Blog: Beth WrightCambodia's apparel industry particularly vulnerable to EU trade curb

Beth Wright | 22 June 2020

Cambodia's garment industry, already buffeted by the coronavirus pandemic, is set for a further hit after the European Union decided to suspend duty-free access for some products from 12 August over "systematic" human rights violations. Here we look at the potential impact and possible shift in trade patterns.

As the temporary withdrawal looms, the European Union is mobilising EUR443m (US$500m) in grants and loans to help the Southeast Asian country in its fight against the outbreak.

Indonesia's clothing industry is another sourcing hub that has been struggling during the crisis, with overseas buyers cancelling orders and the domestic market in the doldrums.

While Sri Lanka's textile and clothing sector is expected to see exports plummet 30% in fiscal 2021.

And in Kenya, the country’s clothing manufacturing industry has been punched hard by the devastation of its main export market, the United States.

Elsewhere, export-oriented Indian garment manufacturers emerging from lockdown are struggling to fulfil new orders due to severe labour shortages caused by the continuing migration of workers to their traditional village homes.

US and European groups have also written to Indian Prime Minister Modi urging him to reject proposals that would relax or suspend some of the country's state labour laws.

Meanwhile, three leading apparel organisations have outlined seven key measures they believe are necessary for a green recovery of the European clothing and footwear industry over the next one to five years.

Swedish fashion giant H&M Group has signed a new pledge committing to accelerate the transition to a circular economy – which environmental sustainability manager Cecilia Brannsten tells just-style will be key to enabling a more resilient future for fashion.

And a Dutch startup has developed a new technology that uses tracer particles and blockchain to guarantee that the recycled cotton that enters the supply chain is the same that comes out as apparel.

Elsewhere, the Federal Trade Commission (FTC) is being urged to take steps to update apparel and footwear labelling requirements so that new technologies such as digital labels could deliver product information to consumers.

And while the African Growth and Opportunity Act (AGOA) does not expire for another five years, calls for its renewal – along with a higher third-country fabric provision cap – are now being made.

Looking to the UK, fast fashion retailer Boohoo has acquired the online businesses and all associated intellectual property of British women's wear brands Oasis and Warehouse from investment firm Hilco Capital Limited in a GBP5.25m (US$6.6m) cash deal.

The move came as sales at UK clothing retailers partially bounced back in May, with the sector seeing online retailing soaring to record levels as most stores continued to remain closed.

In the US, sales at clothing retailers almost tripled in May from the month prior as businesses closed by the coronavirus pandemic began to reopen but remained well below spending levels seen during the same period a year ago.

The results come as almost a fifth of under-45s have increased clothing spend to treat themselves during Covid-19 lockdown, a new survey shows.

Meanwhile in other news, struggling Ted Baker has raised GBP105m (US$131.2m) in capital to reduce its debt and invest in new efforts to try to turn the business around; Stein Mart has raised "substantial doubt" about its ability to survive over the next 12 months; and Tesco is to sell its Polish business to Danish retailer Salling Group in a GBP181m (US$225m) deal.

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