18 Dec 2018
Potential EU Trade Measures Affecting Imports from Cambodia and Myanmar
Hong Kong traders may like to know that certain or all products, excluding arms and ammunition, which originate in Cambodia or Myanmar and which currently benefit from tariff-free access when imported into the EU as per Article 18(1) of Regulation (EU) No 978/2012 applying a scheme of generalised tariff preferences (“the GSP Regulation”) could face customs tariffs in the foreseeable future.
The EU unilaterally grants so-called EBA preferences to Least Developed Countries (“LDCs”) with the aim of contributing to their economic development and their integration into the global trading system. The granting of trade preferences is, however, subject to certain conditions. Beneficiary countries must, for instance, uphold and respect the principles enshrined in various conventions, including core human and labour rights conventions as per Article 19(1)(a) of the GSP Regulation.
Article 22 of the GSP Regulation further provides that normal Common Customs Tariff duties may be reintroduced following an import surge which causes, or threatens to cause, serious difficulties to EU producers of like or directly competing products. The European Commission will start a safeguard investigation when it sufficiently finds that this could be the case on a first sight basis as per Article 24 of the GSP Regulation.
Safeguard measures on rice imports
Earlier this year, Italy lodged a formal request for the adoption of safeguard measures in relation to a surge in imports of rice of the type ‘Indica’ originating in Cambodia and Myanmar (CN codes 1006 30 27, 1006 30 48 and 1006 30 98). One month later, the European Commission published its notice of initiation of a safeguard investigation. On 5 November 2018, the European Commission recognised the economic damage caused by the tariff-free access of rice from Cambodia and Myanmar and considered the application of a three-year safeguard measure on the import of the products concerned.
On 19 November 2018, EU rice producer associations from Italy and four other Member States asked the GSP committee representing all Member States to back the European Commission’s proposal on 4 December 2018. Although a simple majority of Member States backed the proposal on that day, the required qualified majority in favour of the proposed measure was not reached. Due to the absence of the GSP Committee’s opinion in this regard, the European Commission will take the final decision on the application of the safeguard measures, which would then take effect from the start of 2019.
Potential withdrawal of Myanmar’s trade preferences
Another measure that could potentially affect the import of products originating in Myanmar and Cambodia is the temporary withdrawal of EBA preferences as per Article 19 of the GSP Regulation. The temporary withdrawal measure is not linked to economic difficulties experienced by EU producers, but relates to the condition that fundamental human and labour rights are respected in the beneficiary country.
Following developments highlighted in various United Nations reports as regards human rights violations in Myanmar and concerns around labour rights, a monitoring mission of experts from the European Commission visited the country at the end of October. This mission was executed within the framework of a potential withdrawal of Myanmar from the EBA arrangement. This would mean that the duty-free access of certain or all Myanmarese products, as imported into the EU, could be suspended. Withdrawal of Myanmar’s trade preferences is a serious possibility if other channels of cooperation fail to reach results, according to the Commissioner for Trade, Cecilia Malmström.
Potential withdrawal of Cambodia’s trade preferences
The European Commission expressed its concerns about the deterioration of human rights and labour rights in Cambodia, without any improvements in sight. A recent mission of the Commission showed serious and systemic violations of, among others, labour rights, the freedom of speech and the freedom of association. Cecilia Malmström informally announced on 5 October 2018 that the European Commission would be launching the process for the withdrawal of Cambodia’s EBA arrangements. If Cambodia were to respect the fundamental principles, the European Commission could terminate the withdrawal procedure. So far, the dialogue with Cambodia has not led to reconsideration.
The European Commission still has to publish a notice in the Official Journal announcing the initiation of the temporary withdrawal procedure under Article 19 of the GSP Regulation. Given the informal notification in the Trade Commissioner’s blog on 5 October 2018 such announcement could be made relatively soon.
After its official notification, the European Commission will monitor and evaluate the situation in Cambodia for six months within the terms of the GSP Regulation. Subsequently, the Commission will submit a report of its findings within three months after the evaluation period. Cambodia will then have one month to submit its comments on the European Commission’s report.
Within six months from the evaluation period, the European Commission will decide whether it will terminate the procedure or withdraw certain or all tariff preferences. The withdrawal will only take effect six months after the Commission’s decision. Therefore, it could take up to 18 months after the notice is published in the Official Journal before certain or all trade preferences applicable to Cambodian products are withdrawn.