Cambodia Faces Major Economic Blow as E.U. Weighs Ending Trade Deal

BANGKOK — Cambodia faces a serious blow to its economy as the European Union investigates the government’s deteriorating human rights record and considers revoking a special trading deal with the country.

For 17 years, Cambodia has benefited from preferential access to the European Union a major trading partner, under a program called Everything but Arms, which allows what the bloc calls “vulnerable developing countries” to pay fewer or no duties on all their exports to the bloc, except weapons and ammunition. The trading deal has contributed to a period of rapid economic growth in Cambodia.

But the program stipulates that countries meet international norms of human rights and democracy. Instead, Cambodia has engaged in one of its harshest waves of repression in recent years, actions that have prompted the European Union to consider ejecting the country from the program.

The bloc has said that the Cambodian government has engaged in “serious and systematic violations of core human rights and labor rights,” and in February it set in motion an 18-month process that could lead to the suspension of Cambodia’s preferential status under the Everything but Arms program.

Last week, senior officials from the European Union visited the Cambodian capital, Phnom Penh, in the first scheduled talks under the formal suspension process. It will include six months of monitoring and talks, then a further six months during which the commission will reach its final decision. Any withdrawal would take another six months.

In 2017, Cambodia sold $5.8 billion of goods to the European Union, about 40 percent of the country’s total exports.

Since gaining access to the European market in 2001, the textile industry has grown rapidly and now employs about 700,000 people. Most are women, and their wages are often the main source of financial support for families in poor villages around Cambodia.

Sebastian Strangio, a Southeast Asia expert and author of the historical study “Hun Sen’s Cambodia,” said that access to Everything but Arms and similar programs had been “vital in the development of Cambodia’s garment and apparel manufacturing sector — by far the country’s largest source of export revenue.”

He added that the prime minister was engaging in his “classic strategy to negotiate from strength, while wearing down his interlocutors.”

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