The signing of a commercial agreement is still far away, but there is progress. The US Congress passes a law to strengthen relations.
On February 15 and 16, 2022, the fourth meeting of the Trade and Investment Council (TIC) between Ecuador and U.S. One of the main objectives was to evaluate how the first phase agreement effective from August 2021.
Iván Ortiz, director of foreign trade of the Ecuadorian American Chamber of Commerce (Amcham), explained that during the meeting Ambassador Jayme White, representative of the Office of the United States Trade Representative U.S (USTR), assured that the dynamics of the bilateral relationship is at its best.
In addition, the North American authorities showed their willingness to increase the pressure so that the times for the Congress of that country to approve a bill that seeks to strengthen the relationship between Ecuador and U.S.
This project, which was presented by Democratic and Republican representatives, orders in its chapter four that a roadmap be built to deepen the measures to facilitate Commerce and cooperation.
According to Ortiz, if the regulations are approved, it would be an important boost on the road to signing a trade agreement between the two countries.
“It is uncertain a date for the signing of the trade agreement. Everything depends on the priority that the US Congress gives to the negotiations with Ecuador. The agreement should be seen as a means, rather than an end, to increase the chances of export of Ecuadorian SMEs; in addition to balancing the conditions of competition with neighboring countries », he pointed out.
More exports and less tariffs
Currently, products from neighboring countries such as Peru and Colombia enter with 0% tariff to the United States. But in the case of Ecuador, 90% of the exports to the US market must pay between 1% and 35% of tariff.
This situation, without trade agreement, causes losses of $200 million a year to the national export sector. And, in the case of exportshas generated extra costs of $500 million.
In this context, it is understood why it is vital to move towards the treaty of Commerce. The goal of the Government of Guillermo Lasso is that it be completed until 2025.
Meanwhile, an important help will be that the renewal of the General System of Preference (SGP) is fulfilled. That system, which stopped operating in December 2020, gives you access with zero duty to a bundle of products from more than 100 countries.
In the case of Ecuador, they benefited exports important as flowers, but the law that renews the system has been under discussion for more than a year in the North American Congress.
The TIC meeting left the commitment of the Government of U.S to speed up the approval of the GSP. With this, around 15% of the Ecuadorian exportable supply will enter without paying duty.
Ortiz stressed that it will be a great help because the application would be retroactive, that is, exporters will be refunded what they have paid since the system ceased to be in force.
However, this is not enough because many of the Ecuadorian products with the greatest growth potential in the US market are not included. These products are linked to super foods and tropical fruits.
In the first case are the bars, granola, chias and combinations of foods with cereals such as quinoa. Currently, there is an increasingly interesting market niche linked to a healthier diet.
In the second case, the greatest potential is in products such as pineapple, pitahaya, tree tomato, cape gooseberries, strawberries, blueberries, blackberries.
We are complementary economies
The business relationship with U.S in recent years it has been favorable to the country. It is our main trading partner and with whom we have a non-oil balance surplus of $1.5 billion.
“We are complementary economies. What we export does not necessarily compete with what the US productive apparatus produces; and more than 90% of what we import corresponds to capital goods, raw materials, intermediate goods and fuels,” Ortiz said.
The exports to the US market have grown 16% on average over the last four years. That is higher than the average growth in other markets, which reaches 12%.
In this context, the last meeting of the TIC caused progress in the discussion of protocols on environmental issues, labor rights, but above all in the facilitation of Commerce.
These issues are props for a future trade agreement and to generate more opportunities for SMEs. Currently, more than 80% of Ecuadorian exporting companies to the North American market are SMEs.
For the second half of 2022, it is expected that an Ecuadorian technical mission, with public and private palpitation, will go to Washington to continue with the dialogues and shore up the path towards agreement ultimate business. (JS)
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