Trade commissioner Phil Hogan stressed that while Brussels stands by Cambodia in battling the coronavirus, "Our continued support does not diminish the urgent need for Cambodia to respect human rights and labour rights."
"We have provided Cambodia with trade opportunities that let the country develop an export-oriented industry and gave jobs to thousands of Cambodians," he said.
Now, Cambodia has lost its access to the EU's "Everything But Arms" trade arrangement for least developed countries, which will hit typical exports such as garments, footwear and travel goods.
These products represent around 20 per cent of Cambodia's exports to the EU and will now be subject to the general tariffs applied under World Trade Organisation rules.
Hogan said he would restore tariff-free access if the EU sees "substantial improvement" in Cambodia's human rights record.
Cambodia's textile sector employs 700,000 people. Total trade between the two partners was 5.6 billion euros last year.
dpa reports that the Cambodian government now has been given six months to show significant progress in improving political and civil rights to avoid the penalty, which ends tariff preferences on selected clothing and footwear products and all travel goods and sugar.
It applies to around one-fifth of Cambodia's 1 billion euros (US$1.09 billion) worth of annual exports to the EU, the commission said previously.
Cambodia’s longtime Prime Minister Hun Sen has remained defiant and refused to meet Brussels’ demands, such as dropping a case against opposition leader Kem Sokha, who was charged with treason after his party was banned in 2018.
Hun Sen has turned to China for support and is expected to sign a free trade agreement with Beijing soon. The deal, however, appears more symbolic than practical, according to analysts.
The partial EBA loss is certain to exacerbate Cambodia’s economic problems.
Weak global demand amid the global health crisis has seen more than 400 garment and footwear factories employing more than 150,000 workers suspend operations, and the Asian Development Bank predicts Cambodia’s gross domestic product could contract by 5.5 per cent this year.
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