Ecuador – China trade deal put on hold by the cross death and dismissal of the National Assembly

On May 11, Ecuador and China officially signed a free trade agreement that aims to boost bilateral trade, including that in the agricultural sector. The deal was signed by Ecuador’s Minister of Production, Foreign Trade, Investment and Fisheries Julio José Prado and China’s Minister of Commerce Wang Wentao during a video conference after a year of negotiations.

Preferential Chinese import rules for Ecuadorian agricultural produce, including bananas, have been put on hold pending the installation of a new National Assembly.

The consultations for the China–Ecuador FTA began in February 2022 and ended in February of this year, with both countries extolling the economic and social potential of the deal.

However, the new agreement has yet to take effect due to Ecuador’s political crisis and President Guillermo Lasso decision to invoke the “cross death,” abolishing the National Assembly and calling for new elections.

Fore the agreement to enter into force, however, the two countries must go through their respective domestic procedures. In Ecuador, the FTA must be approved by the Assembly and Constitutional Court. With the Assembly dismissed, the agreement has been put on hold and cannot be ratified until a new Assembly resumes operations later this year.

Elections for new assembly members are tentatively scheduled for August with a runoff election, if necessary, scheduled for October.

The agreement will allow 99.6% of Ecuador’s exports to enter the Chinese market without tariffs or barriers, while 828 Ecuadorian products were excluded from the list in order to safeguard local manufacturing.

With regard to the agricultural sector, the preferential access was granted to Ecuador’s most traded products, including shrimp, bananas, cut flowers, cocoa and coffee.

“What we have signed opens up a market of 1.4 billion consumers. Nearly 50% of Ecuador’s exportable supply will enter immediately when the agreement is in force, and the rest will have a 5-to-20-year phase-out period,” Prado specified. Aside from plantains, which were granted a 0% tariff in the first year, the 25% tariff on other bananas will be gradually reduced until it is entirely waived in 20 years. The 25% tariff on dragon fruit and mangos will be eliminated in five years, while the 20% tariff on cut flowers will be removed in 20 years, according to the agreement.

Ecuador has become China’s 27th FTA partner globally and its fourth in Latin America, following Chile, Peru and Costa Rica.
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Credit: Produce Report