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Ecuador and China conclude free trade agreement negotiations – The Diplomat

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After four rounds of negotiations and dozens of technical meetings, the Chinese and Ecuadorian teams have successfully concluded negotiations on a free trade agreement (FTA) between the two countries at the technical level.

The FTA was negotiated over a period of 10 months, in line with the roadmap established by Ecuadorian President Guillermo Lasso during his official visit to Beijing in February 2022. The roadmap focused on reducing tariffs to allow market access and also included trade policies such as rules of origin, improved customs procedures and trade facilitation, trade defence, protocols on sanitary and phytosanitary measures, reduction of technical barriers trade, investment cooperation, promotion of e-commerce, competition, transparency, dispute settlement and economic cooperation.

The entry into force of this trade agreement will allow preferential access to 99% of Ecuador’s current exports to China, mainly agricultural and agro-industrial products such as shrimps, bananas, roses and flowers, cocoa and coffee, among the main ones. It will also open the doors to Ecuador’s non-traditional exports, such as pitahaya, pineapple, mango, blueberries, processed foods, fresh and canned fruits and a host of other products. agricultural and agro-industrial.

The FTA will improve access for Ecuadorian exports to a market of over 1.4 billion consumers, thereby boosting exports, employment, economic growth and investment.

Currently, the joint trade between Ecuador and China is worth more than $10 billion. Until the first half of 2022, China was Ecuador’s main non-oil trading partner.

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The trade agreement with China provided for sensitivities in the agricultural and industrial sectors, establishing a significant number of exclusions, particularly in the area of ​​manufacturing, as well as long periods of tariff reduction.

On the other hand, duty-free access for raw materials, inputs, tools and equipment reduces production costs for Ecuadorian industry and will provide greater variety and quality to Ecuadorian consumers.

This agreement establishes mechanisms in the sanitary and phytosanitary field to speed up market access processes. It also includes provisions on trade defense and trade facilitation that establish measures to protect Ecuadorian industry and implement a better exchange of information.

The Ecuadorian productive sector actively participated in the negotiation, providing input and information to strengthen the negotiating team’s strategy.

The signing of the Free Trade Agreement between Ecuador and China will take place after the completion of the respective processes of formalization of offers, translation and legal review. The date will be announced by the two governments in due course.

Relations between the two countries are long and deep, especially under the leftist Rafael Correa government (in office from 2007 to 2017), which turned to China after Ecuador defaulted on its international debt and lacked foreign credit.

China has thus succeeded in positioning itself as Ecuador’s main creditor. Most of the Chinese credit went to financing six hydropower projects worth $3 billion. Part of the debt was also tied to future oil sales. PetroEcuador, the government company, provided oil to Chinese state-owned PetroChina at a discount as part of Ecuador’s debt repayment.

In September 2022, with Guillermo Lasso in power, Ecuador succeeded in restructuring part of the Chinese debt, which amounted to 4.4 billion dollars. The deal was struck directly with China’s political banks, the China Development Bank and the Export-Import Bank of China, which together have provided more than $18 billion in loans to Ecuador since 2010.

Debt restructuring is a paradigmatic case for other Latin American countries, such as Argentina and Venezuela, which could follow suit when it comes to Chinese debt.

In addition to loans from Chinese state banks and politicians, Ecuador was the first Latin American country to receive funding from the China-controlled Asian Infrastructure Investment Bank.

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Before starting talks with Ecuador, China had already signed a number of free trade agreements in the region, including with Peru, Costa Rica and Chile. The FTA with Chile entered into force in October 2006; with Peru in March 2010; and with Costa Rica in August 2011.

So far, China’s aim seems to be to establish preferential trade relations with Pacific-facing countries, as evidenced by its talks with Colombia and El Salvador, for example.

The most striking case is that of Uruguay, where there have already been some announcements and technical meetings in view of a possible FTA, which would be in line with China’s approach to the Latin America. According to Uruguayan specialist Ignacio Bartesaghi, “geopolitically, it is very convenient for China to sign an FTA with Uruguay”.

Ecuador is China’s next stop in Latin America; it remains to be seen which country will come after that.

This article was originally published in Spanish by ReporteAsia.

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