Prime Minister Hun Sen on Thursday downplayed the potential impact of losing duty-free trade with the EU, saying Cambodia’s economy was already outgrowing the “Everything But Arms” (EBA) deal, which is reserved for least developed countries.
The EU last week gave the Cambodian government its preliminary report on potentially suspending the EBA scheme, demanding “real and credible” improvement in human rights and political issues if it wants to retain the deal. The EU is Cambodia’s biggest export market with a 45 percent share, according to Reuters.
The EU noted the ongoing case against Cambodia National Rescue Party (CNRP) leader Kem Sokha as one of its major concerns and gave the government one month to respond. A final decision is due in February.
“If the EBA is withdrawn and they make [us] pay taxes, just pay the taxes, because it would be withdrawn anyway,” Hun Sen said. Cambodia’s economy graduated from low income to lower-middle income in 2015 according to World Bank classifications.
“The EBA would be gone anyway because our economic growth is strong,” he said during the inauguration of a new building at the Royal Academy of Cambodia.
Hun Sen said the government had been preparing for the possible loss of the EBA since March, and businesses would still be able to make a profit exporting to the EU even if taxed.
“We do not want to lose it, but what can we do? How can we keep this in exchange for our law and independence? We can’t accept that,” he said. Hun Sen has resisted foreign governments’ demands for reform, saying they violate Cambodia’s sovereignty.
The Supreme Court dissolved the main opposition CNRP in November 2017, leading Hun Sen’s ruling Cambodian People’s Party (CPP) to win all 125 seats in the National Assembly eight months later. The EU and U.S. have criticized the CNRP’s dissolution as political, and the 2018 national election as neither free nor fair.
“If they make us pay taxes, just pay,” Hun Sen said. “It would be less profitable, but it would still be profitable. And it would be noble: They will no longer be able to threaten us with it anymore.”
According to the EU, Cambodia is the second-largest beneficiary of the EBA trade preferences, accounting for over 18 percent of EBA imports into the EU last year.
EU imports from Cambodia totaled €5.3 billion (about $5.8 billion) in 2018, 95 percent of which entered duty-free under the deal, the EU said. It added that clothing and textiles accounted for around three-quarters of the imports.
According to the World Bank, Cambodia stands to lose as much as $650 million of the trade if the EBA is suspended.