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II. TRADE AND INVESTMENT REGIME 
(1) TRADE POLICY FORMULATION AND IMPLEMENTATION  
(i) General legal and institutional framework 
1. Ecuador adopted a new Constitution in 1998, re placing the Constitution that had marked the 
transition from a military dictatorship to a democrat ically elected civilian government in 1979.  The 
1998 Constitution defines Ecuador as a unitary repub lic.  The country is divided into 22 provinces for 
administrative purposes.  The central Government may transfer authority to the provinces over any 
matter except those relating to national security, the di rection of foreign, economic and fiscal policy,  
and foreign debt management, and "jurisdic tions expressly excluded by the Constitution and 
international treaties".1  The provinces are thus responsible for education, health and transport.  The 
central Government has also empowered three prov inces to issue animal and plant health permits 
(Chapter III (2)(xi)).  Under the 1998 Constitution, jurisdiction over some spheres may be conferred 
on international agencies.2  Accordingly, Ecuador has given specific bodies of the Andean 
Community authority over certain questions  pertaining to international trade. 
2. Executive power is vested in the President of th e Republic, who is also Head of State.  The 
President is elected by universal suffrage for a four-y ear term and may be re-elected, but only after a 
period of at least four years has elapsed following the end of a term of office.  Authority for submitting the State budget to Congress for approval;  establishing, amending or abolishing tariff rates 
and tariff nomenclature;  and determining foreig n policy lies solely with the President.  The 
establishment of tariff nomenclature and policy h as been partially transferred to the Andean 
Community.  The President alone is empowered to appoint and remove ministers of state without the 
approval of Congress. 
3. Legislative power is exercised by the Nati onal Congress, which is made up of 100 deputies 
elected for four-year terms, renewable indefinitely.  The number of deputies elected in each province depends on the number of inhabitant s.  Each province has at least two deputies.  The Legislature has 
sole authority to approve the State budget and to set  or alter taxes, with the exception of tariffs. 
4. Judicial power is in the hands of the Suprem e Court of Justice, the National Council of the 
Judiciary and the courts, tribunals and judges provided  by law.  The terms of office of Supreme Court 
magistrates are of indefinite duration.  The magi strates appoint new members of the Court by a two-
thirds majority.
3  Although not part of the Judiciary, the Constitutional Court has jurisdiction to hear 
and rule on claims of unconstituti onality of laws and other rules.4  It also resolves conflicts over 
matters of competence stipulated in the Constitutio n.  In proceedings involving Andean rules, the 
courts suspend the internal procedure and refer the matter for interpretation to the Court of Justice of 
the Andean Community (section (3)(ii) below).  Th e interpretation rendered is binding on the national 
judges who consulted the Court. 
5. The Constitution has primacy over any other legi slation, and organic laws take precedence 
over ordinary legislation.  Organic laws are t hose governing the organization and activities of the 
Legislature, the Executive and the Judiciary;  those regulating State bodies established by the 
Constitution;  those relating to the party system, the exercise of political rights and the electoral system;  those governing fundamental rights gua rantees and safeguard procedures;  and those 
                                                     
 
1 Political Constitution of the Republic of Ecuador, 1998, Article 226. 
2 Political Constitution of the Republic of Ecuador, 1998, Article 161. 
3 Political Constitution of the Republic of Ecuador, 1998, Article 202. 
4 Political Constitution of the Republic of Ecuador, 1998, Article 276. Ecuador WT/TPR/S/148 
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determined by the Constitution as having the status of organic laws.5  All other laws are ordinary 
legislation.  An ordinary law cannot amend or take  precedence over an organic law.  Rules laid down 
in international treaties promulgated in the Official  Journal form part of Ec uador's legal regime and 
have primacy over other rules a nd laws, including organic laws.6  Andean Community agreements, 
resolutions and decisions are also part of the Ecuador's legal system and subordinate domestic 
legislation and other domestic rules.7 
6. Regarding the hierarchy of Andean legislati on and other international treaties to which 
Ecuador is party, the Attorney General of the State pronounced as follows: 
"[...] given the Andean field of application,  community rules take precedence over all other 
agreements, conventions and inte rnational treaties.  [...] any provision that is part of the 
internal legal order, as well as those contained in  an international order, shall be compatible 
with the rules laid down in the Community lega l system or else will lack legal value and 
effect."8 
7. The President, the Supreme Court of Justi ce and the Constitutional Court may propose 
constitutional amendments.  Ecuadorian citizens also enjoy a right of initiative in this respect, 
provided that the proposed amendment is supported by at least 1 per cent of registered voters. 
8. Draft laws may be introduced by deputies, th e President, the Supreme Court of Justice, the 
Legislation and Codification Commission9 and by Ecuadorian citizens if the draft is supported by a 
quarter of one 1 per cent of registered voters.10  Only the President is empowered to propose draft 
laws on the annual budget, taxes and matters i nvolving changes to the country's political or 
administrative organization.  The President does not require the approval of Congress to establish 
tariff rates.11 
9. The adoption of organic laws requires an ab solute majority of the National Congress.  
Ordinary laws can be adopted by simple majority , except if the President of the Republic totally 
objects to a draft law approved by Congress.  In such cases, Congress may ratify, by a two-thirds 
majority, the draft ordinary law sent to the Preside nt, but only after one year has elapsed following the 
President's objection.  If the President partially objects to the draft ordinary law approved by 
Congress, he is required to provide the latter with an alternative text;  Congress then has 30 days in 
which to adopt the alternative text by a simple majo rity or the draft law sent to the President by a two-
thirds majority.  The President may also presen t before Congress draft economic emergency laws,12 
which Congress must approve, amend or reject with in 30 days.  In the absence of congressional action 
within a specific time limit, the President ma y promulgate any such proposal as a decree-law. 
                                                      
5 Political Constitution of the Republic of Ecuador, 1998, Article 142. 
6 Political Constitution of the Republic of Ecuador, 1998, Article 163. 
7 Opinion of the Attorney General of the State, issued by means of Official Communication 12206 of 
7 October 2004.  According to the Andean Community General Secretariat, the same pronouncement was made 
by the Supreme Court of Justice and the Constitutional Court of Ecuador. 
8 Opinion of the Attorney General of the State, issued by means of Official Communication 12206 of 
7 October 2004. 
9 The Commission is made up of seven members appointed by a majority of members of the National 
Congress.  Commission members may not simultaneously serve as deputies (Political Constitution of the Republic of Ecuador, 1998, Article 138). 
10 Political Constitution of the Republic of Ecuador, 1998, Article 146. 
11 Political Constitution of the Republic of Ecuador, 1998, Article 257. 
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10. Under the Constitution, the President of the Republic alone is empowered to negotiate 
international treaties.  Interna tional treaties under which Ecuador has subscribed to integration 
agreements, which confer legal authority on an in ternational or supranational agency, or which 
contain an undertaking to enact, amend or repeal a law must be approved by a simple majority of 
Congress.13  Before a treaty can be approved by Congress,  it must be reviewed by the Constitutional 
Court, which determines whether it is in conformi ty with the Constitution.  International treaties 
requiring constitutional amendments can not be adopted before such amendments have been enacted.  
Congress is not empowered to introduce amendmen ts to an international treaty signed by the 
Executive. 
11. In the context of Ecuador's historical perform ance as regards political and legal stability and 
corruption control14, efforts are being made to modernize the country's legal framework and 
strengthen its institutions.  The Government has made the fight against corruption one of the pillars of 
its government programme.15 
(ii) Trade policy formulation and objectives 
12. The objectives of the Cartagena Agreement signe d by Ecuador, Bolivia, Colombia, Peru and 
Venezuela include the formulation of a trade policy common to all the member countries.  The task of 
defining "a Community strategy aimed at achievi ng deeper integration with the other regional 
economic blocs and political, social, economic, and tr ade relations with extra-regional systems" has 
been entrusted to the Andean Council of Ministers of Foreign Affairs and the Commission of the Andean Community (section (3)(ii) below).
16  The Andean Community has developed common rules 
governing trade relations not only among its members but also with non-member countries, mainly in 
areas such as customs, tariffs, agricultural health , technical regulations, contingency measures and 
intellectual property. 
13. At the current stage of the Andean integra tion process, however, Ecuador's trade policy is 
decided chiefly at the national level.  Recogni zing this, the members of the Andean Community 
adopted Decision 598, which allows the member  countries to conduct "individual negotiations for 
trade agreements with third countries".17  Members individually negotiating trade agreements with 
non-member countries should proceed according to th e following guidelines:  "preserve the Andean 
legal system in the relations between the Andean  Community Member Countries;  take into account 
the commercial sensitivities of the other Andean c ountries in the trade liberalization offers;  and 
maintain within a transparency and solidarity frame work an adequate exchange of information and 
consultations during the course of the negotiations".18 
14. The Executive is responsible for formulating domest ic trade policy.  Pursuant to the Foreign 
Trade and Investment Law, foreign trade policy is "determined" by the Foreign Trade and Investment 
Council (COMEXI).19  The Council is made up of the President of the Republic;  the Ministers for 
Foreign Trade, Industrialization, Fisheries a nd Competitiveness, Economy and Finance, Foreign 
Affairs, Agriculture and Livestock, and Tourism;   the President of the Ecuadorian Federation of 
                                                      
13 Political Constitution of the Republic of Ecuador, 1998, Article 161. 
14 Kaufmann, Kraay and Mastruzzi (2003), UNCTAD (2001), p. 116, and Transparency International 
(2004). 
15 National Planning and Development Secretariat (undated). 
16 Andean Subregional Integration Agreem ent (Cartagena Agreement), Article 51. 
17 Andean Community Decision 598 of 11 July 2004, Article 1. 
18 Andean Community Decision 598 of 11 July 2004, Article 2. 
19 Law No. 12, Official Journal/Suppl. 82, 9 June 1997. Ecuador WT/TPR/S/148 
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Exporters;  the Presidents of the National Federa tions of Chambers of Industry, Commerce and 
Agriculture;  and delegates from the agricultu ral, aquaculture and fisheries sectors. 
15. The Ministry of Foreign Trade, Industrializa tion and Fisheries (MICIP) is in charge of 
implementing trade policy.  This requires close c oordination by the MICIP with the Ministry of 
Foreign Affairs (MRE)20 and with entities from the public and privat e sectors.  In the context of this 
Review, the authorities pointed out that the MICIP and the MRE do indeed maintain a high level of 
coordination, chiefly via the MICIP's Under-Secret ariat for Foreign Trade and the MRE's General 
Directorate for World Trade.  Ecuador's Permanent Mission to the WTO is under the MRE. 
16. One of the trade policy objec tives in the Medium-Term Government Plan 2003-2007 is to 
"promote the country's international economic an d trade integration by strengthening the export 
promotion and investment system and by  supporting strategic production sectors".21  This objective is 
among the targets set by the Government for impr oving production and productivity, which is one of 
the five pillars of the 2003-2007 Government Plan. 
17. The Foreign Trade and Investment Law stipulates that foreign trade is a matter of national 
priority.  It establishes the following principal guidelines for the formulation of Ecuador's trade 
policy: 
− To secure the freedom necessary to develop export and import activities and make it 
easier for economic agents to conduct such activities; 
− to promote the modernization and efficiency of the domestic industry; 
− to prevent and counter the adverse effect s of unfair trade practices on the domestic 
industry; 
− to foster export growth and diversification; 
− to further strengthen and develop mechanisms for the promotion of exports; 
− to use the opportunities offered by world trade in technology and services in order to 
boost the country's exports; 
− to ensure that the domestic industry comp etes internationally according to fair and 
equitable trade practices;  and 
− to promote existing integration processes and bilateral and multilateral agreements. 
(2) FOREIGN INVESTMENT REGIME  
18. The National Plan for the Promotion of Non- Oil Investments 2001-2010 underscores the need 
"to attract and protect direct investment as a matter of declared State policy".22  The Plan proposes a 
strategy for achieving a cumulative direct i nvestment of US$7,000 million by 2010 through 
improvement Article 15, of the investment environment. 
                                                      
20 Foreign Trade and Investment Law. 
21 National Planning and Development Secretariat (undated). 
22 Executive Decree No. 3374, Offici al Journal 718, 4 December 2002. WT/TPR/S/148 Trade Policy Review 
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19. The Law on Investment Promotion and Guarantees23 and its implementing regulations and the 
Foreign Trade and Investment Law are the key instruments governing the admission and protection of foreign investments in Ecuador.  Ecuador has adopted Andean Community Decisions 291 and 292.
24 
20. COMEXI is the body in charge of designing direct investment policies, which are then 
implemented by the MICIP in coordination with the MRE.  Ecuador also has an Export and 
Investment Promotion Corporation (CORPEI), whic h is responsible for promoting non-oil direct 
investments in Ecuador. 
21. The Law on Investment Promotion and Guarantees covers "any form of transfer of capital to 
Ecuador from abroad, made by foreign natural or le gal persons and destined for the production of 
goods and services".25  This definition encompasses financia l contributions in freely convertible 
currency and physical or intangible assets, in cluding trademarks and industrial designs.26 
22. Generally speaking, Andean Community Decision 291 gives the member countries ample 
freedom to define their own investment policies.  Although Decision 291 does not include a most-favoured-nation clause, Andean Community member s are required under Decision 439 to grant 
services and service providers from other member c ountries treatment no less favourable than that 
afforded to any other country with respect to  commercial presence and right of establishment 
(Chapter IV (6)(i)). 
(i) Right of establishment 
23. In principle, Ecuador grants national treatment to foreign investments.  Under Article 13 of 
the Law on Investment Promotion and Guarantees, fo reign investments enjoy the same conditions as 
those provided for investments by Ecuadorian natura l and legal persons, meaning that they are not 
subject to prior government authorization.  However, the Law on Investment Promotion and 
Guarantees allows discriminatory treatment betwee n domestic and foreign investors in "strategic" 
areas, including fisheries, mining and hydrocarbons.  In particular, small-scale fishing is reserved for 
Ecuadorian fishermen, and entry is prohibited to shrimp and lobster trawlers flying foreign flags 
(Chapter IV (1)(iii));  there are ceilings on the number of foreign employees authorized to acquire 
mining titles and on that of contractors in the hydrocarbons sector (Chapter IV (2) and (3));  and the 
transport of hydrocarbons is reserved for domestic  shipping companies in which the State holds a 
controlling interest (Chapter IV (6)(iv)).  Th e Constitution restricts the purchase, for economic 
purposes, of land or concessions in na tional security areas by foreigners.
27 
24. The State has exclusive rights under the Constitutio n with respect to the provision of public 
utilities and the use of non-renewable natural resour ces, biodiversity and electromagnetic frequencies 
for radio and television.28  Private investment in these spheres is therefore subject to the granting of 
permits or concessions or to other restrictions th at apply equally to domes tic and foreign investors 
(Chapter IV (2), (3), (5) and (6)). 
25. Pursuant to its commitments under the Genera l Agreement on Trade in Services, Ecuador 
grants foreign investors market access and natio nal treatment in 10 sectors.  Within the Andean 
Community, Ecuador has undertaken to grant market  access and national treatment to investors from 
                                                      
23 Law No. 46, Official Journa l 219, 19 December 1997. 
24 Andean Community Decisions 291and 292 of 21 March 1991. 
25 Law on Investment Promotion and Guarantees, Article 12. 
26 Law on Investment Promotion and Guarantees, Article 14. 
27 Political Constitution of the Republic of Ecuador, 1998, Article 15. 
28 Political Constitution of the Republic  of Ecuador, 1998, Articles 247-249. Ecuador WT/TPR/S/148 
 Page 19 
 
 
Andean Community member countries in all sectors ex cept those listed in the inventory of restrictive 
measures in Decision 510 (Chapter IV (6)(i)). 
26. Foreign investments must be registered with  the Central Bank within 40 days following the 
date of the investment.29  According to the authorities, this requirement is for statistical purposes.  
Domestic investments are exempt from the obligation.   Investors may delegate registration procedures 
to a representative.  Depending on the type of investment made, one or more of the following 
documents will be necessary to co mplete the registration process:  a copy of the public deed;  a 
document certifying the sale of currency;  the Single Importation Document;  and documents certifying the transfer of shares.  Registration is automatic if all the formalities have been 
accomplished. 
27. In principle, there are no restrictions on in vestment modalities open to foreign investors 
wishing to set up business in Ecuador.  Both domest ic and foreign investors in the petroleum sector 
are required to sign contracts with the State oil company (Chapter IV (3)). 
(ii) Protection 
28. Confiscation is prohibited under the Constitution.  Expropriation of property by the State is 
authorized for "social purposes", subject to "proper valuation and compensation".
30 
29. The Law on Investment Promotion and Guarantees and Andean Community Decision 291 
guarantee foreign investors the right to transfer ab road the profits from thei r investments.  Foreign 
investors may also freely transfer the proceeds of li quidation and the sale of shares, equities or rights. 
30. Ecuadorian or foreign natural or  legal persons with an invest ment of at least US$500,000 may 
avail themselves of the tax stability regime estab lished by the Law on Investment Promotion and 
Guarantees.  Under this regime, the income tax rate in  effect at the time the investment was registered 
is frozen for a period that varies acco rding to the type of investment.  Investments in order to develop 
new projects or boost production are covered for a pe riod of 20 years;  those made by existing 
enterprises that do not envisage any extension or e xpansion of production are covered for 10 years.  
COMEXI may extend the duration of the scheme for a maximum period of five years for investments 
in specific sectors.31  Investors that have registered their investments with the Central Bank are also 
eligible.  Investors that satisfy this requirement are automatically admitted to the tax stability scheme 
free of charge.  Investors may definitivel y withdraw from the scheme at any time. 
31. Foreign investors with an investment of at least US$500,000 may also enter into "investment 
contracts" with the MICIP.  Contracts of this type specify "the general and special guarantees and 
securities covering their investment, as provided for in the Law on Investment Promotion and 
Guarantees, in conformity with the Constitution of the Republic".32  Such contracts are designed to 
ensure that "neither the State nor State institutions  will impede, delay or in any other way jeopardize 
the rights of the investor [...] in keeping with the general guarantees recognized by the Constitution, 
the law and the international treaties to which Ecuador is party".33 
                                                      
29 Law on Investment Promotion and Guarantees, Article 15, and Andean Community Decision 291, 
Article 3. 
30 Political Constitution of the Republic of Ecuador, 1998, Article 33. 
31 Law on Investment Promotion and Guarantees, Article 26. 
32 Executive Decree No. 3497, Article 16, Official Journal 744, 14 January 2003. 
33 Executive Decree No. 3497, Article 16. WT/TPR/S/148 Trade Policy Review 
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32. Investors that meet certain requirements may en ter into more extensive investment contracts 
with the State, providing "specific legal stability" guarantees.  The purpose of  such contracts is to 
shield investors from changes to the legislation in force at the time of their investment that "might 
materially and significantly affect" their rights.34  This kind of contract is theoretically available only 
for investments in excess of US$25 million.  Ho wever, investments of under US$25 million which 
lead to an increase in domestic offer or exports, promote the effective development of economically 
depressed areas, generate a high level of employme nt, or develop activities of national interest may 
also enjoy more extensive guarantees.  The same prin ciple applies to investments in public works or 
utilities. 
33. Investment contracts between foreign investor s and the MICIP are issued in the form of 
public deeds.  The cost is equivalent to 0.15 pe r cent of the value of the investment and may not 
exceed US$250,000.35  Investment contracts are valid for 20 years in the case of investments for the 
development of new projects or the expansion of production, and for 10 years in the case of other 
investments.  Between 1997 and early 2005, seven inv estment contracts were signed for a total value 
of US$2,299 million. 
34. Ecuador has concluded bilateral i nvestment agreements with a number of countries;  those in 
force are listed in Table AII.1.  It has signed agre ements to prevent double taxation of income with 
Belgium, Brazil, Chile, France, Germany, Italy,  Mexico, Romania, Spain and Switzerland.  The 
Andean Community also has a double taxation regime.36 
(iii) Promotion and incentives 
35. CORPEI implements the investment promoti on policies designed by COMEXI.  Established 
in 1997 by the Foreign Trade and Investment La w, CORPEI is a private non-profit institution 
recognized by the State as the official export and investment promotion agency (see also Chapter III (2)(v)).  CORPEI has programmes aimed at raising awar eness of investment opportunities 
and at promoting Ecuador's image abroad;  it also or ganizes investment missions.  In order to promote 
investment, CORPEI works in association with ot her institutions such as Ecuador's commercial and 
foreign services, chambers of production and local  export promotion and investment committees. 
36. Ecuador has general and sectoral schemes under which it provides incentives for foreign and 
domestic investment (Chapter III (1)(iv) and (2)(iv) and Chapter IV (1) and (2)). 
(3) I
NTERNATIONAL TRADE RELATIONS  
37. The Medium-Term Government Plan 2003-2007 seeks to "promote global, hemispheric 
regional and subregional integra tion by adopting a firm national stance in negotiations in the 
framework of the FTAA, MERCOSUR, the Europ ean Union and the Pacific Basin, and by 
strengthening Andean Community and LAIA trade agreements".37  In the context of this Review, the 
authorities indicated that the WTO provisions are the starting point for regional and bilateral initiatives. 
                                                     
 
34 Executive Decree No. 3497, Article 22. 
35 Ministerial Agreement No. 2283 of 2 August 2002, Official Journal 639, 13 August 2002. 
36 Andean Community Commission Decision 578 of 4 May 2004. 
37 National Planning and Development Secretariat (undated). Ecuador WT/TPR/S/148 
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(i) World Trade Organization 
38. Ecuador has been a Member of the WTO sin ce 21 January 1996, when it acceded to the 
Agreement Establishing the WTO.38  The National Congress ratified the Protocol of Accession by 
means of a resolution published in Offi cial Journal 853 of 2 January 1996.39  Ecuador took part in the 
post-Uruguay Round negotiations on telecommuni cations and financial services.  Ecuador's 
commitments in those two spheres were annexed to the Fourth and Fifth Protocols to the General 
Agreement on Trade in Services.40  Ecuador has not signed the Agreement on Information 
Technology or any of the plurilateral agreements. 
39. Ecuador grants at least most-favoured-nation treatment to all of its trading partners. 
40. Ecuador has made a number of notifications to the WTO (Table AII.2).  By late 2004, 
notifications were still pending in some areas,  including sanitary and phytosanitary measures and 
customs valuation. 
41. Ecuador has participated in 11 disputes befo re the WTO Dispute Settlement Body, including 
six as a third party (Table AII.3).  As a complaining party, it has participated in two disputes, both concerning the regime applied by certain countries for the importation of bananas. 
42. The three WTO disputes in which Ecuador is a responding party concern contingency 
measures.  In two of the disputes, Mexico holds that "the definitive anti-dumping measure [on cement, 
applied by Ecuador] and the actions that preceded it, including the imposition of the provisional anti-
dumping measure and the initiation of the investigation",
41 are incompatible with various WTO 
provisions.  In the third dispute, Chile submits th at Ecuador's definitive safeguard measure on medium 
density fibreboard was imposed in a manner incons istent with some "substantive and procedural" 
obligations established in the GATT 1994 and the WTO Agreement on Safeguards 
(Chapter III (1)(viii) and (ix)). 
43. Ecuador has made a number of contributions to the work of the WTO since 1996, including 
several under the Doha Agenda (Table AII.4).  It has not submitted its initial offer in the framework 
of the ongoing negotiations on services. 
44. While Ecuador generally supports the current mu ltilateral trade negotiations, it considers that 
provisions on special and differential treatment s hould be implemented in or der to further national 
development efforts, especially in the areas of agriculture and services.42  Ecuador is also in favour of 
a "quantitative and quali tative" increase in technical assistan ce so as to improve the developing 
countries' capacity to use the rules of multilateral trade.43 
                                                      
38 Ecuador's Protocol of Accessi on is contained in WTO document WT/ACC /ECU/6, 22 August 1995. 
39 The Protocol of Accession was ratified by m eans of Decree No. 3333, Official Journal 852, 
29 December 1995. 
40 WTO documents GATS/SC/98/Suppl.1, 11 April 1997; and GATS/SC/98/Suppl.2, 
26 February 1998. 
41 WTO document WT/DS191/1, 17 March 2000. 
42 WTO document WT/MIN(01)/ST/46, 10 November 2001. 
43 WTO document WT/MIN(01)/ST/46, 10 November 2001. WT/TPR/S/148 Trade Policy Review 
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(ii) Preferential agreements  
(a) Andean Community 
45. Ecuador is a member of the Andean Community, which emerged as a result of the signing of 
the Cartagena Agreement in 1969.  In addition to Ecuador, the Andean Community consists of 
Bolivia, Colombia, Peru and Venezuela.  The overa rching objectives of the Andean Community are to 
promote balanced and harmonious  development under equitable c onditions, through integration and 
economic and social cooperation; to accelerate economic growth and the creation of employment;  to facilitate participation in the re gional integration process, looking ah ead toward the gradual formation 
of a Latin American Common Market;  to reduce exte rnal vulnerability and to improve the positioning 
of the member countries within the internationa l economic context;  to strengthen subregional 
solidarity;  and to reduce existing di fferences in levels of development.
44  The Andean Community 
comprises a number of institutions (Table AII.5). 
46. Two of the key goals pursued by Andean Community have been the establishment of a free-
trade area and the creation of a customs union.  A free-trade area comprising Bolivia, Colombia, 
Ecuador and Venezuela has been  in existence since 1993 and covers the entire tariff universe 
(Chapter III (1)(iv)).45  The customs union has yet to be finalized, however, since the common 
external tariff, officially in effect since 1995, was adopted with certain exceptions by only four of the 
five member countries.46  Pursuant to the Declaration of Sant a Cruz de la Sierra, all five members 
agreed in October 2002 to a new common external tariff,47 the application of which has been 
postponed several times and which should enter into effect as of May 2005.48 
47. In May 1999, the Eleventh Andean Presidential Council set itself the aim of establishing, by 
the year 2005, a common market that provides for th e free movement of services, capital and persons, 
as well as the free circulation of goods.49  In order to attain that objective, it was agreed that priority 
would be given inter alia  to implementing the general framewo rk of principles and rules for the 
progressive liberalization of trade in services, as contained in Decision 439 (Chapter IV (6)(i));  to removing any remaining barriers to the movement of capital;  to easing national rules on the 
movement of persons;  to defini ng and implementing criteria for m acroeconomic harmonization;  and 
to further harmonizing trade legislation.
50 
48. Twenty-two claims of inconsistency with regiona l legislation (Table AII.6) have been filed 
with the Court of Justice of the Andean Community  against Ecuador.  All complaints but one were 
brought by the Andean Community General Secretaria t.  In seven of the cases, the Andean Court of 
Justice authorized penalties in the form of a 5 per cent tax on five products originating in Ecuador.  
Penalties are not being enforced in any of these cases.   Ecuador, on the other hand, has never applied 
to the Court for a ruling of inconsistency, a lthough the authorities maintain that the Andean 
Community General Secretariat has intervened di rectly in matters of interest to Ecuador. 
                                                      
44 Andean Community Decision 563 of 25 June 2003, Article 1. 
45 Peru gradually rejoined the free-tr ade area as of 1997 and will be fully integrated in 2005.  Andean 
Community Decision 414 of 30 July 1997. 
46 Wetter (2001), p. 65. 
47 Andean Community Decision 535 of 14 October 2002, Annex I. 
48 Andean Community Decision 580 of 4 May 2004, Article 1. 
49 Act of Cartagena of 27 May 1999, para. 8. 
50 Act of Lima of 10 June 2000, Annex I. Ecuador WT/TPR/S/148 
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(b) Partial-scope agreements nego tiated under the auspices of the Latin American Integration 
Association (LAIA) 
49. Ecuador has signed LAIA par tial-scope agreements with Chile, Cuba, the MERCOSUR 
member countries and Mexico. 
50. The partial-scope agreement with Chile,51 in effect since 1995, establishes a tariff elimination 
programme under which both countri es have abolished tariffs on all traded goods with the exception 
of about 230 predominantly agricultu ral products.  In March 2004, Chile  informed Ecuador that it was 
necessary to "perfect and deepen" its partial-scope agreement.52 
51. The agreements with Cuba53 and Mexico54 establish tariff preferences for a very limited 
number of products.  The agreement with Cuba  provides for duty-free treatment for some 
170 products originating in Cuba an d around 340 originating in Ecuador.55  The agreement with 
Mexico establishes tariff preferences of up to 100 per cent for about 190 products originating in 
Mexico and some 230 originating in Ecuador.56  The agreements with Chile and Cuba incorporate the 
LAIA general rules of origin regime;  the agreemen t with Mexico contains specific rules of origin 
(Chapter III (1)(iii)). 
52. Ecuador, together with Colombia and Venezuel a, signed a partial-scope agreement with the 
MERCOSUR countries in December 2003.57  The authorities are expecting the agreement to come 
into force during the first half of 2005.  One of th e objectives of this agreem ent is to establish a free-
trade area.58  The member countries have negotiat ed tariff elimination programmes amongst 
themselves for that purpose.  According to the aut horities, about one fifth of Ecuador's imports from 
Brazil and Argentina will enjoy duty-free access under these programmes once the agreement is in 
effect.  The remainder will be eligible fo r such treatment by 2018 at the latest. 
53. The agreement establishes a system of special measures for agricultural products, allowing 
the member countries to reduce or suspend tariff preferences if import volumes or prices exceed a 
specified threshold.59  Although the agreement does not contain disciplines governing trade in 
services, it provides for the establishment of "adequate  liberalization mechanisms" within a timeframe 
set by the members.60  The members may submit any dispute in respect of the Marrakesh Agreement 
to the dispute settlement procedure laid down in the agreement.61  Once a complaint has been heard 
under this procedure, however, it may not be brought before any other forum.62 
54. The agreement with MERCOSUR incorporates the tariff preferences provided under the prior 
partial-scope agreements signe d by Ecuador with the MERCOSUR member countries under LAIA 
auspices. 
                                                      
51 Economic Complementarity Agreemen t No. 32 of 20 December 1994. 
52 Chilean Ministry of Foreign Affairs (2004). 
53 Economic Complementarity Agreement No. 46 of 10 May 2000. 
54 Partial-Scope Renegotiation Agreement No. 29 of 30 April 1983. 
55 LAIA (2002), p. 13. 
56 LAIA (2002), p. 13. 
57 Economic Complementarity Agreement No. 59. 
58 Economic Complementarity Agr eement No. 59 of 16 December 2003, Annex I, Article 1. 
59 Economic Complementarity Agr eement No. 59 of 16 December 2003, Annex I, Article 24. 
60 Economic Complementarity Agr eement No. 59 of 16 December 2003, Annex I, Article 28. 
61 First Protocol Additional to Economic Complementarity Agreement No. 59, Article 3:  Dispute 
Settlement Mechanism, 16 December 2003. 
62 First Protocol Additional to Economic Complementarity Agreement No. 59, Article 3:  Dispute 
Settlement Mechanism, 16 December 2003. WT/TPR/S/148 Trade Policy Review 
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(c) Other agreements and arrangements in force 
55. According to the authorities, Ecuador benefits  from the Generalized System of Preferences 
(GSP) schemes of Australia, Bulgaria, Canada, the European Union, Japan, New Zealand, Russia, 
Switzerland and the United States.  Some products eligible for partial ta riff reductions under the 
European Union's GSP enjoy duty-free treatment when they originate in Ecuador or any of the other 
countries included in the special arrangements to combat drug production and trafficking.63 
56. A vast number of products from Ecuador exported to the United States receive duty-free 
treatment under the Andean Trade Preference Act (ATPA).  The Andean Trade Promotion and Drug 
Eradication Act (ATPDEA) was enacted in August 2002, extending the ATPA until 
31 December 2006 and broadening the benefits thereo f by affording duty-free treatment for imports of 
textiles and clothing, footwear, petroleum and pe troleum derivatives, watches and clocks, leather 
goods and tuna vacuum-sealed in flexible alumin ium pouches of a weight not exceeding 6.8 kg.  A 
limited number of products, including certain textiles,  articles of apparel, rum and canned tuna do not 
enjoy any preferences.  The Unite d States is also maintaining its tariff quotas on imports of certain 
agricultural products.  The granting of preference s is conditional upon a number of commercial and 
non-commercial requirements.  Ecuador has never forfeited any benefits under the ATPA through 
non-compliance with these requirements. 
57. Ecuador, together with Argentina, Bolivia, Br azil, Chile, Colombia, Cuba, Mexico, Paraguay, 
Peru, Uruguay and Venezuela, is party to th e Regional Agreement Relating to the Regional 
Preferential Tariff (PAR), concluded in 1984 under LAIA auspices.  This agreement provides for 
tariff preferences covering all of trade among member countries with certain exceptions.  The level of 
preferences granted by each member is determined according to its classification in one of the four country categories established in the agreement.  The field of application of this agreement is limited 
owing to "the currently reduced coverage of the PA R, coupled with its extensive lists of exceptions".
64 
58. Moreover, the broad coverage of the agre ements between Ecuador and Chile, MERCOSUR 
and the other members of the Andean Community means that only trade between Cuba and Mexico 
actually benefits from the PAR, inasmuch as the tr eatment it provides is more favourable than that 
under the partial-scope agreements with the two co untries.  Ecuador's preferential margin under the 
PAR is 12 per cent for imports from Cuba and 8 pe r cent for those from Mexico, while the margins 
granted by Cuba and Mexico for imports fro m Ecuador are 28 and 40 per cent, respectively.65 
59. Ecuador enjoys the unilateral preferences ac corded by the LAIA member countries to 
Ecuador, Bolivia and Paraguay under the regional ma rket-opening agreements signed in 1983.  The 
preferences consist in the elimination of tariffs on a limited number of products defined by each 
member country.  These regional agreements have  not undergone any significant expansion since 
1989, with a resulting erosion of preferences as  LAIA countries gradually negotiate deeper 
agreements.66 
                                                      
63 Article 10, Council Regulation (EC) 2501/2001  of 10 December 2001, amended by Council 
Regulations (EC) Nos. 814/2003 and 815/2003 and Commission Regulation (EC) No. 1686/2003.  On 
15 December 2003, the Council of the European Uni on adopted Council Regulatio n (EC) No. 2211/2003, 
extending the application of Council Regulation (EC) 2501/2001 to 31 December 2005. 
64 LAIA (2002), p. 12. 
65 Second Protocol Amending Regional Agreement No. 4 of 20 June 1990, Article 2. 
66 LAIA (2002), p. 15. Ecuador WT/TPR/S/148 
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(d) Trade agreements currently under negotiation 
60. Ecuador, together with Colombia and Peru, is  negotiating a free-trade agreement with the 
United States.  The first round of negotiations took place in May 2004.  The participants agreed on the 
following negotiating areas:  market access for industr ial goods and textiles;  rules of origin, customs 
procedures and technical barriers to trade;  agri culture;  environmental issues;  labour issues;  
competition policies;  dispute settlement, institu tional issues, and trade defence;  government 
procurement;  cooperation;  investment;  sanitary a nd phytosanitary measures;  intellectual property;  
financial services;  and other services.67 
61. Ecuador, along with all the other countries of  the Western Hemisphere except Cuba, is 
involved in the process leading towards the establis hment of the Free Trade Area of the Americas 
(FTAA), which began with the First Summit of the Am ericas held in Miami, USA, in 1994.  As at 
early 2005, the process had been suspended.  Ecuado r takes part in the negotiations jointly with the 
other Andean Community members.  It ch aired the negotiations between May 2001 and 
October 2002. 
62. As part of the Andean Community, Ecuador began negotiating an ec onomic complementarity 
agreement with three Central Am erican Common Market countries (Guatemala, El Salvador and 
Honduras) in March 2000.  The negotiations were su spended in August 2001.  Guidelines to further 
the negotiation of a free-trade agreement between the Andean Community and the Central American 
Common Market were agreed at the Fifteenth Andean Presidential Council.68 
63. In August 2002, the members of the Andean Co mmunity and Canada agreed to enter into 
exploratory talks on a possible free-trade agreement. 
64. Meeting at the Third Summit between Latin Amer ica, the Caribbean and the European Union, 
held in Guadalajara, Mexico, the members of the Andean Community and the European Union agreed 
to initiate a process towards an association agreemen t, including a free-trade area.  The process will 
commence "with a joint assessment phase of the An dean Community’s economic integration process 
[which] would lead, in due course, to negotiations".69  In December 2003, the Andean Community 
and the European Union signed a Political Dialogue and Cooperation Agreement. 
                                                      
67 Joint Andean Countries Press Release, Cartagen a de Indias, Colombia, 19 May 2004.  Available 
online at:  http://www.comunidadandina.org/prensa/notas/np19-5-04a.htm. 
68 San Francisco de Quito Agreement, Annex on Presidential Dialogue, 12 July 2004. 
69 Meeting of the Troika of the European Union and the Heads of State and Government of the Andean 
Community – Joint Communiqué, Guadalajara, Mexico, 29 May 2004.  Available online at:  http://www.comunidadandina.org/ingles/document/dec29-5-04.htm.