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EU opens its markets to Vietnam

by Jonathan Adams
European Union

The European Union is expected to open up trade to Vietnam, while closing its trade doors with Cambodia

The European Union is expected to open its markets to Vietnam on Wednesday, while closing its trade doors with Cambodia, rewarding the former for progress on labour guarantees and sanctioning the latter for human rights abuses.

The moves mark Europe’s increased insistence that trading partnerships go beyond liberalization and be coupled with commitments to environmental, labour and social standards. On Wednesday, it will display both its carrot and stick.

In Strasbourg, EU lawmakers will vote on a free-trade agreement struck with Vietnam, the EU’s most comprehensive such pact with a developing country and its second with a member of the Association of Southeast Asian nations (ASEAN).

Initial backing from the international trade committee of the European Parliament last month suggested the parliament as a whole would back it.

Critics have taken issue with Vietnam’s record on human and labour rights. Human Rights Watch urged lawmakers to delay approval until Vietnam fulfilled a pledge to allow freedom of assembly for workers and reformed a penal code that it says puts government critics in jail.

EU trade commissioner Phil Hogan told lawmakers in a debate on Tuesday that Vietnam’s human rights situation was “certainly an area of concern”, but said that forums such as an annual human rights dialogue were the way to address shortcomings.

The deal, which could take effect in July, would eliminate 99% of tariffs, although Vietnam will have a transition period of up to 10 years for some imports, such as cars and beer.

Many Vietnamese goods benefit from preferential access to EU markets under a scheme offered to poorer developing countries. However, this applies to duties on two-thirds of product types. Tariffs still apply, albeit at a lower rate, to garments.

By contrast, the European Commission is set to withdraw trade preferences from Cambodia under its “Everything But Arms” (EBA) scheme for the world’s poorest 48 countries. The EU executive said in a report on Tuesday that Cambodian Prime Minister Hun Sen’s government had cracked down on opposition, civil society groups and the media over the past three years.

Global clothing and shoe brands have written to Cambodia’s long-time leader urging reform, but on the eve of the decision, Sen said his nation would not “bow down” to foreign demands.

Cambodia was the second-highest beneficiary of the EBA in 2018, behind only Bangladesh. Its total exports to the EU reached 5.25 billion euros ($5.73 billion) in 2018, a 14% rise from 2016.

Withdrawal of preferences could, for example, see tariffs for key clothing imports into the EU rise to 12% from zero.

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