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April 15, 2020

Brands urge EU to delay withdrawal of Cambodia trade benefits

Europe's major clothing retailers and brands have called upon the EU Commission to consider delaying the withdrawal of the Everything But Arms (EBA) trade benefits received by Cambodia, as they feel the impact of the coronavirus outbreak throughout their clothing supply chains.

By Hannah Abdulla

Europe’s major clothing retailers and brands have called upon the EU Commission to consider delaying the withdrawal of the Everything But Arms (EBA) trade benefits received by Cambodia, as they feel the impact of the coronavirus outbreak throughout their clothing supply chains.

In a letter to European Commission president Ursula von der Leyen, the European Branded Clothing Alliance (EBCA) said the pandemic has created “unprecedented” challenges and urged the Commission to put in place measures to support the long term recovery of the sector.

One of the support measures it called for was the postponement of the withdrawal of the EBA status of Cambodia due to the “exceptional circumstances” and “already severely impacted global industry.”

In February, the EU Commission said it was pulling the EBA benefit due to its concerns over human rights violations in the country. The move means that from mid-August, Cambodia will be charged duties on some garment and footwear products and all travel goods at the WTO’s Most Favoured Nation (MFN) rate. 

The withdrawal amounts to around one-fifth or EUR1bn (US$1.09bn) of Cambodia’s annual exports to the EU and will be effective from 12 August. It also represents the withdrawal of benefits on around 30% of the country’s footwear exports to the EU.

Meanwhile, the EBCA also calls for a temporary reduction of VAT and customs duty rates on imports in the EU on clothing and apparel, in order to provide relief along the entire supply chain, including in the manufacturing countries, and an automatic 90-day deferral of duty payment, harmonised across EU member states.

“The branded clothing industry is impacted dramatically. Within the EU, our sector supports approximately 4.4m jobs through supply, manufacturing, wholesale and retail. The sector thereby has a direct contribution of 1% to the EU’s GDP. In manufacturing countries, the clothing industry leads to massive job creation and capital investments and directly contributes to economic growth. As production and exports of clothing have increased, poverty rates have declined in manufacturing countries. Beyond economic growth, the branded clothing firms contribute to sustainable growth through a variety of social and environmental initiatives they organise and participate in,” stated the letter.

“The disruptions caused by Covid-19 risk many jobs both in and outside the EU. In the EU, sales in our sector have already dropped by approximately 90% and about 90% of employees are currently supported financially by their employers, in addition to state support, in order not to lose their jobs. Such a sharp decline in sales has an inevitable impact on orders. Without orders and with empty production spaces, 4.1m workers (directly employed by brands as well as by suppliers) risk of being unemployed, in Bangladesh alone.”

Cambodia is one of six Asian nations that has issued a joint plea to global buyers to consider the potential impacts on workers and small business enterprises in their supply chains when making purchasing decisions after millions of dollars worth of orders were cancelled in the wake of the coronavirus outbreak.

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