The agreement with the United States would increase consumption and investment in the country

If a treaty with the United States is finalized and all bilateral tariffs are eliminated, Ecuador’s GDP could grow an additional 0.08% per year through 2030, according to Cepal.

A high-level delegation from the United States is in Ecuador for the fourth meeting of the Trade and Investment Council (TIC), which will take place on February 15-16, 2022.

ICT is not part of a treaty, nor does it replace it, but most of it Countries that have a trade agreement with the United States passed through this dialogue space.

If Ecuador concludes a trade agreement with the United States and eliminates all bilateral tariffs, GDP could grow at an additional 0.08% annual rate through 2030.

It is supported by a report from Economic Commission for Latin America and the Caribbean (ECLAC).

The best performance of the Ecuadorean economy will be due to Increase consumption, investment, exports and imports By signing the treaty.

If the agreement were more conservative and only eliminated some tariffs and maintained or reduced others, the Ecuadorean economy would still grow, but it would be less than 0.5%.

“The main impact of a balanced trade agreement with the United States will be Converting the Generalized System of Preferences (GSP) to a permanent (commercial) preferencesays the Economic Commission for Latin America and the Caribbean.

This would “eliminate the uncertainty that the export sector faces every time a revision of the SGP system approaches,” according to the Economic Commission for Latin America and the Caribbean.

The Small Grants Agreement, which has not yet been renewed, expired on December 31, 2020.

If the GSP is not renewed, Ecuador will lose the preferential treatment for exports to the United States of 279 products, for which it will have to pay customs duties.

Winners and losers

With the signing of a treaty with the United States, there will be Ecuadorean sectors and products Look for opportunities. This is the case of fish, food and beverage exports.

It also includes agricultural and agro-industrial exports, including Flowers, fruits and vegetables stand outLike broccoli and asparagus.

Among the manufacturing products, textiles, clothing, shoes and non-metallic minerals stand out.

On the other hand, sensitive products will be signed if an agreement is signed machines and equipment.

This is explained by the fact that the production structure of these activities has been reduced in Ecuador, so the country will find it “difficult to compete with its counterpart in the United States,” says Sebal.

With a trade agreement in place, imports from the United States will grow, mainly due to increased demand for machinery, equipment, vehicles, and chemical products.

“The impacts on imports will largely occur on the corresponding sectors capital goods and intermediate inputsThe report says.

These two groups of imports are Complementary to the production of many national sectors which do not contain basic raw materials and require capital goods, Sibal adds.

Scene without agreement

The Ecuadorean economy can Hold between 0.02% and 0.8% until 2030 If a country does not sign an agreement with the United States, the GSP is abolished and MFN tariffs come into effect.

Most-favoured nation tariffs are taxes that countries apply to imports from other members of the World Trade Organization (WTO) unless the country is part of a preferential trade agreement (such as a free trade area or customs union).

In practice, this means that a file MFN rates are the highest and most restrictivewhich WTO members can impose on each other, the World Bank explains.

The GDP contraction will be as a result of loss of competitiveness of the basket of Ecuadorean exports compared to other countries with which the United States has trade agreements, such as Mexico, Colombia and Peru.

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Sacha Woodward

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