According to the news of the Chinese business website, on May 11, 2023, China and Ecuador signed the “Free Trade Agreement between the Government of the People’s Republic of China and the Government of the Republic of Ecuador”. At present, both China and Ecuador have completed their respective domestic approval procedures, and the agreement will officially take effect on May 1, 2024.
According to the announcement, after the free trade agreement between China and Ecuador comes into effect, the two sides will gradually mutually cancel tariffs on approximately 90% of the tariff items respectively, covering each other’s major export products, among which approximately 60% of the tariff items will immediately cancel tariffs on the day the agreement comes into effect. Most of China’s products such as plastic products, chemical fibers, steel products, machinery and equipment, electrical equipment, home decorations, automobiles and components, lithium batteries, etc. enter the Ecuadorian market, and the Ecuadorian import tariffs will be gradually reduced to zero from the current 5%-40%.
The gradual mutual cancellation of tariffs between the two countries will play an important role in expanding bilateral trade, promoting the integration of industrial chains and mutual investment, and will also prompt the further improvement of the level of trade facilitation. The two sides will simultaneously establish a closer communication and cooperation mechanism in many fields such as rules of origin, customs procedures and trade facilitation, health and plant health measures, technical trade barriers, trade relief, dispute settlement, investment cooperation, e-commerce, competition, and economic cooperation, and promote the mutual coordination of relevant rules and regulations to provide a more convenient, transparent, and stable business environment for enterprises of the two countries.
Ecuador’s economy mainly relies on the exports of bananas, cocoa, oil, coffee, and tourism. The break in diplomatic relations between Mexico and Ecuador will also reduce the export trade between countries. Moreover, recently, Ecuador has also severely affected hydroelectric power generation due to severe drought, and has implemented power rationing measures in many parts of the country since April 16.
It is learned that 75% of Ecuador’s electricity comes from hydroelectric power generation. Affected by the El Nino phenomenon, Ecuador currently has severe drought, resulting in a decrease in the water levels of many rivers and reservoirs. Local media also released the power rationing arrangements in places such as the capital Quito and the port city of Arica on the 16th.
Diplomatic crisis and severe domestic drought have an impact on Ecuador’s export trade such as bananas, coffee, etc. However, after the “Free Trade Agreement between the Government of the People’s Republic of China and the Government of the Republic of Ecuador” takes effect, the import tariffs of the Chinese side for Ecuador’s bananas, prawns, fish, fish oil, flowers and dried flowers, cocoa, coffee and other products entering the Chinese market will also be gradually reduced to zero from the current 5%-20%. This will be beneficial to the development of Ecuador’s export trade.
It is understood that China also implements zero tariffs on products originating from Angola, Gambia, Mali, Madagascar, Mauritania, and the Democratic Republic of the Congo, and the zero-tariff treatment involves 98% of the tariff items of these African countries, such as coffee, palm oil, cotton, cocoa, fruits, seafood, and spices.
The entry into force and implementation of the agreement between China and Ecuador will enhance the level of trade and investment liberalization and facilitation between the two countries, be able to further stimulate the potential of trade and investment cooperation, and promote the all-round quality improvement and upgrading of bilateral economic and trade cooperation, and enhance the well-being of enterprises and people of the two countries.
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