Commerce minister warns of massive tariff costs for Cambodia from EU sanctions

Cambodian Commerce Minister Pan Sorasak has quietly expressed concern that Cambodia could face staggering customs bill should the European Union suspend its preferential trade treatment for Cambodia, The Phnom Penh Post reported on Tuesday quoting a leaked letter of the minister to Prime Minister Hun Sen.

In the leaked letter dated December 4, Pan Sorasak informed Hun Sen that the removal of these preferences would incur $676 million tariff cost based on the $6.2 billion exports to the ER in 2016 while suspension of preferential access to the US for certain goods would add another $10 million bill.

The EU Parliament on Thursday endorsed a resolution calling for a review of Cambodia’s Everything But Arms trade preference, with a suggestion for temporary withdrawal. The EBA allows tariff-free imports to the EU on account of Cambodia’s least developed country status.

But Hun Sen on Sunday brushed off the threat, saying he would not be a “dog that acts just for only a bone or a piece of meat” and dared the EU to “cut it”.

When reached yesterday by the Post, Sorasak did not deny the authenticity of the letter but downplayed it significance.

He insisted that his letter was just an official document sent to Hun Sen for sharing some information.

In the letter, Sorasak noted that the export sector employed more than 400,000 workers. He also suggested the government to lobby friendly EU countries through diplomatic and business networks “because the EU mostly has soft response and more understandable of Cambodia’s situation.”

Stephen Higgins, managing partner of Cambodia-based investment firm Mekong Strategic Partners said though some firms operating in Cambodia might be able to absorb the rising EU tariffs, others would prefer to shut shops, causing a negative domino effects.