Quito – Ecuadorian flower growers who were hoping a potential Ecuador-U.S. free-trade agreement would secure continued access to a vital market now fear the worst after the U.S. broke off negotiations over the seizure of an American oil company’s assets.
On Monday, the Ecuadorian government voided U.S.-based Occidental Petroleum’s operating contract because it said the California-based energy firm, better known as Oxy, transferred assets without informing the relevant authorities in Quito. Oxy had sold 40 percent of its concession to Canada’s EnCana, which in turn last month peddled that stake to a Chinese oil consortium.
Business leaders in Ecuador have been quick to decry the government’s decision to take over an oil field in the country’s northeast from Oxy, not only because it could scare off foreign investment but also because of eventual reprisals by the United States.
The U.S. government on Tuesday announced it would not continue negotiating a free-trade treaty with Ecuador in response to Quito’s move to cancel Oxy’s contract. Indigenous groups and other grassroots organizations opposed to the free-trade deal, for their part, applauded the takeover of the oil field as a “triumph” over the United States.
Esteban Chiriboga, representative of the Ecuadorian association of flower growers, said he was still hopeful that his countrymen would not be completely barred from selling to the United States following “the death” of the free-trade agreement.
Under the Andean Trade Negotiation and Drug Eradication Act, Ecuadorian flowers can currently enter the U.S. market tariff-free. That law expires in December, however, after which time an 8 percent tariff would be levied and Colombian growers would be at a distinct competitive advantage.
“At the moment Colombia is much more competitive: it has much lower production costs, a much longer work week and lower transportation costs,” said Chiriboga, who added that with the tariff Ecuadorian exporters would be driven out of the market.
Ecuadorian flower exports total some $300 million annually, with the United States accounting for more than half of that total.
Peru, Colombia and Ecuador entered free-trade talks with the United States in May 2004, with Lima and Bogota signing deals in December and February, respectively.
