In January 2014, the first round of trade negotiations was launched between Ecuador and the EC over accession to the existing Andean Pact–EU trade agreement. While initially part of the Andean Pact negotiations, the government of Ecuador withdrew from the negotiations in 2009. Agreements between the EU and Colombia and Peru subsequently came into effect in August 2013 and March 2013 respectively.
The week-long talks were reported to have made “important progress”, and discussed issues related to market access for goods, services, government procurement and rights of establishment.
According to an Andean Community press release, “Ecuador concluded that re-engaging with the EU… had great potential for improving EU–Ecuador trade and investment relations and for developing the economy.”
Press reports in early February 2014 suggested that Ecuador was “falling behind as an international banana exporter”. In 2013, Ecuador’s banana exports worldwide were 10% lower than in 2011, although they reached 256 million boxes, 2.9% above the depressed levels of 2012. Significantly, exports to the EU in 2013 dropped by 25% compared to 2012. The suggestion was made that the FTAs concluded with Colombia, Peru and Central American countries had affected the prospects for Ecuadorian banana exports to the EU, with traders such as Del Monte sourcing their bananas from cheaper suppliers with preferential access to the EU market.
Tariffs applicable under the Geneva Agreement on Trade in Bananas (GATB) and newly concluded FTAs with Colombia, Peru and central American banana exporters (New FTAs) (€/tonne)
By 2013, as a result of the additional tariff concessions granted to Peru, Colombia and Central American suppliers under FTA agreements concluded with the EU, Ecuador faced a tariff €8/tonne higher than these competitors, with the difference rising to €10/tonne in 2014, and progressively increasing to €39/tonne by 2020.
By 2020, the quota limits on exports at reduced tariffs will be lifted. This tariff disadvantage, coupled with major buyers turning to other suppliers, appears to have influenced the Ecuadorian government’s decision to relaunch trade negotiations with the EC.
The experience would appear to highlight the important role that the granting of trade preferences (or their withdrawal) can have on corporate sourcing decisions and subsequent trade flows. This would appear to hold resonance for those ACP governments still involved in EPA negotiations as the October 2014 deadline for conclusion of the EPA and Interim EPA process approaches.