TWN Info Service on WTO and Trade Issues (Jul16/01)
1 July 2016
Third World Network

Ecuador's import surcharge extension divides BOP Committee
Published in SUNS #8270 dated 27 June 2016

Geneva, 24 Jun (Kanaga Raja) - The Committee on Balance-of-Payments Restrictions of the World Trade Organisation remained divided Thursday (23 June), on whether import surcharges imposed by Ecuador on a range of goods on balance-of-payments (BOP) grounds are in compliance with the WTO rules.

Ecuador had been implementing the import surcharge on BOP grounds since 11 March 2015, and had initially set a June 2016 deadline to completely phase out these surcharges.

Citing amongst others an unfavourable economic situation, Ecuador has now deferred, for an additional year, the implementation of the rest of the timetable to phase out the remaining import surcharges.

Under the new timetable, the existing surcharges will be reduced one third by April 2017, with the measure being eliminated completely by end-June 2017.

Ecuador had notified to the Committee in May 2016 the modification of the timetable for dismantling its BOP safeguard measure.

In its May communication to the BOP Committee, Ecuador said on 16 April this year, it was hit by an earthquake measuring 7.8 on the Richter scale. The entire country was severely affected, especially its coastal areas where the main economic activities are tourism and the production of at least three of Ecuador's leading export products: tuna, coffee and shrimp.

The event resulted in the sad loss of many human lives and caused substantial material damage; its humanitarian consequences, together with the restoration and rebuilding of the cities and towns affected, will require vast amounts of resources in the short- and medium-term, while the country's full recovery is a long-term undertaking, it said.

Ecuador said that this serious situation has occurred in the most unfavourable circumstances for the country. The prevailing macroeconomic conditions showed a severe deterioration in the balance of payments, which the country has been unable to resolve fully despite the remedies applied through the current safeguard measure and other additional measures taken by the government.

Further, international oil prices, together with the strength of the dollar, continue to put pressure on external accounts, which now have the additional burden of restoration, reconstruction and emergency humanitarian assistance, a situation that will put even more pressure on foreign exchange outflows, the balance-of-payments, and consequently the liquidity of the economy.

Ecuador said it has already taken the relevant economic measures to address this matter, and has activated all the contingency loans to which it has access.

"These loans cannot, however, provide enough to deal with this new and complex situation, which will require tremendous amounts of resources," said the Ecuadorian communication.

The new timetable set out by Ecuador for dismantling the safeguard measure by end of June 2017 is as follows: 15% surcharge, to be reduced to 10% in April, to 5% in May and to zero in June; 25% surcharge, to be reduced to 16.7% in April, to 8.3% in May and to zero in June; 40% surcharge, to be reduced to 26.7% in April, to 13.3% in May, and to zero in June.

According to trade officials, while all Members voiced solidarity with the people of Ecuador and welcomed its sharing of information, several called on the country to dismantle the safeguard measure as soon as possible and to adopt less trade-restrictive measures.

Concerns were expressed as to whether the safeguard measure can be justified economically and whether it is in line with the WTO rules.

Japan and Korea were among those that expressed concerns that the measure is negatively affecting their exports.

Japan in particular cited its automobile sector (which Ecuador had justified with the objective of protecting the environment), while Korea cited mobile phones.

Several members called for a fifth consultation with Ecuador over this issue.

According to trade officials, Canada, Chile, Colombia, the European Union, Japan, Korea, Mexico, Peru, Switzerland and the US did not support the Ecuadorian measure.

On the other hand, Bolivia, Chinese Taipei, Cuba, Jamaica, Dominican Republic, Paraguay and Uruguay voiced support for Ecuador's measure.

According to trade officials, the BOP Committee is to continue its consultations with Ecuador on this issue.