Agreement with China excludes about 800 highly sensitive products; and includes relief with terms of up to 20 years for sectors of medium sensitivity

The trade agreement that Ecuador and China will sign this year after completing the technical negotiations is not only for trade opening, but also for the protection of sensitive sectors that exposed their positions to the Ecuadorian negotiating team during the ten months that the talks lasted.

About, Julio José Prado, Minister of Production, Foreign Trade, Investment and Fisheries, revealed that around 800 sensitive products They were excluded from the agreement with the Asian giant to protect the national industry.

Ecuador announces successful completion of the FTA negotiation with China

“We consider, together with the local productive sectors, which are very sensitive products, there are several items, more than 400 items related to the textile sector that have been preserved so that they are not directly affected by competition with China’s zero tariff , then they will not run into each other,” Prado mentioned in a radio interview, adding that the metal-mechanics, steel, ceramics, and white industry sectors were also protected.

He specified that the 800 excluded products represent 10% of the national tariff.

The minister stressed that the Ecuador agreement protects its industries and does not open it directly to competition with zero tariffs, but at the same time the import costs of inputs that are required for the manufacture of Ecuadorian products will be lowered, many of which which make up the excluded sectors.

Prado also revealed that Ecuador’s trade defense mechanisms were improved.

“We are going to formalize many of the claims processes that we can have when there are products that come with evident under-invoicing, we also reserve the right to be able to put, this clearly says the agreement, compensatory safeguard measures if there is any product that in a way punctual, conjunctural, it affects the Ecuadorian trade balance,” said the official.

Secondly, Daniel Legarda, Vice Minister of Foreign Traderevealed that the agreement also contains baskets of long-term tax relief for sectors of medium sensitivity.

“The sensitivities are protected with exclusions of highly sensitive products and with extremely long terms, with a long adjustment of 10 and 20 years for sectors with medium sensitivity,” said Legarda, who assured that the exclusions and long-term tax relief were good received by the Ecuadorian productive sectors.

These are the 10 products that Ecuador imports and exports the most to and from China, the country with which it will sign an FTA

One of these sectors is textiles. Javier Díaz, executive director of the Association of Textile Industrialists of Ecuador (AITE), who was present virtually at a meeting between Prado and more than 50 private unions that are part of the Fourth Deputy, stressed that the productive sectors developed a very close and detailed work with the Chief Negotiator of Ecuador since the process formally started ten months.

Díaz revealed that at the beginning of the process, conceptually, the most worrying thing was negotiating with a country that has commercial, labor and productive practices observed by the entire world. Then, specifically, they were concerned about the tariff reduction on products where there is national production, which was precisely what the Government was asked to defend from the beginning of the process, and which translates into exclusions and long baskets of tax reduction.

“We have worked subheading by subheading, in a universe close to 1,000. Within all the sensitivity of this process for our sector, the Government understood that it should defend the textile and clothing activity as much as possible,” said Díaz, who assured that in the In 2022, textiles of Chinese origin came to have almost 80% of the total volume of imports of registered textile products.

However, despite the results of the negotiations, Díaz indicated that they are waiting to review the official information, that is, the full text of the agreement, to corroborate that everything indicated in relation to the exclusions and long-term tax relief baskets deadline is in order, which could take two to three more weeks.

Footwear is another of the protected sectors. Lilia Villavicencio, former executive director of the National Chamber of Footwear (Caltu)who participated as a delegate of the sector, indicated that a proposal was presented due to sensitivity so that some items are excluded and thus protect the footwear industry.

“At the dialogue tables, the Negotiating Team received our position and helped to effectively keep it that way, in such a way that the manufacturers regarding the issue know that work was done and protected due to sensitivity,” said the former leader who is now prefect of the province of Tungurahua.

Non-export potential from Ecuador to China is $3.1 billion.

Meanwhile, the business community in general draws a good balance from the negotiations. Miguel Ángel González, president of the Ecuadorian Business Committee (CEE), describes the results as positive and pointed out that a balanced agreement has been reached, in which practically all the Ecuadorian exportable supply is allowed to enter the Chinese market with reduced tariffs.

Regarding the exclusions of products that have a high sensitivity on the part of the Ecuadorian industry, and the long periods of tax relief for various other sensitive products, González assured that “it has been negotiated with the local industry in mind.”

“This is the result of joint work between the negotiating team and the business sector, which participated helping the negotiation to take place in the shortest time and on the best possible terms. This was done through the so-called Cuarto Adjunto, led by the Ecuadorian Business Committee. During the process, the maturity of the various productive sectors was evidenced, which worked based on a country vision,” said the head of the CCE, who assured that the trade agreement would represent a significant boost for Ecuadorian exports. He added that according to the International Trade Center, Ecuador has a potential without exporting to China of $3.1 billion.

González analyzed the impact that an agreement with China has had on other countries in the region. He indicated, for example, that Chile and Peru represent 22% and 9%, respectively, of exports from Latin America and the Caribbean to China, while Ecuador represents less than 4%.

Additionally, 34% of the investment from China destined for the region is sent to these two countries. “The trade agreement with China will allow us to have more investment, in addition to boosting trade between the two countries,” said the business leader. (YO)