EU’s tar­iff threats vs Asia’s au­to­crats risk back­fir­ing

Business World - - Theworld -

NEW YORK — The Euro­pean Union (EU) is threat­en­ing to slap tar­iffs on Asian lead­ers who abuse their power, a move that risks up­end­ing sev­eral key gar­ment-pro­duc­ing na­tions in the re­gion.

Last month, the EU told Cam­bo­dia it would start the process of with­draw­ing tar­iff-free ac­cess for most goods un­der the “Ev­ery­thing But Arms” ini­tia­tive, say­ing its July elec­tion was “marked by ha­rass­ment and in­tim­i­da­tion.”

The bloc is threat­en­ing to do the same for Myan­mar due to geno­cide al­le­ga­tions, and a Reuters re­port said Sri Lanka may be next on the list.

If the EU fol­lows through, the moves risk hurt­ing gar­ment sec­tors that em­ploy nearly two mil­lion la­bor­ers, most of whom are women. In all three coun­tries, the ini­tia­tive has made the EU as one of their big­gest ex­port mar­kets for gar­ments, gen­er­at­ing bil­lions of dol­lars in rev­enues an­nu­ally.

Hu­man-rights ac­tivists have ap­plauded the EU, which is in­creas­ingly tak­ing a lead­er­ship role on hu­man­i­tar­ian is­sues from a more in­ward-look­ing US un­der Pres­i­dent Don­ald Trump.

At the same time, some in the busi­ness com­mu­nity see the moves as coun­ter­pro­duc­tive, and an­a­lysts doubt they will lead to ma­jor changes.

China, in par­tic­u­lar, could step in to off­set any ex­port losses from na­tions hit with new EU tar­iffs, ac­cord­ing to Mur­ray Hiebert, a se­nior as­so­ciate of the South­east Asia Pro­gram at the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies in Wash­ing­ton.

“Putting pres­sure on gov­ern­ments to re­spect hu­man rights is very im­por­tant, but to use sanc­tions as one size fits all will risk marginal­iz­ing the EU in giant swaths of Asia,” Mr. Hiebert said.

“The best the EU can hope for is that it will feel bet­ter about pun­ish­ing gross vi­o­la­tions of hu­man rights.”

Sri Lanka has also sud­denly come un­der scru­tiny af­ter the pres­i­dent abruptly fired the prime min­is­ter, trig­ger­ing a po­lit­i­cal cri­sis that has yet to be re­solved. The coun­try’s gar­ment sec­tor em­ploys some 600,000 peo­ple and ac­counts for about a third of man­u­fac­tur­ing em­ploy­ment.

Tung-Lai Mar­gue, EU’s am­bas­sador to Sri Lanka, told Reuters last week the bloc would con­sider with­draw­ing duty-free tar­iff ben­e­fits if the gov­ern­ment wasn’t meet­ing its com­mit­ments. The em­bassy de­clined to com­ment when con­tacted.

The sit­u­a­tion is more wor­ry­ing for Cam­bo­dia and Myan­mar.

In Myan­mar in par­tic­u­lar, the news is a set­back for many for­eign com­pa­nies that moved in af­ter the coun­try tran­si­tioned to democ­racy from mil­i­tary rule over the past decade. EuroCham Myan­mar said the move may put as many as 450,000 of the coun­try’s gar­ment work­ers out of a job within four years.

Some Euro­pean com­pa­nies have in­di­cated they would move their op­er­a­tions to Africa or other na­tions if the EU puts tar­iffs on Myan­mar goods, ac­cord­ing to Filip Lauw­ery­sen, the ex­ec­u­tive direc­tor at Eurocham Myan­mar and Sec­re­tary Gen­eral of the Euro­pean Busi­ness Or­ga­ni­za­tions Net­work.

The bloc has “com­pletely lost any sense on how to ad­dress these is­sues,” Mr. Lauw­ery­sen said. “Myan­mar is heav­ily backed by China and Rus­sia and there is not much we in Europe can do with our cur­rent sta­tus in the global land­scape of things.”

Pref­er­en­tial ex­ports to the EU from Myan­mar have more than dou­bled in re­cent years to $1.48 bil­lion in 2017, ac­cord­ing to EU data. Aung Ko Ko, an in­de­pen­dent econ­o­mist who also sits on the rul­ing NLD party’s eco­nomic com­mit­tee, said that Myan­mar had not done any­thing wrong and was con­fi­dent the EU wouldn’t stop pref­er­en­tial treat­ment.

“Myan­mar isn’t do­ing any harm­ful ac­tions to EU mem­bers,” he said, not­ing the gov­ern­ment has in­vited Euro­pean of­fi­cials to see the “true story.”

In Cam­bo­dia, the gar­ment sec­tor is by far its big­gest ex­port, a $5 bil­lion in­dus­try that em­ploys about 750,000 Cam­bo­di­ans.

Prime Min­is­ter Hun Sen, whose party won ev­ery seat in a July elec­tion boy­cotted by the main op­po­si­tion party, has struck a de­fi­ant tone to­ward the EU and failed to win a re­prieve from the bloc in talks last month.

In an Oct. 20 let­ter to the trade com­mis­sioner of the Euro­pean Com­mis­sion, the Gar­ment Man­u­fac­tur­ers As­so­ci­a­tion in Cam­bo­dia said a sus­pen­sion of duty-free ac­cess or uni­lat­eral sanc­tions would hurt gar­ment work­ers and their fam­i­lies.

“All the progress that Cam­bo­dia has achieved over the past two decades through the ef­forts of all stake­hold­ers, in­clud­ing de­vel­op­ment part­ners like the EU, could be de­stroyed very quickly,” it said.

Eric Tav­ernier, the chief ex­ec­u­tive of­fi­cer of tex­tile firm We Group Ltd. which has a fac­tory that em­ploys about 700 work­ers in the Cam­bo­dian coastal town of Si­hanoukville, said the sub­se­quent EU tax bur­den would likely mean the end of his busi­ness there.

“Cam­bo­dia is go­ing to face some stuff com­pe­ti­tion from else­where now that they are no longer the cheap­est op­tion,” he said. Still, he un­der­stands why they acted. “Why should we keep help­ing coun­tries if they don’t fol­low ba­sic demo­cratic rules.” —

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