Yangon, Myanmar – The European Union has threatened to impose trade sanctions on Myanmar that could put thousands of jobs in its lucrative clothing industry at risk, if the country does not address ‘severe shortcomings’ in human rights.

Officials wrapped up a four-day fact-finding mission to Myanmar on Wednesday as the EU considers stepping up its response to the brutal crackdown on the Rohingya, and ongoing conflicts elsewhere in the country.

“Trade, done right, is a powerful force for good,” the EU commissioner for trade, Cecilia Malmström, said in a statement at the end of the visit.

The EU, the world’s biggest trading bloc, is considering whether to add to existing travel bans and asset freezes on certain military officers, by removing the tariff-free access to European markets that Myanmar currently receives via the Everything But Arms (EBA) programme.

“We have worked to ensure that trade preferences and access to the EU market are an incentive to promote fundamental human and labour rights,” Malmström added. “We now expect Myanmar to address the severe shortcomings that have been highlighted during this monitoring mission. If they do not act, Myanmar authorities are putting their country’s tariff-free access to the EU market in danger.”

The EU officials’ trip to Myanmar comes after UN investigatorssaid that genocide against the Rohingya was “ongoing” and that as many as 400,000 Rohingya still remaining in Myanmar live under severe restrictions and repression.

Hundreds of thousands of Rohingya fled across the border to neighbouring Bangladesh last year amid a crackdown that a UN report said warranted the prosecution of Myanmar’s top military leaders for war crimes, crimes against humanity and genocide.

Myanmar has dismissed the UN investigation as biased and politically-motivated. Earlier this week, it reached an agreement with Bangladesh for the Rohingya to start returning home this month.

‘True story’

EU officials met ministers, trade unions, businesses, civil society groups, and international rights organisations to discuss issues including cooperation to investigate and prosecute individuals suspected of having committed crimes against humanity, humanitarian access to conflict-hit Rakhine, Kachin and Shan States as well as the conditions for the “voluntary, safe and dignified return of Rohingya refugees in Bangladesh to their places of origin.”

Aung Ko Ko, an independent economist who also sits on the ruling National League for Democracy’s economic committee said he was confident that the EU would not restrict access to its markets.

“Myanmar isn’t doing any harmful actions to EU members,” he said. “It’s not doing any anti-EU activities. Myanmar has welcomed them to see the true story.”

Government spokesman Zaw Htay could not be reached for comment.

Some business associations say the EU’s withdrawal of Myanmar’s trade privileges could force half the country’s 450,000 garment workers to find new work, and leave factories facing the prospect of losing 47 percent of their entire export market.

The European Chambers of Commerce – an umbrella group of six business associations – said it was “deeply concerned” at the prospect of trade sanctions. The withdrawal of EBA would harm the livelihoods of approximately half a million households affecting an estimated 2 million people, it said.

$5bn industry

Under the EBA initiative, the world’s poorest nations can sell anything but arms to the EU tariff-free. Myanmar, Europe’s sixth-largest trading partner, has been part of the programme since 2012.

Earlier this month, the EU told Cambodia, whose garment industry is worth about $5bn, it had started the process of withdrawing the country’s access to the same programme.

Myanmar’s preferential exports to the EU were valued at $1.48bn in 2017, from $610m in 2015, with garments accounting for nearly three quarters of exports, according to EU data. European retailers including H&M and Inditex buy clothing from Myanmar.

The US has imposed targeted sanctions against military commanders and army units as a result of the Rakhine crackdown and is said to be considering more. Last week, Australia slapped sanctions on five generals it said were responsible for human rights violations.