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The announcement last month that Cambodia (and Myanmar) would no longer be allowed to export rice to the European Union tax-free was met with displeasure across the country – with government, farmers and business community all expressing concern.

Under the Everything But Arms deal, developing nations such as Cambodia are given easy, tax-free access to the E.U. market in order to spur growth. The announcement from the European Commission means that Cambodian rice exported to the E.U will now be taxed at $200 per tonne, with the duty dropping to $171 in the second year and then $142.

The E.U. is currently the largest destination for Cambodia’s rice exports – some 270,000 tonnes, or 43% of all Cambodia’s rice exports. The numbers don’t lie: the decision could cost Cambodia around $54 million in the first year alone. Industry reports state that international buyers are already cutting back on orders, a situation that could throw the rice industry into a critical state as growers and processors search frantically for ways to cut production costs and new markets to send their rice.

The decision from the E.U., which came into effect January 18, follows an investigation that revealed how cheap imports from Cambodia and Myanmar were harming the business of rice growers in southern Europe, where there has been abandonment of crops and a mass exodus from rural areas.

The investigation also found that imports of Indica rice from Cambodia and Myanmar had risen by 89% over the past five rice-growing seasons, and that European farmers’ share of the market had fallen from 61% to 29%. Representatives of the Cambodian private sector, including Thalias CEO Arnaud Darc, sent a letter to the European Commission stating that the consequences of the decision would impose serious economic damages on Cambodia.