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EU’s EBA Withdrawal Serves as Adrenaline for Cambodia-China FTA

ISSUE 2020
No 34
Release 30 October 2020
By SREU Rithiya*

Over the last two decades, the partnership between Cambodia and the European Union (EU) has significantly contributed to the Kingdom’s socio-economic development. The preferential trade ‘Everything but Arms’ (EBA) scheme that the EU has extended to Cambodia since 2001 has been vital to promoting the well-being of the Cambodian people. Cambodia’s poverty reduction has dropped remarkably from over 50 per cent in 1994 to just below 10 per cent in 2018.

On 12 August 2020, the EU decided to partially withdraw the EBA from Cambodia under the accusation that the Kingdom had violated human rights principles, enshrined in the International Covenant on Civil and Political Rights.

While the Cambodian opposition groups congratulated the EU’s decision to pressure the government, some analysts said the EU’s resolution was both immoral and unjust.

Dr Cheunboran Chanborey, a senior analyst at the Asian Vision Institute, a Phnom-based policy research think tank, said it was immoral because the EU’s EBA decision coincided with the global COVID-19 crisis, which has seriously affected Cambodia’s export-driven economy. Therefore, the EU should have postponed the resolution on the partial withdrawal. It is also unjust due to the widely shared perception of the EU’s double standard and inconsistent actions.

Other beneficiary countries have far worse human rights records than Cambodia, but the EU has not taken any serious action against them. Instead, the EU started to negotiate free trade agreement (FTA) in June 2012 with Cambodia’s neighbour – an obviously undemocratic country by Western democratic principle and standard. That country does not hold elections and has signed far less of the International Labour Organisation’s core conventions than Cambodia.

The EU’s EBA punishment of Cambodia in the name of human rights and democracy is hypocritical and vividly unveiled the EU’s double standard. This story of injustice reminded Cambodian people of a historical “déjà vu”. It reminded them of Prime Minister Hun Sen’s speech at the 75th Session of the United Nations General Assembly.

A little more than 40 years ago, Cambodia was liberated from the Khmer Rouges’ genocidal regime, where more than 2 million Cambodians have perished at the hand of the barbaric regime. For many years, the traumatized and exhausted survivors, totally stripped of everything, had to rebuild the nation from scratch. Quite ironically, it was to these very same survivors who were being punished by a majority of UN member states while allowing the Khmer Rouge executioners to occupy the Cambodian seat in the UN. These same governments that preached incessantly about democracy and human rights were the ones that have deprived the entire surviving population of access to food, health, education, housing, development, and even peace for 12 long years.

Dr Raoul M. Jennar, a political scientist, who has conducted research on Cambodia for more than 30 years, said the EU’s withdrawal of the EBA is seen as “eminently political” and is unlikely to bring about any change in the Kingdom. He said, “Cambodian authorities see themselves as victims of EU double standards policy. So Cambodia is happy to receive aid from those who have contributed to its reconstruction and who, today, play an important role in its development without interfering in its internal political life.”

With the suspension of the EBA, the EU will lose its influence and soft power on Cambodia to other regional actors, such as China and Japan, which see Phnom Penh as a potential strategic political and economic partner.

Cambodia was the first destination of Chinese Foreign Minister Wang Yi’s 2020 tour to Southeast Asia, followed by Malaysia, Laos, Thailand, and a transit visit to Singapore from 11 to 15 October 2020. On 12 October, Beijing announced to give a red packet to Phnom Penh – a grant aid worth USD 140 million – for Cambodia to implement its top priority projects in 2020.

As a small state, Cambodia does not have many choices but to let the EBA go and find alternative ways to develop the country, particularly amidst the COVID-19 pandemic.

While some people view the withdrawal of the EBA as a loss for Cambodia, the withdrawal is the adrenaline for Cambodia to rush for FTA deals. Noticeably, the first-ever Cambodia-China Free Trade Agreement (CCFTA) was just signed on 12 October 2020.

An FTA offers an exporting country reduced or no tariffs on its goods exported to another country, thus making prices more competitive. Under the CCFTA, China will purchase Cambodia’s agricultural products at a lower price, thus increasing demands and providing more jobs and income to Cambodian farmers.

According to the Ministry of Commerce, Cambodia will be able to export more than 340 products, mostly agricultural in nature, to China duty-free now. CCFTA will increase the volume of the two countries’ bilateral trade, valued at USD 7.4 billion in 2018 to reach the set target of USD 10 billion by 2023. In 2019, the two-way trade between the two countries stood at USD 8.5 billion.

For Cambodia’s FTA with China to be a success, the Kingdom must both improve the country’s economic competitiveness and garner the kinds of Chinese investment that will produce local jobs. “Cambodia must steer prospective Chinese investors towards contributing to local development and creating local jobs… Key local products should be identified and supported so that Cambodian producers can compete with Chinese firms. Then, Cambodia will greatly benefit from FTA with China,” said Suy Heimkhemra, who holds a master’s degree in public policy from the Australian National University. Heimkhemra also warned of the over-reliance on one country, which can make Cambodia less flexible to risks, taking into consideration China-dependent tourism and garment industries in the wake of the COVID-19 pandemic.

China is Cambodia’s closest political ally and the main source of economic support, through aid and investment. Although Cambodia closely aligns with China, Phnom Penh’s economic diplomacy seeks to have bilateral FTAs with other countries and regions, namely South Korea, Japan, India, Mongolia, the United Kingdom, the United States, and the Eurasian Economic Union.

Cambodia’s neutrality cannot be fully realised unless she has strong economic independence. In this sense, Cambodia must sprint to sign FTAs with as many countries as possible in order to ease the strain of losing the EU’s trade scheme.

The views expressed are the author’s own and do not reflect the views of the Asian Vision Institute.