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Ecuador’s New Free Trade Pact With China Provokes Lots of Excitement and Even More Questions

The signing ceremony in Quito of Ecuador's new free trade agreement with China on May 12, 2023. Image via @Produccion_Ecu.

By Chris Alden and Alvaro Mendez

The ongoing political crisis in Ecuador, which saw President Guillermo Lasso dissolve the National Assembly and trigger an election, came against the backdrop of the signing of a Free Trade Agreement (FTA) with China. This agreement offers a number of opportunities that Lasso hopes will cement Ecuador’s position as an economic hub for the South American country.

Upon taking office in 2021, Lasso promised he would re-engage with the world as a true internationalist. In foreign policy terms, he has been pragmatic, bringing about a rapprochement with Washington while maintaining good relations with Beijing. Apart from the new FTA with China, he hopes to conclude FTAs with the U.S., Japan, and Canada among others. His government sees these agreements as the “ideal vehicles” to collaborate with the great commercial powers and improve the economic situation of Ecuador.

Some observers suggest that President Lasso’s enthusiasm for FTAs is attributable to his close ties with the business community, which stand to benefit from these agreements. Whether this is true or not, Lasso has been notably proactive in pursuing his trade objectives. For instance, during his visit to Beijing in February 2022, he had two primary goals: renegotiating Ecuador’s existing debt to China, which totals $4.6 billion, and initiating talks on the recently signed FTA. Given this context, it is unsurprising that his government has maintained close ties with Beijing, building upon the groundwork laid by predecessors Correa and Moreno.

Negotiations between Quito and Beijing for the agreement concluded in January 2023, with only very general details being made public. Further details were released around the time the agreement was signed on 10 May 2023. The agreement now needs to be ratified by Ecuador’s national assembly before it can enter into force. Speedy as this may seem, it is actually the usual speed of China’s FTA negotiations with global South countries eager to reach an agreement.

Based on the trade information provided so far, the FTA seems to grant privileged access to China for 99% of Ecuador’s current exports, which predominantly consist of agricultural products. It also paves the way for non-traditional Ecuadorian exports such as pitahaya, pineapple, and blueberries to penetrate the Chinese market. However, critics argue that the Lasso administration rushed through the FTA, leaving strategic issues unresolved, such as intellectual property rights, labor standards, and environmental protections.

China is currently Ecuador’s second-largest trading partner and official data suggest it is gaining ground, threatening to push the U.S., its main trading partner, into second place.

The FTA will definitely benefit Ecuador, but Beijing has the upper hand in capturing the benefits, particularly if trade experts and civil society are frozen out.

It is noteworthy that the negotiators did incorporate a provision known as cuarto adjunto (“adjoining room”). This theoretically enables civil society to participate in simultaneous discussions on issues being negotiated by officials. However, these conversations seem to largely reflect the sentiments of the business and industrial sectors. Despite these provisions, the process has been slightly unclear for civil society, which has led to difficulties in understanding the exact nuances of the negotiations. This lack of clarity is reminiscent of transparency issues of previous administrations. Given this context, the upcoming ratification process could face some opposition.

Chris Alden is a professor of international relations at the London School of Economics and director of LSE IDEAS and Alvaro Mendez is the director of the LSE Global South Unit. Together they co-authored the recently published book “China and Latin America: Development, Agency and Geopolitics.”

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