In the Details

In the Details

Relations between the EU and Ecuador have grown stronger over the past decade, following the opening, in 2003, of the EC Delegation in Quito, and the signing, in 2007, of a memorandum of understanding that outlined the joint political, economic, and social priorities for the two parties until 2013. At the heart of EU-Ecuador relations has been the issue of market access. Ecuador currently enjoys preferential access to the EU market on a unilateral, non-reciprocal basis through the EU’s market access program for developing countries, the Generalized System of Preferences (GSP), and the EU’s good governance and sustainability program, the GSP+.

Almost 60% of Ecuador’s exports to the EU benefit from preferential access, and the government estimates that the market access provided by the GSP+ is worth $2.2 billion and has resulted in export growth worth 2.5% of non-oil GDP. Recently, however, the EU announced that countries classified by the World Bank as upper middle income or higher, which Ecuador has been since 2011, will no longer be eligible for the GSP starting in 2014.

There are still issues that need to be agreed on between the parties for inclusion in the Ecuador-EU agreement. Ecuador hopes to sign a “Trade Agreement for Development,” which would focus primarily on market access issues and shared development priorities. The EU, however, is insistent that Ecuador must sign the full FTA agreed with Colombia and Peru, which includes other trade issues, such as intellectual property, public procurement, investment, and trade services.

The EU remains a core market for many of Ecuador’s main export industries, especially tuna, shrimp, and bananas, and many exporters in these industries focus solely on serving their customers in the EU. Its other main exports to the EU include flowers, passion fruit concentrate, heart of palm and palm oil, broccoli, pineapples, elaborate wood, textiles, snuff, papayas, metallurgical products, handicrafts, and mangoes. In recent years, exports to the EU in these industries have been growing at a rate of 6% annually. Ecuador has also been diversifying, with 30% of its non-traditional exports also going to the EU. However, Ecuador’s trade relationship with the EU is still primarily based on its top six export products. Any attempt to diversify its export base and take advantage of the size of the EU market will likely require concessions on both sides, though the benefits for all parties would appear considerable.