BRUSSELS -- A push to exclude Cambodia from a European Union preferential trade deal may be fading following a flurry of lobbying by Cambodian trade bodies and politicians, and after several Central and Eastern European member-states said they will advocate on its behalf.
An EU official with knowledge of the negotiations said there is growing uncertainty in Brussels as to whether Cambodia will be removed from the "Everything But Arms," scheme. EBA grants some developing countries duty-free and quota-free access for almost all exports to EU markets.
Decision-makers are increasingly conscious of progress on workers rights in Cambodia, the official said, and know that ejecting it from the program could impoverish thousands of already-poor Cambodian workers if manufacturers move out of the country.
Last year, the EU purchased roughly 40%, or about $6 billion, of Cambodia's exports. It was the largest single customer for Cambodia's export-dependent economy and the country's second-largest trading partner after China.
Brussels is expected to publish within weeks a preliminary report on the human rights situation in Cambodia. It launched a review in February because of "a deterioration of democracy [and] respect for human rights."
The Cambodian government estimates that new European tariffs would cost exporters $700 million annually and could force many manufacturers to shift their operations to neighboring countries such as Vietnam, which is close to ratifying a free-trade deal with the EU. Brussels has previously suspended trade privileges for Myanmar, Belarus and Sri Lanka over human rights concerns.
To qualify for the EBA program, countries must meet standards on democracy and human rights. The EU decided to review Cambodia's eligibility after the government cracked down on independent media in 2017, and the dissolution later that year of the Cambodia National Rescue Party, the largest opposition group, on insurrection charges widely seen as spurious.
The ruling Cambodian People's Party, which has been in power since 1979, went on to win all 125 parliamentary seats in a 2018 general election that the EU called "not representative of the democratic will of the Cambodian electorate."
For two years Brussels has called for the release of Kem Sokha, the CNRP president, who has been detained on treason charges. It is also demanding progress on human rights, especially freedom of the press. It has hinted that it would like the CNRP to be legally reinstated.
Cambodian Prime Minister Hun Sen, one of the world's long-serving leaders, was upbeat in October after a number of Central and Eastern European governments said they would argue Phnom Penh's case.
"The Czech Republic holds the view that [the EBA scheme] is a very important tool, and Cambodia has a positive stance regarding human rights," Czech Prime Minister Andrej Babis said last month. "We believe that the EU will discuss this issue, and we will resolve it."
Hungarian President Janos Ader, who visited Phnom Penh on Oct. 28, also reportedly promised to lobby his fellow EU politicians on Cambodia's behalf, while Bulgaria, which Hun Sen visited last month, also likely offered its support.
A decision by the European Union to end Cambodia's trade preferences would hit the country's garment industry, which employs 700,000 people.
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Cambodian authorities have also benefited from pressure by trade bodies. The European Chamber of Commerce in Cambodia in September called on Brussels to have a "sober second thought" about scrapping the country's EBA status. Ending the preferences, it said in a statement, would "jeopardize European investments, the European business community, European development initiatives and the livelihoods of Cambodian citizens."
The Cambodia Bicycle Coalition also warned in a statement: "This will be devastating for Bavet City and Svay Rieng Province, and cause tens of thousands of people to fall back into poverty." The area is a bicycle manufacturing hub in Cambodia, which, in turn, is the largest supplier of bicycles to the EU.
Both trade groups say that workers rights are improving in Cambodia, and that the EU should take this into account when deciding on the trade preferences.
Despite these developments, Phnom Penh is not brimming with confidence. Some officials put the odds of Cambodia's ejection from EBA at 50-50, and the government is braced for the worst. An official report leaked in August predicted economic growth would fall to 6.5% next year, compared with 7.1% for 2019, if Cambodia loses the trade benefits.
Nevertheless, Hun Sen is putting on a brave face. Writing on Facebook in early October, he said that "Chinese people investing in Cambodia" should not worry, "even if the EBA scheme is dropped."
Cambodia’s Prime Minister Hun Sen, left, greets Chinese President Xi Jinping at the Great Hall of the People in Beijing in April.
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The threat of higher European trade barriers does not appear to have softened the government's attitude toward its opponents. In recent months there have been more arrests of CNRP grassroots activists -- more than 50 since August. This underscores that the government "has no intention of lifting the heavy-handed repression that has darkened Cambodia in recent years," according to an Oct. 20 statement by Phil Robertson, deputy Asia director at Human Rights Watch.
An EU official who asked not to be identified said there are concerns among some in the European Commission and the European External Action Service that when new Brussels officials take office they may water down the report's conclusions and demands.
After the commission's preliminary report is published Cambodia will have until February next year to respond. If the EU decides to end the trade preferences, tariffs could be reintroduced in August 2020.
The outcome may depend on whether exiled CNRP leaders return to Cambodia on Nov. 9 as planned. Some pundits believe they will again fail to show up, despite repeated promises to the contrary. Hun Sen, for his part, says he will not allow the opposition figures to return and has threatened to immediately arrest them -- or worse -- if they enter the country.
If that happens, "it will seal the deal of EBA suspension and more sanctions. I have no doubt about it," said Sophal Ear, an associate professor of diplomacy and world affairs at Occidental College in Los Angeles.
