EU, U.S. reluctant to remove trade preferences for Cambodia garments

The European Union and the United States appear reluctant to remove preferential trade access for Cambodia’s vital garments sector, Fitch’s BMI research unit said on Tuesday, despite calls from rights groups for targeted sanctions in the wake of a political crackdown ahead of a July general election.

Concerns about garment exports have mounted ahead of the vote, which some Western nations say will not be free with rights groups accusing the government of intimidating its opponents and presiding over a decline in civil and political rights following last year’s dissolution of the opposition Cambodia National Rescue Party (CNRP).

Cambodia, a top garment-making hub, has been the sixth fastest-growing economy in the world over the past two decades, with an average GDP growth rate of 7.6 percent, according to the World Bank, thanks largely to garment exports.

Around 30 percent of its garments are destined for the European Union.

In its report, BMI said that the “EU and the US appear reluctant to remove preferential trade access for Cambodia’s crucial garment exports, which suggests that the worst-case-scenario of major industry disruption and factory closures is unlikely.”

“At this stage, it appears that the US and the EU will likely refrain from undertaking such punitive actions against Cambodia in the near-term,” said Raphael Mok, Senior Analyst, BMI Research.

Rights groups and the opposition have repeatedly called on the United States and others to impose targeted sanctions in the wake of a wide-ranging crackdown on political dissent.

But industry insiders have said that they oppose any cut to trade preferences, saying it would hurt garment workers the most.

The Garment Manufacturers Association of Cambodia (GMAC), which represents 600 factories, told Reuters in December that it expects exports this year to grow 3 to 4 percent.

The European Union and the U.S. Embassy in Cambodia did not immediately respond to Reuters’ request for comment on trade preferences.

BMI maintained its forecast for real GDP growth to slow to 6.4 percent in 2018, from 6.9 percent in 2017, and added that rising wages meant economic diversification is needed.

Last year, the government raised the minimum monthly wage of workers in its textiles and footwear industry by 11 percent to $170, higher than in Bangladesh, another garment hub, where the minimum wage for workers is 5,300 taka ($63.02) a month.

($1 = 84.1000 taka)