Bangkok: Cambodia faces a serious blow to its economy as the European Union investigates the government's deteriorating human rights record and considers revoking a special trading deal with the country.

For 17 years, Cambodia has benefited from preferential access to the European Union, a major trading partner, under a program called Everything but Arms, which allows what the bloc calls "vulnerable developing countries" to pay fewer or no duties on all their exports to the bloc, except weapons and ammunition. The trading deal has contributed to a period of rapid economic growth in Cambodia.

But the program stipulates that countries meet international norms of human rights and democracy. Instead, Cambodia has engaged in one of its harshest waves of repression in recent years, actions that have prompted the European Union to consider ejecting the country from the program.

Cambodia's Prime Minister Hun Sen delivers a speech in Kampong Speu province, south of Phnom Penh, at a ceremony to mark construction of the country's first expressway. Credit:AP

The bloc has said that the Cambodian government has engaged in "serious and systematic violations of core human rights and labour rights", and in February it set in motion an 18-month process that could lead to the suspension of Cambodia's preferential status under the Everything but Arms program.