Officials Debate Affect of EU

As the European Union ex­pands from 15 to 25 countries on Saturday, officials in Cambodia were unsure whether the benefits of increased market access would offset the stiff competition they expect to face from the union’s poorer new members.

“An enlarged EU can increase in­comes or affect Cambodia neg­a­­­tively,” said Kea Sovan, chief of the World Trade Organization De­partment in the Ministry of Com­­merce. “Cambodia will get a large market from the EU,” he added. “But some foreign invest­ors want to invest in the new EU countries because they are poor and their labor is cheap.”

As a least-developed country, Cambodia enjoys duty-free, quota-­free access to the EU on most items, though restrictions on some agricultural goods re­main. The 10 states join­ing the EU on Saturday give Cambodia in­creased access to 75 mil­lion potential consumers, but will offer tough competition in producing garments, which comprise the bulk of Cam­bodian exports.

Cambodia exported about

$420 million worth of goods to the EU last year, consisting mostly of garments. EU members and the commission provide about $118 million in aid to Cambodia annually, though that is unlikely to increase significantly since most of the joining members are poorer than the existing ones.

The average per capita income in the 10 new EU countries—Slovenia, Malta, Hungary, Czech Republic, Slovakia, Estonia, Po­land, Lithuania, Latvia and Greek Cyprus—is about $9,200. For ex­ist­ing EU members, it’s about $28,400.

In a presentation on Wednes­day, EU officials said the im­proved market access for Asian goods and services would outweigh the potential negative trade effects.

“All of the 10 countries joining the EU have much higher rates of protection than existing members,” said Winston McColgan, charge d’affaires for the Cam­bodian delegation of the Euro­pean Commission. “So whatever trade you have is going to be easier and more profitable.”

Polish Ambassador Kazimierz Duchowski said he expects Cam­bodia to continue exporting garments, footwear and handicrafts to his country.

The EU enlargement “will make things better in all spheres,” he said. “It’s a bigger organization with lower taxes and tariffs.”

Though he said it was “a little too soon” for Polish companies to invest in Cambodia, he said Pol­ish businesses have inquired about starting up garment and footwear companies here.

But before they invest, “they need to know very well how the system operates in Asia,” Du­chow­ski said. “Many things are not too transparent here.”

A top garment industry official contacted Wednesday said the expanded EU will not benefit the country in the short term, but it will later on.

“There are pros and cons,” the official said. “There is a big­ger market in the new EU. But we will face a stiff challenge from gar­ment producers there because they can deliver goods within weeks, not months.”

But, he added, “European markets may produce high-end garments, but Asia is much more effective at mass production.”

Weighing the benefits to Cam­bodia of an enlarged EU depends on the length of perspective, McColgan said.

“The challenge for Cambodia is to diversify its exports,” he said. “An enlarged EU gives Cambodia an additional set of opportunities for Cambodia to diversify,” as it could provide new markets for Cam­bodia to try exporting new products, he said.

 

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