EU to Tax Cambodian, Myanmar Rice After Probe Finds Import Increases Hurt Local Producers

The European Union will impose a tax on rice from Cambodia and Myanmar for three years, beginning at the end of the week, after an investigation found that “a significant increase” in imports of the grain from the two countries “caused economic damage” to European producers.

Cambodia and Myanmar benefit from the EU’s Everything But Arms (EBA) trade scheme, which grants them, and other least developed nations, tax- and quota-free access to the bloc’s market.

But in a statement issued late on Wednesday, the European Commission said that as of Jan. 18, the EU will reinstate the normal customs duty on Indica rice from the two countries of 175 euros (U.S. $199) per ton in year one, following by a reduction to 150 euros (U.S. $170) in year two, and 125 euros (U.S. $142) in year three.

According to Commission, an investigation it launched in March last year found that Indica rice imports from both Cambodia and Myanmar had increased by 89 percent over the past five growing seasons, while prices remained lower than those on the EU market and actually decreased during the same period.

“This surge in low-price imports has caused serious difficulties for EU rice producers to the extent that their market share in the EU dropped substantially from 61 percent to 29 percent,” the Commission said.

The decision to reinstate duties on the rice imports was taken using a safeguards mechanism of the EU’s Generalised Scheme of Preferences (GSP) tariff-reduction scheme for developing countries, which the EBA is one pillar of.

The initial request for trade safeguards on rice imports was made by the Italian government in February last year, the Commission said, adding that the request had been backed by all other EU rice growing Member States—Spain, France, Portugal, Greece, Hungary, Romania and Bulgaria.

‘A positive development’

On Thursday, Cambodia’s Council of Ministers spokesman Phay Siphan told RFA’s Khmer Service that his government was unconcerned by the Commission’s announcement, adding that the rice tax would demonstrate that Cambodia is entirely capable of competing with other countries in international trade.

“Imposing a tax on Cambodia is a positive development, which proves that Cambodia is able to pay duties like other countries,” he said.

“We know that imposing the tax will affect us, but we must ready to compete on a level playing field with other countries in trade.”

Phay Siphan said that in order to cope with the new tax, Cambodia’s government will further develop the local market so that it will “be ready for any circumstances.”

He said that Cambodia will encourage exports to alternative markets, such as the Philippines, and will continue to rely on demand in China.

Last month, the Secretariat of One Window Service for Rice Export said Cambodia exported 497,240 tons of milled rice in the first 11 months of 2018, down 13 percent compared to the same period last year. It said China was the Southeast Asian nation’s top export market for rice, followed by France, the Netherlands, Poland and Britain.

Threatened EU trade sanctions are a politically sensitive topic in Cambodia, which banned the opposition Cambodia National Rescue Party (CNRP) and jailed its leader in 2017, paving the way for Prime Minister Hun Sen’s ruling Cambodian People’s Party (CPP) to win all 125 seats on offer in parliamentary elections in July 2018.

According to the European Commission, the EU ranked in 2017 as Cambodia’s second-largest trade partner, importing goods worth 5 billion euros (U.S. $5.8 billion) from the country.

Cambodia’s Ministry of the Interior on Wednesday arrested a CNRP activist after he posted a Facebook message saying the EU planned to impose a tariff on Cambodian rice, sources in the country said.

Theng Savoeun, secretariat coordinator of the Coalition of Cambodian Farmers Community, told RFA Thursday that Cambodia has no measures in place to protect farmers from the effects of an EU rice import tax, and urged the government to put aside a portion of the national budget to buy domestic rice.

“This issue is much like that of farmers losing their land [to government concessions], and we have seen that when the farmers lose their land, they protest,” he warned.

Tougher competition

Myanmar industry insiders told RFA’s Myanmar Service Thursday that the EU’s decision would have little impact on the country’s rice exports, which are already limited by a lack of infrastructure.

“This decision will not affect us very much on rice exports to Europe, but if it were on our garment exports, it would hurt,” said Hla Maung Shwe, deputy chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).

The Myanmar Times also quoted Lu Maw Myint Maung, joint secretary of Myanmar Rice Federation, as saying that restoring EU tariffs on rice imports will affect the production of only 66,000 to 110,000 tons of Indica rice.

But Soe Tun of the Myanmar Rice Federation acknowledged to RFA that the decision will make it harder for Myanmar’s already small rice export industry to compete with other Asian rice producers.

“In the past, even though our rice was not of top quality, it was cheaper than others because of this preferential tax treatment,” he said.

“Now, if our rice is to be taxed, we will need to compete with other countries in our rice market, and our share of the market may become smaller.”

Yan Naing Tun, permanent secretary of the Myanmar’s Ministry of Commerce, told RFA Thursday that the government is “working on something in accordance with the regulations to buffer the impact” of the decision.

The EU is currently Myanmar’s sixth biggest trading partner, and total trade between the two nations was worth U.S. $2.38 billion in 2017. The EU imported goods worth U.S. $1.77 million from Myanmar and sent nearly U.S. $615 million to the Southeast Asian nation.

Myanmar exported more than 3.3 million tons of rice in the 2017-18 fiscal year.

Reported by Thiri Minzin for RFA’s Myanmar Service and by RFA’s Khmer Service. Translated by Khin Maung Nyane and Samean Yun. Written in English by Joshua Lipes.