Quito, Ecuador — Ecuador reached a trade accord with the European Union Thursday, five years after President Rafael Correa backed out of the talks alleging an agreement would damage local industry.
"We’ve finally closed a balanced accord with the EU that maximizes opportunities, reduces costs to a minimum, respects the development model of the country and allows us to protect our sensitive industries," Foreign Trade Minister Francisco Rivadeneira said in a statement on the ministry’s website.
The government reopened talks this year to avoid losing its preferential access to European markets under a separate trade program that expires in December. Ecuador, the world’s largest banana exporter, had pulled out of talks between the EU and the Latin American nations of Peru and Colombia in 2009, with President Correa, a self-described socialist revolutionary, warning that free-trade agreements could destroy the country’s economy.
Thursday’s statement didn’t say if the deal will come into effect before the current trade preferences expire at the end of the year. Those preferences are ending as Ecuador no longer qualifies as a low-income nation following a decade of growth averaging 4.6 percent.
Talks between the EU, Peru and Colombia were concluded in 2011 and their accords went into effect last year.
Without a new agreement, the loss of Ecuador’s preferred access would have cost exporters about $500 million in the short term and led to thousands of job cuts as local industry loses out to regional competitors, said Roberto Villacreses, a research analyst at the Ecuadorean Institute of Political Economy.
"The loss of hundreds or thousands of jobs in an economy as small as ours would have an impact and generate concern," Villacreses said in a July 9 telephone interview from Ecuador’s biggest port city, Guayaquil. "The government realized that they made a mistake earlier and now they’re trying to fix it."
Ecuador, a tropical nation about the size of Italy, shipped about $3.05 billion of goods to the E.U.’s 28 members last year and received $2.78 billion in return, according to the South American nation’s central bank.
Last month, Correa said not signing a deal would hurt national consumption, investment and trade. The country would lose at least $200 million a year, Correa said June 14, citing a report by the United Nations Economic Commission for Latin America, known as Cepal.
"I would never have begun to negotiate a trade agreement with the European Union, but we have to be realistic," Correa said. "We should take the risk to avoid the greater evil of being left without tariff preferences."
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