US trade benefits for Ecuador seen at risk in Assange case

A women walks past a barrier with Free Julian Assange posters opposite the Ecuadorian Embassy in London August 14, 2012.

WASHINGTON (Reuters) - An possible decision this week by Ecuador to grant political asylum to WikiLeaks founder Julian Assange would put long-time U.S. trade benefits for the Andean country at risk, U.S. business leaders and analysts said.

"It's not a move destined to win many new friends in Washington," said Eric Farnsworth, vice president at the Council of Americas, a group representing U.S. companies that do business in the Western Hemisphere.

Ecuador's President Rafael Correa said on Monday he hoped to announce his decision on Assange's asylum request by the end of the week.

Assange has been taking refuge in the Ecuadorean Embassy in London since June 19 to avoid extradition to Sweden, where he is wanted for questioning on sex crime allegations.

The former computer hacker, whose WikiLeaks website published thousands of secret U.S. diplomatic cables in 2010, says he fears he could be sent to the United States, where he believes his life would be at risk.

Chevron Corp. (CVX.N) and many U.S. business groups are already urging the White House to suspend Ecuador's trade benefits under the Andean Trade Preferences Act, which dates back to the early 1990s.

Human rights group, in another sign of eroding support in Washington for Ecuador, also have raised concerns about Correa's clamp down on the media, said Michael Shifter, president of the Inter-American Dialogue, a think tank focused on U.S. relations with Latin America.

"There's an irony that someone like Correa, who is criticized for his attacks on press freedom, is allied with somebody (Assange) who is supposed to be a champion for the freedom of information," Shifter said.

"What sort of brings them together is their defiance of the United States," Shifter said.

Congress first passed the Andean trade program in 1991 to help create jobs in the region and discourage the illegal drug trade. It allowed Colombia, Peru, Bolivia and Ecuador to ship thousands of goods to the United States without paying duties.

Ecuador is now the sole beneficiary under the program since Colombia and Peru have negotiated free trade pacts with the United States and the White House suspended Bolivia in 2008 for its failure to cooperation in the U.S. war on drugs.

OIL AND MANGOES

Ecuador exported about $1.7 billion worth of goods to the United States under the program in 2011, mainly $1.6 billion of petroleum products. That was down sharply from $4.2 billion in 2010, partly reflecting an eight-month expiration of the program while the U.S. Congress and the Obama administration bickered over a number of trade concerns.

Other important exports for Ecuador under the program include cut flowers and fruits such as mangoes and pineapples.

The program will expire again next July unless Congress votes to renew it. In addition, the Obama administration could suspend Ecuador's benefits sooner if it decides Quito is not meeting the program's eligibility requirements.

"In my view, (a decision to grant Assange asylum) would add to the growing weight of issues arguing against reauthorization next summer. The question is whether it would also create sufficient interest in suspending the benefits before they actually expire," Farnsworth said.

Last week, the U.S. Trade Representative's office announced the start of its annual review process for Ecuador and set a September 17 deadline for interested parties to file petitions asking Ecuador's trade benefits be terminated or reduced.

Over the past several months, a number of U.S. business groups have already weighed in with such recommendations.

Most are based in part on Chevron Corp.'s long-running legal battle with Ecuador over pollution blamed on Texaco, which Chevron purchased in 2001.

An Ecuador court ruled against Chevron in February 2011 and last week damages stemming from that hotly-contested decision were increased to $19 billion from $18.2 billion.

Chevron says Texaco settled the case with Ecuador in 1998 and the new ruling against it was obtained by fraud.

The company also accuses Ecuador of ignoring an international tribunal's interim ruling that directed it to suspend efforts to collect damages in the case.

Bill Reinsch, president of the National Foreign Trade Council, whose members include Chevron, said the business community hopes for action from the White House on Ecuador's trade benefits, aside from the Assange case.

However, a decision by Correa to grant Assange asylum "would provide the excuse (to suspend benefits) if the administration is looking for one to do it," Reinsch said. (Editing by Anthony Boadle)