Cambodian rice to lose EU duty-free status

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A farmer in Preah Vihear province collects paddy rice in December 2017. Heng Chivoan

The Cambodian rice sector is set to lose its duty-free export status to the EU today – its major rice market – after the European bloc decided to impose tariffs on rice from Cambodia and Myanmar to curb a surge in such imports.

The decision will be in effect for three years, during which time the tariff rate will be steadily reduced. The sector will be forced to pay about $53 million in the first year based on the amount the Kingdom exported to the EU last year.

 

On Wednesday, the European Commission said: “An investigation has confirmed a significant increase of imports of Indica rice from Cambodia and Myanmar into the EU that has caused economic damage to European producers.

“The European Commission has therefore decided today to re-introduce import duties that will be steadily reduced over a period of three years.”

 

Cambodian government data said the Kingdom exported a total of 626,225 tonnes of rice last year, of which the EU absorbed around 43 per cent or 269,127 tonnes.

Based on last year’s figures and the tariff rate imposed by the EU, the Cambodian rice sector will need to pay about €47 million ($53.6 million) in the first year, €40.3 million in the second, and €33.6 million in the third.

Exporters and economist The Post spoke to yesterday shared similar views on the impact of the rice tariff to EU market. They said the solution to overcoming the EU decision is to lower operating costs and diversify markets.

Centre for Policy Studies director Chan Sophal said the new tariffs will not seriously affect the export of Jasmine rice from Cambodia into the EU, but white rice will be affected.

 

He said in this case, farmers may shift to Jasmine rice or other crops if feasible. However, he said the real impact should depend on consumers’ view toward Cambodian rice.

“I think it will depend on the substitutability of the Cambodian rice in EU market outlets. If they like Cambodian rice, the supermarkets and consumers in Europe may not mind paying a bit more. It should not be a big share of their consumption expenditure."

“The government should consider reducing the electricity cost and port fee to help our rice industry to remain or be more competitive. This measure will also help if the garment industry is seriously affected by a suspension of the Everything But Arms preferential agreement with the EU,” he said.

Cambodia Rice Federation vice-president Hun Lak echoed Sophal’s views. He said the actual impact of the EU tariff on rice needed a wait-and-see period to assess consumer reaction.

However, he stressed that the EU’s decision would certainly have a negative impact on the Cambodian rice industry be it big or small.

“Cambodia still regards Europe as its main market, so when we need to pay tariffs, we need to find a way out. We also need to lower our operating costs to balance tariff fees so that we can continue exporting to Europe,” Lak said.

On the positive side, he said rice exports to China may expand and that China provided Cambodia a rice export quota of 300,000 tonnes per year last year, but the Kingdom Cambodia could only export 170,000 tonnes to that country.

“In the future, we will have more negotiations with China [on increasing the quota] to export our rice,” he said.

AMRU Rice Cambodia chairman and CEO Song Saran said yesterday that the EU market will always remain an important one for Cambodia, so rice exporters will need to find a solution to maintain their ability to export to that market.

At the same time, he said Cambodia will need to improve its competitiveness and explore new markets so as to rely less on a single market.

“We need the EU market and we cannot afford to lose it. So we will have to find a way to lower our operating costs to improve competitiveness,” he said.

Prime Minister Hun Sen last week unveiled a new campaign to reduce the reliance on preferential trade status offered by advanced countries, saying the government will provide better trade facilitation and eliminate unnecessary procedures.

Among a series of trade facilitation, he announced a plan to relieve Camcontrol from its inspection duties at border checkpoints, remove informal charges for customs clearance, and reduce container goods scanning.