GSP positive but Ecuador needs a trade agreement with the U.S., say exporters

Exports with the GSP account for 400 million dollars.
Photo: Andes

The Generalized System of Preferences will benefit nearly 840 Ecuadorian companies according to Ministry of Foreign Trade

Quito, March 26 (Andes).- The GSP renewal for Ecuador, among the 120 developing countries that will be benefitted, was confirmed with the signing of the US spending bill by President Donald Trump in spite of his veto threat.

The Ecuadorian Ministry of Foreign Trade affirmed in a statement that the GSP will have a positive impact for about 840 Ecuadorian companies for a total of 400 million dollars in exports until 2020.

Pablo Campana, head of this Ministry, explained that the entry of Ecuadorian products to the United States with no tariffs makes the country more competitive in comparison to other countries that have commercial agreements with such nation but added that it is important “to go beyond” referring to a possible bilateral trade agreement.

“We must not only focus on what we have now but we must go beyond and strengthen relations to benefit all products and exports of the country,” he said.

Interviewed by Andes Agency, President of the Ecuadorian Federation of Exporters (FEDEXPOR) Daniel Legarda affirmed that this program will also benefit the United States.

“It’s good news for the country and it accounts for 200 and 400 million dollars, depending on the year, of non-oil exports that go to that destination which would otherwise have to pay a tariff of 40 million dollars a year,” he added.

Legarda commented that from the US perspective, the GSP favors industries in that country which depend on raw material, supplies and products that also create jobs in the United States.

However, he ratified that Ecuador needs a trade agreement with that nation similar to that signed with the European Union (EU) for which both the private and public sectors must join efforts in order for exports to be Ecuador’s main source of income.

“Ecuador cannot continue to depend on tariff preferences, such preferences expire and it hinders companies from growing or doubling their capacity or investing in a new production line for the United States,” he explained.

He explained that in the case of products with zero tariffs such as banana, shrimp, cacao or coffee, there is no guarantee that a tariff will be imposed in the future which would affect Ecuadorian products’ competitiveness and their presence in the market.

He explained that Ecuadorian products like malanga (tuber resembling a sweet potato), cassava, wood walls, pineapples, frozen vegetables, construction material such as iron rods and steel would be tariff-free with the GSP system.

FEDEXPOR told Andes Agency that 3 billion dollars were exported to the United States in 2015, 2,5 billion in 2016 and 2,5 billion in 2017.

On this matter, representative of the Association of Textile Industries in Ecuador (AITE) Javier Diaz told Andes Agency that the GSP renewal is positive for Ecuador.

However, he explained that this benefit does not include all products. This is the case of textiles that enter the northern country with tariffs of12% to 30% which makes it difficult to compete in that market.

“We have many opportunities to export to the United States; we need a trade agreement with that country. Our Colombian, Peruvian, Central American competitors have advantage on this since they do not pay any tax for their textile products.”

Diaz added that the United States is Ecuador’s main commercial partner and added that presidents Donald Trump and Lenin Moreno’s political will is required.

According to him, the country’s main sensitive area would be agriculture but it is necessary to negotiate in order to reach agreements.

The leader affirmed that there are many advantages in signing a treaty with the United States including logistics and geographical proximity.