Trade Policy Review - Ecuador

Statement by David Shark
June 15, 2005

Thank you Chair,

On behalf of the United States, I welcome this opportunity to participate in the first trade policy review of Ecuador. We are especially pleased to welcome Cristian Espinosa back to Geneva, in his capacity as Vice Minister of Foreign Trade and the leader of Ecuador’s delegation today. In addition, we want to thank the Secretariat and the Government of Ecuador for their quality reports, and we appreciate Ambassador Fernando de Mateo’s comments as our discussant; they will help us to focus our work.

The United States and Ecuador share an expanding trade relationship. The United States is Ecuador's principal trading partner, accounting for about 40 percent of its exports and nearly 43 percent of its foreign direct investment. U.S. goods exports to Ecuador were $1.7 billion in 2004, up 15.2 percent from the previous year. U.S. imports from Ecuador were $4.3 billion, up 57.4 percent. Ecuador benefits from duty-free access to the United States for most of its exports under the Andean Trade Preference Act (ATPA), and since May 2004 Ecuador has been participating in the negotiation of a U.S.-Andean free trade agreement (FTA). We hope the FTA will be a key component in Ecuador’s continued reform program and assist its economic growth; in particular, we hope it will stimulate the expansion of Ecuador’s non-oil exports and help to further diversify its economic base.

Chair, in looking through the documents prepared for this meeting, it quickly became apparent that Ecuador has taken positive steps since the 1990s. On the trade side, MFN tariffs have been reduced, and its entire tariff schedule is bound. On the economic side, Ecuador should be proud of its near doubling of per capita GDP during the period 2000-2004, combined with the decline in its inflation rate to only 1.9 percent. While increased oil revenues have contributed to Ecuador’s economic success, greater household consumption and economic reforms, including tax reform, appear to have made significant contributions, too.

At the same time, having reviewed Ecuador’s trade policies and their impact on the multilateral trading system, we have become concerned about Ecuador’s implementation of its WTO obligations in several areas. As I mentioned previously, Ecuador has reduced significantly its MFN tariffs since the 1990s. However, the tariffs applied to some products appear to be higher than bound rates, as the Secretariat Report points out. Furthermore, Ecuador committed to phase out its price band system in its WTO accession protocol – with a total phase-out by 2001 – yet we understand that Ecuador still maintains a price band system applying to imports of more than 150 agricultural products. Another concern involves transparency – we commend the improvements in the transparency of Ecuador’s trade regime that have been taken since the 1990s, but we urge Ecuador to follow up on these improvements by notifying its SPS and TBT measures and bringing its other notifications, such as those under the Agreement on Subsidies and Countervailing Measures, up to date.

In terms of future steps, we urge Ecuador to look at its customs procedures, because improvements in this area would help Ecuador reap the full benefits of lower tariffs and other trade liberalization. According to the Secretariat Report, customs clearance took an average of 12 days last year. Another study found that the cost of customs clearance amounts to around 15 percent of the value of imports. The preshipment inspection program, the import licensing regime, the requirement for Central Bank approval for all imports exceeding US$4,000, and the sheer number of entities and documents involved in customs procedures, all add substantially to the cost of doing business. Ecuador should benefit immensely from negotiations underway in the DDA on trade facilitation, but we would urge it not to wait until the conclusion of negotiations before taking action in this area.

Also in terms of next steps, we encourage Ecuador to build on its comprehensive intellectual property law – enacted in 1998 – with better enforcement, as the effective protection of intellectual property rights can be an important driver of growth and foreign direct investment. The lack of effective enforcement appears to be taking a toll, as music piracy has led to the majority of international record companies closing their offices in Ecuador.

During the course of this review, we seek assurances that Ecuador’s taxes on distilled spirits are being applied equally on imports and domestically produced goods. We urge Ecuador to adopt a more transparent tax regime that applies the same tax rate for all products, such as a fixed rate per degree of alcohol.

We encourage Ecuador to show a high level of ambition in the Doha negotiations and we join others in calling for Ecuador to submit its initial services offer.

In closing, let me commend the Government of Ecuador for the important steps it has taken since the 1990s. But more remains to be done – we urge Ecuador to stay the course and to build on its accomplishments, and we hope today’s review will provide attractive candidates for further liberalization. The United States looks forward to further work with Ecuador – in this review, in our shared objective of successfully concluding the DDA, and in the context of our regional cooperation. Thank you.