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Business Concern Over Ecuador Benefits

Business groups and companies are concerned about Ecuador's compliance with U.S. trade benefits.


BY CHRONICLE STAFF


U.S. business groups and companies are expressing concern over Ecuador’s compliance with the Andean Trade Preferences Act (ATPA).


“We will be watching very closely over the first six months of next year to see if the Government of Ecuador takes advantage of the reprieve it has been granted by Congress to make a sea change with regard to its lack of respect for the rule of law,” says Patrick Kilbride, director of Western Hemisphere Affairs at the U.S. Chamber of Commerce, the world’s largest business federation.

The ATPA, which provides duty-free access to the
United States for more than 5,000 products from Colombia, Ecuador and Peru,  is set to expire this year unless an extension is approved by the U.S. Congress.


The House of Representatives on Monday approved a one-year extension with a review after six months.  The U.S. Senate still has to approve the extension before it’s finalized into law. That may happen any time between now and Christmas, Hill insiders say. 

The bill passed by the House of Representatives does not single out 
Ecuador. "Colombia and Peru – in our view unnecessarily – got lumped into the six-month review, as well," Kilbride says.  

NO MESSAGE FOR ECUADOR

That move was also criticized by the National Association of Manufacturers, which represents 14,000 manufacturing companies across several sectors.

“We are disappointed that the Congress did not include a message specifically putting Ecuador on notice that its behavior puts its continued receipt of preferences benefits at serious risk,” Franklin J. Vargo, NAM’s international vice president, said in a letter Monday to the chairman and ranking member of the U.S. House Committee on Ways & Means. “In light of the deteriorating investment climate in
Ecuador, as well as Ecuador’s repudiation of its Bilateral Investment Treaty (BIT) with the United States and President Correa’s announcement on sweeping aside fundamental patent protections for pharmaceutical and agricultural chemical products, the NAM believes that language specific to Ecuador should have been maintained in the extension language of [the bill passed].”

NAM is concerned that without continuing language aimed at challenging Ecuador’s actions, other nations receiving preference programs will be tempted to follow suit, leading to worsening investment conditions and undermining a central tenant of preference programs that participants uphold their commitments to the United States on investment and rule of law, it said.

MOVING BACKWARDS
 

Also the Emergency Committee for American Trade (ECAT), voiced concern about Ecuador. “While ECAT is disappointed that Congress did not take even stronger action with respect to Ecuador, ECAT welcomes the six-month review process that was included in this legislation and will work intensively with the Administration and Congress to ensure a robust and meaningful review of whether Ecuador’s actions warrant its continued receipt of ATPA benefits,” ECAT President Calman J. Cohen said in a statement. “As noted in the President’s June 30, 2009, report reviewing Ecuador’s ATPA status and independent sources such as Transparency International and the World Bank, Ecuador continues to move backwards with regard to its respect for the basic rule of law, including through government corruption, denial of justice in its court system and repudiation of contracts.”

According to Germany-based corruption watchdog Transparency International, Ecuador has Latin America’s third-worst rate. Only Venezuela and Haiti are more corrupt, according to the latest Corruption Perceptions Index from Transparency released last month. The index shows that Ecuador is worse than countries like Azerbaijan and Nigeria when it comes to corruption.

 

ECAT had originally asked Congress to reject an ATPA extension for Ecuador, while approving it for Colombia and Peru.

DISTURBING ACTION

 

Meanwhile, the U.S. Chamber of Commerce, the Business Roundtable, the National Foreign Trade Council (NFTC), the American Apparel & Footwear Association (AAFA) and 14 other business groups also expressed concerns about Ecuador.

 

”We remain concerned that Ecuador has announced it will withdraw from the Bilateral Investment Treaty (BIT) with the United States,” said a letter delivered to members of the U.S. House of Representatives this week. “Such an action is disturbing and raises serious questions about Ecuador's ability to fulfill basic obligations that it has made and its commitment to a sound bilateral economic partnership. We urge continued and heightened attention to this issue by Congress and the Administration and expect that the review process afforded by this law will provide the opportunity to seek and secure needed improvements.”

 

U.S.-based oil giant Chevron has also been critical about Ecuador. “Concerns about the rule of law, politicization of the judicial process and treatment of U.S. companies in Ecuador require regular monitoring to ensure that Ecuador meets the obligations required in order to enjoy these trade benefits,” it said in a statement this week.  “We also believe the shorter term extension provides an opportunity for the program’s important benefits to be extended while Congress undertakes a broader review of the programs.”

JUDICIAL BIAS

Chevron has denounced unfair treatment by
Ecuador’s judiciary in connection with a $27 billion lawsuit against it by a group of Ecuadorians claiming environmental damages caused by the U.S. company. The government of President Rafael Correa has actively meddled in the lawsuit, while judicial officers linked to the case have used incorrect information, Chevron says. In August, Chevron revealed videos showing a government party official asking for a $3 million bribe to him, Correa and a judge to hand out environmental remediation contracts in the aftermath of a ruling against the U.S. company. 

 

While business groups have been concerned about Chevron’s treatment, it isn’t the only U.S. victim in Ecuador. Oil company Occidental had its operations, the largest in Ecuador at the time, expropriated in May 2006. The company has sued Ecuador for $3 billion in the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID).

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