WORLD  TRADE  
ORGANIZATION   
WT/TPR/S/254/Rev.1 
11 January 2012 
 (12-0146) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
ECUADOR 
 
Revision 
 
 
 
 
This report, prepared for the second Trade Policy Review of Ecuador, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification fro m Ecuador on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Sergios Stamnas (tel: 022/739 5382) or Mr. Carlos Pérez del Castillo 
(tel: 022/739 5336). 
 
Document WT/TPR/G/254 contains the policy statement submitted by Ecuador. 
 
 
 Ecuador WT/TPR/S/254/Rev.1 
 Page iii 
 
 
 CONTENTS 
    Page 
SUMMARY   vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE POLICY FRAMEWORK  vii 
 (3) T RADE POLICY DEVELOPMENTS  viii 
 (4) S ECTORAL POLICY DEVELOPMENTS  x 
 (5) O UTLOOK  xi 
I.  ECONOMIC ENVIRONMENT 1  
(1)  OVERVIEW  1  
(2)  RECENT ECONOMIC PERFORMANCE  3  
(3)  MAIN MACROECONOMIC POLICY DEVELOPMENTS  6  
(i)  Monetary and exchange rate policies 6  
(ii)  Fiscal policy 7  
(4)  STRUCTURAL POLICIES  7  
(i)  Tax reform 8  
(ii)  Labour market reform 8  
(5)  BALANCE OF PAYMENTS  9  
(6)  DEVELOPMENTS IN MERCHANDISE TRADE  11  
(7)  FOREIGN INVESTMENT  13  
II.  TRADE AND FOREIGN INVESTMENT REGIME 17  
(1)  OVERVIEW  17  
(2)  RECENT CONSTITUTIONAL AND INSTITUTIONAL DEVELOPMENTS  17  
(3)  INSTITUTIONALIZATION OF TRANSPARENCY  19  
(i)  Trade policy formulation and evaluation 19  
(ii)  Domestic transparency 20  
(iii)  Transparency in relation to the WTO 22  
(4)  TRADE LAWS AND REGULATIONS  22  
(5)  TRADE POLICY OBJECTIVES  23  
(6)  TRADE AGREEMENTS AND ARRANGEMENTS  24  
(i)  WTO 24  
(ii)  Preferential and regional trade agreements 26  
(7)  TRADE DISPUTES AND CONSULTATIONS  29  
(i)  WTO 29  
(ii)  Other 29  
(8)  FOREIGN INVESTMENT REGIME  30  
III.  TRADE POLICIES BY MEASURE 34  
(1)  OVERVIEW  34  WT/TPR/S/254/Rev.1 Trade Policy Review 
Page iv 
  
     Page 
(2)  MEASURES AFFECTING IMPORTS  36  
(i)  Registration and documentation requirements 36  
(ii)  Customs valuation 38  
(iii)  Rules of origin 39  
(iv)  Tariffs 39  
(v)  Other charges affecting imports 46  
(vi)  Import prohibitions, restrictions, and licensing 47  
(vii) Contingency measures 50  
(viii) Standards and technical regulations, and sanitary and 
phytosanitary measures 52  
(ix)  Government procurement 56  
(x)  Local content 60  
(3)  MEASURES AFFECTING EXPORTS  60  
(i)  Registration and documentation 60  
(ii)  Export levies and reference prices 61  
(iii)  Export prohibitions, licensing, and other restrictions 62  
(iv)  Tax concessions 63  
(v)  Export promotion and marketing support 65  
(vi)  Export finance, insurance, and guarantees 65  
(4)  OTHER MEASURES AFFECTING PRODUCTION AND TRADE  66  
(i)  Taxation 66  
(ii)  Other forms of production assistance 70  
(iii)  Competition, price, and consumer protection policy 73  
(iv)  State-owned entities 76  
(v)  Intellectual property rights 78  
IV.  TRADE POLICIES BY SECTOR 83  
(1)  INTRODUCTION  83  
(2)  AGRICULTURE , LIVESTOCK , AND FISHERIES  84  
(i)  Overview 84  
(ii)  Policy framework developments 84  
(iii)  Border measures 86  
(iv)  Domestic support 86  
(v)  Bananas 87  
(vi)  Fisheries 88  
(3)  MINING   89 
(4)  ENERGY   91 
(i)  Hydrocarbons 91  
(ii)  Electricity 94  
(5)  MANUFACTURING  96  
(i)  Car assembly industry 97  
(ii)  Agri-industry 98  
(6)  SERVICES  99  
(i)  Features and multilateral commitments 99  
(ii)  Policy objectives 99  
(iii)  Financial services 99  
(iv)  Telecommunications and postal services 103  
(v)  Transport 104  
(vi)  Tourism 106  Ecuador WT/TPR/S/254/Rev.1 
 Page v 
 
 
     Page 
REFERENCES   107 
APPENDIX TABLES  111  
CHARTS 
I. ECONOMIC ENVIRONMENT 
I.1 Merchandise trade, by product, 2005 and 2010 12 
I.2 Merchandise trade, by main origin and destination, 2005 and 2010 14 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Frequency distribution of MFN tariff rates, 2005 and 2011 41 
III.2 Tariff escalation, by two-digit ISIC industry, 2005 and 2011 42 III.3 Average applied MFN and bound tariff rates, by HS section, 2005 and 2011 44 
III.4 Imports controls, 2011 49 
IV. TRADE POLICIES BY SECTOR IV.1 Interest rate spread, 2005-10 102 
TABLES 
I. ECONOMIC ENVIRONMENT 
I.1 Selected macroeconomi c indicators, 2005-10 1 
I.2 Basic economic indicators, 2005-10 5 
I.3 Balance of payments, 2005-10 10 
I.4 Foreign direct investment inflows, 2005-10 15 
III. TRADE POLICIES AND PRACTICES BY MEASURE III.1 Structure of the MFN tariff, 2005 and 2011 40 
III.2 Products for which applied MFN tariff  rates exceed their bou nd rates, 2011 45 
III.3 Government procurement, 2011 59 III.4 Margins of preference to domestic suppliers, 2011 59 
III.5 Structure of tax revenue, 2005-10 66 
III.6 ICE rates, by product, 2004 and 2011 68 
IV. TRADE POLICIES BY SECTOR 
IV.1 Banana production, exports, and prices, 2005-10 88 
IV.2 Oil production, refining, and trade 2005-10 92 IV.3 Fuel prices, 2005-10 94 
IV.4 Electricity, 2005-10 94 
IV.5 Electricity tariffs, 2011 95 IV.6 Telecommunications market, 2006-10 103 
IV.7 Price caps, 2005-10  104  WT/TPR/S/254/Rev.1 Trade Policy Review 
Page vi 
  
     P a g e  
APPENDIX TABLES 
I. ECONOMIC ENVIRONMENT 
AI.1 Merchandise exports, by group of products, 2005-10 113 
AI.2 Merchandise imports, by group of products, 2005-10 114 
AI.3 Merchandise exports, by trading partner, 2005-10 115 
AI.4 Merchandise imports, by trading partner, 2005-10 116 
II. TRADE AND INVESTMENT REGIMES 
AII.1 Most recent notifications under the WTO Agreements, 1 January 2005 to 30 June 2011 117 
III. TRADE POLICIES AND PRACTICES BY MEASURE AIII.1 Products subject to tariff quotas, in-quota, and out-of-quota duties, 2011 118 
AIII.2 Preferential tariff treatment, 2011 119 
AIII.3 Products subject to import controls, 2011 120 
 Ecuador WT/TPR/S/254/Rev.1 
 Page vii 
 
 
 SUMMARY 
(1) ECONOMIC ENVIRONMENT  
1. Ecuador is a small, fairly open, 
"dollarized" economy, very much dependent 
on oil revenue (for 14%-20% of GDP, more 
than half of export earnings and 20%-30% of government revenues).  Thus, the economy remains vulnerable to external shocks, including the recent global economic 
downturn that began in 2008 and resulted in a 
slowdown in growth due in large part to the sharp reduction in oil export prices and volumes, which was compounded by a sharp drop in expatriates' remittances, the second most important source of foreign currency.  
However, Ecuador weathered the crisis well, 
and growth rebounded to 3.6% in 2010;  it is predicted to be 5.1% in 2011, mainly due to higher prices for oil exports and a strong rebound in domestic demand, especially public 
investment in infrastructure projects.  As a 
result of "dollarization", inflation has remained relatively low.  During the period under review, urban unemployment fell from 9.3% to 6.1%.  Human development improved and there has been a slight fall in income 
inequality.  On the other hand, Ecuador's 
productivity is such that it is ranked among the world's least competitive economies. 
2. With Ecuador's "dollarized" monetary 
regime constraining macroeconomic policy 
options in responding to external shocks, the 
burden has fallen mainly on fiscal policy.  Accordingly, Ecuador's fiscal deficit rose sharply to 5.1% of GDP in 2009, largely due to the drop in revenues from oil exports, 
increased energy subsidies, and high public 
investment in strategic infrastructure projects, health, education, and social welfare, to correct long overdue investment in these areas and pave the way to sustainable growth.  As a result of the increased fiscal deficit, national 
saving was insufficient to finance gross 
domestic investment.  The consequent saving-investment gap was reflected in Ecuador's current account, which shifted from a surplus to a small deficit in 2009 and a larger deficit, of 3.3% GDP, in 2010.  The 
Government responded by restricting certain imports through safeguard measures from 22 January 2009 to 23 July 2010. 
3. The EU remains Ecuador's main 
non-oil export market, and the United States its main supplier.  In 2009 and 2010, FDI inflows dropped considerably, as a result of the international financial crisis, and major 
policy and constitutional changes.  A 
wide-ranging Organic Code of Production, Trade and Investment, passed in 2010, streamlined the legal framework governing, inter alia , foreign direct investment, which 
now provides for national treatment to foreign 
investors under certain conditions and 
additional guarantees involving investment contracts.  The FDI regime remains, in principle non-discriminatory, except for investment in "strategic" sectors and certain 
other areas (e.g. fisheries, media, extractive 
activities, and maritime transport) representing about 50% of GDP, where the Government retains certain exclusive rights. 
(2) T
RADE POLICY FRAMEWORK  
4. Ecuador is in the process of 
thoroughly redesigning its economic and 
social development strategy, with a view to, inter alia , diversifying the economy and 
making it more inclusive.  During the period under review, it undertook major 
constitutional amendments and related 
institutional changes, with potentially far-reaching implications for the roles of trade and FDI in this strategy.  These constitutional amendments provide for, inter alia , greater 
state involvement in, and/or control of, 
"strategic" sectors of the economy and envisage an increasingly inward-looking trade regime, with greater emphasis, for example, on certain pre-defined priority sectors and some selective import substitution activities.  The 
2008 Constitution has frequently been the 
source of litigation, controversy and investor concern in numerous areas, both at home and abroad, possibly to the detriment of FDI.  Ways to enhance total factor productivity, and WT/TPR/S/254/Rev.1 Trade Policy Review 
Page viii 
  
 thereby improve Ecuador's international 
competitiveness, as well as product and market diversification have also become important features of economic policy. 
5. Despite new constitutional provisions 
focused on regionalism, Ecuador, a beneficiary of WTO trade-related technical assistance, recognizes that multilateral trade rules provide a certain degree of security and predictability, 
and used WTO Dispute Settlement procedures 
to defend its trade interests during the period under review.  Its regional integration objectives have increasingly been based more on political or social criteria rather than conventional economic priorities.  Following a 
recent pragmatic policy shift, Ecuador 
envisages concluding its trade negotiations with the EU without further delay, and negotiating more comprehensive agreements for development covering several policy areas 
rather than just trade.  Such agreements are 
now being negotiated (for example with Turkey) or explored (for example, China, Korea (Rep. of), Gulf Cooperation Council countries, and EFTA). 
6. New legislation was passed in several 
trade and trade-related areas (e.g. production, 
trade, investment, government procurement, SPS, hydrocarbons, mining), but no comprehensive regulatory reform has been undertaken to streamline or simplify the 
existing legal framework consisting of 
different types of national legal instruments, and several Andean Community regulations (e.g. on customs valuation, reference prices, rules of origin, contingency measures, 
standards, SPS, competition policy, 
intellectual property rights).  As comprehensive legislation implementing constitutional and institutional changes is in the process of being passed or implemented, no evaluation of their impact is available at 
present.  Streamlining business creation, 
investment, and customs clearance procedures has been a priority. 
7. Action has been taken to improve and 
institutionalize transparency, and consequently fight corruption, a concern and a challenge in 
Ecuador.  Despite some improvement since its last TPR, Ecuador's WTO notification record has been characterized by irregular 
submissions or long periods without 
submission in several areas;  improved notifications are envisaged with the technical support of the WTO Secretariat. 
(3) T
RADE POLICY DEVELOPMENTS  
8. The tariff remains one of Ecuador's 
main trade policy instruments and an important source of ta x revenue (13.3% of 
total tax revenue).  As a result of customs tariff reforms (including the adoption of the HS 2007 tariff nomenclature) and changes in 
the type, level, and distribution of duty rates, 
the average applied MFN tariff rate dropped from 11.4% in 2005 to 9.3% in 2011.  Whereas the average applied MFN tariff for industrial imports dropped from 10.6% to 
7.6%, that for agricultural products rose from 
16.7% to 19.6%.  Some 53.5% of applied MFN tariff rates are currently in the range of zero to 5%, up from 38.7% in 2005.  Peak ad valorem  rates (affecting meat offal, rice, 
and milk and milk cream) remained 
unchanged.  The structure of tariff rates has 
become more complex and dispersed with the increase in the number of ad valorem  rates, 
and the adoption of compound duties;  the tariff now involves 17 ad valorem , and 
10 compound rates.  Some 95% of tariff rates 
are ad valorem , which contributes to the 
transparency of the tariff.  On the other hand, ad valorem  equivalents of non- ad valorem  
rates, which in general tend to conceal 
relatively high tariff rates, were not available.  
The fact that all tariff lines are bound imparts a high degree of predictability to the tariff.  However, the simple average of bound MFN rates (21%) is considerably higher than the average applied MFN rate (9.3%), providing 
the authorities with substantial scope for 
increasing applied MFN tariff rates within bindings, as was the case during the review period.  Furthermore, 19  ten-digit lines exceed 
the bound rates by 5 to 15 percentage points, a 
problem to be corrected upon completion of Ecuador WT/TPR/S/254/Rev.1 
 Page ix 
 
 
 the HS 2002 transposition of binding 
commitments, hopefully this year.  The use of compound rates on items bound on an ad 
valorem  basis, and the non-submission of their 
ad valorem  equivalents (AVEs) casts doubt on 
whether these rates are within their binding levels. 
9. Computerized customs clearance and 
other modernization efforts were undertaken to 
facilitate trade by, inter alia , reducing physical 
inspections, and instead focusing on import risk assessment;  the pre-shipment inspection regime was eliminated as of 2008.  Imports have been subject to a so-called "redeemable quota/installment" ( cuota redimible ) (until end 
2010), a contribution to the Children's 
Development Fund, and a tax on foreign exchange flight, all levied on ad valorem  
basis. 
10. Import prohibitions and restrictions 
affect numerous items but slightly less than in 
2005;  they apply mainly for human, animal or plant life or health, the environment, safety, or security reasons.  As from August 2011, 53 ten-digit tariff have been subject to new non-automatic import licensing requirements.  
In addition to institutional changes in the area 
of standards, new mandatory conformity assessment requirements, consisting of test reports and certificates of conformity for industrial products were introduced in 2007.  
The share of national standards that are 
identical to international standards stands at 3.6%.  No new mutual recognition agreements (MRAs), a trade facilitation measure, were signed during the review period;  some of the 
few existing MRAs expired and were not 
renewed.  New legislation was passed to ensure more flexible and user-friendly management of the entire Codex Alimentarius legislation, and to regulate biotechnology.   
11. A safeguard measure against imports 
of windshields other than those from 
developing countries except for Colombia (September 2010), and safeguard measures for balance-of-payments purposes were taken during the review period, in the form of 
quantitative restrictions and tariff surcharges. 
12. Major legislative, procedural and 
institutional changes were implemented in 
2008 with a view to improving the 
transparency and efficiency of Ecuador's public procurement regime;  as from 2009, all government-controlled companies have been subject to the new rules.  New online 
procurement procedures were introduced, but 
special procedures continue to be used most often;  open calls for tendering are the second most frequently used procurement method.  Emphasis was placed on using government procurement as an instrument of industrial 
policy, and a series of preferences for local 
suppliers, depending on local content and company size, were adopted. 
13. To ensure domestic supplies and 
encourage domestic processing, temporary 
export prohibitions (on rice) and quantitative 
restrictions (on exports of waste and scrap of certain ferrous and non-ferrous metals) are being used;  temporary export surveillance also affects leather and furs.  Exports of bananas and coffee remain subject to industry 
levies;  exports (and pr oduction) of banana and 
plantains, cocoa, coffee, shrimp, and fish products continue to be subject to minimum reference or support prices paid to producers by buyers.  Ecuador has maintained 
drawbacks, maquila (until 2010), free zones 
(until 2010), and a special economic development zone (as from 2010) that offer various tax concessions, including exemptions from income tax. 
14. To promote investment in domestic 
production activities for various purposes, in December 2010 three classes of tax incentives (general, sectoral, for depressed areas), including income tax holidays, were introduced for new investment in priority and 
selected import-substitution sectors, as well as 
for small and medium-sized enterprises;  non-tax incentives, involving concessional loans and grants, are also available.  Domestically produced milk and canned tuna, WT/TPR/S/254/Rev.1 Trade Policy Review 
Page x 
  
 scad, sardine, and trout remain subject to a 
zero rate of value-added tax (IVA), which is largely collected on imports;  corrective action is envisaged when revising other tax-related 
matters. 
15. Several articles of the 2008 
Constitution restrict competition by favouring state control or intervention in strategic activities.  This, and the lack of privatization 
efforts, state involvement in the production 
and trade of certain goods and services remains significant and in certain areas (e.g. mining, pharmaceuticals) is being strengthened.  Public enterprises benefit from the same tax-free status available to public 
sector bodies, which includes income tax 
exemption and zero-rating for IVA (i.e. reimbursement of taxes levied on the purchase of local or imported inputs of goods and services).  As from 2007, Ecuador intensified 
price controls for several sensitive consumer 
items, fuels, and public utilities;  implementing this policy required the use of subsidies.  Action was also taken to improve consumer protection. 
16. Legislation on protection of 
intellectual property rights was reinforced 
under the 2008 Constitution, particularly relating to ancestral knowledge and biodiversity, and is undergoing substantial reform.  Registration procedures and 
enforcement action were also improved.  
Despite intentions to issue compulsory licences for numerous pharmaceuticals and agrichemicals, only one such licence has been issued (April 2010) so far. 
(4) S
ECTORAL POLICY DEVELOPMENTS  
17. Despite its relatively modest 
contribution to GDP (6.6%), agriculture (including fisheries) accounts for about a third of employment, so that labour productivity in the sector is roughly one sixth of the level in 
the rest of the economy.  At the same time, 
compared to other sectors, agriculture is a major recipient of budgetary assistance in the form of preferential loans for training, technology transfer, crop diversification, and 
infrastructure projects.  The average applied MFN tariff rate for the sector has increased, while such protection in manufacturing has 
been reduced.  Certain agricultural products 
remain subject to peak tariff rates and variable import levies under the Andean Community's price band system applied to agricultural items originating in non-Andean Community 
countries.  Tariff-rate quotas tied to domestic 
absorption requirements for 17 agricultural items have not been used because of lower applied MFN rates and increases in the world prices of the items concerned.  No special safeguard measures were used during the 
period under review.  Ecuador remains the 
world's largest banana exporter and a leading producer; the signing of the Geneva Agreement on Trade in Bananas (May 2010) improved its export prospects to the EU 
market. 
18. New mining and hydrocarbons laws 
changed the nature of contracts with private-sector companies (from shareholders to services providers), thereby requiring the renegotiation or termination of these contracts.  
Hydrocarbons, one of several "strategic" 
sectors, remains a key activity, accounting for more than half of merchandise exports despite the sharp decline of its contribution to GDP;  two state firms remain the dominant players in 
all hydrocarbons operations.  Despite being an 
important oil exporte r, Ecuador's import 
dependency on refined products has increased, but action is being take n to expand its refining 
capacity.  Refined oil prices are subsidized at a 
considerable budgetary cost.  State control and 
involvement in mining, another "strategic" sector, was increased by, inter alia , creating a 
national mining company;  the required quota on the number of Ecuadorian  workers was 
reduced.  Reforms were undertaken to improve 
the efficiency of state firms' operations in the 
electricity market, which is dominated by a government-controlled enterprise and remains import-dependent in periods of drought.  Electricity tariffs are cross-subsidized. Ecuador WT/TPR/S/254/Rev.1 
 Page xi 
 
 
 19. The manufacturing sector plays a 
relatively modest role in the economy and in merchandise exports.  While the average MFN tariff rate applied to the sector has declined, 
the redistribution of rates has resulted in more 
pronounced tariff escalation.  Budgetary assistance for manufacturing remains low.  A programme under the Automotive Policy of the Andean Community remained in place 
during the period under review;  a support 
programme for replacing aging public transport vehicles was also implemented, and tariff protection for passenger motor vehicles was reinforced.  As from September 2011, concessional tariff treatment based on the local 
content of the final product has been granted 
to imports of completely knocked down kits of certain passenger motor vehicles, pickups, and sport-utility vehicles. 
20. The services sector is by far the largest 
contributor to GDP accounting for 56.5% in 
2010.  Ecuador's GATS commitments remain unchanged.  Some access limitations on foreign investment and other restrictions apply to basic telecommunications, radio services, maritime transport, and airports.  The State 
maintains a dominant position in fixed-line 
telecoms, another "strategic" sector;  price caps for telecom services are in place.  
Cabotage and transportation of hydrocarbons are reserved to vessels flying the Ecuadorian flag, and transportation of hydrocarbons to a 
state-owned firm;  preferential kerosene prices 
are reserved for aircraft registered in Ecuador.  Tax incentives for new tourism projects were suspended in 2010. 
(5) O
UTLOOK  
21. Ecuador's economic growth is 
expected to remain relatively strong, albeit vulnerable to external economic shocks.  Nonetheless, its long-term prosperity depends on its success in improving the total factor productivity of its enterprises and thus their 
international competitiveness, and thereby 
diversify its economy.  It remains to be seen whether Ecuador's unorthodox policies, such as state intervention and selective import substitution, together with regional trade 
liberalization are the most effective means to 
accomplish its economic and social objectives.  A stable, predictable, and transparent trade and trade-related legal and institutional framework could be the key to success.