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DE RUEHQT #0162/01 0411845
ZNR UUUUU ZZH
R 101844Z FEB 10
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0949
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBO/AMEMBASSY BOGOTA
RUEHCV/AMEMBASSY CARACAS
RUEHGL/AMCONSUL GUAYAQUIL
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RUEHQT/AMEMBASSY QUITO
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC

UNCLAS QUITO 000162 
 
SENSITIVE 
SIPDIS 
DEPT FOR WHA/AND AND EEB/TPP/MTAA FOR CRAFT 
PASS TO USTR FOR HARMAN, RHODE,EISSENSTAT, AND SHACKLEFORD 
TREASURY FOR YUAN 
USDOC FOR ITA 
 
E.O. 12958: N/A 
TAGS: ETRD ECON WTRO USTR EC
SUBJECT: GOE EXTENDS BOP SAFEGUARDS BY SIX MONTHS, ELIMINATES 
EXCHANGE RATE SAFEGUARDS ON COLOMBIAN PRODUCTS 
 
REF: QUITO 96; QUITO 53; 09 QUITO 509; QUITO 102; 09 QUITO 1026 
 
¶1.   (SBU)   Summary.  Embassy has confirmed that Ecuador's Foreign 
Trade and Investment Council (COMEXI) has developed a definitive 
schedule to eliminate the balance of payments (BoP) safeguards 
within six months.  The safeguards were supposed to be eliminated 
by their one year anniversary on January 23, 2010.  Following a 10% 
reduction in the safeguards on January 23, COMEXI has now decided 
the BoP safeguards will be reduced by 30% every two months until 
their final elimination on July 23.  Publication of the COMEXI 
decision, bringing it into force, is expected within one to two 
weeks.  Separate protective measures for the footwear and textile 
sectors are still in the works.  In line with a previously 
announced timeline, COMEXI also decided to eliminate exchange rate 
safeguards, that had been in place since July 2009, on a final 
group of 236 Colombian products.  Neither of these COMEXI decisions 
has been published yet on its website.  End Summary. 
 
¶2.   (SBU)   Ecuador's Foreign Trade and Investment Council 
(COMEXI) passed a resolution on February 3 that establishes a 
schedule for reducing existing balance of payments (BoP) safeguards 
every two months until their final elimination on July 23, 2010. 
The safeguards were put into place January 22, 2009 and were 
supposed to be eliminated after one year (Refs A, B and C). 
COMEXI's February resolution confirms the GoE's intention to 
continue the safeguards for an additional six months (Ref D).  The 
February 3 COMEXI decision has not been published yet, but Econoff 
confirmed the content with officials at the Ministry of Foreign 
Affairs (MFA) and Ministry of Industries and Productivity (MIPRO). 
COMEXI decisions are usually published within one to two weeks. 
 
¶3.   (SBU)   On January 23, 2010, the safeguards were reduced by an 
initial 10%, as per COMEXI Resolution 533, published on January 15. 
According to the February 3 COMEXI decision, the safeguards will be 
reduced by an additional 30% on March 23, another 30% on May 23, 
and a final 30% on July 23.  As an example, if the surcharge under 
the GoE's balance of payments measure had been a 12% ad valorem 
tariff, as of January 23, that tariff became 10.8%.  On March 23, 
the tariff would be reduced to 7.2%; on May 23 it would be reduced 
to 3.6%; and on July 23 the tariff would be eliminated.  Specific 
tariffs would be reduced in a similar fashion. 
 
¶4.  (SBU)   Contacts at the MFA and MIPRO also confirmed that 
COMEXI is devising separate protective measures for the footwear 
and textile sectors.  For now, these products remain within the 
group of 627 products affected by the BoP safeguard measure. 
However, press reports state that COMEXI has decided to apply a 10% 
ad valorem plus $6 specific tariff to footwear.  We cannot confirm 
at this time the level of import protection the GoE plans to apply 
to the footwear and textile sectors or the timing for these new 
measures, but suspect they will come into force before final 
elimination of the BoP safeguards. 
 
¶5.  (U)   Separately, local press has reported that COMEXI also 
approved elimination of exchange rate safeguards for a final group 
of 236 imports from Colombia.  Under this safeguard measure, 
certain imports from Colombia were subject to the BoP safeguard 
measure on top of the MFN tariff rate, rather than the Andean 
Community preferential tariff rate of zero.  The safeguards were 
initially imposed on 1,346 products in July 2009.  The number of 
covered products was reduced to 666 in August 2009.  A further 319 
products were removed from the safeguards in October, and an 
additional 111 in December.  This latest COMEXI decision is in line 
with the policy and timeline previously announced by the GoE for 
elimination of safeguards on Colombian products (Ref E and 
previous).  The safeguards have had deleterious effects on a number 
U.S. companies, including some producing chocolate products and pet 
food. 
 
Comment 
 
¶6.  (SBU)   The GoE is expecting to encounter criticism at the next 
 
 
WTO Balance of Payments Committee meeting.  However, comments by 
our MFA interlocutor lead us to conclude that the GoE believes the 
establishment of an elimination schedule will help to dampen the 
criticism and help Ecuador avoid any specific action against it 
within the WTO. 
HODGES