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  October 24th, 2015 | Written by

WTO Divided on Ecuador’s Import Surcharges

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  • Ecuador imposed import surcharges on balance-of-payments grounds.
  • Ecuador’s import surcharges ranged as high as 45 per cent on final consumer goods.
  • Ecuador’s economic situation has worsened since June, due to the recent sharp drop in oil prices.

In consultations that ended a few days ago, World Trade Organization members remained divided about how the organization should react to import surcharges imposed by Ecuador earlier this year.

In March, Ecuador announced it would impose a surcharge on about 30 per cent of imports to safeguard its balance of payments due to a “highly unfavorable economic climate.”

The surcharges consist of five per cent on “non-essential capital and primary capital goods,” 15 per cent on imports of “medium need,” 25 per cent on ceramics, tires, motorcycles, and televisions, and 45 per cent on final consumer goods. Ecuador notified the WTO of the measure in April 2015.

In a meeting in June, Ecuador shared with WTO members a plan to phase out the import surcharge by June 2016 and announced that the surcharge on final consumer goods would be reduced from 45 per cent to 40 per cent as of January.

During the recent consultation, some WTO members strongly supported Ecuador’s measure, while others called for its immediate removal. Several other members expressed sympathy with Ecuador’s balance-of-payments difficulties but reiterated serious concerns including on whether the measure could be economically justified, whether it is in line with WTO rules, and on its negative impact on export from other WTO members.

A representative from the International Monetary Fund (IMF) reported that Ecuador’s economic situation has worsened since June, mainly due to the sharp drop in oil prices in recent months affecting the main sector of Ecuador’s economy, as well as declining growth, a deteriorating business climate, difficulties in accessing financing and currency appreciation.

Ecuador provided additional clarifications on its economic and balance-of-payments situation and prospects, and outlined the results of the second evaluation of the impact of the measure.

The WTO’s Committee on Balance-of-Payments Restrictions is scheduled to resume its consultations with Ecuador in February 2016 following a third evaluation of the impact of the measure by Ecuador.