Cambodia turns to US to buoy garment sector

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PHNOM PENH, Sept 2 (AFP): Safeguards protecting Cambodia's garment sector expire by year's end, and the country hopes the United States, its biggest market, will help stave off a disastrous downturn in the industry which accounts 80 per cent of all exports.
Trade officials, led by Commerce Minister Cham Prasidh, were in Washington in July urging US Congress to pass legislation that would slash tariffs on goods from 14 of Asia's least developed countries, or LDCs, including Cambodia.
The measure is the only way to insulate Cambodian manufacturers from a changing global industry that increasingly favours larger producers, like China, with better infrastructure and cheaper production costs.
"We know our quality is the same as the Chinese, we are fighting only over the price," said Cham Prasidh, adding that US tariffs on Cambodian garment exports are between 15 and 25 per cent.
"If we don't pay the duty, it means we are competitive," he told the news agency in an interview last week.
"Our economy is mainly based on our export of garments ... anything that is affecting this sector is affecting the whole Cambodian economy."
Some 70 per cent of all Cambodian textiles go to the US, said Ken Loo, secretary general of the Garment Manufacturers Association of Cambodia (GMAC).
Continued access to that market is crucial to the survival of the garment sector, which was worth 2.5 billion dollars last year and employs more than 330,000 people, mostly young women supporting families in rural Cambodia.
"If we are able to get a reduction or exemption ... it would definitely go a long way to ensure the continued growth and survival of the industry," Loo said.
Cambodia's garment sector was sent into a spin in the first months of 2005 following the end of US textile quotas that guaranteed the country protection from larger competitors.
Factories began closing in rapid succession and thousands of workers were made jobless.
"Safeguard" restrictions imposed on some Chinese textiles in mid-2005 by the US and European Union stabilised the sector, even spurring it on to greater growth.
But while Cambodian trade officials had lobbied Washington for tariff reductions since 2004, their efforts have taken on a greater urgency amid rising fear that the end of Chinese restrictions this year and next could again throw the industry into crisis.
"Our industry suffered significantly" in the months immediately following the expiration of the US quotas, said Loo.
"If safeguards are removed and no new mechanism put in place to restrict China, our industry will suffer similarly," he added.
Foreign diplomats are also closely watching developments, keenly aware of the industry's importance to Cambodia's economic health.
"The entire economy hinges on the success of the garment sector and America must absolutely get rid of the tariffs" if the sector is to survive, said one western diplomat.
The Tariff Relief Assistance for Developing Economies, or TRADE Act which cuts tariffs to the 14 Asian LDCs, is already before the US Senate.
A parallel bill extending duty relief to all least developed countries is expected to be brought before the House of Representatives, Cham Prasidh said.
"Some (Congress people) have agreed to co-sponsor, but many of them are waiting to see the new legislation first," he said.
Other US officials point out that tariff relief for poor nations is already being considered within the Doha round of World Trade Organisation (WTO) negotiations.