Ecuador and Mexico: Trade agreement still does not see the light of day

RIO DE JANEIRO, BRAZIL – There is still no white smoke in the negotiations between Ecuador and Mexico.

Although the Ecuadorian government had announced that the last round of the trade agreement with its Mexican counterpart would conclude last week, yesterday, May 30, the parties issued an ambiguous statement in which it is only indicated that the talks would continue.

LACK OF CLARITY

“The negotiating teams of both countries held high-level technical meetings in which significant progress was achieved to close the agreement, addressing issues of market access, rules of origin, sustainable fisheries, trade defense, institutional matters, and in the areas of services and investment, which marked substantial progress to achieve an adequate technical closure,” reads the joint statement which, in summary, translates to the fact that there is still no agreement.

The explanation of the Ecuadorian Ministry of Production in response to the press’s insistence was that the ninth round, which was to be concluded, “continues, has not been closed and will be resumed virtually and in-person following the planning and coordination of the two countries”.

It was also mentioned that in this round, which was attended by the Undersecretary of Foreign Trade of Mexico, Luz María de la Mora, and the Vice Minister of Foreign Trade of Ecuador, Daniel Legarda, in addition to the respective chief negotiators, “the commitment to achieve a technical closure of the negotiations as soon as possible was reiterated”. No other details were clearly communicated.

The following dates of the meetings were not informed either, and the ministry did not answer if the difficulty in reaching an agreement is due to the three sensitive products: shrimp, tuna, and bananas. If the negotiating teams cannot reach an agreement, the next step is to do so at the ministerial or, if necessary, presidential level.

WHY IS THE AGREEMENT WITH MEXICO IMPORTANT?

Ecuador depends mainly on the trade agreement with that country to formalize its entry into the Pacific Alliance, an objective it has pursued for four years. Although the government has received the support of the other members of the Alliance (Colombia, Peru, and Chile) for its integration, sealing the agreement with Mexico is indispensable.

Although negotiations were advancing at a good pace, sensitive products for both countries slowed down their momentum, especially shrimp and bananas. Ecuadorian producers are seeking that these two goods, the main non-oil exports of Ecuador, enter Mexico without tariffs, which the negotiating counterpart has resisted.

Currently, Ecuador does not sell shrimp to that destination precisely because of the high taxes for exporters; 2015 was the last year of shipments of the crustacean to that country.

Although shrimp farmers have explained that there would be no effect on Mexican business people since the market is wide enough.

Ecuador and Mexico are holding 21 technical round tables. The pending tables for this last round were those of market access, rules of origin, institutional matters, and trade defense. Precisely, the first one is the negotiation of sensitive products.

In addition, before signing an agreement, a legal review will have to be carried out.

TRADE BETWEEN ECUADOR AND MEXICO

In 2021, non-oil trade between Ecuador and Mexico left an unfavorable balance of US$522 million, where imports had a greater preponderance than exports. In the case of exports, they reached US$161 million in 2021, which meant an increase of 80% compared to 2020.

In the first quarter of 2022, non-oil exports increased by 42% compared to the same period of the previous year, and non-oil imports increased by 12%.

In 2021, Mexico became the 15th destination market for the country’s non-oil exports. Currently, this market hosts around 326 exported products.

The main export products to Mexico are cocoa beans, food preparations, vegetable oils, white goods, and sugar and confectionery; 77% of non-oil exports are concentrated among the five main products. In addition, more than 223 companies are linked to exports to this country.

Imported products include machinery and electrical appliances, vehicles, machinery and mechanical appliances, pharmaceuticals, and cosmetics. Among the first five products, 58% of non-oil imports are concentrated.

Non-oil imports from Mexico increased by 21% in 2021. 52% of non-oil imports correspond to raw materials and capital goods.

With information from Bloomberg