China, Ecuador free trade pact picks up steam

Agreement set to lift business potential and strengthen relations, experts say

Momentum is picking up toward a free trade agreement between Ecuador and China that could ramp up trade and strengthen the relationship between the South American nation and its Asian partner.

This momentum was exemplified by Expo China 2023 held at the end of November in Quito, Ecuador's capital, and Guayaquil, its financial center.

Ecuador's leaders are eager to move forward with the agreement, which promises to boost bilateral trade. There are high expectations that an FTA could help swell Ecuador's exports to China by 30 percent within the first three years, about $2 billion above current levels.

"We hope, once the free trade agreement comes into force, to be able to have an increase of 60 percent in the first year in terms of imports and obviously to have a better exchange in terms of Ecuadorian exports," Maria Lissette Alban, executive director at the Ecuadorian-Chinese Chamber of Commerce, or CCECH, told China Daily.

Highlighting the importance of the FTA for the government, Ecuador's Congress created a commission, in charge of regulating the agreement and pointing to a willingness to open the country up.

The commission aims to depoliticize the trade agreement and hasten its adoption in the National Assembly. The deal has already cleared Constitutional Court review and the deadline for ratification is June 2024.

"For the current government, this FTA is especially important. It is an FTA for which the ideological or political tendency does not matter. The general public knows that it is a benefit for the interests of the state. We hope that in the coming days, it will be debated in the Assembly and that it will come into force as soon as possible," Andres Zhang, a fruit exporter and board member at the Ecuadorian-Chinese Chamber of Commerce, told China Daily.

Expo China 2023 was a key event even as the push took shape to get the agreement approved. The event created a ready-made forum to highlight the potential of a trade agreement even as it provided a window to the Chinese market and helped promote cross-cultural understanding. About 200 Chinese and Ecuadorian companies took part.

"At this moment, the bilateral trade between China and Ecuador amounts, on both sides, to more than $12 billion, with fairly balanced trade. Based on the experience of the other free trade agreements that China has signed in the region — Chile, Peru, and Costa Rica — we expect growth in the first year of 20 percent in bilateral trade. That is more than $2 billion in commercial exchanges," said Zhang.

The ratification of the trade agreement and the knowledge acquired at the expo translate into enormous potential for economic development, job creation, and cross-cultural interaction between the two countries.

Alban from the CCECH said the entire production will benefit from lower tariffs on Chinese products, which will allow them to upgrade and be more competitive.

China is Ecuador's main non-oil export trade partner, with shrimp, bananas, frozen fish, and cocoa all exported to the Asian giant.

High exports

"For the banana sector, an agreement with China would make us double our exports," said Jose Antonio Hidalgo, the executive director at the Association of Banana Exporters of Ecuador, in a statement.

He said Ecuador exported bananas worth $156.62 million in 2020, a 29 percent decrease compared to 2019. "In addition, we have not been able to grow due to the 10 percent tariff we levied on China."

The cocoa sector is also looking forward to the ratification of the agreement, as China has become one of the most profitable emerging markets for the sector in the past five years.

In addition to large demand, Chinese buyers are willing to pay for premium quality, said Francisco Miranda, president of the National Association of Cocoa Exporters of Ecuador.

"A trade agreement with China could be of great importance and benefit to our industry because it would help streamline and economize the route of our cocoa to the eastern country," he added.

According to data provided by the Ecuadorian-Chinese Chamber of Commerce, Ecuador's exports to China totaled $5.7 billion in 2022 and seemed to be on a growth track in 2023, adding up to $3.1 billion in the first half of the year, up 35 percent from the same period a year earlier.

The writers are freelance journalists for China Daily.