The European Union has extended for three years the trade benefits it granted to Cambodia’s bicycle industry, exempting it from revisions to trade preferences given to least-developed countries. However, Cambodia is also among the countries the E.U. plans to investigate for possibly allowing more developed countries, mainly China, to benefit from its low export tariffs.
The E.U. agreed on July 28 to give Cambodia a three-year exemption to allow its industry to adjust to revisions made in January to the bloc’s Global System of Preferences (GSP)—a plan geared toward promoting trade with least-developed countries through low or no export tariffs.
As part of the revision, Singapore and Malaysia, who supply the vast majority of parts used in the country’s bicycle factories, were dropped from the E.U.’s scheme, making it harder for Cambodia to meet GSP rules that stipulates 30 percent of a bicycle must be made using local components.
However, a report published in the Official Journal of the European Union says that, per Cambodia’s request, the bloc will allow Cambodia to scale back its use of foreign-made parts over three years, with regular reports to the European Commission.
“Cambodia has presented in its submission to the Commission plans for encouraging bicycle part manufacturers to invest in the country over the next three years with a view to adapting its industry towards greater independence in its supplies,” the report says.
Cambodia’s bicycle industry has seen rapid growth, with the total value of exports increasing from $268 million in 2012 to $357 million in 2013. Cambodia is the second largest exporter of bicycles to the E.U. after Taiwan, according to industry publication Bike Europe.
But Cambodia’s growth has also drawn negative attention, with allegations that Chinese bicycle manufacturers are disguising the origin of their bikes by sending them through Cambodia and other countries that receive trade benefits from the E.U.
In a statement released last week, the European Commission said it is acting on a request from the European Bicycle Manufacturers Association to investigate alleged measures by China to avoid a 48.5 percent “anti-dumping duty” imposed on its exports to prevent China from selling goods below fair market price.
“The request contains sufficient prima facie evidence that the anti-dumping measures on imports of bicycles originating in the People’s Republic of China are being circumvented by means of transshipments via, and assembly operations in, Cambodia, Pakistan and the Philippines,” the statement says.
The E.U. says the investigation will last nine months but does not say what the repercussions will be for countries found to be complicit in avoiding anti-dumping tax.