RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/148 
11 May 2005  
 
(05-1867) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
ECUADOR 
 
Report by the Secretariat 
 
  
 
This report, prepared for the first Trade Policy Review of Ecuador, has been 
drawn up by the WTO Secretariat on its ow n responsibility.  As required by the 
Agreement Establishing the Trade Polic y Review Mechanism (Annex 3 of the 
Marrakesh Agreement Establishing the World Trade Organization), the 
Secretariat has sought clarification from Ecuador on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to  
Mr Karsten Steinfatt (tel. 022 739 6759)  or Mr Raymundo Valdés (tel. 022 739 
5346). 
 
Document WT/TPR/G/148 contains the policy statement submitted by Ecuador. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Ecuador. 
 Ecuador WT/TPR/S/148 
 Page iii 
 
 
CONTENTS 
 
Page 
SUMMARY OBSERVATIONS vii  
 (1)  INTRODUCTION  vii  
 (2) T HE ECONOMIC ENVIRONMENT  vii 
 (3) T RADE AND INVESTMENT POLICY FRAMEWORK  vii 
 (4) M ARKET ACCESS FOR GOODS  viii 
 (5) O THER MEASURES AFFECTING TRADE  ix 
 (6) S ECTORAL POLICIES  x 
I. ECONOMIC ENVIRONMENT 1  
 (1)  RECENT ECONOMIC DEVELOPMENTS  1  
 (i)  Structure and employment 1  
 (ii) Economic growth 3 
 (iii) Fiscal policy 5 
 (iv) Monetary and exchange rate policy 7 
 (v) Balance of payments and external debt 9 
 (2) T RADE IN GOODS AND INVESTMENT FLOWS  11 
 (i) Composition of trade 11  (ii) Geographical distribution of trade 12 
 (iii) Foreign direct investment 12 
 (3)
 OUTLOOK  13  
II. TRADE AND INVESTMENT REGIME 14  
 (1) T RADE POLICY FORMULATION AND IMPLEMENTATION  14 
 (i) General legal and institutional framework 14  (ii) Trade policy formulation and objectives 16 
 (2) F
OREIGN INVESTMENT REGIME  17 
 (i) Right of establishment 18  (ii) Protection 19  (iii) Promotion and incentives 20 
 (3) I
NTERNATIONAL TRADE RELATIONS  20 
 (i) World Trade Organization 21 
 (ii) Preferential agreements 22 
III. TRADE POLICIES BY MEASURE 26  
 (1) M EASURES AFFECTING IMPORTS  26 
 (i) Customs documentation and procedures 26 
 (ii) Customs valuation 28 
 (iii) Rules of origin 30  (iv) Tariffs 30  (v) Other charges 37  (vi) Prohibitions 40 WT/TPR/S/148 Trade Policy Review 
Page iv 
 
 
Page 
 
 (vii) Other restrictions and licensing 41  (viii) Anti-dumping and countervailing measures 43 
 (ix) Safeguard measures 45 
 (x) Standards and technical regulations 49  (xi) Sanitary measures 52 
 (2) M
EASURES AFFECTING EXPORTS  54 
 (i) Registration and documentation 54 
 (ii) Other charges and minimum prices 55 
 (iii) Prohibitions, licensing and other restrictions 55  (iv) Subsidies, charge and tax concessions and free zones 56 
 (v) Export promotion and marketing support 59  (vi) Financing, insurance and guarantees 59  (vii) Measures applied in third markets 59 
 (3) O
THER MEASURES AFFECTING PRODUCTION AND TRADE  60 
 (i) Company registration 60  (ii) Competition policy 61  (iii) Price fixing, production cont rols and marketing agreements 62 
 (iv) State trading, State-owned companies and privatization 62 
 (v) Incentives 63 
 (vi) Government procurement 65  (vii) Intellectual property rights 69 
IV.
 TRADE POLICIES BY SECTOR 75  
 (1) A GRICULTURE AND FISHERIES  75 
 (i) General features 75 
 (ii) Crop and livestock sector 76 
 (iii) Fisheries sector 81 
 (2) M INING , EXCLUDING HYDROCARBONS  81 
 (3) H YDROCARBONS  83 
 (i) General features 83 
 (ii) Institutional and legal framework 84 
 (4) M ANUFACTURING  86 
 (5) E LECTRIC POWER  89 
 (6) S ERVICES  92 
 (i) General features 92 
 (ii) Telecommunications 93 
 (iii) Financial services 97  (iv) Maritime transport 103  (v) Air transport 106 
V. APPENDIX TABLES 115 
 
 Ecuador WT/TPR/S/148 
 Page v 
 
 
CHARTS 
 
Page 
III. TRADE POLICIES BY MEASURE 
III.1 Frequency distribution of MFN tariff rates, 2005 34 
III.2 Tariff escalation by ISIC 2-digit industry, 2005 35 III.3 Products subject to import licensing, December 2004 41  
TABLES 
I.
 ECONOMIC ENVIRONMENT 
I.1 Structure of GDP and employment, 1998-2004 1 
I.2 Structure of GDP by expenditure, 1998-2004 2 I.3 Central Government finances, 1998-2004 5 I.4 Leading monetary indicators, 1998-2004 8 I.5 Balance of payments, 1998-2003 9 
III.
 TRADE POLICIES BY MEASURE 
III.1 Summary analysis of MFN tariff, January 2005 31 
III.2 MFN tariff structure 33 III.3 Products for which the applied MFN ta riff rates exceed the bound rates, 2005 36 
III.4 Tariff concessions granted under speci al customs regimes, December 2004 36 
III.5 ICE rates by product, December 2004 40 
III.6 Safeguards investigations notif ied to the WTO, December 2004 45 
III.7 Programmes offering concessions on du ties and other taxes, December 2004 56 
III.8 Participation in agreements on intell ectual property protection, December 2004 69 
III.9 Overview of the protection of inte llectual property righ ts, July 2004 70 
IV.
 TRADE POLICIES BY SECTOR 
IV.1 Value added in the agriculture and fisheries sectors, 1998-2004 75 
IV.2 Products subject to tariff quotas 78 IV.3 Oil indicators, 1998-2003 83 IV.4 Value added in manufactures, 1998-2003 86 IV.5 Selected telecommunications indicators, 1997-2004 93 
IV.6 Structure of the financial system, 1998 and 2004 97 
  WT/TPR/S/148 Trade Policy Review 
Page vi 
 
 
APPENDIX TABLES 
 
Page 
I. ECONOMIC ENVIRONMENT 
AI.1 Merchandise exports by pr oduct, 1991 and 1998-2003 117 
AI.2 Merchandise imports by pr oduct, 1991 and 1998-2003 118 
AI.3 Merchandise exports by tradi ng partner, 1991 and 1998-2003 119 
AI.4 Merchandise imports by tradi ng partner, 1991 and 1998-2003 120 
AI.5 Flows of foreign direct investment, 1993 and 1998-2003 121 
II. TRADE AND INVESTMENT REGIME 
AII.1 Existing agreements signed by Ecuador on the promotion and reciprocal protection of 
investments, January 2005 122 
AII.2 Selected notifications to the WTO, February 2005 123 AII.3 Status of WTO dispute settlement proceedings involving Ecuador, 1996-2004 126 
AII.4 Main proposals and submissions by Ec uador within the framework of the Doha 
Development Agenda, June 2004 128 
AII.5 Main bodies of the Andean Integration System 130 AII.6 Complaints filed against Ecuador with th e Court of Justice of the Andean Community 131 
III.
 TRADE POLICIES BY MEASURE 
AIII.1 Analysis of Ecuador's preferential tariffs, January 2005 133 
AIII.2 Licensing regime, November 2004 135 
AIII.3 Register and index of Ecua dorian animal health standards 138 
AIII.4 Sub-regional register of sanitary and phyto sanitary standards;  Ecuador:  phytosanitary 142 
IV. TRADE POLICIES BY SECTOR 
AIV.1 Summary of specific commitments under the GATS 145 
 
 
 Ecuador WT/TPR/S/148 
 Page vii 
 
 
SUMMARY OBSERVATIONS 
 (1) I
NTRODUCTION  
1. Since the early 1990s, Ecuador has 
taken substantial steps to liberalize and 
improve the predictability and transparency of its trade and investment regime through autonomous, regional, and multilateral initiatives.  Ecuador has bound all its tariff 
lines in the WTO, and MFN rates have been 
progressively reduced to an average of 11.4 per cent in 2004.  Some non-tariff barriers persist, notably non-automatic import licensing, lengthy customs procedures, and the use of reference pric es.  Although foreign 
investment generally receives national 
treatment, constraints to private investment exist in some sectors, including hydrocarbons, electricity, and telecommunications.  Addressing these and other trade and 
investment barriers would help sustain 
economic growth and enhance the ability of Ecuador's economy to respond to external shocks in the absence of an independent monetary policy. 
(2) T
HE ECONOMIC ENVIRONMENT  
2. Following a sharp decline in 1999, 
Ecuador's real GDP grew  by an average of 
4.1 per cent between 2000 and 2004.  Per capita income reached US$2,325 in 2004.  This recent growth is largely attributable to a 
favourable external environment and prudent 
macroeconomic policies.  However, the economy is vulnerable to natural phenomena and variations in the price of primary commodities, particularly that of petroleum. 
3. In the wake of the economic and 
financial crisis that affected Ecuador at the end of the 1990s, one of the most severe in its recent history, Ecuador adopted the U.S. dollar as legal tender in 2000.  By doing so, financial costs were reduced and expectations 
stabilized, thereby helping to reactivate the 
economy.  At the same time, inflation decreased significantly.  On the other hand, dollarization meant that Ecuador was no longer able to exercise an independent monetary policy, thus forgoing the use of a 
policy instrument. 
4. Fiscal policy is the remaining 
macroeconomic instrument for influencing the 
level of domestic demand;  however, its 
relative inflexibility limits its efficiency as a macroeconomic adjustment tool.  Although there have been important fiscal reforms, following dollarization there appears to be an 
urgent need to complete the reforms that are 
still pending, including changes to the fiscal pre-allocation scheme and the elimination of subsidies and tax exemptions. 
5. International trade plays an important 
role in Ecuador's economy.  Although there 
has been considerable diversification, exports 
of petroleum and of agricultural and fisheries products still dominat e Ecuador's export 
basket.  Ecuador's main trading partners are the United States, the member countries of the 
Andean Community, and the European 
Communities. 
(3) T
RADE AND INVESTMENT POLICY 
FRAMEWORK  
6. Ecuador has been a Member of the 
WTO since 1996, and participated in the 
negotiations on telecommunications and 
financial services following the Uruguay Round.  It has not signed the Agreement on Information Technology, nor any of the plurilateral agreements.  Ecuador has 
participated in various dispute settlement 
cases, and has submitted many notifications, although some are still pending. 
7. While Ecuador is seeking to formulate 
a common trade policy with the other members 
of the Andean Community, at the current stage 
of regional integration its trade policy is chiefly decided at the national level.  The opening up of trade through multilateral and 
regional initiatives has been used by Ecuador as a catalyst for structural change.  At the 
regional level, an agreement involving deep 
integration with the other countries of the Andean Community coexists alongside broad agreements for the liberalization of trade in WT/TPR/S/148 Trade Policy Review 
Page viii 
 
 
goods (Chile and MERCOSUR) and 
agreements of a selective nature providing for limited trade liberalization (Cuba and Mexico). 
8. At the beginning of 2005, Ecuador 
was in the process of negotiating other preferential agreements, including one with the United States that could have an extensive impact on its trade and investment regime.  
The growing number of preferential 
agreements increases the complexity of Ecuador's trade regime, and as with other WTO Members, generates some concern as to the impact on trade and investment flows. 
9. In general, Ecuador grants national 
treatment to foreign investors.  The regulatory 
framework governing foreign investment also offers investors the possibility to sign contracts with the State that give them greater fiscal and legal certainty.  Ecuador's 
participation in the Andean Community and its 
commitments under the WTO have enhanced the predictability of its investment regime and more generally, its legal framework. 
10. Ecuador adopted a new constitution in 
1998, replacing the Constitution adopted 
during the transition from a military regime to 
a civilian government in 1979.  The WTO Agreements take precedence over domestic laws, but not over Andean statutes.  In the context of its historical performance as 
regards political and legal stability, Ecuador 
is making efforts to strengthen its institutional and legal framework.  Moreover, Ecuador has made the fight against corruption one of its priorities. 
(4) M
ARKET ACCESS FOR GOODS  
11. Ecuador's trade regime has undergone 
major reforms since the 1990s.  MFN tariffs have been considerably reduced.  The simple average MFN tariff stands at 11.4 per cent, but if charges applied exclusively to imports 
are included, the average would be about 
11.9 per cent.  Average tariff protection for agricultural products (15.7 per cent) is substantially higher than for other products (10.8 per cent).  Moreover, in the framework 
of the Andean price band system, Ecuador sets the tariff level for certain agricultural products according to their international 
prices. 
12. Ecuador has bound its entire tariff, 
mostly at 30 per cent.  The improved predictability that this provides with respect to market access conditions in Ecuador is 
somewhat marred by the substantial difference 
between applied and bound rates.  The MFN tariffs applied to a limited number of tariff lines appear to be higher than their respective bound rates. 
13. In connection with its participation in 
the Andean Community, Ecuador grants duty-
free treatment to practically all imports originating in Bolivia, Colombia, Peru, and Venezuela.  It also grants preferential treatment to imports from Chile, Cuba, 
Mexico, and the members of MERCOSUR. 
14. A small fee applies to all imports 
except those originating in the Andean Community.  The fee, applied also to exports, is used to fund in part the official export promotion agency, which has played an 
important role in the diversification of 
Ecuador's exports.  Internal taxes appear to be applied equally to imported and domestic products, except in the case of milk and canned tuna, which are exempt from VAT only 
if they are of domestic origin. 
15. Customs clearance times are 
relatively long, possibly reflecting the high proportion of physical inspections and the excessive number of entities and documents 
involved in customs formalities.  A customs 
modernization plan is currently being implemented.  Ecuador has operated a preshipment inspection programme since 1994.  It has applied the Agreement on Customs Valuation since 2001, but still uses 
reference prices to determine the customs 
value of a number of products subject to the Andean price band system. Ecuador WT/TPR/S/148 
 Page ix 
 
 
16. Ecuador prohibits imports of certain 
used products.  It also maintains an import licensing regime that applies to some 1,380 tariff lines, of which roughly half correspond 
to agricultural goods.  Imports exceeding 
US$4,000, and all exports are subject to "approval" by the Central Bank.  In the vast majority of cases,  licensing and the "approval" appear to duplicate other import 
requirements.  Care needs to be taken to 
ensure that licensing is not used as a non-tariff barrier to trade. 
17. Ecuador has never imposed 
countervailing measures, and its use of anti-dumping and safeguard measures has been 
limited.  One of its anti-dumping duties and 
one safeguard measure were the subject of consultations at the WTO.  In connection with Ecuador's application of  safeguard measures, 
the General Secretariat of the Andean 
Community reiterated that members of the 
Community were not exempt from Andean regulations in order to comply with their multilateral commitments.  Ecuador once invoked the transitional safeguard mechanism provided for under the WTO Agreement on 
Textiles and Clothing. 
18. In the area of technical standards and 
regulations, Ecuador has launched a process of rationalization involving the conversion of its 640 mandatory technical standards into 
voluntary standards, and the adoption of 
technical regulations following the principles laid down in the WTO Agreement on Technical Barriers to Trade.  It has adopted and notified to the WTO four technical regulations.  The 
law provides for recognition of equivalence 
between Ecuador's technical regulations and certain international standards "of repute". 
19. Ecuador has not submitted any 
notifications under the WTO Agreement on the Application of Sanitary and Phytosanitary 
Measures.  It does not have an inventory of 
sanitary and phytosanitary measures applied to imports from outside the Andean Community. (5) O
THER MEASURES AFFECTING TRADE  
20. Exports of coffee beans, roasted or 
ground, are subject to a contribution to the producer's association equivalent to 2 per cent 
of their f.o.b. value.  The State fixes minimum 
reference prices for bananas, cocoa, coffee, 
shrimps, and fisheries products.  All exports are subject to the payment of a redeemable charge equivalent to 0.15 per cent of their 
f.o.b. value (0.05 per cen t in the case of oil). 
21. Ecuador has a number of customs 
schemes through which it offers tax exemptions on imported g oods with a view to 
promoting exports.  However, in the case of the free zone regime, certain fiscal benefits are 
granted even if the production is destined for 
the Ecuadorian market. 
22. Ecuador is not a party to the WTO 
Plurilateral Agreement on Government Procurement.  Its current legislation enables it 
to limit tendering to domestic companies, and 
restricts the participation of foreign consulting firms, except when the necessary experience or capacity is not available locally.  Efforts are being made to enhance transparency in government procurement. 
23. While Ecuador does not have a 
general legal framework for competition policy, it is currently completing a preliminary draft law on the subject.  The State plays an important role in production activities through 
state enterprises and as a shareholder in 
companies operating in areas such as electricity, telecommunications, tourism, financial services, mining, agricultural products, and miscellaneous manufactures.  
The initial privatization policy was abandoned 
in favour of the granting of concessions to private operators. 
24. The WTO TRIPS Council reviewed 
Ecuador's legislation on intellectual property rights in December 1998.  The current regime 
for the protection of intellectual property 
rights is made up of domestic laws and regulations, and Andean Community and WTO  WT/TPR/S/148 Trade Policy Review 
Page x 
 
 
legislation.  While Ecuador permits parallel 
imports of patented or trademarked goods, among others, the same does not apply to goods protected by copyright. 
 
(6) S
ECTORAL POLICIES  
25. The contribution of the agriculture 
and fisheries sectors is important to Ecuador's economy, in terms of both exports and 
employment.  Ecuador maintains tariff quotas 
for certain agricultural products considered sensitive;  in some cases, the granting of such quotas is linked to absorption of domestic production. 
26. The petroleum sector generates an 
essential share of GDP, exports, and tax 
revenue.  The State controls refining and plays an important role in crude oil extraction and sale of hydrocarbons on the domestic market.  However, private enterprises have been 
participating increasingly in the production 
and transport of crude oil.  Refining, storage, and marketing of hydroc arbons by private 
companies require the authorization of the President of the Republic. 
27. The economic crisis at the end of the 
1990s had a considerable impact on the 
performance of the manufacturing sector, whose growth since then has been below that of the economy as a whole.  Most industries benefit from tariff escalation, tariff 
concessions, and relatively high effective rates 
of protection, which may well have distorted the allocation of resources in the economy.  Safeguard measures have been used for the temporary protection of certain industries, 
while an agreement concluded in the context 
of the Andean Community has provided considerable assistance to the Ecuadorian automotive sector. 
28. The State continues to dominate the 
electricity sector, but over the past decade the 
legal framework has been reformed with a 
view to boosting competition and promoting private sector participation.  Electricity tariffs are still insufficient to cover total costs.  This situation, coupled with high electrical energy losses, has given rise to the accumulation by 
distribution companies of significant debts with the other participants in the electricity market.  As a result, investment in the sector 
has been limited, and infrastructure 
modernization and reduction in the high electricity costs has been delayed. 
29. Ecuador has assumed relatively broad 
specific commitments under the General 
Agreement on Trade in Services.  It also 
signed the Fourth and Fifth Protocols (on telecommunications and financial services), but in the case of telecommunications it did not assume any commitments with respect to the Reference Paper.  Liberalization of trade 
in services is one of the mainstays of the 
common market that the members of the Andean Community are seeking to establish in 2005. 
30. In the telecommunications sector, two 
state enterprises enjoyed regional monopolies 
in fixed telephony until 2001, and approximately 94 per cent of fixed telephony services users are still subscribed to those companies.  Although attempts to privatize both enterprises never materialized, private 
sector investment in telecommunications has 
gradually increased, largely due to the significant improvements made to the legal environment since the mid 1990s.  However, further reforms are needed, if only to clarify 
the responsibilities of the various government 
agencies involved in the sector.  Cross-subsidies are still offered, but the law calls for their elimination. 
31. The financial sector benefited from 
significant reforms to the legal and 
institutional framework, above all the prudential framework.  There are no limits on foreign participation in banks or insurance companies except with respect to the establishment of representative offices, which 
is not permitted in the case of insurance 
companies and is subject to the principle of reciprocity in the case of banks.  The economic crisis of 1998-99 dealt a serious blow to the sector, causing a drastic reduction in the 
number of financial institutions.  Dollarization Ecuador WT/TPR/S/148 
 Page xi 
 
 
has also led to important changes in the 
structure and operation of the financial system, and borrowing and lending rates have fallen together with the intermediation 
margins.  There are four state development 
banks, all of which are in a fragile situation. 
32. Maritime transport plays a 
fundamental role in Ecuador's international trade.  The State owns two shipping companies 
and the main commercial ports.  However, 
there are also a number of private ports, and state-owned ports may delegate administration, maintenance, and development to private companies.  Internal water transport is confined to ships operating under the 
Ecuadorian flag, with certain exceptions.  The transport of hydrocar bons is confined to 
national shipping companies that are at least 51 per cent state-owned.  The authorities are currently drafting new laws to modernize the 
sector's legal framework. 
33. Rights to exploit international air 
transport services may be granted to companies from any country, provided the government of that country is willing to offer 
similar rights to Ecuadorian airlines.  The 
State may delegate the maintenance, development, and construction of airports to private firms, and grant permits for related activities.  Air transport costs are high in comparison to other countries in the region.