Garment Factories Aiming to Kick Taxes on Footwear to US

Cambodia’s garment factories are hoping to partner with the Commerce Ministry in asking the U.S. to grant the country’s burgeoning footwear exports duty-free access should the U.S. decide to make the option available.

The Generalized System of Preferences (GSP)—the U.S.’s largest trade preference program, aimed at helping the world’s poorest countries—currently excludes footwear. In March, however, a bill reached the floor of the U.S. House of Representatives that proposes adding some types of footwear to the list of items eligible for duty-free access.

Kaing Monika, deputy secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), said on Tuesday that the trade group was hoping to work with the Commerce Ministry on a joint petition asking the U.S. to let Cambodia in on the deal.

“The provision of GSP for footwear would help us export more and attract more investment,” he said.

He said GMAC was already in preliminary talks with a U.S. law firm that might help with the petition, but declined to identify it.

In a statement published by local media on Monday, GMAC said that about 59 factories were currently exporting footwear and that securing duty-free access to the U.S. would help the garment industry cope with a rapidly rising minimum wage for its workers.

The International Labor Organization, drawing on government figures, says Cambodia exported footwear worth $763 million last year, $126 million of it to the U.S.

Though footwear accounts for a fraction of the $7.3 billion in garments Cambodia exported last year, it is making up an increasingly large share. While exports of non-footwear garments grew by 6.4 percent in value last year, exports of footwear jumped by 15.6 percent.

Commerce Ministry spokeswoman Soeng Sophary declined to discuss any potential partnership with GMAC on a petition and said the government was waiting on the U.S. to actually add footwear to the GSP program before deciding on its next move.

Suon Prasith, deputy director-general for international trade at the ministry, however, said the government would probably be willing to help GMAC with a petition.

“If they do, I don’t think there would be any objection since we worked together on this before,” he said, referring to Cambodia’s successful bid to add its travel goods exports to the GSP program last year. “We are more than happy to see more investment and to bring more jobs to the people.”

Ms. Sophary said it was too soon to say what impact the addition of travel goods has had on Cambodia’s garment industry. But Mr. Monika credited it with already helping to attract a South Korean company to the country with plans to employ at least 4,000 workers.

Mr. Prasith said he believed the U.S. bill was likely to pass. But Anthony Galliano, CEO of Cambodian Investment Management, was not so sure. He said the bill would have to make it past the administration of U.S. President Donald Trump, which is far more averse to unbalanced trade deals than its predecessor and that the U.S. currently imports billions of dollars more in footwear than it exports.

Under the current climate, “this may not go through, especially given that there is a huge deficit in the trade of footwear,” he said. Even if it did, and Cambodia was brought on board, Mr. Galliano said the country would still face hurdles. “Cambodia would still need to compete on types of shoes produced, their quality, currency, labor and energy costs and productivity against neighboring countries such as China, Vietnam and Indonesia,” he said.

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