WORLD TRADE
ORGANIZATIONWT/MIN(98)/ST/31/Rev.1
20 May 1998
(98-2151)
MINISTERIAL CONFERENCE
Second Session
Geneva, 18 and 20 May 1998Original:  Spanish
ECUADOR
Statement Circulated by H. E. Mr Benigno K. Sotomayor,
Minister for Foreign Trade, Industrialization and Fisheries and
President of the Andean Community of Nations
It is an honour for Ecuador to join the other countries and governmental and non-
governmental organizations meeting in Geneva on the historic occasion of the 50th Anniversary of the
multilateral trading system.
Ecuador believes that the globalization of the economy constitutes a challenge for developing
countries, not only in economic and political terms but above all in the social field.  It is, however, a
phenomenon that does not give equal opportunities to all countries and can exacerbate differences andinequalities in levels of development if it is  not tackled within the framework of concerted
agreements.
Ecuador became a Member of the WTO in January 1996 after showing that its foreign trade
regime for goods and services was fully consistent with the disciplines and rules of the WTO
Agreements.  Since then, its policy of openness has sought to promote better integration in foreign
markets, and this trend has prevailed despite opposing forces in favour of protectionist measures,
usually as a result of the tension caused by recent crises.
Ecuador's macroeconomic policy has focused on stabilizing the economy as a precondition
for achieving sustainable growth.  Strengthening of the external sector has been pursued and fiscal
reform is being intensified as an essential basis for sustained economic growth and better distribution
of income.
In pursuing its macroeconomic objectives, four fundamental elements have governed
Ecuador's strategy:  maintenance of a stable monetary policy, strengthening of the external sector,
fiscal sustainability, privatization and structural reform, so as to promote more efficient
macroeconomic management and systemic efforts to enhance competitiveness.
Ecuador considers that the disciplines imposed by the multilateral Agreements oblige all
countries to pursue a non-restrictive trade policy.  Nevertheless, as a result of the Agreements reachedin the WTO, developing countries are facing significant restrictions on their capacity to implement a
development-oriented  trade and industrial policy.  In this new context, it is essential to take up the
question of the room for manoeuvre that exists for implementing such policies.WT/MIN(98)/ST/31/Rev.1
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Ecuador believes it is vitally important to work towards giving developing countries real and
increased opportunities to participate in global trade, by offering better market access conditions and
by reinforcing cooperation and technical assistance.
The special and differential treatment of developing countries within the WTO should be
evaluated before the Third Ministerial Conference of the WTO is held.  This evaluation should lead to
findings and conclusions that define what the countries concerned should achieve within thismechanism on the one hand and identify the risks they face when undertaking further negotiations as
Members of the World Trade Organization on the other.
Ecuador considers that Member States of the WTO should respond effectively and
immediately to the needs of developing countries so that they can participate constructively in the
multilateral trading system with the support of improved institutional cooperation.
Liberalization of trade in agricultural products must necessarily cover the question of a sharp
and rapid reduction in the levels of subsidies for agriculture and export credits granted to farmers inindustrialized countries.
Ecuador considers it necessary to give the Members of the WTO an opportunity to reflect on
the current trend towards compartmentalizing multilate ral negotiations into sectors.  This type of
procedure erodes a large part of the negotiating power of developing countries.
Together with the other Members of the WTO,   Ecuador has participated in monitoring
implementation of the main Agreements.  The work so far carried out by the WTO on implementation
has allowed the periodic review of compliance with many of the specific and general commitments
undertaken by Members under the various Agreements.
In the case of Ecuador, compliance with the commitments on accession to the WTO has also
been reviewed.  Ecuador has satisfactorily observed these commitments and has outlined a workprogramme to pursue specific actions that will al low it to meet the agreed commitments within a
time-frame.
In addition, as President of the Commission of  the Andean Community, I would like to take
this opportunity to underline the achievements of our integration process, commenced almost 30 years
ago, which now plans to create a real community of nations encompassing Ecuador, Bolivia,Colombia, Peru and Venezuela.
As an open integration model, the Andean Community has its place within the multilateral
system of the World Trade Organization;  recent de velopments show that it contributes towards and
promotes economic development and the international integration of its Members.
Trade liberalization within the Andean Community has been accompanied by a reinforced
institutional framework and enhanced transparency in trade, under a stable legal framework that has to
a large extent been achieved through the establishment of a dispute settlement mechanism.
The Andean Community is currently undertaking action to improve its expanded market by
liberalizing trade in services, adopting common rules on government procurement, harmonizing
macroeconomic policies and promoting physical integration projects.
In addition, the Community has sought to derive greater benefit from the increased
interdependence of economies at the international level.WT/MIN(98)/ST/31/Rev.1
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In this connection, trade relations with other blocs and countries in the region have been
strengthened, framework agreements with MERCOSUR and Panama have been concluded with a
view to negotiations on a free trade area, and there has been active participation in the process that
will lead to the establishment of a Free Trade Area of the Americas, while seeking closer relations
with Canada, Central America and the Caribbean countries.
On the occasion of the 50th anniversary of the GATT, the Andean Community of Nations
wishes to reaffirm its commitment to the multilate ral trading system and its firm determination to
continue participating actively in this international negotiating forum with the conviction that this will
help to attenuate differences in levels of development and ensure its full integration in the global
economy.
Lastly, allow me to congratulate the Chairman of the Conference and the Director-General of
the WTO on the work they have done in guiding the progress and improvement of the multilateral
trading system, to which we remain committed through our resolute participation.  This allows us to
view with confidence and optimism the opportun ities for development and economic growth of
Members of the Organization in the years to come.
This Ministerial Conference of the WTO coincides with the commemoration of the
50th anniversary of the GATT.  Among its founder members were the countries that set up theEuropean Communities and held the first round of tariff reductions, and each round of trade
negotiations within the GATT was linked to the expansion of the Communities.  The last roundestablished the WTO and Ecuador also celebrated this event in Marrakesh, but I must emphasize that
one black spot in the Uruguay Round was the Framework Agreement on Bananas which the EU
included among its specific commitments, thus perpetuating a system that was seriously
discriminatory to Latin American developing countries and disregarding the recommendations of two
GATT Panels.
As the world's biggest exporter of bananas a nd principal supplier of the European single
market, 15 days after having become one of the new Members of the WTO Ecuador requested
consultations with the European Commission on its common market organization for bananas.  A
Panel was set up before which ecuador acted jointly and severally with the United States, Guatemala,Honduras and Mexico.  In September 1997, the WTO Dispute Settlement Body adopted the Panel's
conclusions and recommendations, which were ratified by the Appellate Body, and the European
Communities were requested to bring their regime into conformity with the GATT 1994.
In the three and half years of the WTO's existence, during which the dispute settlement
mechanism has become the factor that has given the WTO greater credibility, this was the first
occasion on which the European Communities had to abide by a ruling by the Dispute Settlement
Body.  Therefore, full and prompt compliance on the part of the EU was of prime importance for the
system's status.
It is however, a subject of concern to the Government of Ecuador that the European
Commission's proposal contains certain aspects that avoid full application of the recommendations of
the Dispute Settlement Body.  These elements are the following:
1. Import licensing regime.  There is a gap in the proposal because the reports by the Panel and
the Appellate Body state that these licences should be given to operators belonging to categories Aand C in the current regime, who have been deprived of 30 per cent of the licences, which have been
transferred to ACP and Community operators although they have never marketed Latin American
bananas, and 28 per cent to ripeners, whose activity is not importing or buying direct from producers.
There are well-founded fears that the new regime will once again give licences to ACP and
Community operators and to ripeners, thus continuing to violate Articles II and XVII of the GATS,the most-favoured nation and national treatment clauses respectively.WT/MIN(98)/ST/31/Rev.1
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In order to comply with the WTO, the licences should be awarded to the current A and C
operators according to the figures for the past thre e years, in recognition of the large sums expended
on acquiring the licences confiscated, which accordin g to the Panel and the Appellate Body should be
returned at no cost.
2. Bound tariff.  The proposal breaches the tariff bound in the WTO, which has been applied
since 1995 and the fourth consecutive year in 1998, by dividing up the tariff quota arbitrarily, as thiswas not recommended by the WTO, neither is it a requirement of the commitments under the
Lomé Convention nor has it been requested by the Member States of the EU.  Moreover, this new
tariff of ECU 300, which violates the bound tariff of ECU 75, creates less favourable conditions for
Latin American bananas, violating Article XIII of the GATT and Articles II and XVII of the GATS,
because this new duty corresponds to half of the amounts paid by Latin American suppliers to ACP
and Community operators for the purchase of the licences confiscated.  In addition, according to the
proposal, the revenue generated by this new tariff, will be directly used to subsidize ACP producers,establishing an unlawful and inequitable tax that is prejudicial to third world farmers such as those in
Latin America who see no reason why they should subsidize farmers in other countries.
3. Tariff quota.  The proposal divides the tariff quota for third countries into three, including
ACP countries, although the recommendations of the Panel and the Appellate Body call for a single
quota under which Latin American bananas pay a tariff of ECU 75 and ACP bananas zero.
4. Country quotas for substantial suppliers.  The proposal states that, if there is no agreement
with substantial suppliers, the European Commission will fix the quotas unilaterally.  It should be
emphasized that the Commission has no legal basis for unilateral attribution of the quotas because all
the representative periods it could use are unlawful as they violate Article XIII of the GATT, as the
two Panels of the GATT and the WTO Panel concluded.
5. Duration of the new regime.  There is no indication of the duration except that the exemption
granting a zero tariff for ACP countries expires on 29 January 2000 and, what is worse, the proposal
indicates that until 31 December 2005 the Commission should simply submit a report on its operation.
Lastly, the Government of Ecuador emphasizes that the credibility of the WTO is more the
responsibility of major trading partners such as the European Union than of small developingcountries such as Ecuador, for which the Dispute Settlement Understanding is deserving of special
consideration that cannot be disregarded.  Thus, the consistency with the WTO rules which the
European Union's banana regime will have to display is something that will implicate and strengthen
the credibility of the multilateral trading system.
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