....”

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Article
17 February 2020

Cambodia: European Branded Clothing Alliance urges Cambodian govt. to address human rights violations & EC to track progress with clear roadmap & timeline

Author: European Branded Clothing Alliance

"Statement on European Commission's Cambodia Decision", 13 February 2020

Following a year of investigations, …, the European Commission published its decision on the partial withdrawal of Cambodia’s preferential trade preferences... On the account of violations of human rights principles and due to insufficient progress made by Cambodian authorities, the Commission proposes to partially withdraw Cambodia’s EBA preferences for certain product categories, changing their status to the Most Favoured Nation (MFN) clause…

EBCA supports the EU’s commitment to high social and labour standards and condemns any violations against human and labour rights and strongly encourages the Cambodian authorities to continue work on the Commission’s conditions for a decision reversal… This decision will have a large impact, both economic and social, notably for the most vulnerable parts of the Cambodian population, i.e. the workers in the affected sectors.

EBCA members have a strong presence in Cambodia and engage actively to promote social and labour standards throughout the supply chain. EBCA believes enhanced engagement to be a powerful tool to raise environmental, social and societal conditions. By being present in the market, applying the brands’ high social and labour standards whilst simultaneously facilitating ownership through the education of workers, standards are being raised… The benefits of Cambodia’s EBA preferential status cannot be underestimated…

We urge the Cambodian authorities to commit to a better respecting of human and worker rights, as well as allowing more room for domestic political debate. We also would call upon the Commission to establish a clear roadmap and timeline for the Royal Government of Cambodia in order to track progress over the coming months…

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Article
16 February 2020

Cambodia: Withdrawal of EU preferences will only push Cambodia towards China, says Nikkei Asian Review

Author: Nikkei Asian Review; Khmer Times

"Japanese business journal says punishing Cambodia is going to backfire on EU," 16 February 2020

...Japanese business journal, Nikkei Asian Review... said that removing tariff-free access will more likely to backfire, pushing Cambodia away from Europe and toward China.

“In taking the drastic step of suspending Cambodia’s tariff-free access to EU markets last week, the European Commission hoped it would incentivize Phnom Penh to repair human rights violations and improve its governance.

“EU foreign policy seeks to be simultaneously normative and strategic. Normative means it wants to export its purported norms, human rights and good governance, as a foreign policy priority.

But as the recent palm oil spat demonstrated, such...foreign policy negatively affects Europe’s strategic goals: Malaysia and Indonesia successfully lobbied against granting the EU strategic partnership status with ASEAN in retaliation for EU restrictions on palm oil"...

...[W]hile EBA seeks to incentivise governments to follow human rights and good governance best practices, everyone is aware that removing it will strike at the very people EBA intends to lift out of poverty.

 

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Article
15 February 2020

Cambodia: 20 business associations issue a joint letter expressing regret over European Commission's partial EBA withdrawal decision but commit to work closely with brands

Author: European Chamber of Commerce in Cambodia & others

"Press Release: The Cambodian Private Sector Regrets the Decision by the European Commission to Partially Withdraw Preference Granted to the Kingdom of Cambodia under Everything but Arms Arrangement", 14 February 2020

The Cambodian Chamber of Commerce and signatories, as representatives of the Cambodian private sector, regrets the decision taken by the European Commission to partially withdraw preferences granted to the Kingdom of Cambodia under the Everything but Arms (EBA) arrangement,... 

…, tariffs will be applied to 20% of Cambodia’s exports to the European Union, representing approximately US$1.3 billion of the total US$5.8 billion of goods exported annually to the European Union (approximately 45% of Cambodia’s overall exports). Specifically, tariffs will be introduced on 20% of selected garment products and 30% of selected footwear products, and all travel goods and sugar…

…, the Royal Government of Cambodia has undertaken extensive structural reforms to eliminate unnecessary burdens and improve trade facilitation that are intended to reduce the cost of doing business in the Kingdom…

Looking forward, Cambodia will continue to benefit from trade preferences for 80% of its exports to the European Union. Therefore, we respectfully call on the European Commission and the Royal Government of Cambodia to continue to engage in dialogue on the issues raised by the Commission’s review…

We will continue to work closely with international brands and development partners to strengthen and promote the values of human and labour rights in Cambodia, in accordance with international best practices…

The Cambodian private sector is dedicated to working with all investors, development partners and the Royal Government of Cambodia to review and implement additional measures and legislation that will enable a more conducive environment for all businesses, employees and Cambodian society.

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Article
15 February 2020

Cambodia: Adidas, H&M, & others review their business & investment strategies and implications of EC's partial EBA withdrawal decision

Author: Shaun Turton, Nikkei Asian Review

"Fashion brands weigh Cambodia strategy after EU curbs trade", 14 February 2020

Stripped of some of its European trade privileges, Cambodia is bracing for an economic hit as major brands such as H&M review their production in the country. The European Commission… announced it would suspend duty-free access for 40 products from Cambodia, equal to about 20% of the country's exports to the bloc, or some 1.1 billion euros ($1.19 billion)…

Barring this, economists expect higher export costs will see some textile production shifted away from the country's vital apparel industry... H&M has indicated it will reconsider sourcing from Cambodia after the country lost some of its EU trade privileges…

Already, Swedish giant H&M -- which sources from factories in Cambodia employing about 77,000 workers -- has signaled changes to its supply chain. In a statement, the company said the partial EBA withdrawal would constrain the competitiveness of Cambodia's textile sector. "It will negatively affect future investments, as well as predictability and trust, two crucially important elements of a well-functioning industry," the company wrote…

Stefan Pursche, a spokesperson for Germany's Adidas, which sources 22% of its textiles from Cambodia … said the company was reviewing the implications of the EU's decision…

Discussing the EU's decision, the association's senior vice president of policy Nate Herman said, on top of increased production costs, it would also "hit the country's reputation." "We are strongly concerned with the labor rights situation in the country, and the potential adverse impact the loss of these preferences could have on Cambodia's workers and economy," Herman said…

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Article
15 February 2020

Cambodia: Fair Wear, Ethical Trading Initiative & 5 other NGOs urge Cambodian govt. to address issues of human & labor rights violations

Author: Fair Wear & Others

"EU: ‘We partially and temporarily suspend preferential tariffs for the Government of Cambodia’: International community urges Cambodian government to take action", 14 February 2020

After a yearlong official investigation, and despite progress, the EU still found serious and systematic violations of human rights including severe limitations to political rights and freedom of speech as well as serious barriers to labour rights and workers exercising their associational rights.

Indeed, …, labour advocates, union leaders and activist workers have been increasingly targeted by the Cambodian government. Lately there has been some progress: This includes the resolution of some of the fabricated criminal charges against union leaders, the restoration of some of the unions’ ability to access the Arbitration Council, and some recent amendments to the Trade Union Law.

At the same time, the current environment for labour rights advocates, trade union leaders, and civil society activists remains not conducive to ensure a genuine improvement of the human rights and labour rights situation in Cambodia…

The EU’s decision will take effect on the 12th of August 2020 and targets around 20% of the export including garment, footwear and accessories. It will therefore affect a significant part of the 600.000 workers employed in the sector…

We therefore call upon the Government of Cambodia to increase its efforts and make additional improvements on human and labour rights violations… As such we urge the Cambodian government to immediately address four key issues:

  1. Amend the Trade Union Law (TUL)…
  2. Repeal the Law of Associations and NGOs…
  3. Drop all outstanding criminal charges against union leaders…
  4. Respect and foster the important role of the Arbitration Council…

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Article
13 February 2020

Cambodia: H&M Group comments on European Commission's decision to partially withdraw Cambodia's trade preferences

Author: H&M Group

"H&M Group comments on EU trade preference withdrawal for Cambodia", 12 February 2020

H&M Group strongly agrees with the EU’s aim to address serious human and civil rights violations in Cambodia. We have had consultations with the government on labour rights and freedom of association, and also to express concerns about the human rights situation. We are, together with local and international stakeholders, as well as other brands, continuously working to develop a sustainable textile industry…

Cambodia is an important production market for H&M Group. We placed our first orders in the country in the 90s and have been driving different social programmes on the ground to improve the livelihood and working conditions of garment workers…

The partial withdrawal of the EBA will have a negative impact on the employment of the people in the textile industry… Without an EBA, it will be difficult for Cambodia to create the necessary transformation of the textile industry, such as the development of an industry-wide collective bargaining agreement. It will negatively affect future investments, as well as predictability and trust, two crucially important elements of a well-functioning industry…

If Cambodia had complied with the EU’s requirements, as well as launched strategic initiatives essential for a modernised textile industry, …, the country would continue to be a very attractive sourcing destination…

However, due to a lack of adequate initiatives in developing the Cambodian textile industry, and a partial withdrawal of the EBA privileges, we will now further evaluate how the EU’s decision will impact our business and production strategy in Cambodia.

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Article
12 February 2020

Cambodia: European Commission decides to partially withdraw Cambodia’s trade preferences affecting selected garment and footwear products, & all travel goods and sugar

Author: European Commission

"Commission decides to partially withdraw Cambodia’s preferential access to the EU market", 12 February 2020

The European Commission has decided to withdraw part of the tariff preferences granted to Cambodia under the European Union's Everything But Arms' (EBA) trade scheme due to the serious and systematic violations of the human rights principles enshrined in the International Covenant on Civil and Political Rights.

The withdrawal of tariff preferences … will affect selected garment and footwear products, and all travel goods and sugar… Unless the European Parliament and the Council object, this will take effect on 12 August 2020.

High Representative for Foreign Affairs and Security Policy/Vice-President of the European Commission, Josep Borrell, said: “The duration, scale and impact of Cambodia's violations of the rights to political participation and to the freedoms of expression and association left the European Union with no other choice than to partially withdraw trade preferences… For the trade preferences to be reinstated, the Cambodian authorities need to take the necessary measures.”

Commissioner for Trade, Phil Hogan, said: “The European Union is committed to supporting Cambodia's economic and social development through trade preferences. However, the respect for human rights is non-negotiable for us... Our aim is that the Cambodian authorities end human rights violations, and we will continue working with them in order to achieve that.”

… The Commission and the European External Action Service will continue their engagement with the Cambodian authorities and monitor the human rights and labour rights situation in the country closely. In case Cambodia shows significant progress, notably on civil and political rights, the Commission may review its decision and reinstate tariff preferences under the EBA arrangement.

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Article
5 January 2020

Cambodia: Workers and unions confederation calls on the govt. to engage with EU to maintain EBA in fear of mass job losses

Author: Vicheika Kann, Voice of America

"Worker Confederation: Gov’t Responsible If EBA Suspended", 4 January 2020

The Cambodian Confederation of Unions collected 1,300 thumbprints from workers on a petition asking Prime Minister Hun Sen to work with the European Union to prevent a suspension of the critical “Everything But Arms” trade privileges.

The alliance of worker unions issued a letter … to express their concern over the government’s reaction to the EU’s preliminary investigation in the potential suspension of the trade privileges.

“If we lose our job because of the suspension of EBA tariff scheme from the European Union, we will consider the leaders of the Royal Government of Cambodia responsible and the ones who have brought hardship to us and our families,” the letter reads…

Rong Chhun, president of the Cambodian Confederation of Unions, said the withdrawal of the EBA privileges would put Cambodia in a serious crisis.

“If Cambodian citizens lose their jobs, they lose their income, the turmoil will happen,” he said, at a press conference ... “The turmoil means there will be social insecurity.”

Rong Chhun said it was not hard for the government to comply with the EU’s requirements and restoration of democracy would help improve the situation and to maintain the preferential access.

Cambodian People’s Party Senator Sok Eysan said that the EBA withdrawal would not affect the country’s economy and that the EU’s demands were political in nature…

The Garment Manufacturers Association in Cambodia has said that the withdrawal could affect the garment sector in Cambodia and brands have also expressed their concerns, which could lead to relocation…

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