2019, the year Cambodia’s textile production hub was at risk

A business of 10 billion euros, about 75% of the country’s exports. These numbers reflect the importance of the textile industry for Cambodia and, at the same time, the relevance of the country in the global supply chain map. The country could now lose its leading role in global sourcing due to the European Union’s threat to withdraw tariff benefits. 

At the end of 2018, European authorities announced their intention to withdraw access from the Asian country to the Everything But Arms (EBA) trade agreement, after knowing the conclusions of a Brussels delegation that determined that the current government party illegalized the opposition just before holding elections. The European organization threatened the country with this sanction in order to correct practices that violated human rights and urged member countries to vote in the council of ministers.

Following this measure, tensions between Cambodia and the European Union intensified in 2019. In January, the European Commission gave the green light to the suspension of the zero tariff to Cambodia after member countries gave their approval. Then, Brussels opened a six-month period of intensive monitoring and evaluation of the situation in the country. At the end of the year, the organization issued a preliminary report to the Cambodian government in which it gave a period of one month to obtain a response and make a decision on whether or not to eliminate tariff preferences in the country.

The pressure Cambodia received were supported by various groups in the fashion industry

The pressures Cambodia received to end the violation of human rights and avoid the sanctions of the European Commission have also been supported by various groups in the fashion sector. Nike, Adidas, Gap, Levi Strauss, Esprit, PVH or VF, among others, addressed a letter in May 2019 to the Government of the Asian country alerting Hun Sen, Cambodian Prime Minister, about the damage it could represent to the local industry the textile suspension of European tariff benefits.

China also had something to say. Beijing’s government supported Cambodia, offering its help in case that the European Union canceled its tariff benefits. Amid the conflicts, the Asian country raised the minimum wage by 4.4%, to 190 dollars. This increase, which will take effect in January 2020, is the second in the country in a few months.

Treaty with Vietnam

Another of the milestones that have marked the textile supply chain map has been the signing of the Free Trade Agreement between the European Union and Vietnam. In July, the European Commerce Commissioner, Cecilia Malmström, and Vietnam’s industry and commerce minister, Tran Tuan Anh, signed the deal in Hanoi, capital of the Asian country. The pact, in addition to phasing out 99% of tariffs, also incorporates measures to defend labor and environmental rights. The agreement is the most ambitious trade sealed by the European Union with a developing economy and starts from both parties’ commitment towards liberalization and “open, fair and regulatory” integration.

Vietnam has also approved a salary increase in 2019, the third in three years

Also, Vietnam has also approved a wage increase in 2019, the third in three years. Through the National Salary Council, the country’s government approved an increase of 5.3%. On average, workers in Vietnam earn 4.6 million dongs a month, the equivalent of 200 dollars. 

At the same time, in November 2019, the Ministry of Industry and Commerce of Vietnam announced that the country has not achieved its objectives to develop fashion, textile and clothing industry, which was marked in 2010. 

Bangladesh, meanwhile, reactivated in the last year the Accord on Fire and Building Safety, created after the Rana Plaza catastrophe. The Bangladesh Garment Manufacturers and Exporters Association (Bgmea) formed the Readymade Sustainability Council (RSC) platform, which replaces the Accord on Fire and Building Safety so far, to monitor the implementation of safety measures in factories in the country. The RSC also has the support of the European retailers, which constituted most of the companies that signed the Accord.