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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.”

The government of Prime Minister Hun Sen has dissolved the main opposition party, the Cambodia National Rescue Party, and jailed and then released the party’s leader, Kem Sokha, causing other party members to flee overseas. The authorities have also cracked down on independent news media, most notably with the forced closing of The Cambodia Daily; harassed local rights defenders and land activists; and curtailed rights to free expression and assembly.

Those actions, effectively resulting in the imposition of one-party rule, contributed to the European Union’s investigation.

“It should be clear that today’s move is neither a final decision nor the end of the process,” the European Union trade commissioner, Cecilia Malmstrom, said in February when the suspension process was announced. “But the clock is now officially ticking, and we need to see real action soon.”

The visit by the European Union delegation, and the process of suspension, has served to fire Mr. Hun Sen’s longstanding resentment of what he calls the interference of Western countries on issues of human rights and democracy.

Lao Mong Hay, a leading political analyst in Cambodia, said, “Hun Sen is very determined not to trade what he calls national sovereignty and independence for foreign aid.”

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

Mr. Hun Sen did not meet the European delegation. During the officials’ visit, he toured a local factory and expressed defiance about the suspension process.

“I have nothing to be afraid of in talking about this,” he said. “Who is doing the monitoring? I have already said that if they give us preferential access, it won’t make us rich. If they withdraw it from us, it won’t make us dead.”

In January, referring to the ramifications of the end of access to the program, he warned the European Union: “If you want the opposition dead, just cut it. If you want the opposition alive, don’t do it, and come and hold talks together.”

In what seemed a provocative move in the week before the delegation’s visit, a government-friendly court in Phnom Penh issued indictments against eight opposition members who fled the country last year. They had been talking of returning to Cambodia, but the indictment effectively prevented their return.

Phil Robertson, deputy director of the Asia division of Human Rights Watch, said, “Prime Minister Hun Sen and his government have no one but themselves to blame for their predicament.”

“There is still hope as the E.B.A. decision deadline approaches,” Mr. Robertson said, referring to the Everything but Arms agreement, “the Cambodian government will finally look over the cliff and realize it doesn’t want to go that way — and come back to the bargaining table on human rights issues with the E.U.”

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