Tuesday, May 30, 2006

Loss of Jobs in Ecuador as Trade Agreement Ends

(Source Article: Ecuador fears job losses - FT.com)

Some 30,000 jobs per year will be lost if Ecuador’s trade agreement with the U.S. expires at year’s end.

Ecuador’s President, Alfredo Palacio, asked the U.S. to extend the trade agreement for an extra year, but the country’s chief trade negotiator was doubtful about such prospects given the country’s recent decision to revoke a contract with California-based oil company, Occidental, and seize approximately US$ 1 billion; the decision to oust Occidental came after the government discovered the U.S. company improperly transferred its stake in an oil field to a Canadian company. (see Ecuador regrets Occidental move - FT.com)

Some government officials have responded that the country can find other markets for its exports, and thus suggesting its loss of an agreement with the U.S. will be of little consequence. But with some of its sectors exporting up to 70% of their production to the U.S., such confidence seems misplaced.

Neighboring countries like Peru and Colombia have already seen an influx in investment as both countries have secured trade deals with the U.S.—Colombian President Uribe, recently winning his second term, is a staunch conservative and supporter of the Bush administration.

An end to the “low-tariff” regime on the country’s exports could severely damage sectors such as agriculture and textiles. Unfortunately, the U.S. ambassador to Ecuador suggested that the regime could end early: “These preferences cannot be granted to any country that has…confiscated or has taken under its control the property of an American corporation,” she said.

A new trade deal is unlikely to happen until new leaders are installed in both the U.S. Congress and Ecuador’s presidential position: a contest for Ecuador’s presidency is in October, with US mid-term election in November. Unfortunately, January may come too late.

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