What will happen EU announces partial EBA withdrawal?

Yesterday, the Cambodian media released big news. The European Union officially announced the results of the EBA revocation and decided to cancel some preferential tariff treatment for EBA in Cambodia.

The decision means that starting in August this year, the European Union will impose a $ 1.1 billion import tax on Cambodia, which involves clothing, footwear, and all tourism products and sugar.

According to the European Commission, the withdrawal of the EBA process was initiated to express the EU's concerns about Cambodia's human and labor rights.

Since February 2019, the European Parliament officially started a period of 18 months of the "Everything but Arms" (EBA) duty-free review proceedings to Cambodia, to decide whether to revoke the preferential treatment, "EU", "EBA" and other words become the topic that Cambodian are most concerned. What effect will the withdrawal of the EU have on Cambodia? What is the attitude and measures taken by the Cambodian government? Let ’s take a look.

EBA refers to the preferential trade treatment provided by the European Union to Cambodia, which is "exempt from taxes except weapons". It provides complete duty-free, quota-free access to the EU market for all products except weapons and ammunition.

First, the withdrawal of EBA trade preferences will affect the Cambodian economy and worker employment. According to a World Bank report published in May 2019, the loss of EBA will reduce Cambodia ’s exports to Europe by USD 514 to 653 million. The most significant impact is that import tariffs will be raised from 0 to 16% in the footwear industry and 12% The garment industry is expected to reduce exports by $ 510 million.

EBA treatment has brought economic development opportunities to Cambodia, and a large number of foreign factories have entered. After being revoked, it will affect not only the national economy, but also the livelihood of local people. The chain reaction brought by it will likely cause 40% of garment factory workers and 20% of shoe factory workers to lose their jobs.

In addition, due to the impact of the Novel Coronavirus pneumonia, the suspension of Chinese textile factories has led to a shortage of  materials in Cambodia. The factory was forced to close or dismiss workers, which is even worse for Cambodian workers.

Second, this withdrawal will push Cambodia away from the EU and closer to China. At the meeting on February 10, the Cambodian Prime Minister Hun Sen vowed that if the EU decides to cancel Cambodia's EBA preferential plan, he will fight back. Prime Minister Hun Sen emphasized that on the issue of EBA, Cambodia will not submit to EU pressure and will maintain its own peace, stability and sovereignty.

Cambodia also has a replacement plan, and if the EBA is cancelled, it will continue to trade with other EU countries. Although this measure will keep Cambodia away from the European Union, it will also close relations with China. The Cambodian government hopes to sign a free trade agreement with China as soon as possible, and use the huge market of China's billion people to fix the loss.

Third, it will affect Cambodia's political development, including the potential to change Sam Rainsy's political career. Cambodian opposition leader Shen Liangxi, using the EBA as a political bargain, asked the Cambodian government to allow former core me, using the EBA as a political bargain, asked the Cambodian government to allow former core members of the Salvation Party, including him, to return to Cambodia and restore its party operations. He also called on the people to accept Prime minister Hun Sen's sanctions and try their best to keep the EBA and the rice bowl of 800,000 Cambodian workers.This time, the EU canceled some preferential EBA tariff treatment in Cambodia, affecting the livelihoods of millions of Cambodians, which will face considerable pressure on the Cambodian government.

Cambodia's Attitude Towards EBA Withdrawal and taken Measures

On December 11, Prime Minister Hun Sen reiterated Cambodia's position that will not use national sovereignty for any aid or trade preferences. He also said that the EU would cancel Cambodia's preferential EBA tariff treatment soon or later. In 2025 or 2026, the EBA will automatically expire, then Cambodia's goods exports to the EU will have to pay taxes.

At the same time, Prime Minister Hun Sen stated that the withdrawal of the preferential tax policy of EBA will have little effect on Cambodia's long-term exports. Although short-term exports will be affected, it will not completely hit Cambodia's economy. It was emphasized that Cambodia's national revenue does not come from clothing exports, but from customs and taxes on product imports. "

The European Union canceled some preferential EBA tariff treatment in Cambodia, causing Cambodia ’s exports to the European Union, including part of clothing, footwear products and all travel goods, sugar and other industries to be hit hard. The Cambodian government has taken proactive measures since the EU Parliament initiated Cambodia's EBA tax-free review legal process to decide whether to revoke the preferential treatment. Internally, through measures such as reducing transportation costs and reducing national holidays, to protect corporate interests and promote the development of trade, actively strengthen ties with foreign countries, request assistance from other countries, and resolve the current difficulties faced by foreign trade.

1. Banking on Britain to fix the situation. Prime Minister Hun Sen revealed that after the European Union canceled the preferential treatment of Cambodia's EBA tariffs, Cambodia considered to shift its focus on exports to the United Kingdom, because the United Kingdom indicated that it would withdraw from the European Union, and Britain imported more Cambodian products than any other European country.

2. Expect China to lend a helping hand through the difficult situation. On February 5th, Prime Minister Hun Sen called to the Chinese President in Beijing that Cambodia was affected by the European Union's withdrawal of the EBA and hoped to sign a free trade agreement with China as soon as possible to promote trade and investment between the two countries.

China stated that it will provide assistance to Cambodia and support Cambodia. On the afternoon of February 12, the Chinese government through a spokesman of the Chinese Ministry of Foreign Affairs stated that it resolutely opposes the use of the EBA issue to interfere in Cambodia's internal affairs and supports the efforts of the Cambodian government and people to safeguard national independence and national dignity.