The signing of the trade agreement between Ecuador and China opens up great expectations for Ecuadorian exports, according to Julio José Prado, Minister of Production, Foreign Trade, Investments and Fisherieswhich predicts that after the entry into force of the instrument and until 2030, the growth of exports to China will exceed 12 billion dollarsthis is 48% more of current shipments located in 5.739 million dollars.

This agreement was signed after ten months of negotiations, after the process started with the signing of the Memorandum of Understanding in January 2022. A month later, with the visit of the President of the Republic, Guillermo Lasso, the negotiations began.

Between April and December of that year, rounds of negotiations were held that ended with the technical closure of the agreement, which includes export products such as shrimp, bananas, timber, animal feed, cocoa, fruit and more, including tuna. But in another way, namely in imports, 826 sensitive Ecuadorian products were excluded to protect the national industry, including fisheries, which includes tuna.

The trade agreement foresees a gradual reduction of tariffs on Chinese cars until 2038, imported furniture will not be reduced

The exclusion of Chinese tuna was a request from the national fishing sector, he admits Rafael Trujillo, executive director of the National Chamber of Fisheries (CNP)which claims that Chinese tuna has drastically lower costs due to subsidies and poor compliance with minimum labor and social standards.

“That is why we are asking for an exemption. From this point of view, Chinese tuna represents unfair competition for Ecuador,” says the head of fisheries, who explains that what is excluded from the agreement is the reduction of Chinese fishing in Ecuador, but the tariff on tuna is reduced. Ecuadorian who will reach the Asian giant.

This relief will be immediate as soon as the agreement enters into force. Ecuadorian tuna currently pay a 5% duty to enter China.

Trujillo adds that China has become the main exporter of prepared and canned fish in the world. “For this reason, as a sector, we request the exclusion of this product from the negotiations due to existing deficiencies in competitiveness with regard to highly subsidized production in an Asian country, and non-compliance with the principles of sustainable development of the Ecuadorian fishing sector,” he points out.

for his part, Bruno Leone, president of CNPconfirm that it is 33 games those related to fishing were excluded. “From there to here it’s off because we just can’t compete,” admits Leone, who points out that China is the country with the highest level of fishing subsidies, with figures estimated at 7.2 billion dollars (21% of the global subsidy amount) and is the largest fishing country with 15% of the world’s catch (12 million tons).

China accepts direct negotiations with Ecuador on fishing fleet

Its tuna business is mainly based on subsidies for long-distance fishing and subsidies for its production, explains Leone, who assures that China’s exports of prepared and canned fish will reach $5 billion in 2021, compared to barely $866 million 20 years ago. In the special case of prepared and canned tuna, China is the third largest exporter, increasing from $5 million in 2002 to $702 million in 2021; its exports have doubled in the last 5 years alone.

Add Latin America and the Caribbean which accounted for 14% of China’s canned fish exports in 2021, 66% went to Mexico and the rest to other destinations such as Chile, Dominican Republic, Colombia, Peru, Ecuador, among others.

While Ecuador has exported an average of $73 million in fishery products (not aquaculture) to China over the past five years, 54% of that amount is fishmeal, with the rest mostly frozen fish.

Trujillo, for his part, believes that China is not an important market for Ecuador for tuna exports, on the other hand, for fishmeal because the Asian giant has a deficit in production and for which it is also considered in the agreement together with fish oil.

What is the difference between an FTA and a trade agreement?

According to Ecuadorian Federation of Exporters (Fedexpor), Fishmeal pays a 2% tariff to enter the Asian giant, while other fish pay 7%, a percentage that will immediately be reduced to zero after the agreement enters into force, Trujillo confirms.

Ecuador’s export supply pays about $140 million a year in customs duties to enter China, which includes fishery products, according to information from Fedexpor.

Other products that currently pay tariffs and which will drop to zero with the agreement, immediately or gradually, will be:

Other supplier countries to this market, such as India for shrimp or the Philippines for bananas, enjoy tariff concessions, which for India are half the duty rate paid on shrimp, and for the Philippines it is duty-free import of bananas.

Meanwhile, exports of fish products and crustaceans (prawns not included) to China have not started well this year. Between January and February, shipments totaled just $2 million, down 60% in currency and 71% in volume, according to FedExpor.

Thus, an agreement between China and Ecuador will be signed in Quito

2022 was not positive either, since the 16 million dollars that Ecuador exported in this type of product represented a decrease of 6% in foreign currency and 21% in volume. However, the sector’s red figures did not affect the overall balance, as the $5.739 million reached by non-oil exports in 2022 reflected a growth of 57% compared to 2021; and between January and February 2023, the item increased by 8%.

In this context, Minister Prado points out that China is an extremely large market, with 1,400 million inhabitants, the largest in the world, with high purchasing power. “Ecuador has great potential to create excellent products,” says the official, who classifies the signing with China as a historic event for Ecuador’s economy, as the Asian giant is currently Ecuador’s main trading partner.

This is confirmed by FedExpor, according to its data, China was the main destination for non-oil exports in 2022, since this destination is 27% of the total amount exported from Ecuador.

Raw materials, mostly imported from China

Total imports from China in 2022 were $6,452 million, an increase of 19%. Non-oil imports totaled 6,264 million dollars, with a growth of 20%.

Imports of manufacturing inputs (raw materials and capital goods) account for 77% of non-oil imports arriving from China, totaling $4,822 million in 2022 (I)