Since 11 March, Ecuador has been imposing surcharges on about 30% of imports to safeguard its balance of payments due to a “highly unfavourable economic climate”. These surcharges consist of 5% on non-essential capital and primary capital goods, 15% on imports of "medium need", 25% on ceramics, tyres, motorbikes and TVs and 45% on final consumer goods. Ecuador’s assessment of its economic and balance-of-payments situation is available here. A background report prepared by the WTO Secretariat for these consultations is available here .

A representative from the International Monetary Fund (IMF) gave an overview of Ecuador’s economic situation, particularly emphasising its balance-of-payments situation, including its level of foreign exchange reserves. The IMF representative also referred to the sharp drop in oil prices in late 2014 affecting the main sector of Ecuador’s economy, as well as declining growth and an appreciated currency. The IMF representative also mentioned the structural adjustment measures that Ecuador committed to adopt following recommendations by the IMF Board in 2014.

Ecuador explained that the measure:

• is the ultimate resort to restore equilibrium of its balance of payments, in particular because, as a dollarized economy, it cannot resort to the use of monetary or exchange rate policies

• has been notified to the WTO Committee on Balance-of-Payments Restrictions in line with paragraph 9 of the Understanding on Balance-of-Payments Provisions and under Article XVIII:B of the WTO General Agreement on Tariffs and Trade (GATT) 1994 allowing developing countries to control their level or value of imports when, as part of their process of economic development, they are faced with balance-of-payments difficulties
• excludes essential goods including raw material and capital goods, medicine and medical equipment, car parts, lubricants and fuels
• will be removed after 15 months
• does not exceed the extent necessary to address the balance-of-payments problems
• is adopted in a transparent manner
• will be subject to a trimestral review
• is restrictive but not prohibitive as trade is still flowing into Ecuador.

Twenty-five WTO members shared their views on Ecuador’s import surcharges. While most members acknowledged the deterioration of Ecuador’s balance of payments, and some of them expressed their agreement with the measures, several claimed that the surcharges are causing a burden on their exporters and urged Ecuador to remove the measures as soon as possible. They also urged Ecuador to implement economic reforms and to remain consistent with WTO rules, while looking for less trade-distortive measures. Members also questioned Ecuador on:

• how the situation compares to 2009 when Ecuador first invoked GATT Article XVIII:B

• the economic justification for the measures

• how the measures are helping to restore Ecuador’s balance-of-payments situation

• whether any less trade-distortive measures have been envisaged

• how excluding members of the Latin American Integration Association from the measures can be justified by WTO rules

• whether the support of the IMF is envisaged

• the criteria used to determine the different tariff surcharge rates

• the timeline to remove the measures and if there is any plan to remove the measures earlier. 

 

Next

Chair Ambassador Bertrand de Crombrugghe De Picquendaele of Belgium will continue consulting with members.

The Committee on Balance-of-Payments Restrictions is scheduled to resume its consultations with Ecuador in September.