WORLD TRADE
ORGANIZATIONG/SG/Q2/ECU/5
27 May 2003
(03-2839)
Committee on Safeguards Original:  Spanish
NOTIFICATION UNDER ARTICLE 12.1(a) OF THE AGREEMENT
ON SAFEGUARDS CONCERNING A FINDING OF
SERIOUS INJURY OR  THREAT THEREOF
CAUSED BY INCREASED IMPORTS
NOTIFICATION UNDER ARTICLE 12.1(c) OF
THE AGREEMENT ON SAFEGUARDS
Replies to Questions Posed by CHILE1 Regarding the Notification
of ECUADOR2
The following communication, dated 6 May 2003, has been received from the Permanent
Mission of Ecuador.
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I have pleasure in sending you the enclosed document, which contains the replies by Ecuador
to the questions posed by Chile on 24 April 2003 regarding the notifications of Ecuador concerning
the adoption of a provisional safeguard measure on fi breboard. Those notifications were circulated in
documents G/SG/N/6/ECU/3 and G/SG/N/10/ECU/2.
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The following questions refer to Ecuador's notifications under Article 12.1(a) and (c) of the
Agreement on Safeguards (initiation of an inves tigation and adoption of a provisional measure).
1. The notification indicates that the meas ure applies to "medium-density fibreboard
(MDF), classified under NANDINA heading 4411". To how many by-products in the NANDINA
heading 4411 does the safeguard measure apply?
The measure applies to NANDINA heading 4411, which, in conformity with the import tariff,
covers the following 8 sub-headings:
4411.11.00, 4411.19.00, 4411.21.00, 4411.29.00, 4411.31.00, 4411.39.00, 4411.91.00 and
4411.99.00.
2. What products does the enterprise reque sting the investigation produce other than
fibreboard (MDF)?
                                                     
1 G/SG/Q2/ECU/4
2 G/SG/N/6/ECU/3 and G/SG/N/10/ECU/2G/SG/Q2/ECU/5
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Aglomerados Cotopaxi S.A. produces particle  board with various finishes (hardboard),
medium-density fibreboard (MDF), pieces of solid  sawn wood of various dimensions, finger-joint
strips and blockboard.
3. Do the products of the enterprise request ing the investigation correspond to their own
production or production by third parties?
Aglomerados Cotopaxi S.A. produces the fibreboa rd in its own factory and not through third
parties.
4. What, in Ecuador's opinion, are the unfores een circumstances that explain an increase
in imports of fibreboard and justify the adoption of a safeguard measure?
The Agreement on Economic Complementarity and the Reciprocal Protection of Investments
(AC-32) has led to a significant increase in imports of fibreboard as a result of the establishment of a
preferential margin of 100 per cent for the mass entry of this product into the Ecuadorian market.
5. In the notification on initiation of an investigation, it is indicated that the evidence "on
the basis of which the investigation was initiated" are imports from 1999-2001, which showed a
sustained and steady increase of 327.2 per cent, and a downward trend in the profits of the
domestic industry.  Is this sufficient evidence to initiate a safeguards investigation?
An analysis of the information and documentati on provided by the applicant enterprise shows
the existence of factors that have been clearly affe cted by the steady growth in imports, such as sales,
the ever increasing share of the local market taken by the imported product, the rise in inventories, the
losses suffered by the enterprise, and the reduction in installed capacity, production and productivity,
together with the impossibility of reducing wages, which have remained at the same level.
6. Why does Ecuador consider that the increa se in imports of fibreboard (MDF) is the
substantial cause of the serious injury – replaceme nt of the domestic product on local markets –
suffered by Ecuador's industry?
The applicant enterprise states that the variables that are threatened by serious injury were not
affected during the periods when no massive imports occurred, whereas since growing imports of theproduct have been recorded these variables have deteriorated.
7. Although there has obviously been an increase in imports,  to what extent does this
respond to an increase in the exchange rate?  In  other words, has there been a similar increase
in imports by other sectors of Ecuador's economy?
The introduction of dollarization has enabled Ecuador to achieve macro-economic stability,
which has helped it to overcome a severe crisis. That recovery has led to increases in the imports of
some goods.
8. When notifying the initiation  of the investigation, Ecuador submitted figures for the
year 2001. In the notification on the provisional measure, for some of the factors the figures are
those for the year 2002. The figures for 2002 show ed that there has been a decrease in the
growth rate for imports (although in absolute te rms they continue to increase) and a substantial
reduction of losses. What period did the inve stigating authority take into account for the
purposes of the investigation?
The period of investigation established by the investigating authority was 1999, 2000, 2001
and January-November 2002.G/SG/Q2/ECU/5
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9. The safeguard applied by Ecuador is provisional and, according to Article 6 of the
Agreements on Safeguards, the safeguard measure may be imposed when there are critical
circumstances where delay would cause damage which it would be difficult to repair. In this
regard, could Ecuador explain how critical the situation is in the domestic industry, in
particular, why does it run the risk of damage which it would be difficult to repair?
The growth in imports during the period under review has led to a displacement of domestic
production in the local market, associated with the easy distribution of imported products in the local
market.  Earnings have also been falling and Aglomerados Cotopaxi S.A. has recorded negative
results during the last three years, leading to a deterioration in the company's market share and in
economic and production performance which, if not corrected, would cause injury that could not
easily be remedied.
10. In view of the fact that the enterprise requesting the measure accounts for 100 per cent
of the domestic industry, is there any adjustment plan for this industry to improve its
competitiveness when the safegu ard measure no longer applies?
Aglomerados Cotopaxi S.A. has been requeste d to submit a readjustment plan which would
enable it to improve its competitiveness,  should the provisional measure be confirmed.
11. Has Ecuador previously applied anti-dumping or countervailing duties on imports of
fibreboard (MDF) from any other exporting country? Are there any substitute products forfibreboard (MDF)? If so, has Ecuador applied anti-dumping or countervailing duties to those
products?
No measures of that kind have been taken.
12. Does the safeguard measure apply to Ande an countries ? Are they included in the
investigation?
The Andean countries are excluded from the application of the safeguard measure, although
they are included in the investigation.
13. What is the current state of the investigations?
The investigating authority, on the basis of the information, documentation and arguments
provided by the interested parties, is now preparing the final report for submission to the Foreign
Trade and Investment Council (COMEXI) for decision.
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