The tariff reduction contemplated in the trade agreement with China will boost exports of traditional products in that market.
Workers from the Mundo Banana company, in Santa Elena.
The trade agreement with China, ratified on February 7, 2024 by the National Assembly, represents an important growth opportunity for the country’s main export products.
According to the Central Bank, between January and November 2023, Ecuador exported 1,697 million tons of products to China worth USD 5,291 million.
Although there was a slight decrease – in value – compared to the same period in 2022, these figures place China as the second destination for Ecuadorian products, after the United States. The main one for non-petroleum products.
Exports to China have been growing exponentially. By 2022, the value of shipments to that country was almost 15 times the value of 2012.
The tariff reductions offered by the trade agreement for the main products of the country’s agro-export basket will lower export costs and, therefore, offer growth opportunities in that market.
According to a study by the Economic Commission for Latin America and the Caribbean (ECLAC), with the trade agreement, Ecuador’s exports to China could grow around 7% in the short term. And if other non-tariff measures are reduced for Ecuadorian products in that market, the increase could be close to 30%.
The president of the Corporation of Exporters Guilds of Ecuador (Cordex), highlights that in addition to the impact that the trade agreement will have on traditional products such as bananas, it will promote the diversification of the exportable basket to China.
This is taking into account that non-traditional products, such as dragon fruit, blueberries and quinoa, will be able to enter China without paying tariffs, once the treaty comes into effect.
Below is an analysis of the possible impacts for the main products:
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Shrimp
Shrimp is the first export product to China, with 1,576 million pounds exported in 2023, equivalent to a value of USD 3.5 billion.
In addition, China is the main market for this product, with a 59% share of total shrimp exports, according to the National Chamber of Aquaculture.
In 2023, shrimp exports to China grew 21% in volume, but fell 2% in value. This responds to a drop in prices, as a result of lower demand from end consumers, explains José Antonio Camposano, president of the National Chamber of Aquaculture.
Camposano clarifies that although shrimp is the main export product to China, it is not the “winning” product of the trade agreement, since the tariff they currently pay in China is barely 2% due to a unilateral exception from China towards any country. from which they import shrimp.
“The tariff has not been a difficulty, but the trade agreement brings dialogue mechanisms to facilitate health requirements. The exchange of information will be more fluid. This generates important certainties,” he adds.
On the other hand, Camposano hopes that the price situation will improve for the second half of the year and that this will allow them to grow in China and other markets.
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Banana
Ecuadorian bananas are one of the winning products of the trade agreement, if we take into account that they currently pay a 10% tariff in that market, but thanks to a gradual reduction of tariffs, 10 years after the entry into force of the agreement they will already be free. of tariffs.
In 2023, Ecuador exported 15.2 million boxes of bananas to China, with a growth of 45% compared to the previous year, according to data from the Banana Marketing and Export Association (Acorbanec).
By country, China is the fifth destination for the country’s banana exports , with a share of 4.25%.
With the entry into force of the trade agreement, banana shipments could grow between three and four times in the first three years , estimates Richard Salazar, director of Acorbanec.
This is important at a time when Ecuadorian bananas are experiencing difficulties in Russia, its main market , as a result of the recent suspension of five exporting companies due to the alleged detection of the humpback fly in several containers.
