WORLD TRADE
ORGANIZATIONG/SG/Q2/ECU/7
13 October 2003
(03-5420)
Committee on Safeguards Original:  Spanish
NOTIFICATION UNDER ARTICLE 12.1(a) OF THE AGREEMENT ON
SAFEGUARDS ON INITIATION OF AN INVESTIGATION
AND THE REASONS FOR IT
NOTIFICATION UNDER ARTICLE 12.1(c)
OF THE AGREEMENT ON SAFEGUARDS
Questions Posed by CHILE Regarding the Notification from ECUADOR1
The following communication, dated 13 October 2003, has been received from the Permanent
Mission of Chile.
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I hereby submit Chile's questions regarding the notifications from Ecuador on the
investigation and adoption of a safeguard measure on fibreboard.  These questions supplement those
that were posed by Chile in document G/SG/Q2/ ECU/4 and answered in document G/SG/Q2/ECU/5.
                                                     
1 G/SG/N/6/ECU/3 and G/SG/N/10/ECU/2.G/SG/Q2/ECU/7
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Questions regarding the application of the definitive safeguard measure on imports of
fibreboard adopted by the Foreign Trade and Investment Council of Ecuador (hereinafter referred to
as 'COMEXI').
I. CLARIFICATION OF QUESTIONS POSED BY CHILE AT THE MEETING OF THE
COMMITTEE ON SAFEGUARDS LAST APRIL
1. Please describe the analysis carried out by the Ecuadorian investigating authority which led it
to conclude that the eight subheadings under tariff heading 4411 are like products or products directly
competitive with each other.  Please describe the analysis carried out by the Ecuadorian investigating
authority which led it to conclude that the eight subheadings under tariff heading 4411 are products
alike to or directly competitive with imported goods.
2. Ecuador indicated that the entry into force of Economic Complementarity Agreement (ACE)
No. 32 has been an unforeseen development.  This agreement was signed on 20 December 1994, with
the tariff cut under heading 4411 beginning on 1 January 1995 and culminating on 1 January 1998
with a 100 per cent preference.  How, therefore, can  the entry into force of ACE No. 32 be considered
an "unforeseen development" justifying the imposition of a safeguard measure?
3. Ecuador indicated that the dollarization of its economy had generated an economic recovery
that had, in turn, led to an increase in imports of various products.  If this were the case, increased
imports would have been a foreseeable consequence of government policy.  How, therefore, can the
investigating authority maintain that the increa se in imports is attributable to "unforeseen
developments" – a requirement for the application of safeguards under Article XIX of the GATT?
4. When questioned about the critical circumstances in which delay would have caused injury to
the domestic industry that it would have been difficult to repair, Ecuador's reply was not satisfactory,
as it referred to events that were a perfectly normal part of the process of marketing imported
products.  It would be hard to classify " the easy  distribution of imported products in the local market "
as a critical circumstance.
5. Ecuador indicated that once the provisional safeguard measure had been confirmed, the
domestic industry, i.e. Aglomerados Cotopaxi, would submit, at the request of the investigating
authority, a readjustment plan that would allow it to  improve its competitiveness.  Has this plan been
submitted?  If not, when will it be submitted?  If the plan has already been submitted, what does it
entail?
6. Ecuador indicated that the countries of the Andean Community are excluded from the
safeguard measure " although they are included in the investigation ".  In its reply, Ecuador did not say
whether the Andean Community countries exported the product concerned to Ecuador and thereforecontributed to the alleged injury or threat thereo f.  Should this be the case, would excluding these
countries from the measure not be arbitrary and contrary to the provisions of the WTO Agreement on
Safeguards?
II. CONSIDERATIONS EXPRESSED BY THE ANDEAN COMMUNITY IN ANDEAN
COMMUNITY RESOLUTION No. 705
7. Preambular paragraph 15 of Andean Community Resolution No. 705 states that "according to
the Ecuadorian Government, a request for safeguard measures on all products under tariff heading
4411, which comprises eight subheadings, shall be made on the basis of practical reasons, as it would
otherwise be easy to circumvent the measures when importing the product, particularly in the light of
minimal differences in weight in grams per cubic centimetre that would be impossible to detect atcustoms".  Under which provision of the WTO Ag reement on Safeguards did Ecuador group togetherG/SG/Q2/ECU/7
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the eight subheadings of tariff heading 4411?  Does Ecuador consider it legitimate to group together
subheadings representing products that are neither alike nor directly competitive?
8. Preambular paragraph 23 of Andean Community Resolution No. 705 states that "the
Ecuadorian Government indicated that the average salary within the domestic industry had increased
substantially due to the dollarization of the economy.  It also indicated that this situation applied to theentire domestic economy, explaining that the 55 per cent increase in labour costs over the previous
four years had occurred in response to real even ts affecting the industry's competitiveness and could
be compared to the increased cost of other goods and services".  Did the investigating authority
consider this salary increase when analysing the loss of competitiveness of the Ecuadorian product
and its consequent bearing on the alleged injury?  Is the loss of competitiveness suffered by the
domestic industry not a foreseeable development resulting from increased imports of like or directly
competitive products and/or a drop in exports?  Can the foregoing be considered by the investigatingauthority to constitute unforeseen developments?
9. Preambular paragraph 27 of Andean Community Resolution No.705 states that "in a
communication dated 6 March 2003, the Colombian Government indicated that the Ecuadorian
Government's report contained inconsistencies of a legal and technical nature, which it believed
would lead the Secretary General to consider the imposed measure as inappropriate".  Were the legaland technical inconsistencies that Colombia referred to amended by the Ecuadorian investigating
authority and was the measure corrected consequentially?
III. FORMAL ASPECTS
10. If the investigation began on 5 December 2002,  could Ecuador please explain why the WTO
was not notified until 20 February 2003 (G/SG/N/6/ECU/ 3)?  Similarly, could Ecuador please explain
why the WTO has not yet received official notification of the provisional safeguard measure, adopted
on 8 January 2003?
11. Could Ecuador please submit a copy of Executive Decree No. 3497 of 14 January 2003?  Is
this Decree in force?  Has it been notified to the WTO?
12. Could Ecuador please state whether the report required under Article 3.1 of the WTO
Agreement on Safeguards, setting forth the findings and reasoned conclusions reached on all pertinent
issues of fact and law, has been published?
13. Is the quantitative restriction imposed by Ecuador equal to or higher than the average level of
imports over the last three years?  Could Ecuador please submit any data regarding the average level
of imports?
14. On the basis of which provision of the WTO Safeguards Agreement did the Ecuadorian
investigating authority allocate quotas to importers ?  Among the Ecuadorian companies that are able
to import, are there any Ecuadorian producers of the product in question or of like products, or any
companies related to such producers?  How will the unused quotas be reallocated?  Will these quotas
be cumulative after 12 months?
15. The COMEXI Resolution that imposes the measure does not indicate the "methodology used"
to determine an alleged threat of serious injury (as required under Decree No. 3497).  Could Ecuadorplease provide information on the methodology applied?
16. From what date does Ecuador calculate the period of application of the measure?  When will
the first year be completed?G/SG/Q2/ECU/7
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17. If the measure is extended, does Ecuador intend to apply the same quota administration
method?  Will the list of authorized importers be modified?  How will the quota increase be allocated?
(Please note that Chile does not consider the individual allocation of quotas to importers to be a valid
mechanism under the provisions of the WTO Agreement on Safeguards).
18. Which body is in charge of administering the quota?  Is information regarding the utilization
of the quota publicly available?  (Please note that Chile does not consider the individual allocation of
quotas to importers to be a valid mechanism under the provisions of the WTO Agreement on
Safeguards).
IV. SUBSTANTIVE ASPECTS
19. To which domestic industry has the safeguard been applied?  Which products are alike to or
directly competitive with the imported product?  (Please provide disaggregated HS code data).
20. Could Ecuador please provide detailed figures for each tariff subheading, regarding the rate
and amount of the increase in imports of the product concerned in absolute and relative terms, the
share of the domestic market taken by increased imports, changes in the level of sales, production,
productivity, capacity utilization, employment, profits and losses, and employment (Article 4.2(a) of
the WTO Agreement on Safeguards)?
21. COMEXI Resolution No.193 states that an inspection on the industrial premises of Cotopaxi
revealed that "the productivity levels achieved by the company in the past had apparently  been
affected by fibreboard imports".  In accordance with Article 4.1(b) of the Agreement on Safeguards,
"the existence of a threat of serious injury shall be based on facts and not merely on allegation,
conjecture or remote possibility" and Article 4.2(b) states that the investigation should demonstrate,
"on the basis of objective evidence , the existence of the causal link between increased imports of the
product concerned and serious injury or threat thereof".  Could Ecuador please define the scope of the
term "apparently", as it appears in the above-mentioned Resolution?
22. To what extent is the alleged decrease in the installed capacity of the production line for
veneer wood, the line for drying veneer panels, the wood-sawing line, the finger joint and veneer
assembly line and the finger joint press, a result of  the fibreboard imports?  Could there be any other
reasons relating to the market for these specific production lines?
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