Bloomberg News

Ecuador Scraps Trade Pact Over U.S. Threats in Snowden Case (2)

June 27, 2013

Ecuador, the South American nation considering an asylum request from fugitive U.S. intelligence leaker Edward Snowden, renounced its U.S. trade benefits today, saying they were being used as “blackmail.”

“Ecuador doesn’t accept pressure or threats from anyone and doesn’t barter its principles and sovereignty or submit to mercantile interests,” President Rafael Correa said today in a speech in the central province of Los Rios. What Snowden revealed “is a terrible case of massive espionage, both nationally and internationally that clearly threatens the right to intimacy and the sovereignty of states.”

The announcement comes a day after U.S. Senator Robert Menendez, the New Jersey Democrat who is chairman of the Senate Foreign Relations Committee, said he would lead the effort to block renewal of trade preferences for Ecuador if it granted Snowden asylum. The Andean nation has been lobbying the U.S. congress to renew the preferences, known as ATPDEA, which are due to expire next month.

“Our government will not reward countries for bad behavior,” Menendez said yesterday in a statement. “If Snowden is granted asylum in Ecuador, I will lead the effort to prevent the renewal of Ecuador’s duty-free access under GSP and will also make sure there is no chance for renewal of the Andean Trade Promotion and Drug Eradication Act. Trade preferences are a privilege granted to nations, not a right.”

Job Losses

Ecuador would lose at least 40,000 jobs if the trade preferences aren’t renewed, the nation’s Ambassador to the U.S. Nathalie Cely said last year. While most of the $1.01 billion in exports to the U.S. in April was oil, shipments also included more labor intensive products such as cut flowers, broccoli and shrimp. Exports fell from $1.14 billion in April 2012, according to U.S. Census data.

Ecuador’s Communications Secretary Fernando Alvarado, who called the trade preferences a “new instrument of blackmail,” said today the government is offering the U.S. $23 million, an amount similar to what the U.S. provides under ATPDEA, to provide human rights training to combat torture, illegal executions and attacks on peoples’ privacy.

The loss of trade preferences isn’t crippling, though it will make local producers and exporters less competitive in the U.S. than similar companies in neighboring countries, said Santiago Mosquera, an analyst at Fitch Ratings. Peru, Chile and Colombia have trade agreements with the U.S. that give their exports duty-free access to the world’s biggest economy.

Hard Times

“They are going to have a harder time competing in the global arena because they now have to pay tariffs to get into their largest market,” Mosquera said today in a telephone interview from New York. “Looking into the future, it has more implications in terms of investment.”

Companies affected by the loss of the trade preferences will receive compensation from the government in the form of tax credits, Correa said at a separate event in Los Rios today.

“That sector that’s so nervous, I say take a valium,” Correa said. “I’m not in the least bit concerned.”

Ecuador, which last year granted refuge to WikiLeaks’ founder Julian Assange, is considering an asylum request from former National Security Agency contractor Snowden, Foreign Minister Ricardo Patino said July 23. The decision may take as long as two months, Patino said yesterday.

“It took us two months to make the decision on the case of Assange, so do not expect us to make that decision sooner this time,” Patino said.

Assange has spent the past year holed up in Ecuador’s London embassy to avoid extradition to Sweden, where he faces questions about allegations of rape and sexual molestation, which he denies.

Moscow Airport

Snowden, a former worker for government contractor Booz Allen Hamilton Holding Corp. (BAH:US) who Russian President Vladimir Putin has said is in the transit area of a Moscow airport, disclosed top-secret U.S. National Security Agency programs that collect phone and Internet data.

U.S. Senator Orrin Hatch, a Utah Republican and ranking member of the Senate Finance Committee, today urged President Barack Obama to “act swiftly” and cancel Ecuador’s preferential access to U.S. markets. Among the reasons he cited in an e-mailed statement was Ecuador’s “disregard for the rule of law.”

The ATPDEA trade preferences, enacted in 1991, sought to combat cocaine production in the Andes through incentives for farmers to stop producing coca.

To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net.

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net.


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