Ecuador will reduce some import surcharges but businesses say it’s not enough

Ecuador said Thursday it will reduce the import surcharge on some products by 12.5% to 40% beginning October 26. The announcement coincides with a visit to European capitals by Vice President Jorge Glas and Foreign Trade Minister Juan Carlos Cassinelli, who are lobbying EU members to speed up negotiations for a trade agreement with Ecuador.

Vice President Jorge Glas

If an agreement is not reached by the end of 2016, many Ecuadorian exporters will lose temporary trade preference status with EU members.

The import surcharge reduction applies to 1,784 products, including appliances, clothing, liquor, fruits and meat. In August, Ecuador reduced its special consumption tax, or ICE, by 5% on products imported from Europe, also in an effort to appeal to EU trade negotiators.

Ecuador claims it cannot afford to eliminate the surcharges and ICE entirely due to a poor economy and reconstruction expenses from the April 16 coastal earthquake.

EU negotiators continue to say that the surcharge is an obstacle in reaching a trade agreement with Ecuador and that it may violate World Trade Organization (WTO) rules. Ecuador is in talks with the WTO for permission to extend the surcharges for a second year. The WTO had okayed them for a period of one year in 2015.

Meanwhile, Ecuadorian businesses say that they welcome the tax reduction on imported products but that it is not enough. Roberto Aspiazu, director of the Ecuadorian Business Committee, says the surcharges should be eliminated entirely. “We need a serious gesture from the government that they support helping local businesses,” he said. “These small steps don’t do that.”

Between January and July of this year, imports into Ecuador fell by 34.2%, according to the Central Bank. Aspiazu says the decline is due both to the surcharges and the economic recession. “Businesses and industry are hurting in this country and we are looking for bold actions, not baby steps.”