EU trade agreement means prices for booze and cars will drop; whether it’s ‘free’ trade or not is open for debate

A few details of the new trade agreement between Ecuador and the European Union are beginning to leak out and they point to lower costs on a number imports from Europe, including liquor and cars.

Although President Rafael Correa has gone to great lengths to claim the new trade agreement with the European Union (EU) is not a “free” trade agreement, most observers say that it differers little from the agreement signed three years ago between EU, Colombia and Peru. Ecuador dropped out of those discussions at the time, claiming they were not in the country’s best interests.

Ecuador’s foreign trade minister Francisco Rivadeneria is echoing Correa’s sentiment, claiming that the country has not “given in” to the demands of a free trade arrangement. “The new agreement respects the development model of the country and permits us to protect sensitive sectors of our economy.”

National Assemblyman Patricio Donoso, an oppenent of Correa’s Alianza Pais party, says that whether the agreement is “free” or not is a matter of semantics. “They can call it whatever they want. My question is why didn’t we sign the agreement three years ago? The terms are essentially the same as the one signed by Peru and Colombia.”

What is known so far about the agreement is that the costs for liquor and wine from Europe will drop dramatically and the cost of European-made cars will be reduced incrementally over seven years.

When the trade agreement goes into effect in 2016, the price of bottle of Scotch will drop by nearly 50%. The Johnny Walker label is the biggest imported liquor to Ecuador, representing more than 40% of the market. Since 2008, Ecuador has attached heavy import dues and taxes on imported liquor, and the EU demanded a rollback in the negotiations.

Details of other key points in the trade negotiations have not been released. A major issue was Ecuador’s lack of control over sale of counterfeit music and movie cds and dvds.

The trade between Ecuador and the EU, which amounts to about $500 million annually, must still be approved by EU member nations and Ecuador’s National Assembly.

Photo caption: Ecuador’s trade minister Francisco Rivadeneria.