The European Commission's announcement last week of the partial suspension of Cambodia's duty- and quota-free access to European Union (EU) markets deals a blow to both the Hun Sen government and his country's economy given the EU is Cambodia's largest trading partner.
Cambodia will lose reduced tariffs on 20% (worth US$1.1 billion) of its exports to the EU. The trade privileges were granted under the EU's Everything But Arms (EBA) programme -- an initiative in which the EU imports goods from the least developed countries without imposing tax and quota restrictions.
The suspension will take effect on Aug 12 from which the standard tariffs will be imposed on Cambodia's all travel goods, sugar and some garment and footwear products.
The EU's decision came after more than two years of inspections which found the Cambodian government has "seriously" and "systematically" violated human rights by suppressing freedom of expression, silencing civil society groups, persecuting the opposition party and failing to ensure labour rights, it said.
Cambodian business leaders and pro-Hun Sen labour unions had urged the EU not to withdraw the tariff-free privileges, claiming millions of Cambodian workers would lose their jobs. Some analysts said the EU's move will push Cambodia into expanding its trade partnership with China.
But I believe the EU is on the right track in making that decision. Doing business nowadays, countries cannot overlook the fact that many of their trading partners, particularly countries with authoritarian governments, may have gained from preferential trade privileges through exploitation of labourers and violations of human rights.
Take Cambodia's sugar industry as an example. Sugar produced in Cambodia is on the list of goods under the EBA. Though the scheme, implemented since 2001, intends to help the country fight poverty and improve the economy, it has attracted Thai and Chinese sugar companies to invest in Cambodia to seek benefits derived from the trade privileges.
These companies have set up sugar mills and occupied vast areas of land to expand sugarcane plantations in many parts of Cambodia -- especially in Koh Kong, Oddar Meanchey and Preah Vihear provinces.
This land acquisition was approved under the government's policy to grant investors Economic Land Concessions -- long-term leases that allow them to occupy and clear land to develop industrial agriculture.
The policy has resulted in the forced eviction of local farmers and communities who had previously lived on the land. According to a local media report, more than 120,000 ha of land have been granted to companies for industrial sugarcane production.
Thousands of families have been forced to leave their farmlands by sugar companies. In many cases, the companies achieved that with help from soldiers and government officials.
Last month, I visited some families in Sre Ambel town of Koh Kong province whose land plots were seized by a foreign sugar company. Among them were Taing Muoy, a local woman who lost a seven-ha plot to the company in 2006.
The day she was evicted, someone brought a bulldozer into her land. It took around 90 minutes for them to demolish her crops and her house and take away her only assets built during the past 30 years. She saw a soldier with a gun standing guard not far from the bulldozer.
Other people in her community faced a similar fate. The company later compensated them by giving each of them a 1.5-ha plot. But the soil on the new land plots does not suit farming.
"I used to have everything: a house, farm, food and buffalos. Now I must buy everything for my family, and I must borrow money from a lender to feed them. I am in debt. I became poor after losing my land," Taing Muoy told me in tears.
How come the preferential trade scheme aiming to end poverty has been exploited in a way that forced many people into greater impoverishment?
Such exploitation works in countries where the state's recognition of human rights protection and democracy is low, as in the case of Cambodia.
In that circumstance, the scheme usually benefits local and foreign rent-seekers who enjoy duty- and quota-free access to international markets and reap excessive profits at the expense of the poor.
They usually have some close ties with governments in those countries.
In Cambodia, after the destruction of land records by Khmer Rouge fighters, the Hun Sen government has avoided issuing land title deeds to many people, especially those in rural areas. But it has not reluctant to enable forced eviction by companies being granted land concessions.
In addition to its concerns over political and human rights violations, the EU cannot overlook this form of exploitation. Otherwise, these exploitative practices will be further embedded in Cambodia's economy thanks to the EBA.
The EU's partial suspension of trade privileges serves as a wake-up call for the Cambodian government to rethink its approach to economic development.
To end poverty, the government cannot turn a blind eye to gross violations of human rights and land rights of many Cambodians.
Paritta Wangkiat is a Bangkok Post columnist.