UK to maintain Cambodia’s duty-free access

A crane unloads containers from a docked ship at the Phnom Penh Autonomous Port. Pha Lina

Thu, 29 June 2017

Kali Kotoski

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The British government has attempted to assuage the fears of least developed countries (LDCs) including Cambodia by assuring them that they will retain their trade privileges to the United Kingdom following the country’s exit from the European Union, something the International Labour Organization (ILO) has warned could put Cambodia’s critical garment and footwear industry on shaky footing.

A statement released on Sunday said that despite Brexit, the UK would continue to commit to protect its current trade relations with LDCs to help keep global prices for goods and commodities in check, as well as building on existing trade agreements with the world’s poorest countries.

The release was aimed to waylay uncertainty for the 48 LDCs that currently benefit from reduced or zero tariffs under the EU’s “Everything But Arms” agreement.

“Our departure from the EU is an opportunity to step up to our commitments to the rest of the world, not step away from them,” the UK’s International Trade Secretary Liam Fox said in the statement.

The commitment to preserve duty-free access was explained in the statement as being both motivated by reducing poverty worldwide, as well as sheltering “some of the poorest countries that could face tariffs of over 10 percent – which could be passed on to UK consumers through higher prices at the till”.

British Ambassador to Cambodia William Longhurst confirmed via Twitter yesterday that Cambodia’s duty-free access to the UK would be preserved.

“The UK Government is committed to maintaining duty-free access to UK markets for Cambodia once we leave the EU,” he tweeted, adding that the UK remained the single largest trade partner for the Kingdom, importing roughly $1 billion worth of products last year.

While the statement from the British government should bring some certainty to the foot-loose garment sector, David Van, local managing director of Bower Group Asia, expressed cautious optimism about the UK’s commitments.

“I can only assume that UK government is committed to granting market access privileges – similar to the EBA for EU – to LDCs as part of the British government’s efforts for more equitable trade,” he said in an email.

“However, how much that would benefit Cambodia is a matter of digging into the detailed breakdown of Cambodia exports to the EU to find out how much percentage is actually bound for UK.”

According to the ILO, the EU accounted for 45 percent of all Cambodian garment exports during the first half of 2016, with the UK market alone taking up 24.3 percent. The organisation warned in January that Brexit uncertainty was already weighing down the local garment sector through the depreciation of the British pound and the possibility that without a clear policy, Cambodia’s status could revert back to World Trade Organisation (WTO) rules.

If the UK reverts to WTO rules, countries that it does not have a free trade agreement with, such as Cambodia, would no longer receive preferential access, the report said, adding that Cambodian would then have to broker a new bilateral trade deal.

Van Sou Ieng, chairman of the Garment Manufacturers Association in Cambodia, said it was “great to hear” assurances from the UK that it would keep the same terms for garment exports.

“This will give Cambodia’s garment exports a more stable and predictable market access because the UK buys about 15 to 20 percent of Cambodian exports and it will promote further growth and maintain and sustain employment for Cambodians,” he said.