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Cablegate: Colombia Analyzing Ecuador's Revised Trade

VZCZCXYZ0006
OO RUEHWEB

DE RUEHBO #2587 2292148
ZNR UUUUU ZZH
O 172148Z AUG 09
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0209
RUEAIIA/CIA WASHDC IMMEDIATE
INFO RUEHCV/AMEMBASSY CARACAS PRIORITY 2618
RUEHPE/AMEMBASSY LIMA PRIORITY 7917
RUEHQT/AMEMBASSY QUITO PRIORITY 8614
RUEHSG/AMEMBASSY SANTIAGO PRIORITY 2505
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 4949

UNCLAS BOGOTA 002587

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN ETRD CO
SUBJECT: COLOMBIA ANALYZING ECUADOR'S REVISED TRADE
RESTRICTIONS

1. (SBU) SUMMARY: Ecuador reduced the number of emergency
tariffs on Colombian products (from 1346 to about 660 items)
on August 12 in response to two Andean Community (CAN)
resolutions and high-level bilateral negotiations. Trade
Minister Plata stated he would continue to pursue bilateral
negotiations to remove all import tariffs on Colombian
products as quickly as possible, without resorting to
judicial mechanisms. Colombian pundits and business leaders
believe political motivations lie behind Ecuador's actions
and are concerned about the impact of the emergency measures
on Colombian exports. End Summary.

2. (U) On July 10, Ecuador adopted a one-year, emergency
currency safeguard against Colombian imports spanning 1346
products. Ecuador argued that Colombia's Central Bank took
measures that devalued the Colombian Peso, adversely
affecting Ecuador's dollar-denominated economy. The
Ecuadorian emergency safeguard eliminated the Andean
Community duty-free treatment and applied tariffs to Colombia
imports similar to those on products from non-CAN countries.
The measure applied a 20 to 30 percent tariff on most
(approximately 80 percent) of Colombian products entering
Ecuador.

3. (U) The Andean Community's General Secretariat reviewed
Ecuador's actions, and on August 8 issued resolution 1250.
It ruled that the Colombian-Ecuadorian currency exchange rate
had adversely affected competitiveness conditions. The
General Secretariat determined that the Colombian Peso had
devalued 18.5 percent, which made Colombia's exports
significantly cheaper and Ecuador's products more expensive.
Resolution 1250 also authorized Ecuador to impose temporary
"corrective measures" that could remain in force until these
competitive conditions normalized. However, there were no
specifics in the resolution to explain the "corrective
measures." Trade Minister Plata stated he is seeking
clarification.

4. (U) The Andean Community also issued resolution 1251,
which determined that Ecuador's currency safeguard measures
constituted a tariff, and as such were to be removed within
15 days of the resolution's publication. Plata argued that
the two resolutions appear contradictory and the Andean
Community needs to provide additional information.

5. (U) In the meantime, Ecuador's recent removal of tariffs
on certain products will benefit Colombia's meat, vegetable,
oil, and dairy sectors. Ecuador's Minister of Production,
Nathalie Cely, claimed that their objective is to remove
additional tariffs as trade levels approach those of 2007.
In 2008, Ecuador imported USD 1.48 billion worth of Colombian
goods and services -- an increase of 18.5 percent compared to
2007 figures. Ecuador attributed this trade increase largely
to the devaluation of Colombia's currency.

6. (SBU) Several business leaders told Emboffs that the
safeguards are politically motivated, and they are concerned
about continued restrictions on Colombian exports to
Venezuela and Ecuador -- respectively Colombia's second and
third largest export markets. A prominent bank official
expected the trade spat between Ecuador and Colombia to
continue in different forms until the next Colombian
President is elected next year.
Brownfield

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