Ecuador’s Trade Preferences: The Real Story

A recent Los Angeles Times editorial on Ecuador’s trade preferences with the United States curiously ignores evidence of Ecuador’s hostility to the United States and erroneously asserted that Chevron is calling for an end to beneficiary status for Ecuador under the Andean Trade Preferences Act.  While more than one organization is calling for “halting the trade agreement” with Ecuador, Chevron is not.  Chevron argues that countries should not be unconditionally rewarded with unilateral trade benefits even as they flout commercial obligations with the United States.  Because Ecuador has taken a series of actions to undermine trade and investment rules, Chevron is calling for treating Ecuador differently under the Andean trade act than the other two countries included in the act, Peru and Colombia.  Chevron is proposing several ways for Congress and the administration to treat Ecuador differently, including statutory periodic reviews or limiting preferences to private entities and firms in Ecuador, not to government-owned entities such as Ecuador’s state-owned oil company, Petroecuador.

The claim made by the Los Angeles Times, that Ecuador has “demonstrated a willingness to work with the U.S.” does not reflect what is actually happening with the bilateral relationship.  In the last year alone, Ecuador has taken a variety of actions that demonstrate its hostility to U.S. interests.  For example, it evicted the United States from an air base where it ran drug interdiction efforts for at least a decade.  It also became only the second country in history (after Bolivia) to withdraw from a 156-member international dispute settlement body after calling the body “an atrocity” that “signifies colonialism” and “slavery . . . to Washington.”  It also announced intent to withdraw from investment treaties with the United States and a dozen other countries, and it provided Ecuadorian interests a roadmap for using U.S. intellectual property rights without permission.  The situation in Ecuador has gotten so bad that in November, Transparency International called Ecuador one of the most corrupt governments in the Americas, with a score worse than 27 of the 31 countries tallied in the Hemisphere and 146th out of 180 countries total worldwide.

Ecuador once was a U.S. ally that respected the rule of law, but that has not been the case in recent years, and its treatment of U.S. investors and its obligations on investment and contractual matters reflects that change.  The U.S. government, Transparency International, and the World Bank have all noted serious concerns with Ecuador’s judicial system and adherence to the rule of law.  Contrary to the editorial’s assertion, Chevron is not asking the U.S. to force a favorable outcome in the case.  It asks for a fair hearing, a hope that Ecuador will honor its contractual obligations, and consideration of Ecuador’s actions on well-established trade and investment treaties and guidelines.

Chevron has been a longstanding supporter of trade preferences program.  However, we believe that extending unilateral trade preferences should carry with it some type of recognition that the recipient countries must adhere to the rule of law and trade and investment obligations.  We would hope that U.S. policymakers, and Los Angeles Times editorial writers, believe in this same standard.