Bringing in the good news in Ecuador with free trade agreements

Last Tuesday (3rd of January 2022), president Guillermo Lasso went to Twitter to announce the “good news” that the negotiations for an Ecuador-China Free Trade Agreement (FTA) had been concluded. He pointed out that this would mean “preferential access to the world’s largest market” for Ecuadorian exports and “cheaper machinery” for their industries. 

China already is Ecuador’s main non-oil trading partner and the Ecuadorian vice-minister for Foreign Trade shared expectations that the deal would mean a 20% increase of Ecuadorian exports to China, which were worth almost 3 billion US dollars in 2020 (about 64% in exported crustaceans and just short of 13% in crude oil). 

Nonetheless, further steps need to be taken before the deal is officially signed (which should take some four more months) and ratified. The latter step may prove especially difficult as president Lasso does not hold a majority in the fragmented Ecuadorian parliament. Rather, the Ecuadorian National Assembly is mostly made up of members from former president Rafael Correa’s Revolución Ciudadana Movement (34% of seats) and the indigenist Pachakutik Movement (17,5% of seats), both of which have a history of opposing Free Trade Agreements (FTAs) (as can be seen here and here for the RC’s position and here for the Pachakutik’s position).

FTAs were a key campaign promise of Lasso’s in the 2021 elections. As his trade policy platform, he had proposed pursuing FTAs with “at least” the world’s ten largest economies and fully joining the Pacific Alliance, the regional trade bloc currently composed of Chile, Colombia, Peru and Mexico. 

On the latter, a trade deal with Mexico has been the main roadblock to Ecuador’s accession to the bloc. Negotiations have been put on hold late December 2022 following the two countries’ inability to agree on bananas and shrimp’s place in the deal. Both are staple Ecuadorian exports, but have faced explicit opposition by Mexico, whose own president came out declaring that their exclusion from the deal was a precondition for signing it.

Over the backdrop of increased US-China competition, Ecuador’s new FTA is also expected to boost interest in their northern neighbours. The United States is the country’s main trading partner (it imported about 4,8 billion US dollars worth of Ecuadorian goods and services, 34% of which in crude and refined oil) and president Lasso was hosted at the White House just last month. Then, trade was one of the main items put forth by the Ecuadorian side despite resistance in the US to negotiating new FTAs. The latter has prioritised discussing economic cooperation under its Americas Partnership for Economic Prosperity (APEC) framework.

Thinking of the coming months in Ecuador:

• There is still some time until Lasso’s trade deals are presented to the legislature, but, as a signature policy of his, it will be consequential to follow up on how he manages parliamentary opposition and how left-wing legislators will formulate their position on the matter.

• In December 2022, Ecuador also signed a trade deal with Costa Rica. It will be interesting to see whether the government presents it to the National Assembly beforehand and uses it as a bellwether or attempts to negotiate it in bulk with the new China FTA.

• Currently, it seems unlikely that the talks with Mexico will move forward so the country’s accession to the Pacific Alliance may be postponed indefinitely as already noted by Ecuador’s Foreign Trade Minister Julio José Prado.