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Ecuador will seek a trade agreement with Russia after the elimination of preferences

Fresh Plaza | 31 August 2021

Ecuador will seek a trade agreement with Russia after the elimination of preferences

The generalized system of preferences (GSP) granted by Russia, as part of the Eurasian Economic Union (EAEU) for a group of Ecuadorian products, expires on October 11. This means that 66 Ecuadorian export goods that currently pay fewer tariffs will lose these benefits, equivalent to 12 million dollars a year. Another 74 countries will also leave that GSP together with Ecuador.

The GSP is a mechanism through which the EAEU grants preferential access conditions to a selection of products from 103 developing countries. Ecuador is one of them.

The Ministry of Production said that one of the criteria that the Eurasian bloc used to eliminate the 75 countries of the GSP was the internal economic growth of each nation, taking into account their GDP per capita. According to data from the World Bank (WB), Ecuador registered a GDP of $ 5,600 per person up until 2020, which positions it as a country with an upper middle income.

Another factor for the elimination of the GSP was the trade deficit that the EAEU countries maintain with Ecuador. The bloc brings together Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia. According to the Ministry, the best alternative to reduce this effect will be to promote the signing of a Trade Agreement that benefits both parties.

Russia is one of the main markets for Ecuadorean agricultural food products. From January to June 2021, the country has exported 493 million dollars in non-oil goods to that destination, led by bananas.

According to data from the Banana Marketing and Export Association (Acorbanec), the Eurasian country is the second biggest market for the country’s bananas. In the first half of 2021, it concentrated 20% of total shipments, which is equivalent to about 39 million boxes.

Richard Salazar, the director of the union, said that the price of a box of bananas would be $ 0.25 more expensive because of the elimination of these preferences. Currently, banana exporters pay a tariff of 3.75% for the product, starting October they will pay 4%.

Salazar said that this wasn’t the only challenge facing the sector. The devaluation of the Russian currency (the ruble) makes imports from Ecuador more expensive, which is a barrier to increasing shipments, he said. The banana sector believes that the signing of an agreement could help sustain and increase sales to that destination.

 source: Fresh Plaza