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 10 months, following a roadmap set by Ecuadorian President Guillermo Lasso during his official visit to Beijing in February 2022. Origin, improved customs procedures and trade facilitation, trade defense, protocols for sanitary and phytosanitary measures, reduction of technical barriers to trade, investment cooperation, promotion of e-commerce, competition, transparency, dispute resolution, economic cooperation.
The entry into force of this trade agreement will provide preferential access to 99% of Ecuador’s current exports to China. The main ones are mainly agricultural products such as shrimp, bananas, roses, flowers, cocoa and coffee. It also opens the door to exporting non-traditional exports from Ecuador such as pitahayas, pineapples, mangoes, blueberries, processed foods, fresh and canned fruits, and many other agricultural and agricultural products.
The FTA will improve access for Ecuador’s exports to a market of over 1.4 billion consumers, promoting exports, employment, economic growth and investment.
Ecuador and China’s joint trade is now worth more than $10 billion. Until early 2022, China was Ecuador’s main non-oil trading partner.
A trade deal with China foreshadows sensitivities in the agricultural and industrial sectors, establishing a significant number of exemptions, especially in the manufacturing sector, and establishing a long period of tariff reduction.
On the other hand, tariff-free access to raw materials, inputs, tools and equipment will reduce production costs for the Ecuadorian industry and offer more variety and quality to Ecuadorian consumers.
The agreement establishes mechanisms in the sanitary and phytosanitary sector to speed up the market access process. It also contains provisions on trade defense and trade facilitation, which enable the possibility of establishing measures to protect Ecuadorian industry and to conduct better information exchange.
The Ecuadorian production sector actively participated in the negotiations, providing input and information to strengthen the negotiating team’s strategy.
The signing of the Ecuador-China free trade agreement will take place after the formal processes of offer, translation and legal review have been completed. The date will be announced by both governments in due course.
The two countries have long-standing ties, especially deepened during the leftist government of Rafael Correa (2007-2017). He turned to China after Ecuador defaulted on international debt and drained foreign credit.
In this way, China was able to establish itself as Ecuador’s main creditor. Most of China’s credit is used to finance her six hydropower projects worth $3 billion. Part of the debt also related to future oil sales. State-owned Petroecuador is supplying China’s state-owned PetroChina with oil at discounted prices as part of Ecuador’s debt service.
With Guillermo Lasso coming to power in September 2022, Ecuador successfully restructured some of China’s debt, which reached $4.4 billion. The deal, reached directly with China’s policy banks, the China Development Bank and the Export-Import Bank of China, has collectively provided more than $18 billion in loans to Ecuador since 2010.
Debt restructuring is a classic case for other Latin American countries such as Argentina and Venezuela that may follow suit on China’s debt.
In addition to loans from China’s state-owned banks and politicians, Ecuador was the first Latin American country to receive loans from the China-controlled Asian Infrastructure Investment Bank.
Before China began negotiations with Ecuador, it had signed a number of free trade agreements in the region, most notably with Peru, Costa Rica and Chile. The FTA with Chile entered into force in October 2006. With Peru in March 2010. and in August 2011 with Costa Rica.
So far, China’s aim appears to be to establish preferential trade ties with countries looking to the Pacific, as seen, for example, in talks with Colombia and El Salvador.
The most notable example is that of Uruguay, where specific announcements and technical meetings have already taken place in view of a potential FTA, which would be in line with China’s approach to Latin America. According to Uruguay expert Ignacio Bartesagui, “Geopolitically, it is very convenient for China to conclude her FTA with Uruguay.”
Ecuador is China’s next step in Latin America. It is not yet known which country will come after that.
This work was originally published in Spanish by ReporteAsia.