Business and manufacturing unions are joining the debate on the China-Ecuador trade deal being evaluated by the National Assembly’s Committee on International Relations and Human Mobility. For example, the Chambers of Commerce of Guayaquil and Quito presented their positions in support of the instrument that was signed on May 10 and received a favorable decision by the Constitutional Court on November 1.

The National Assembly is the last filter in the country that this agreement lacks before it can enter into force. This was highlighted by the Chamber of Commerce of Guayaquil in a statement published this Friday, December 29, in which it notes with concern that neighboring countries, such as Chile and Peru, have already concluded trade agreements with China in 2005, pending legislative approval. 2009, respectively, while Ecuador only started the process of becoming a trade partner of the mentioned country in 2022.

The competition of Chinese products worries companies that take their positions before the Assembly, which is working on a trade agreement with China

“This fact highlights the backwardness of our country in foreign trade policy. While other governments have prioritized free trade and signing trade agreements, Ecuador has had restrictive policies for years. Today, efforts must be focused on actively promoting international trade,” the union said.

Meanwhile, for the Quito Chamber of Commerce, the agreement is fundamental for the growth of the manufacturing sector. The union warned that it will be careful about the decisions made in the Assembly regarding the agreement with the Asian giant and called on the legislators of the Commission “to give way to this trade agreement which represents a key stimulus for the economy and sustainable development of the country”.

However, the agreement also has objections that have been heard these days by other unions in the manufacturing sector, one of them being the Chamber of the Automotive Industry of Ecuador (Cinae). For its executive director David Molina, even without a trade agreement, Chinese vehicles already concentrate 35% of the Ecuadorian market and he stated that while Chinese vehicles have gained market, vehicles assembled in Ecuador have lost share and that other industrial sectors are facing the same problem.

Molina assured that the content and effects of the agreement are not widely discussed in society. Furthermore, he asserted that structural issues of costs and benefits were not discussed in the Chamber of Representatives – which gathers representatives of the manufacturing sectors. The Ministry of Production, Foreign Trade, Investment and Fisheries (MPCEIP) has contracted a study with ECLAC, the results of which are not known,” revealed the head of Cinae. He added that no progress has been made in the internal competitiveness plan to ensure fair market competition.

Molina made these observations last Tuesday before the Commission, before concluding that “an agreement of this magnitude, due to China’s scale of production, its economic model, its labor and environmental regime, etc., requires a broad national debate that assesses the net impact on the manufacturing sectors and employment in different territories”

What is known about the trade agreement between Ecuador and China?

Molina explained to the legislators that it was known from the initial report of the MPCEIP that the trade balance would become deficit with the agreement. He indicated that exports will grow by 9 percent and imports by 19 percent.

“From the MPCEIP report, it is known that Ecuador will stop collecting $562 million with the agreement resulting from imports from China. “At last week’s session, it was said that the savings for exporters will be around 140 million dollars. We estimate a total effect of 700 million dollars, and in the first year 190 million dollars”, calculated Molina.

Finally, the CEO of Cinae assured that disciplines such as intellectual property, labor regime, environmental protection regime and subsidies are part of the negotiations with China. “Ecuadorian companies have to compete under unfair conditions, with an economic model that does not respect the rules of the free market,” he said.

Meanwhile, the Guayaquil Chamber of Commerce is defending the deal based on projections of increased exports to Ecuador. The union assured that if a trade deal with China is reached, exporters will have more markets to trade with and cited the International Trade Center as calculating that a trade deal with China would represent a potential increase in exports of $2.965 million.

The Chamber of Industry of Guayaquil defends the trade agreement between Ecuador and China

“Among the users, we are talking about MSME export companies and craftsmen, who represent 71 percent of the total exporters,” the union states. As for importers, the Chamber assured them that under better conditions they will have access to capital goods, inputs and raw materials. “Consumers are big winners due to the great variety of new products, better prices of existing goods and services, as well as potential jobs generated by new investments,” said the union.

He also emphasized that the trade agreement took into account the most sensitive sectors such as industry, agriculture and fisheries where there are certain branches that were left out of the agreement such as ceramics, the textile and clothing sector, footwear, among others. “Other medium-sensitive sectors such as vehicles, household items, etc. have a 20-year tax reduction process. In other words, domestic industry is protected,” the Chamber said.

However, for Molina, it is not so. He admitted that the agreement has several exclusions, but not a complete one. “An example in tires: the exclusion applies to radial tires, but not to conventional tires. The tire trade is expected to enter through the “conventional” item,” he said.