Duty-free access is key for Cambodia because the US buys 70 percent of Cambodia’s garments and currently charges a 17 percent average tariff on them.
Cambodia fears that at the end of this year, when US emergency quotas on Chinese garments expire, factories will give up on Cambodia’s 330,000 garment workers and relocate either to China or Vietnam, which now enjoys the quota-free access of a full World Trade Organization member.
Hoping a tariff cut will keep factories where they are, Cambodian Commerce Minister Cham Prasidh traveled several times to Washington in 2007 to press the case.
Representative Jim McDermott introduced a bill in Congress that would cut the tariffs.
“We’re talking about people, about countries where people live on about $2 a day,” McDermott told VOA Khmer recently. “And my view that’s the bottom line. It doesn’t make any difference what color you are or what language you speak, if you’re living on $2 a day, you need some help.”
McDermott, a Democrat who served in the Peace Corps in Africa, introduced the New Partnership for Development bill in October, and this bill would expand duty-free garment access to all least developed countries.
Currently major garment producers Bangladesh and Cambodia are the only developing countries that do not benefit from other special trade preference programs that grant duty-free access.
The bill has the strong support of the US retailers and importers who want to increase their profits by paying less for the garments.
But because of strong opposition from the US textile industry, as well as African and Central American countries, and increasing anti-trade rhetoric by Democrats in Congress running for president, trade watchers in Washington believe the bill has little chance of succeeding this year.
In February the US textile industry and garment makers in Africa and Central America wrote to Congress urging it to deny duty-free access to Bangladesh and Cambodia. These nations describe Cambodia as an industrial powerhouse that will cost them jobs
Under existing preference programs, many poor countries must use US fabric to get duty-free access when shipping garments back to the US.
Restrictions on African garments also limit their use of non-African fabric. These restrictions are important sources of textile jobs in the states of North Carolina, South Carolina, Georgia and Alabama.
“If this act went through, we could lose tens of thousands of US textile jobs because we would lose billions of dollars in yarn and fabric orders currently being exported overseas and turned into clothing and brought back into the United States,” textile lobbyist Cass Johnson, the president of the National Council of Textile Organization, told VOA Khmer. “Those apparel orders would be lost because Bangladesh and Cambodia, two countries that use no US yarns or fabrics, would be replacing those orders with new apparel orders that are made of Chinese yarns or fabrics.”
“That’s because the bill gives them extraordinary new benefits which make it impossible for us or our overseas export partners to compete,” Johnson said. “We send nearly $10 million worth of yarns and fabrics to Mexico, the Andean countries and to the CAFTA region under various trade promotion programs.”
US textile makers see Cambodia’s growing garment exports, up 20 percent from 2006 to 2007 despite a 49 percent decrease in the last quarter of 2007, as a major threat
“ Bangladesh and Cambodia, even without this new bill, have taken about $2 billion of apparel trade from the region,” Johnson said. “They are super-competitive countries. They have grown 60 percent over the last three years. This bill would supercharge that growth. You would see billions and billions of dollars lost from the region. You’ve got to think: that is potentially hundreds of thousands of jobs.”
The letter to Congress was signed by business groups in South Africa, Lesotho, Kenya, and Madagascar in Africa; and Peru, Nicaragua, Mexico, Colombia, the Dominican Republic, Ecuador, Guatemala, Honduras, and El Salvador in the Americas.
Jas Bedi, the Chairman of the Kenya Apparel Manufacturers Exporters Association, said the bill undermines the African Growth and Opportunity Act, signed into law in 2000, which gives duty-free access to lesser developed African countries.
“Kenyan industry is similar to the rest of Africa [and] is struggling to survive with no gain in market share with the expiry of the Multifiber Agreement since 2005,” he said. “This new bill will not help the situation.”
Lobbyists, including some retail supporters of McDermott’s bill, said that 2009 would be the first opportunity to discuss new benefits for Cambodia. This year several US preference programs expire and when an attempt to extend them and add new benefits for Africa failed in a House committee last month, these supporters were discouraged.
“My feeling is that there is, there is always time in a legislative session, when we’re talking March, to do something,” he said.
McDermott said that the fight to get his bill passed has become complicated. There is a battle in the US Congress over enacting a new free trade agreement with Colombia.
President George W. Bush has made that bill his top trade priority, but Democrats and union leaders in the US are against it.
The battle is forcing Democrats to choose sides, and they are choosing to oppose greater trade.
Statements by senators Hillary Clinton and Barack Obama, the leading Democratic candidates for president, against the cornerstone of US trade policy, the NAFTA agreement with Mexico and Canada, have further motivated Democrats to oppose new trade benefits.
“But there’s quite a bit of time for us to do something,” McDermott said. “We’ve been talking about having hearings on this bill in April. And so, I already think there’s a real possibility that we’ll get a lot of that done.”
McDermott included benefits in the bill to appease worried African countries after they complained last year. One limits the amount of clothing Cambodia could claim duty-free access for to the amount of garment it currently produces.
This could avoid a massive increase or “surge” in new Cambodian garments that would dominate the market. Deapite the pressure, McDermott said that he will not take Cambodia and Bangladesh out of the bill
“Poor countries, LDCs [lesser-developed countries] ought to be dealt with,” he said. “And if you’re an African LDC, you’re not a whole lot different than an Asian LDC or a South American LDC...The fear of the Africans is that they’re going to lose everything, that it’s all going to be sucked up by the Asians. Well, we put in protections, we put in firewalls that you couldn’t get more than they’re producing already and for the next ten years.”
Lobbyist Johnson said these safeguards are not enough.
“When countries have had these caps before they very cleverly get around them by offering importers the ability to use part of the cap but only if they will bring in new business,” Johnson said. “There are various ways around the cap that countries and importers have used in the past. I’m sure Bangladesh and Cambodia would be no exception.”
Johnson also said that the supporters of the bill are not really concerned with helping Cambodia or making clothes cheaper for American consumers, so much as enriching themselves.
“Major importers and retailers are supporting this bill,” Johnson said. “One of the reasons, and this is one of the stories you don’t hear about this bill, is they get $900 million a year in duty savings. They pay $900 million in duties on apparel goods coming from those two countries and that would be a gift from the US treasury into their pockets, which doesn’t help the people in Bangladesh and Cambodia much but it does help US retailers get a little richer.”
Asked if his LDC bill is dead now that developing countries have joined forces with the US textile industry against it, McDermott noted that his bill has the support of powerful House Ways and Means Committee chairman, New York congressman Charles Rangel.
“When somebody tells me a bill is dead,” he said, laughing, “that makes it even more fun when we make it happen.”