On May 1, 2024, a significant milestone in international trade was achieved with the activation of the China-Ecuador Free Trade Agreement (referred to as the China-Ecuador FTA or FTA). This landmark treaty marks a pivotal turn in the economic relations between Ecuador and China, setting a robust framework for enhanced trade and investment opportunities.
Immediate Tariff Elimination on Key Goods
The agreement heralds the immediate elimination of tariffs on 60% of tariff items, ensuring that a broad spectrum of goods can now move between the two nations with reduced financial barriers. This initial step is part of a broader plan to eventually eliminate tariffs on 90% of goods traded between Ecuador and China. The scope of products benefiting from these cuts spans from Ecuadorian bananas and seafood to Chinese machinery and automotive parts, promising to diversify and enrich the trade portfolios of both nations.
Regarding specific products, tariffs for Ecuadorian goods like bananas, white shrimp, fish, fish oil, fresh and dried flowers, cocoa, and coffee entering the Chinese market will gradually decrease from 5%-20% to zero. Similarly, Chinese products such as plastic products, chemical fibres, steel products, machinery, electrical equipment, furniture, automotive, and parts entering the Ecuadorian market will see a gradual reduction of tariffs from the current 5%-40%.
Long-Term Economic Benefits
According to the Chinese Ministry of Commerce (MOC), the FTA’s implementation will maximize trade and investment opportunities between the two nations, advance a thorough modernization of bilateral trade and economic cooperation, and benefit businesses and citizens in both.
For Ecuador, this agreement represents an opportunity to bolster its agricultural and aquacultural sectors, enhancing the global reach of its flagship products. For China, it provides a strategic inroad into the Latin American market, reinforcing its position as a global economic leader.
Regulations and Compliance
To ensure the smooth implementation of the China-Ecuador FTA, the General Administration of Customs issued Announcement No. 46 of 2024, announcing the regulations on origin management of import and export goods. Goods meeting the requirements of the rules of origin can apply for preferential tariff rates under the China-Ecuador FTA when declared for import in China. The regulations on origin management primarily lay down two aspects. First, the rules regarding the origin of goods and auxiliary rules such as direct transportation primarily to ensure the origin qualification of the goods. Second, the implementation procedures for the origin of goods primarily specify the import and export obligations, origin certificates, and procedural contents like origin verification, all aimed at ensuring that the origin goods can be declared to enjoy tariff preferences in compliance.
Looking Forward
As trade barriers fall, the China-Ecuador FTA is poised to be a driving force for economic growth, job creation, and increased cooperative ventures between the two countries. By facilitating smoother trade flows and fostering an environment of mutual economic benefit, the agreement is expected to serve as a model of successful international cooperation.
