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US warns Ecuador free-trade pact at risk

US warns Ecuador free-trade pact at risk

Thu Apr 20, 2006

By Doug Palmer

WASHINGTON (Reuters) - The United States warned Ecuador on Thursday that a proposed free-trade agreement was at risk unless Quito acted on a growing list of investment and other concerns.

"No date has been scheduled for continuation of talks with Ecuador. A number of difficult issues remain in the U.S.-Ecuador free trade negotiations, particularly but not exclusively in the area of agriculture," Neena Moorjani, a spokeswoman for the U.S. Trade Representative’s office, told Reuters.

"Meanwhile, the number of investment problems has grown rather than decreased, and Ecuador still needs to take a number of steps to update its labor code," she said. "Ecuador needs to address these issues to create the basis for a credible free-trade agreement capable of garnering political support."

The blunt warning came one day after Ecuador’s legislature approved a bill that requires U.S.-based Occidental Petroleum and other foreign oil companies to hand over part of their extra revenue resulting from higher oil prices.

Ecuador’s lead negotiator, Manuel Chiriboga, said in a written statement that his country "will not allow problems not related to the trade negotiations to interfere with the excellent development of the trade pact so far."

The statement said "Ecuador is ready to continue with the trade talks."

The new law reflects efforts by Ecuadorean President Alfredo Palacio and legislators to tap into record-high world oil prices by requiring companies to share 50 percent of their profits resulting from revenues above benchmark prices.

Foreign oil companies have said the bill is unconstitutional and have threatened to sue the Andean nation in local and international courts.

Ecuador’s government argues the oil reforms are necessary to ensure equal benefits for both the state and oil companies that have reported record profits in recent years.

The bill’s approval came as the Ecuadorean government formally proposed that foreign oil companies renegotiate their contracts to increase state participation in the deals.

Chiriboga said earlier this week Quito would launch a diplomatic effort to get the talks with the United States back on track and said he wanted negotiations to start again by May 15.

That would be approximately two years since Ecuador and two of its Andean neighbors began talks with the United States. Peru and Colombia have concluded deals in recent months, while the talks with Ecuador have dragged on.

(Additional reporting Alonso Soto)

 source: Reuters