This year India, Turkey and Thailand lose their GSP designations to the USA. This had cost a lot of negative changes in the trade, commerce and industrial sectors of these countries. But recently, United States Trade Representative(USTR) wrapped up a five-day mission to Cambodia June 7, a tour that could bring major changes in the country’s export-based economy.
USTR is the agency responsible for advising the US president on trade policy. The agency went to Cambodia with a view to discuss bilateral trade issues including automobile standards, labor situations, etc.
But sources also include that the agency was also searching for the possibility of removing Cambodia from the US’ Generalised System of Preference (GSP) facility due to alleged poor labor rights’ condition of Cambodia.
It is a matter of coincidence that in the same week of USTR’s arrival in Cambodia, a fact-finding team from the European Commission also arrived in the country. They also came to run an analysis on whether Cambodia should be part of Europe’s ‘Everything But Arms’ scheme, the European Union’s version of the GSP.
US and EU have been the two largest customers of Cambodia’s export-based economy, buying around US$9 billion last year. Of these, more than half were exported under GSP and EBA schemes.
If these preferential trade schemes are removed from Cambodia, the country’s economy would face a huge crisis. Last month, fashion brands including Nike, Adidas, Levi Strauss sent a joint letter to Cambodia’s PM Hun Sen stating their concerns regarding the labor rights situation.
Due to political unrest conditions and the government’s negligence towards sensitive issues like labor rights, worker safety, the country is likely in the way of losing its GSP and EBA facilities.
It might cost the exporters of the country around $700 million loss each year also causing factory closures of garment sector leading to unemployment of around 800000 workers.
It should be noted that Cambodia will lose more if it loses EBA than GSP. Because of the $5.5 billion worth goods exported to EU last year, the US $5.4 billion fell under the EBA scheme.
On the other hand, only $720 million out of $3.8 billion worth of goods exported to the US last year included the GSP scheme.