Commercial agreement with the European Union: Ecuador, beween a rock and a hard place?

Eduardo Tamayo G.

07/03/2012

Opinión

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The government of Ecuador, represented by the foreign affairs minister Ricardo Patiño, will resume conversations with the European Union on March 19 with the prospect of establishing a bilateral commercial agreement.

The business sectors concerned with bananas, shrimp and fish have brought strong pressure to bear on the Rafael Correa government to achieve a commercial agreement, convinced that if this is not done they will lose customs benefits from the year 2014 that are foreseen in the General System of Plus Preferences.

The European commissioner Karel de Gucht has also proposed that Ecuador suscribe to a bilateral agreement with the European Union (EU), arguing that "this is the best solution for Ecuador in the long term, to ensure her access to the markets of the EU".

With these pressures Ecuador is between a rock and a hard place. Either Ecuador signs a free trade agreement with the EU under the terms of that already signed by Colombia and Peru (and which is awaiting ratification by the European Parliament), or she will be left out of the customs benefits since the European Union is in the process of taking a new direction of her international policy towards poor countries, according to Gucht.

Ecuador, however, has opted for a different path from those countries that have chosen free trade agreements and which have, in the case with Mexico, provided an expression of their complete disaster. Ecuador joined those countries that rejected the ALCA and then opted for the same position when the business sectors sought to sign on to a Free Trade Agreement with the United States, this in pursuit of their own particular interests.

A Free Trade Agreement with a Europe in crisis and dominated by rightwing neoliberal policies would have unforeseeable consequences for Ecuador, since it would not only benefit certain sectors to the prejudice of others (the majority) but would prevent the establishment of a distinct development policy, especially if she accepts the conditions with respect to intellectual property, public expenditure and services, which go way beyond the provisions of the World Trade Organization, to the enormous benefit of transnational corporations.

Katiuska King Mantilla, who was minister for coordination of Economic Policy of Ecuador from April 2010 to October 2011, proposes, in the following interview, the arguments for which Ecuador should resist the Siren songs of free trade.>

What interest does the European Union, which is in crisis, have in singing a Free Trade Agreement with Ecuador?

-- Clearly, a Spanish member of the European Parliament has proposed that they want to go ahead with agreements both in Central America as well as with the Andean Community, in this case, Colombia and Peru, and now Ecuador, in order to gain access to markets, but in similar conditions to those the United States already enjoys (since they have signed Free Trade Agreements with Central America, Colombia and Peru). In the case of the European Union, the agreements are much stronger than these agreements were with the United States.

But Europe is in a state of crisis, does this mean that they are looking for a way out through this kind of trade agreements?

-- Due to the fact that they have an internal consumption problem, of internal effective demand, they want to seek external markets; and for this, they not only want to be able to sell, but to do so under favourable conditions, under which they can export more under the same conditions as their competitors, and thus overcome the crisis that they have with internal consumption.

What interest could the European Union have in coming into Ecuador, which is a small market?

-- Well, here we have two lines, any market is desirable, perhaps not for the big operators but for the medium ones, hence any additional market is important, and above all because they are putting the country between a rock and a hard place, saying that they have to do this since the agreement between Colombia and Peru is in the final stages, hence if they don't do it they may lose access to the European market, something which is simply not true.

Who would benefit from a trade agreement with the European Union?

-- The exporters of agricultural products, but above all the banana companies, and with this we would maintain the same model of primary-export production and what we would do is to guarantee lower tariffs for them, and it is obvious that those who would gain would also be those who import European products.

What other large producers would benefit?

-- In addition to the banana companies, the producers of shrimp, and to some extent, flowers.

What does the banana sector propose?

-- We have here a very interesting discussion, since bananas have been a product that has been subject to the rules of the European game; there is a joke here that says that it would be good if they regulate the banana trade (size, diameter, etc.) as they do nuclear power plants, since what is asked of Ecuadorean bananas is impressive. Ecuador complies with the norms but is subject to a discriminatory treatment with respect to the ex-colonies that do not pay customs duties. Ecuador has won every negotiation in the World Trade Organization, but was never able to apply the retaliation and to correct the problem, to the point that in the year 2009 Ecuador said that they would not continue the negotiations until the banana problem was resolved.

Unfortunately the resolution of the banana issue was not felicitous because it ended with tariffs which were proposed from the beginning, that is 114 dollars per tonne, and not even now, since this will only be in effect in 2016. The negotiation was not effective in lowering the tariff and in the Free Trade Agreements they obtained tariffs of 75 dollars per tonne in 2016, hence the difference will not be now but in 2016-2017. But this is the sales pitch, do it now in order to obtain preferential tariffs. But as I have said, the banana question and that of other products does not depend on tariffs alone.

What sectors will be affected by a free trade agreement with the European Union?

-- Here we have a very complex problem, since when I talk of those who benefit I am speaking simply in terms of reduction of tariffs; but an agreement such as that proposed by the European Union has very serious elements in terms of the service sector, of intellectual property, of public sector contracts, which would limit any future possibility of changing our productive patterns, hence we would not only see this in terms of losing but in terms of serious limitations that the State would have, because the agreement seeks, in order to simplify things, to remove state regulation so that the market would determine the direction the country would take, and this obviously means to maintain the situation of an exporter of agricultural goods.

How does this trade agreement look in the perspective of the regime of Buen Vivir (Good living) that is put forward in the Constitution of Ecuador?

-- There is an opposition from the start, because what the free trade agreements propose is liberalization to ensure bigger markets, that is to say that we pose fewer obstacles so as to facilitate trade, and this is exactly what the Constitution does not propose. The Constitution proposes agreements to benefit the countries, agreements that allow the country to develop opportunities for Good Living (Buen Vivir), hence there is a contradiction from the onset, as I mentioned to the Vice-Minister of External Trade of Ecuador (Francisco Rivadeneira).

In semantic terms, now there is talk of a Multiparty Trade Agreement, is this the same as an FTA?

-- It is exactly the same; this agreement proposed by the European Union is a free trade agreement in the sense that it proposes aspects in every one of the working groups, that go way beyond what is established in the World Trade Organization.

It has been announced that there will be further conversations between Ecuador and the EU. What can we expect from this?

-- Well, I think that what they will say to Ecuador, what they will ask, is if in effect we are interested in signing the terms that have already been negotiated with Colombia and Peru; and if that is the case, they will proceed in the same way as with those countries. That is, they will say the same thing that they have been saying for more than two years, since 2009, and on this basis they expect a decision on the part of Ecuador.

You say that a trade agreement with the European Union would impact the good living model of development in Ecuador, but to spell things out a little, what would happen with groups that will suffer, agricultural sectors, milk producers....

-- Something that I have been saying is that supposedly the agreement with the European Union is an agreement in terms of complementation, since we do not compete with the European Union but that we have complementary economies. But I don't agree with this, because the European economy has many more agricultural subsidies, hence what we shall see is a pauperization of the population in the rural sector that already has problems. This sector has not benefited from this better economic situation in general terms, and what would happen is to put even more pressure on this sector, and above all displace much of national production; there are sectors that are very sensitive to imported products.

(Translation: Jordan Bishop)

See the full text of the interview in Spanish here: http://alainet.org/active/53174&lang=es

https://www.alainet.org/en/active/53243