VZCZCXYZ0003
RR RUEHWEB

DE RUEHQT #0509 1752327
ZNR UUUUU ZZH
R 242327Z JUN 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0532
INFO RUEHBO/AMEMBASSY BOGOTA 8226
RUEHCV/AMEMBASSY CARACAS 3608
RUEHLP/AMEMBASSY LA PAZ JUN LIMA 3279
RUEHGL/AMCONSUL GUAYAQUIL 4434
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/USDA FAS WASHDC 0641

UNCLAS QUITO 000509 
 
SENSITIVE 
SIPDIS 
 
USTR for Bennett Harman 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN EC
SUBJECT: ECUADOR MODIFIES BALANCE OF PAYMENTS SAFEGUARD MEASURES 
 
REFTEL A:  Geneva 500 
       B:  Quito 60 
 
¶1.  (U) Summary:  On June 23, the GOE announced modifications to its 
import measures implemented in January in response to what it termed 
a balance of payments (BOP) crisis.  Based on recent commitments in 
WTO BOP Committee meetings, the GOE announced that it was 
transitioning most of its "safeguard" quota measures to tariffs. 
The GOE also intends to reinstate trade preferences for its Andean 
Community (CAN) trading partners.  End Summary. 
 
¶2.  (U) Minister for the Coordination of Production Nathalie Cely 
and Minister for Industries and Productivity Xavier Abad announced 
on June 23 that the GOE was adjusting its import safeguard measures 
implemented in January.  The measures imposed quotas and tariffs 
above WTO bound rates on imported products in response to a 
GOE-declared BOP crisis (reftel A).  Under the original measures, 
627 products (mostly consumer goods) were affected:  356 by tariff 
increases and 271 by quotas.  The measures also removed any tariff 
preferences granted to Ecuador's trading partners, requiring them to 
pay MFN tariffs in addition to the safeguards.  During the WTO BOP 
Committee meetings which ended on June 4, the GOE committed to 
replace most of its quantitative restrictions with price-based 
measures by September 1 (reftel B).  The revisions announced 
yesterday move all but 20 products from quotas to tariffs.  The 
change will take effect on June 25. 
 
¶3.  (SBU) The revisions affect 251 products; the 356 products that 
had duties imposed in January are not affected by this change.  Of 
the 251 products that will no longer be under quota, 234 must pay a 
12 percent tariff charge on top of the pre-"safeguard" tariff level. 
 The remaining 17 items include:  10 automotive products (parts of 
car assembly kits) which must pay a 3% tariff charge; apples, 
grapes, and pears, which must pay a 10c/kilo specific tariff; and 
four tariff lines for tires which must pay a 80c/kilo specific 
tariff.  The 20 products remaining under the quota system will 
reportedly not be announced until late on June 24.  Commoff 
conversations with contacts indicated that these products are used 
primarily in what the GOE considers its "strategic industries."  One 
GOE official indicated publicly that these products might include 
raw materials such as plastics.  He maintained that quotas would be 
retained to ensure that prices for these products do not rise. 
 
¶4.  (U) Ministers Abad and Cely also announced that a decision on 
whether to restore trade preferences for Ecuador's CAN partners was 
imminent.  (Note:  Ecuador's trade measures affected its CAN 
partners inordinately, as they went from paying zero tariffs to MFN 
plus tariff charges, on some products reaching a total of 60%.  CAN 
members requested the CAN rule on the validity of Ecuador's 
measures; the CAN said that Ecuador could maintain its safeguard 
measures but must reinstate CAN preferences.)  Minister Cely noted 
that, as the head of Ecuador's trade committee COMEXI, she 
recommended the country comply with the CAN decision. 
 
¶5.  (SBU) Comment:  It is positive that the GOE is moving quickly to 
comply with its commitments in the WTO BOP Committee to switch to 
price-based measures in place of quotas.  A decision at the same 
time to reinstate CAN preferences may or may not be problematic in 
the WTO.  End Comment. 
 
HODGES