INDEPENDENT NEWS

Cablegate: Goe to Lower Tariffs On Inputs, Raw Materials, Capital

Published: Thu 6 Sep 2007 08:16 PM
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E.O. 12958: N/A
TAGS: ECON ETRD EC
SUBJECT: GOE TO LOWER TARIFFS ON INPUTS, RAW MATERIALS, CAPITAL
GOODS
REFTEL: Quito 1794
1. (SBU) Summary: The GOE intends to reduce tariffs on inputs, raw
materials, and capital goods to increase production and
competitiveness and control rising prices. Tariffs on 1,957
products will fall from 5-20 percent to 0-5 percent. The private
sector has praised the plan but fear it could be accompanied by
increased tariffs on imported manufactured goods. End Summary.
2. (U) As part of a new economic policy to increase production and
competitiveness in the industrial and agricultural/fishery sectors
(and counter rising prices), the GOE presented a proposal August 21
to cut tariffs on inputs, raw materials, and capital goods to
COMEXI, a joint public sector/private sector trade committee.
COMEXI approved the proposal after the GOE agreed to reduce a few
more tariff lines at the request of the private sector. Tariffs on
1,957 products will be reduced from 5-20 percent to 0-5 percent. To
implement the proposal, President Correa must issue an executive
decree, which is expected within several weeks.
3. (U) The tariff reductions cover a wide range of products and are
expected to benefit numerous sectors, including textiles,
agriculture and fisheries, automotive, food and beverage, and white
goods. The cuts that have generated the most attention are those
for wheat and wheat flour (tariffs on these products will drop from
20 percent to zero for six months as part of an effort to maintain
bread prices in the face of rapidly rising international wheat
prices, reftel).
4. (SBU) Comment: The GOE's plan to reduce tariffs and further
open Ecuador's economy is a positive, market-oriented development.
However, according to the Executive Director of the Guayaquil
Chamber of Commerce, Teodoro Maldonado, the GOE told COMEXI that the
cuts would be accompanied by increased tariffs on some manufactured
goods to protect Ecuadorian industry. To date, the GOE has not
indicated what tariff lines it might increase. This type of
protectionist measure, if implemented, would reflect a strain of
thinking in the GOE that government intervention will help promote
local production. Maldonado reported that his chamber would resist
any tariff increase, but did not know how other parts of the private
sector might react. End Comment.
JEWELL
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