By Alicia Gutiérrez | 2023-10-03

QUITO -- Representatives of various Ecuadoran groups have voiced their apprehensions regarding the Free Trade Agreement (FTA) between China and Ecuador, which was signed by the governments of both countries in May.

A recent statement by the Ecological Action organization raises concerns about what it perceives as a significant threat to Ecuador's economy and sustainability.

"The FTA will further tether Ecuador to Chinese geopolitics, relying heavily on them for vital resources like minerals, including those sourced from the seabed, such as oil, fishing, shrimp and other essential products," the organization's president, Ivonne Ramos, said September 7, reading the statement.

Cecilia Chérrez, a spokesperson for the environmental movement, voiced concern about the presence of a Chinese fishing fleet in the Galapagos reserve, saying the boats have a detrimental impact on the marine species within this protected area.

Chérrez also remarked that the FTA with China diminishes opportunities for small and medium-sized Ecuadoran businesses, pointing out a lack of adequate regulations accompanying the agreement.

"In the name of free trade and its inherent lack of oversight, this treaty closes the door to effectively curbing the influx of millions of Chinese products that pose a significant threat to many small and medium-sized production sectors in our nation," she said. "Meanwhile, it is opening pathways to receive scrap and waste from Chinese manufacturing in our territories."

For her part, Paulina Garzón, director of the NGO Sustainable Latin America (LAS), said the investment chapter of the treaty raises profound concerns.

"The investment chapter is deeply concerning. It starts by asserting that a fundamental aspect of this treaty is the integration of Chinese companies across all sectors," she said.

"Ecuador, as one of the parties, is expected to actively provide information about the sectors and activities where Chinese companies might invest. This indicates an expansion beyond mere product trade," she added.

LAS is an NGO focused on safeguarding the environment and local communities from exploitative Chinese investments in Latin America and the Caribbean.

Garzón emphasized the need for careful consideration of the potential support the FTA might extend to "Chinese companies in expanding fishing and aquaculture operations."

"China possesses the world's largest fishing fleet and leads all other countries in illegal fishing," she emphasized.

This situation is not unique to Ecuador; it is a challenge that "several South American countries have grappled with," Garzón said. "The Free Trade Agreement is expected to exacerbate this issue."

Next steps

The Ecuador-China FTA was signed virtually on May 10 in a ceremony incuding Ecuadoran Minister of Production, Trade, Investment and Fisheries Julio Prado and Chinese Minister of Commerce Wan Wentao.

The agreement came after a series of technical meetings held between April and December 2022.

The document covers a total of 17 items, including one specifically addressing electronic commerce, leading Ecuadoran authorities to deem it a "state-of-the-art" treaty.

This development marks Ecuador as the first Latin American nation to incorporate a chapter of this nature in a trade agreement with China, noted Prado.

But numerous groups have raised concerns that throughout the analysis and negotiation process of the agreement with China, specialists from and members of civil society were not adequately involved or consulted.

Moreover, crucial aspects pertaining to environment and labor notably did not feature in the discussions.

The agreement is subject to review and approval by both the Constitutional Court and the National Assembly of Ecuador. Upon successful completion of the internal legal processes in both countries and acquisition of the necessary approvals, the agreement is expected to come into force in early 2024.

The deal would boost Ecuador's non-oil exports over the next 10 years by $3 billion to $4 billion, or as much as 33%, according to the Financial Times.

The FTA allows preferential access for 99% of exports to China, in particular agricultural and agro-industrial products including shrimp, bananas, cut flowers, cocoa and coffee.

Analysts, however, are warning that the agreement may not pay off for Ecuador.

One of the concerns is that the deal could give China even more political leverage in Ecuador.

Ecuador, like other countries that have made deals with China, has become a victim of China's "debt-trap diplomacy" that lures countries into unsustainable debt and allows China undue influence.

China became Ecuador's largest financier during the administration of President Rafael Correa, who was in office from 2007 to 2017. During this time, Ecuador's debt to China reached $5 billion, representing 4% of the country's current GDP.

Last September, Ecuador was forced into restructuring its debt to Chinese banks, gaining relief worth some $1.4 billion until 2025.