Customers and entrepreneurs are expectant at the promise of greater supply and better prices due to the new trade agreement with the Asian giant.

The trade agreement between Ecuador and China is about to complete its second week of validity, since its entry into force on May 1, and customers' expectations of finding more diversity and better prices for products from the importers in the showcases of the importers Asian giant grows with the days.

“People say that new and cheaper things are going to come, every month I come to this importer to buy wholesale merchandise for my small business that I set up in my house since the pandemic and the prices are very comfortable, now we have to see what It happens,” says Beatriz Matamoros while waiting in line for her order to be taken at Novedades Vargas Online, in La Alborada, north of Guayaquil.

The entrepreneur does not know details of the trade agreement or what products can be cheaper.

And one of the immediate effects of the agreement was the reduction to zero tariffs on products that make up 4,677 import subheadings. On this list there are merchandise that already entered Ecuador with zero tariffs, through tax reforms, but the agreement protected this advantage, such as electric motorcycles.

There are other products such as: digital cameras, reduced from 25% to 0%; hard drives, drops from 10% to 0%; LED lamps, reduced from 10% to 0%; computer accessories, decreased from 10% to 0%; speakers, drops from 5% to 0%; and cash registers, drops from 5% to 0%.

Gabriela Fajardo, manager of the Novedades Vargas Online store, assures that her clients have not yet inquired about lower prices based on the commercial agreement and that they have rather been affected by the increase in the value added tax (VAT) from 12% to 15% that has been in force since April 1.

The new merchandise with the benefits of the agreement is believed to arrive in July: "In the next two months we will have more grounded in this issue and products will be able to be marketed with improved prices thanks to the trade agreement."

The expectation and calculations are similar in other import chains, even in some their managers are in China to learn first-hand what new items to import with the benefits of the agreement. For security they prefer reservation.

Meanwhile, large warehouse chains such as Estuardo Sánchez also hope in the short term to offer products with improved prices and greater variety. Bella Gavilanes, Logistics and Imports Manager of the firm, reveals that the main products that they import and will benefit from a 0% tariff starting this year will be: bicycles, reduced from 10% to 0%; coffee makers, from 30% to 0%; textile carpets, from 30% to 0%; dental chairs, from 10% to 0%; calculators, from 5% to 0%; and orthopedic items, from 5% to 0%.

"As a company we receive more than 1,000 containers per year, and every day we receive innovative products. Among the containers received so far we have not received merchandise with the benefit, but we have some cargoes in transit that are going to benefit from the tariff benefit (partial and total) in May.” Among those products with the benefit of a partial reduction are toys, porcelain tableware, mixers and fans, says Gavilanes.

50% of its product portfolio is imported from China.

The benefits

Regarding the impact of the agreement for its clients, it analyzes that the first will be in the public sale price of the benefited products, which will have a considerable reduction that will be transmitted to the final consumer in the first line, which will maintain active trade.

The second notable impact, according to Gavilanes, will be that new products such as technology, beauty items, machinery, vehicles, etc., whose high-end brands were marketed in other countries with higher per capita income or in very small sectors of Ecuador, will be more accessible to more consumers with more affordable prices.

Long term results

Not all importers project immediate benefits from the agreement. Buen Hogar, for example, which specializes in Christmas decoration, fabrics and household items, will see results in the reduction of tariffs over time, 7 or 15 years according to the gradual reduction table of the products that make up its portfolio, the 80% of which comes from China, reveals Jorge Wated, commercial manager of the chain that has six stores nationwide.

From China, where he is in search of new merchandise as he does every year, Wated assures that the trade agreement was not shared with the importing sector or with the industrialists of which he is also part of the textile business.

“It is a trade agreement in which few people met, they protected a specific group of industries and that's it, the rest there was no socialization, there was no call at a general level so that the different types of industries that exist in the country have their observations and the impact can be measured on certain products that Ecuador does produce, which could also be extremely competitive,” laments the businessman.

He cites as an example iron wire, which is excluded from the trade agreement. It is part of the 800 subheadings that represent 10% of the Uruguayan tariff that were protected during the negotiation. He points out that to import wire you must pay a 25% tariff, but finished products that are also produced in Ecuador and that have a high wire component are going to be released, so, without a doubt, those plants are going to have to close," he warns. .

'Fewer barriers to entry of low quality products'

However, Wated recognizes that they are two totally different aspects, as he recognizes that over time the agreement will be beneficial for the importing sector and products that are currently very expensive for the Ecuadorian market will be brought in and with the agreement they will end up being cheaper, but warns that the treaty eliminates one less barrier to entry so that there are more competitors, which in many cases are informal, Chinese and Uruguayan, which will impact formal companies in the country.

“The more tariffs are lowered, the more entry barriers are reduced, more products of different types and qualities enter and of course, you will have more variety, the final consumer benefits, but I believe that the entry of very high-quality products also proliferates.” low quality in the market and there would no longer be greater control in that relationship, we have to measure the impact of that a little,” analyzes Wated.