NOTIFICATION UNDER PARAGRAPH 9 OF THE UNDERSTANDING
ON THE BALANCE-OF-PAYMENTS PROVISIONS OF THE
GENERAL AGREEMENT ON TARIFFS AND TRADE 1994

COMMUNICATION FROM ECUADOR

The following communication, dated 4 October 2016, is being circulated at the request of the delegation of Ecuador.

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In accordance with the notification requirements set forth in paragraph 9 of the Understanding on the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994, and in order to maintain transparency in the steps it has taken during this process, Ecuador hereby notifies that as of 26 October 2016, in strict compliance with Article XVIII, Section B, paragraphs 9 and 11, of the GATT 1994 and in view of the slight improvement in the country's external accounts, the Foreign Trade Committee (COMEX) in plenary session decided to relax the restrictive measure in force because of the disequilibrium in the balance of payments.

Please find attached Resolution No. 021-2016 of the Foreign Trade Committee (COMEX) of 6 September 2016, which amends the Single Annex to Resolution No. 011-2015 adopted by the COMEX in plenary session and amendments thereto, by replacing the 40% tariff surcharge with a 35% surcharge and the 25% tariff surcharge with a surcharge of 15%.

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RESOLUTION NO. 021-2016

THE FOREIGN TRADE COMMITTEE IN PLENARY SESSION

WHEREAS:

Article 261, paragraph 5, of the Constitution of the Republic of Ecuador provides that the central State shall have exclusive jurisdiction over, inter alia, economic, tax, customs, tariff and foreign trade policies;

Article 276, paragraph 2, of the Constitution of the Republic establishes that one of the objectives of Ecuador's development structure is to build a fair, democratic, productive, mutually supportive and sustainable economic system;

Pursuant to Article XVIII, Section B, of the General Agreement on Tariffs and Trade 1994 (GATT 1994), a developing country Member may, if experiencing balance-of-payments difficulties and needing to maintain the implementation of its programme of economic development, restrict the quantity or value of merchandise permitted to be imported, provided that the import restrictions instituted do not exceed those necessary to forestall the threat of, or to stop, a serious decline in its monetary reserves; that is, it may control the general level of its imports in order to safeguard its external financial position and to ensure a level of reserves adequate for the implementation of its programme of economic development;

Article XVIII, Section B, paragraph 11, stipulates that the Member country shall progressively relax the import restrictions applied for balance-of-payments purposes, as conditions improve, and shall maintain them only to the extent necessary;

The Understanding on the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994 of the World Trade Organization (WTO) clarifies the provisions of Articles XII and XVIII, Section B, of the GATT 1994 and of the 1979 Declaration on Trade Measures Taken for Balance-of-Payments Purposes, procedures for consultations, notification and documentation, and conclusions of consultations;

Under paragraph 4 of the Understanding, Members confirm that restrictive import measures taken for balance-of-payments purposes may only be applied to control the general level of imports and may not exceed what is necessary to address the balance-of-payments situation;

Paragraph 9 of the Understanding provides that Members shall notify to the WTO General Council any changes in the application of such measures, and that significant changes shall be notified to the General Council prior to or not later than 30 days after their announcement;

Article 71 of the Organic Code of Production, Trade and Investment (COPCI), published in the Supplement to Official Journal No. 351 of 29 December 2010, created the Foreign Trade Committee (COMEX) as the body entrusted with approving national public trade policies;

Article 72(e) of the COPCI provides that the COMEX, as the governing body for trade policy, shall be responsible for: (e) regulating, facilitating or restricting the export, import, movement and transit of goods that have not been inward cleared or are not Ecuadorian, in the cases provided for in the Code and in the international agreements duly ratified by the Ecuadorian State;

Article 78(f) of the COPCI provides that the COMEX shall be responsible for applying temporary measures to remedy balance-of-payments imbalances;

Article 88 of the COPCI provides that the Ecuadorian State, through the governing body for trade policy, may adopt trade defence measures that restrict imports of products for balance of‑payments protection, such as safeguard measures and any other mechanism recognized by the international treaties duly ratified by Ecuador;

Executive Decree No. 25, published in the Supplement to Official Journal No. 19 of 20 June 2013, created the Ministry of Foreign Trade as the State body responsible for trade policy and, in its Third Amending Provision, provided that it should preside over the COMEX;

In the framework of the WTO's multilateral rules, the COMEX, meeting in plenary session on 6 March 2015, adopted Resolution No. 011-2015, published in the Supplement to Official Journal No. 456 of 11 March 2015, approving the application of a temporary and non‑discriminatory tariff surcharge (5%, 15%, 25%, and 45%), in order to control the general level of imports, safeguard the economy's liquidity and reduce the disequilibrium in the balance of payments;

Article 3 of Resolution No. 011-2015 provides that the safeguard measure shall be duly monitored "in order to ensure that it is commensurate with ongoing needs to overcome the balance-of-payments situation, the intention being to relax the measure as the balance improves and eliminate it when it is no longer necessary";

The COMEX, meeting in plenary session on 8 April 2015, adopted Resolution No. 016-2015, published in the Supplement to Official Journal No. 483 of 20 April 2015, under which it was decided to amend Resolution No. 011-2015, as adopted by the COMEX in plenary session and published in the Supplement to Official Journal No. 456 of 11 March 2015, in accordance with the provisions of the said Resolution;

Pursuant to Resolution No. 046-2015, which was adopted by the COMEX in plenary session on 11 December 2015 and entered into force on 16 December 2015, the COMEX decided to amend the Annex to Resolution No. 011-2015, as adopted by the COMEX in plenary session and published in the Supplement to Official Journal No. 456 of 11 March 2015, in respect of the subheadings listed in that Annex;

Pursuant to Resolution No. 047-2015, which was adopted by the COMEX in plenary session on 24 December 2015 and entered into force on 13 January 2016, the COMEX decided to amend the Annex to Resolution No. 046-2015, which was adopted by the COMEX in plenary session on 11 December 2015 and entered into force on 16 December 2015, in respect of the subheadings listed in that Annex;

In document WT/BOP/G/23, published on 26 October 2015, the Republic of Ecuador officially notified the WTO Committee on Balance-of-Payments Restrictions of the World Trade Organization of the timetable for the dismantling of the measure restricting imports because of the disequilibrium in Ecuador's balance of payments;

Pursuant to Resolution No. 001-2016, which was adopted by the COMEX in plenary session on 21 January 2016 and entered into force on 31 January 2016, the COMEX decided to amend the tariff surcharge on the tariff subheadings listed in the Single Annex to Resolution No. 011-2015, as adopted by the COMEX in plenary session and published in the Supplement to Official Journal No. 456 of 11 March 2015, and amendments thereto, by reducing it from 45% to 40%, in accordance with the timetable for the dismantling of the measure submitted to the WTO Committee on Balance-of-Payments Restrictions;

Pursuant to Resolution No. 006-2016 of 29 April 2016, the COMEX decided to partially implement the timetable for the dismantling of the safeguard measure, scheduled to take effect in April 2016, removing only the 5% tariff surcharge rate (mainly on raw materials and capital goods), and to defer implementation of the next stage of the remaining timetable to April 2017 (reduction by one third on a monthly basis from April to June), chiefly because of the adverse effects of the earthquake in the coastal areas and the damage caused, which has been estimated at more than 3% of GDP.

Technical Report No. 013-BOP-AI-2016 of 5 September 2016, issued by the Inter-Institutional Technical Group responsible for analysing the scope of the safeguard measure, showed a recovery in the overall trade balance in the first half of 2016, according to the Ministry responsible for coordinating economic policy, compared to the deficit posted during the same period the previous year. This is mainly due to an improvement in non-oil trade performance, from US$-2,853 million between January and June 2015 to US$-598 million over the same period in 2016, i.e. a recovery of almost 80%.

The aforementioned Technical Report also considers that, according to the Ministry responsible for coordinating economic policy, Ecuador will see a process of gradual recovery over the coming months and that given the relative improvement in trade balance figures, it is possible to partially relax the balance-of-payments safeguard measure, for example by levelling the tariff surcharges. Nonetheless, it is necessary to closely monitor developments in the external sector of the Ecuadorian economy;

The COMEX, meeting in plenary session on 6 September 2016, examined and approved Technical Report No. 013-BOP-AI-2016 of 5 September 2016, presented by the Inter-Institutional Technical Group responsible for analysing the scope of the safeguard measure, which, taking into account the signs of recovery of Ecuador's macroeconomic situation, recommends relaxing the safeguard measure, by reducing only the 40% rate to 35% and the 25% rate to 15%;

Pursuant to Resolution No. MCE-DM-2015-0003-R of 12 August 2015, Mr Xavier Rosero Carrillo, an official of the Ministry of Foreign Trade, was appointed Technical Secretary of the Foreign Trade Committee (COMEX);

In exercise of the powers conferred under the COPCI, in accordance with Article 70 of the COMEX Operating Regulations, issued by Resolution No. 001-2014 of 14 January 2014, and other applicable regulations,

HEREBY DECIDES:

Article 1.- To amend the Single Annex to Resolution No. 011-2015, as adopted by the COMEX in plenary session and published in the Supplement to Official Journal No. 456 of 11 March 2015, and amendments thereto, by replacing the 40% tariff surcharge with a 35% surcharge and the 25% tariff surcharge with a surcharge of 15%.

Article 2.- To replace the table in Article 2 of Resolution No. 006-2016, as adopted by the COMEX in plenary session on 29 April 2016, with the table below:

GENERAL PROVISIONS

FIRST.- The amendments incorporated in this Resolution apply only to the provisions indicated herein; otherwise the provisions of Resolution No. 011-2015, as adopted by the COMEX in plenary session and published in the Supplement to Official Journal No. 456 of 11 March 2015, and Resolution No. 006-2016 of 29 April 2016, respectively, shall apply.

SECOND.- The Technical Secretariat of the COMEX, in exercise of its powers under the COMEX Operating Regulations, shall forward this Resolution to the Official Journal for publication.

FINAL PROVISION

This Resolution shall enter into force on 26 October 2016, without prejudice to its publication in the Official Journal, and shall be implemented in accordance with Article 112 of the Organic Code of Production, Trade and Investment (COPCI).

FOR COMMUNICATION AND PUBLICATION.- Done at Quito, Metropolitan District, on 6 September 2016.

Humberto Jiménez                                                              Xavier Rosero

CHAIRMAN                                                                            SECRETARY

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