Ecuador suspends wheat tariff
The suspension of wheat tariffs in Ecuador has opened the market to U.S. exports. On Dec. 23, 2016, Ecuador’s Foreign Trade Committee passed the extension of the current tariff and duty exemption for wheat, wheat semolina, and wheat flour imports from all origins including the U.S. COMEX Resolution 040-2016 states that Ecuador will extend the application of the current zero percent ad valorem exemption and suspend the application of the Andean Price Band (variable levy) until Dec. 31, 2019. This is the first time that a three-year tariff suspension has been granted, as previous extensions covered a maximum two-year period. Ecuador’s Ministry of Agriculture, Livestock, Aquaculture and Fisheries (MAGAP) supported the extension. Ecuador last implemented two-year term exemption extensions in 2013 and 2015, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in a March 7 report.
According to the report, the USDA’s office in Quito (FAS Quito) collaborated with the government of Ecuador, combined with advocacy by the U.S. Embassy in Quito and Ecuador’s Association of Wheat Millers (ASEMOL), resolved a situation that jeopardized future U.S. wheat shipments. Without this COMEX exemption extension, Ecuadorian wheat imports would have been subject to a 36% tariff – a combination of an ad-valorem tax plus the Andean Price Band’s variable levy. These levies would have resulted in an increase in the price of wheat in the Ecuadorian market, jeopardizing Ecuador’s domestic food security needs and input costs for the export aquaculture sector, while also reducing total U.S. food and agricultural exports to Ecuador. U.S. wheat exports totaled $52 million in 2016, the report said. The U.S. already has a significant trade deficit in agricultural products with Ecuador, reaching $1.8 billion in calendar year 2015.
The report estimates Ecuador’s human consumption of wheat in calendar year 2016 at nearly 630,000 tonnes based on a per-capita consumption of 39 kilograms per year and a population of 16.080 million (Central Intelligence Agency, July 2016 population estimate). Ecuador’s calendar year 2016 feed wheat use is estimated at 270,000 million tonnes, of which 150,000 tonnes is for shrimp production destined to foreign markets. For calendar year 2017, FAS Quito forecasts the value of U.S. sales of wheat to Ecuador at $65 million. Wheat is the United States’ second largest agricultural export to Ecuador.
Ecuador’s domestic wheat production has declined steeply since the 1970s. The report estimates the planted wheat area in Ecuador at 5,000 hectares with an average yield of 0.8 tonne per hectare. In 2008, the Ecuadorian government placed incentives to increase cultivation, namely through the provision of subsidized fertilizers, government-backed loans, and improved seed varieties, have not yielded expected results. Central and northern highland farmers have opted instead to switch to more profitable crops such as quinoa. The FAS assesses Ecuador’s annual wheat production at less than 5,000 tonnes. Therefore, it foresees that Ecuador will remain an insignificant producer of wheat and will rely on imports to satisfy domestic human and animal feed consumption as well as export aquaculture consumption needs.