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EU decision to withdraw preferential trade access to hurt Cambodia

The EU may withdraw preferential trade access to Cambodia over Cambodia’s human rights record. Such a withdrawal would be nothing short of devastating for Cambodia’s garment industry, given the inherently low margins of the sector and the importance of demand from the EU.

Cambodia is one of several developing countries granted duty-free and quota-free access to the EU for all exports, except arms and ammunition, under the Everything But Arms (EBA) trade agreement. The garment and footwear industry is one of the pillars of Cambodia’s economy. The sector has helped improve labor standards and workers’ living conditions, reduce poverty and promote sustainable growth. Cambodia’s garment sector employs some 7,00,000 workers, whose jobs could be in question if EBA is pulled. Brands depend on Cambodia for sourcing. Adidas, for instance, sourced about a quarter of its apparel volume last year from Cambodia, more than from any other country, including China and Vietnam.

For now, the EU is Cambodia’s largest trading partner, taking in nearly half of Cambodian exports, mostly textiles, footwear and agricultural products. Nearly all of these exports enter the EU market under EBA tariff preferences. Most of Cambodia’s exports to the EU would face 12 per cent customs without EBA.