Groups representing Cambodia’s apparel and footwear manufacturers have issued a fresh appeal to the European Union (EU) to postpone the planned withdrawal of the Everything But Arms (EBA) trade benefits as the country reels under the impact of the Covid-19 pandemic.
Cambodia is currently set to lose its duty-free benefits on some garment and footwear products and all travel goods from 12 August. After this date, the products will incur duties at the WTO’s Most Favoured Nation (MFN) rate.
In a letter dated yesterday (2 June), the Garment Manufacturers Association in Cambodia (GMAC), the Cambodia Footwear Association (CFA), and the European Chamber of Commerce in Cambodia (Eurocham) urged the presidents of the European Commission and European Parliament, and the European External Action Service (EEAS) high representative, to re-evaluate the decision in light of the crisis.
They want the withdrawal of any of Cambodia’s EBA benefits to be postponed for at least 12 months.
“The Covid-19 pandemic has had a devastating impact on the economy globally and the situation is no different in Cambodia where the development of the country relies heavily on its trade with Europe,” says Eurocham chairman Arnaud Darc.
Since the beginning of the pandemic, some 250 factories in the Cambodian apparel, footwear, and travel goods sectors have had to suspend operations, with most others operating at reduced capacity. The groups say more than 130,000 workers in the sector, most of whom are women, have already lost their jobs and this number is likely to rise sharply.
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By GlobalData“The near-term future remains challenging, as numerous brands and retailers in Europe and North America have been forced to cancel orders or go into bankruptcy by the impact of the pandemic. We estimate that Cambodian apparel, footwear, and travel goods sales in the second quarter of 2020 will fall by 50-60% compared to 2019, with little prospect of recovery before 2021.”
The EU Commission in February said it was pulling the EBA benefit due to concerns over human rights violations in the country.
The withdrawal amounts to around one-fifth or EUR1bn (US$1.12bn) of Cambodia’s annual exports to the EU and represents the withdrawal of benefits on around 20% of apparel imports and about 30% of the country’s footwear exports to the EU.
GMAC, CFA and Eurocham say that on top of the “enormous negative impact” from Covid-19, the move would mean “more orders and jobs will be lost or will never come back.”
“The EU must not ignore the gravity of the situation and the devastating impact of removing EBA benefits in August, as the damage of an unprecedented pandemic is still being felt by our sectors,” says GMAC chairman Sou leng Van.
The call follows a similar appeal from major European clothing retailers and brands in April.
The Cambodian economy depends heavily on the garment industry, which accounts for more than 78% of the country’s total merchandise exports and 20% of its annual economic growth. It is also the main non-agrarian employer, with nearly 700,000 garment workers in 1,500 factories.
A report from the World Bank this week estimated the Cambodian economy could contract by nearly 3% this year as a result of Covid-19.
In April, GMAC joined forces with representatives from garment supplier nations Vietnam, Pakistan, China, Myanmar, and Bangladesh urging global brands and retailers to consider the potential impact on workers and smaller suppliers before cancelling orders or delaying payments.
