WORLD TRADE  
ORGANIZATION  WT/BOP/R/97 
6 November 2009 
 
 (09-5556) 
Committee on Balance-of-Payments Restrictions  
  
 
REPORT ON THE MEETI NG OF 19 OCTOBER 2009 
 
1. The Committee met on 19 October 2009, under the Chairmanship of Ambassador Darlington 
Mwape (Zambia), to conduct the eighth annua l review under the Transitional Review 
Mechanism (TRM) pursuant to paragraph 18 of the Pr otocol of Accession of China to the WTO;  to 
assess Ecuador's progress in the dismantlement of m easures taken for balance-of-payments purposes;  
and to adopt the Annual Report (2009) of the Comm ittee to the General Council.  The agenda for the 
meeting was contained in WTO/AIR/3440. 
2. The Chairman
, turning to the first item of the agenda , recalled that, according to Annex 1A of 
the Protocol, China was requested to provide info rmation on foreign exchange and payments to the 
Committee.  He gave the floor to the representative of China to this end. 
3. The representative of China  thanked the Chairman and stated that China had no comments. 
4. Noting that no other Member had any comments or questions for the delegation of China, the 
Chairman  proposed that he would prepare a brief fact ual report on the TRM to the General Council.  
The report would note that the Committee had met to consider this issue and would contain as an attachment the relevant parts of the minutes of the meeting.  It was so agreed.  Turning to the second 
item on the agenda:  consultations with Ecuador, the Chairman recalle d that Ecuador had notified the 
WTO on 18 February 2009 (WTO document WT/BOP/N/ 65) that it had applied tariff surcharges and 
quantitative restrictions on 630 tariff subheadings at the 10 digit-level, representing 8.7 per cent of all 
the tariff lines, for a year, until 22 January 2010.  The notification had been updated on 
30 March 2009 (document WT/BOP/N/67).  The Comm ittee had held consultations with Ecuador on 
22 and 24 April 2009, 2-4 June, and 25 Septembe r 2009.  As had been explained during the 
Committee's last meeting Ecuador had notified to  the WTO on 16 July 2009 and 8 September 2009 
(documents WT/BOP/N/70 and WT/BOP/N/72, respectively) and further explained in 
WTO document WT/BOP/G/17 that it had passed legi slation to convert into  tariff surcharges the 
quantitative restrictions applied on 271 HS tariff subheadings at the 10 digit-level.  The tariff 
surcharges applied were mostly ad valorem , at levels of 3 per cent, 12 per cent, 30 per cent and 35 per 
cent.  For the majority of these subheadings  (234) the level used had been 12 per cent ad valorem .  
Specific duties had been applied on a few products, including tyres and some fruits.  Recently, on 9 October, Ecuador had submitted a new notifica tion to the Committee (document WT/BOP/G/18).  
He wished to give the floor to the re presentative of Ecuador for further details. 
5. The representative of Ecuador
 stated that, pursuant to th e commitments undertaken by 
Ecuador during the consultations held within the framework of  Balance-of-Payments Committee 
meetings of 22 and 24 April 2009 and 2 and 3 J une 2009, as set out in the conclusions of the 
Committee Report contained in WT/BOP/R/91 of 11 June 2009, his country was submitting the 
periodic report corresponding to the Committee mee tings of October 2009, in accordance with 
Article XVIII:B 12(b) of the GATT 1994 an d paragraph 7 of the Understanding on 
Balance-of-Payments Provisions of the GATT 1994. 
6. On 15 September 2009, Ecuador ha d submitted a report stating, inter alia , that it had 
complied early with its commitments assumed with in the Committee and highlighting, among those WT/BOP/R/97 
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  commitments, the replacement of all quantitative rest rictions with price-based measures.  Ecuador's 
remaining commitments boiled down to two points.  Firstly, to conduct ongoing monitoring for any 
positive short-term developments in  its balance-of-payments position with a view to loosening the 
restrictions imposed and to inform the Committee of any steps that might have been taken to that end.  
Secondly, to confirm its intention to lift the rest rictions on 22 January 2010, as originally proposed.  
As the last report had been examined by the Comm ittee only three weeks before , all Ecuador could do 
for the moment in submitting its new report was to note that its balance-of-payments position had not 
changed significantly thus far.  However, the G overnment of Ecuador continued to monitor the 
development of its balance of payments, and if it were to consider that an acceptable level of 
equilibrium had been reached and there was evidence of stabilization of those factors of the world 
economic crisis that affected the balance, it would so notify the members of the Committee. 
7. It should be noted that the information provide d by the International Monetary Fund at the 
Committee meeting of 25 September confirmed what Ecuador had said, namely that in spite of a 
recovery of oil prices, its fiscal balance was e xpected to show a deficit for 2009-2010.  Among the 
reasons already known to the Committee, that was the main reason why the IMF had concluded that 
Ecuador's external account forecasts had not changed significantly since the Committee's 
consultations in April. 
8. With the present report, Ecuador had complied w ith its commitment to submit two reports to 
the Committee before the expiry of the established period for the application of the restrictions.  
However, Ecuador remained at the disposal of WTO Members for any additional consultations on the 
subject. 
9. The Chairman
 thanked the representative of Ecuador for his statement and opened the floor to 
Committee Members for comments or questions. 
10. The representative of Panama  thanked the delegation of Ecua dor for the report submitted.  
Panama wished to recall that it had engaged in bilate ral talks with Ecuador on this subject with a view 
to resolving issues of mutual interest.  Panama welc omed the attention given by Ecuador to this matter 
and the steps it had taken in response to the talks.  Panama was, however, concerned that the solutions 
had only been partial.  The measures that had been the subject of the bilateral consultations and which 
nevertheless remained in force constituted an unn ecessary disruption to trade.  Panama therefore 
asked Ecuador to recognize the need to consider particular cases in whic h Panamanian trade was 
significantly affected by Annexes 1 and 2 of COME XI Resolution No. 487.  The scope of the measure 
that Panama wanted Ecuador to review was direc tly related to the heavy specific tariffs imposed on 
clothing and footwear, and the tariff surcharges app lied to certain products such as television sets, 
which had been referred to in bilateral talks and s ubsequently in the Committee.  Panama wished to 
emphasize the serious impact that such measures were having on its economic situation and the severe 
damage caused to trade between Ecuador and Pana ma.  The trade flow between both Members had 
decreased by 26 per cent and exports to Ecuador in the first half of 2009 had fallen by more than 
US$50 million in relation to the same period in 2008. 
11. The delegation of Panama wished to renew its call for Ecuador to present a time-schedule for 
phasing out the measures.  Finally, Panama wanted to  thank the delegation of Ecuador for its replies 
to the questions posed and circulated at the most  recent Committee meeting on 25 September 2009.  It 
would study them very carefully. 
12. The representative of Canada  stated that Canada supporte d Ecuador's ongoing efforts to 
monitor the balance-of-payments situation with the view to reducing the import restrictions measures 
as conditions warranted.  Canada also acknowledged  Ecuador's transparent efforts to share the 
findings with the WTO Balance-of-Payments Committee.  Canada noted that as of 9 October 2009, Ecuador's oil prices had increased by over a 100 per cent since the introduction of the import  WT/BOP/R/97 
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  restrictions.  At the same time, the non-petroleum trade balance had improved considerably since the 
beginning of the imposition of the restrictions.  Furthermore, Canada noted that Ecuador's public 
external and internal debt situation had also improved.  The improvement of oil prices, the 
non-petroleum trade balance and public debt pos ition all pointed to improving balance-of-payments 
conditions.  Canada looked forw ard to further improvements in Ecuador's balance-of-payments 
situation and to its responses. 
13. The representative of the United States  stated her hope that the meeting would provide a 
better understanding of the steps Ecuador was taking to  modify the level and scope of its measures in 
line with improvements in Ecuador 's economic situation, and to remove all trade measures for 
balance-of-payments purposes no later than 22 January  2010.  She recalled that Article XVIII:B of the 
GATT, as well as the commitment Ecuador had made in paragraph 31 of the BOP Committee report, 
called for Ecuador to relax its balance-of-payme nts restrictions as conditions improves.  The 
United States was pleased to have seen improvements in Ecuador's external accounts this year.  As the 
United States had noted at the September meeting, oil prices had nearly doubled since their lows in 
January 2009, resulting in moderate trade surplu ses for the months of June, July and August, 
compared to the sizeable deficits witnessed in the first quarter.  At the same time, second quarter 
remittances had increased by nearly 10 per cent over t hose received by Ecuador in the first quarter of 
2009.  Recently released data by Ecuador's Central Bank also indicated that Ecuador's current account 
had registered a surplus in the second quarter co mpared to a deficit in the first quarter. 
14. In recent months, Ecuador had received a US$480 million loan from the FLAR, an SDR 
400 million allocation from the IMF and a US$1 billion advance from China for an oil contract, which 
together exceeded the US$900 million it had paid ou t to retire US$2.9 billion in defaulted bonds in 
May and June.  These net inflows had bolstered th e capital account.  Moreover, bank deposits had 
stabilized after falling by roughly 6 per cent in the first quarter, signalling capital flight pressures had eased.  Together these improvements in the extern al accounts had contributed to an increase in 
Ecuador's Net Foreign Assets (NFAs). 
15. Despite these improvements, the United States noted that Ecuador continued to face deep 
fiscal challenges due to the Government's reluctance  to sufficiently adjust expenditures after a sharp 
drop in revenue.  In fact, at the 25 September meeting of the Committee, the IMF representative had 
noted that Ecuador had not adhered to its plans to  reduce primary public spending sharply, and had 
projected a 2009 non-financial public sector deficit of 3.5 per cent.  The authorities' reluctance to reduce public spending and their recent decision to tr ansfer NFAs from the Social Security Fund to 
State-owned banks to increase credit to the private s ector, would be the principal causes of any future 
decrease in Ecuador's NFAs, not the country's bala nce-of-payments situati on.  The United States 
noted that Ecuador's fiscal deficit was in fact a fiscal, not a balance-of-payments issue, and should be addressed with fiscal, not balance-of-payments measures.   In fact, in the April consultations, the IMF 
had stated explicitly, in response to a US questi on, that Ecuador's balance-of-payments measures 
would not rectify its fiscal situation.  Thus, Ecuador's characterization of IMF statements as somehow 
being supportive of its balance-of-payments measur es was a distortion of the IMF's actual assessment. 
16. The United States recalled that Ecuador had repeated ly stated that improvement in its external 
conditions, not its fiscal balance, was needed if its trade restrictions were to be relaxed.  This 
improvement continued to occur, and the United States requested that Ecuador adhered to its 
commitments and relaxed the level and scope of its balance-of-payme nts measures.  The United States 
further requested that the level and the scope of Ec uador's restrictions be re laxed as soon as possible, 
to alleviate the negative effects on trade.  As not ed during the September meeting, there had been a 
negative effect on trade between the United States and Ecuador since the measures had gone into 
effect in January.  The United Stat es recognized that Ecuador had dom estic production in some of the 
areas that had experienced a decline, and con tinued to caution Ecuador against any tendency to 
maintain restrictions on these sectors as a form of industrial policy through import substitution. WT/BOP/R/97 
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  17. Based on the improvements in Ecuador's economic  situation, and to alleviate the negative 
affects of the restrictions on trade, the United Stat es requested that Ecuador take concrete action to 
progressively relax the level and scope of its rema ining balance-of-payments measures and report the 
steps it had taken to the Committee.  The United States also requested that Ecuador provide information on the specific steps it was taking to fully remove the restrictions by 22 January 2010. 
18. The representative of the European Communities
 noted that, as stat ed already in the 
Committee's September meeting, the EC welcomed th e fact that Ecuador had gradually replaced the 
quantitative restrictions by ad valorem  duties.  However, as had been noted by several Members in the 
September meeting, Ecuador had not yet complied with all the commitments it had taken in the 
Committee's consensus report.  Notably, it had not met the commitment to "progressively modify the 
level and scope of the measures" as its balance-of-p ayments situation improved.  Ecuador had instead 
argued that its balance of payments was still not on such a sustainable basis that would allow for the 
remaining restrictions to be lifted. 
19. The EC wished to take this opportunity to make  some observations with regard to Ecuador's 
balance-of-payments situation:  as had been not ed in document WT/BOP/G/17 circulated by the 
Ecuadorian delegation ahead of the September meeti ng, its overall economic si tuation and its balance 
of payments had seen notable improvements followi ng the recovery in oil prices and global demand 
for Ecuador's export products.  This had been also  echoed in Ecuador's statement in the September 
meeting, where it had noted that its balance of paym ents showed a positive trend, and that the critical 
level of the economy's liquidity had improved.  Ma ny other WTO Members shared this assessment.  
As one Member had pointed out in the Septem ber meeting, Ecuador's balance of payments, 
international reserves and the trade balance had seen a significant recovery in particular from June to 
August this year.  In addition to the favourable evol ution of oil prices, the depreciating US dollar had 
played an important role in this by improving th e country's relative competitiveness.  There were no 
indications that these favourable developments ha d been reversed since then.  Furthermore, one 
Member pointed out that Ecuador's trade restric tions had between January and July resulted in a 
reduction of imports which was equi valent to the target announced by the Ecuadorian Government.  
Therefore, import restrictions seemed to have already achieved their stated aim. 
20. The IMF representative had confirmed in the September meeting that Ecuador's short term 
macroeconomic outlook had improved mostly due to more favourab le external conditions, such as 
increases in world market prices for Ecuador's e xports.  However, the IMF representative has also 
drawn the Committee's attention to a concerning issu e, namely that despite the better-than-expected 
external developments, Ecuador's fiscal accounts were still under threat  due to the reluctance of the 
Ecuadorian authorities to consolidate public fi nances spending in line with their earlier 
announcements.  Indeed, primary expenditure by th e non-financial public sector had grown by 17 per 
cent year-on-year in early 2009. 
21. The EC found it extremely worrying that Ecuador  had not been willing to capitalize on the 
better-than-expected external developments by in troducing necessary fiscal consolidation.  The EC 
was also concerned that Ecuador did not seem to be  taking all the measures that would be needed to 
bring its balance of payments in equilibrium on a sound and lasting basis.  Such concerns were 
reinforced by reports according to which imports of, for instance, footwear had decreased considerably in 2009, while at the same time footwear production in Ecuador had seen very brisk 
growth. 
22. Against this background, the EC joined othe r Members which had requested that Ecuador 
start already now to take concrete action to progres sively relax the level and scope of its remaining 
measures so as to ensure that all measures could be removed by the 22 January 2010 deadline.  The 
EC wished also to join others in inviting Ecuador  to provide a time-schedule for the gradual phasing 
out of the remaining measures.  WT/BOP/R/97 
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  23. Finally, the EC wished to remind Ecuador of the importance of removing the remaining 
measures in a way that took into account the interests of all WTO Members and did not favour any particular country or countries. 
24. The representative of Chile
 thanked the delegation of Ecua dor for its status report and 
welcomed Ecuador's constructive and transparent approach in handling the consultation process 
concerning its balance-of-payments restrictions, both  at the multilateral level within the WTO and in 
the bilateral consultations between the two countries.  Chile also wished to reiterate its hope that the 
favourable development of the balance-of-payment s situation, which had been noted by various 
delegations at the meeting in the context of th e external circumstances currently facing Ecuador, 
would enable the country to modify progressively both the scope and the level of the measures in 
order to bring them into line with the relevant  provisions of the GATT and the Understanding on 
Balance-of-Payments Provisions of the GATT 1994.  Th e measures would in any event be eliminated 
by 22 January 2010 at the latest. 
25. The representative of Colombia  thanked the delegation of Ecua dor for its statement and for 
the report it had submitted.  Colombia was still affected by the measures and hoped that Ecuador 
would be able to continue mee ting its commitment gradually to modify their level and scope.  
Colombia also hoped that Ecuador would, in any event, fulfil its commitment to eliminate the 
measures by 22 January 2010 at the latest. 
26. The representative of the Bolivarian Republic of Venezuela  thanked Ecuador for the report on 
its current situation.  Venezuela felt that the Ec uadorian Government knew Ec uador's situation better 
than anyone else.  One Member had said that Ecuador 's problem was of a fiscal nature and related to 
its social expenditure.  In that case it would be  important to define what was meant by social 
expenditure, as UNESCO had made it clear that anythi ng relating to social or educational matters was 
not expenditure but an investment.  During the pe riod of change that Ecua dor was going through, its 
Government was fulfilling a valid commitment to  the poorest sectors of the population, those 
traditionally and historically excluded from health care and education services.  That showed full well 
that the Government of Ecuador knew its c ountry's situation better than anyone else. 
27. Some Members had once again called for Ecua dor to fulfil its commitments, but it was 
perhaps precisely because it had fulfilled its transpar ency commitments with regard to the Committee 
and the WTO that Ecuador was present.  It would be interesting if those same Members that had asked Ecuador to fulfil its commitments were to notify the stimulus packages that they had applied since the 
beginning of the crisis at the end of 2008 so that  the packages could be assessed by the Organization.  
It would then be possible to see whether such stimulus measures were not actually more 
trade-distorting than the measures applied by a small Andean country like Ecuador.  Venezuela 
welcomed the commitment shown by Ecuador with in the WTO and believed that many of the 
Members calling for more commitment from Ecuador  should follow that small country's example. 
28. The Chairman
 thanked all Members for their commen ts and questions, and turned to the 
delegation of Ecuador to respond to the comme nts and questions that had been raised. 
29. The representative of Ecuador  welcomed the comments made, in particular those pertaining to 
Ecuador's transparency during the consultations.  Tr ansparency was very important to Ecuador and it 
was therefore extremely pleased to see its efforts ac knowledged by the Members.  In reference to the 
comments made by the distinguished delegate of  Venezuela, Ecuador had indeed fulfilled its 
commitments and that was why it stood before th e Committee explaining the measures taken, as 
required under the agreements reached. 
30. Some Members had emphasized the importance of having some sort of timetable for 
dismantlement targets.  Ecuador once again reiterated its commitment to reassess the measures taken WT/BOP/R/97 
Page 6  
 
  on the basis of developments in its balance-of-payme nts situation.  Although it was true that there had 
been an improvement, the situation remained criti cal and it was important for Members to understand 
that the balance-of-payments situation had reached  the point where it might have endangered the 
country's dollarization system.  Ecuador did not feel  that it had distorted or used the International 
Monetary Fund (IMF) report to its own benefit.  Se veral IMF reports noted and confirmed the serious 
economic situation in Ecuador.  Ec uador did not agree that it had not fulfilled its commitments during 
the consultations.  As pointed out at the previ ous Balance-of-Payments Committee meeting, Ecuador 
had replaced all quantitative restrictions with price- based measures, which had been one of its main 
commitments.  Ecuador had also undertaken to m onitor the measures applied and was currently doing 
so.  Some Members had expressed concern about Ecua dor's public spending.  It was relatively easy to 
talk about public spending when all needs were covered.  The Government of Ecuador accorded the 
utmost importance to public spending primarily direct ed at meeting social n eeds.  Nonetheless, it had 
also adopted measures to maintain a cert ain control over some forms of spending. 
31. With those brief comments Ecuador had tried to  respond to the concerns raised by some 
Members and it reiterated once again that its commitment was to eliminate the measures by 
22 January 2010 at the latest, as agreed. 
32. The Committee took note of the comments made. 
33. The Chairman
 then turned to the third item on the agenda, the adoption of the Annual Report 
of the Committee, contained in document WT/BOP/W /32.  The Chairman suggested some changes to 
the Annual Report, which were available in a room  document.  First, that following informal 
consultations with some Members, he wished to propose that the penultimate sentence of paragraph 2 
of the Annual Report be changed to read as follo ws:  "The Committee agreed, in the light of the 
commitments taken by Ecuador, to conclude its cons ultations."  This was a more accurate reflection 
of the consultations held.  Second, that the date in the first sentence of paragraph 4 be changed from 
2008 to 2009.  Third, that an additional sentence be added at the end of paragraph 4 of the report as 
follows:  "The Committee met on 19 October 2009 to  continue its consulta tions with Ecuador". 
34. The representative of Ecuador  said that his country had no objections to the proposed 
changes, but wished to point out that although the first proposed change would appear to reflect what 
had actually been said, his delegation would need  time to reflect and consult its authorities. 
35. The representative of Colombia  hoped that any changes made would be notified in the most 
transparent and timely manner possible. 
36. The Chairman  suggested that the Secretariat inco rporated the changes agreed and the 
Committee adopted the report ad referendum.  It was so agreed. 
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