US embassy cable - 05QUITO710

UNCLAS SECTION 01 OF 03 QUITO 000710 
 
SIPDIS 
 
DEPT PASS TO USTR BENNETT HARMAN 
 
E.O. 12958: N/A 
TAGS: ETRD, EINV, ECON, EC 
SUBJECT: ECUADOR'S WHITE GOODS POLICIES 
 
REF: STATE 30500 
 
1. Summary.  In response to reftel, Emboffs met with newly 
appointed Vice Minister of Industries in the Ministry of 
Trade (MICIP) Jorge Illingworth and Ecuadorian Standards 
Institute (INEN) Director General Felipe Urresta to discuss 
white goods.  Urresta had not, as he had offered to USTR, 
presented his proposal to the Special Committee to suspend 
the current practice that had prevented entry of certain 
US-produced white goods into Ecuador.  Though he had on two 
occasions received copies of the US white paper on Ecuador 
standards and our request to provide a written response, he 
has not provided us with one.  He did provide an oral 
response and requested a meeting with USTR and Embassy 
officials prior to the April 18-22 Lima round of FTA 
negotiations.  Though the GOE claims it complies with its WTO 
commitments regarding technical trade barriers, its 
interpretation of compliance leaves plenty of room for doubt. 
End Summary. 
 
White Paper Comments 
-------------------- 
 
2. Commercial and Econ officers recently met with newly 
appointed Vice Minister of Industries in the Ministry of 
Foreign Trade (MICIP) Jorge Illingworth and President of the 
Ecuadorian Standards Institute (INEN) Felipe Urresta to 
discuss the USG white paper provided in reftel.  Urresta 
confirmed that he had received copies of the white paper from 
USTR and the Embassy on two separate occasions.  He had not 
provided a copy of the white paper to the &Special 
Committee8 referred to by Urresta and the white paper, which 
is the Comite Interinstitucional de Normalizacion, or 
Inter-institutional Standards Committee (CIN by its Spanish 
initials), but said he had discussed the salient points of 
the white paper with CIN. 
 
3. Illingworth and Urresta said that the trade statistics 
they reviewed (from manifestos.com) do not indicate a 
significant drop in US white goods entering Ecuador.  They 
said instead that the statistics indicated imports of white 
goods from other countries (especially Brazil, Italy and 
Colombia) were growing more rapidly than imports from the 
USA.  Urresta also asserted that there is nothing new in 
Ecuador,s procedures regarding white goods, claiming that 
the GOE is simply implementing its 1998 standards law. 
 
4. According to Urresta, neither the INEN nor MICIP have ever 
rejected Underwriter Laboratories (UL) certifications. 
Urresta also claims that the GOE need not, under the WTO 
Technical Barriers to Trade Agreement, notify the WTO if the 
GOE is applying internationally recognized standards and 
processes, as is the case with white goods.  He denied that 
the GOE was requiring new INEN-1 compliance certificates for 
superficial changes to white goods (e.g., new colors). 
 
Urresta Takes No Action on His Offer to USTR 
-------------------------------------------- 
 
5. Urresta had also not discussed with CIN the offer that he 
had made to USTR,s Suzanne Troje last October.  We again 
reviewed the content of that offer for Illingworth,s 
benefit.  First, INEN would repeal the regulations and 
instructivos (described by Urresta as mandatory instructions 
designed to eliminate discretion when implementing 
regulations) that have prevented some US white goods from 
entering Ecuador.  Second, the GOE would issue a formal 
notification of new regulations with a 90-day period to 
receive comments on the proposed regulations.  Third, the GOE 
would arrange a transparent review of the comments received 
in response to the notice.  Finally, the GOE would publish 
the new regulation, allowing six months for implementation 
before it took full effect.  Urresta said he was willing to 
bring the proposal to CIN, but later offered an alternative 
to unblock the entry of US-made refrigerator freezers.  He 
said the CIN could approve a modification to the regulations 
that would allow US origin refrigerators and freezers to 
enter Ecuador upon presentation of a UL 250 compliance 
certificate, a certificate of &tropicalization8, and a 
certification that the equipment does not use CFCs.  Urresta 
suggested that USTR and Embassy officials meet in Quito prior 
to the April 14-18 Lima FTA negotiations round. 
 
Organizational Structure 
------------------------ 
 
6. The CIN and various technical committees are the principal 
bodies involved in standards and compliance policy. 
Established in 1998 by Executive Decree 1536, the CIN is 
responsible for publishing the list of goods that must comply 
with Ecuadorian norms and technical registrations.  The 
CIN,s duties include adding or removing products from the 
list of those that must comply with Ecuadorian regulations, 
recommending guidelines for the correct application of this 
law, recommending processes to harmonize national standards 
with international ones, and any other activity related to 
the contents of this decree. 
 
7. The CIN published the first list of products subject to 
norms and technical regulations in 1999, with subsequent 
modifications in 2000, 2002 and 2003.  In January 2003, by 
Executive Decree 3497, the GOE introduced the INEN-1 
certificate, which certifies that a product complies with 
Ecuadorian technical regulations.  The INEN-1 is valid for 
one year.  The list of products was last modified in August 
2003 by Acuerdo Interministerial 03420 (Registro Oficial 158) 
to include new types of gas ranges and refrigerators. 
 
8. Executive Decree 3497 also defined who would serve on the 
CIN: the vice ministers of Industry and Foreign Trade of 
MICIP, one representative each from the chambers of commerce, 
industries and small industries and the Director General of 
INEN (currently Urresta).  The latter is not a voting member 
of CIN, but in effect runs CIN agendas and meetings.  INEN 
provides technical assistance to the CIN and the technical 
committees.  Embassy sources indicate that INEN (through 
Urresta) manages and leads much of the standards work, 
leaving the CIN to rely upon INEN,s technical expertise. 
 
9. The technical committees are responsible for formulating 
new regulations, revising old ones and drafting instructivos. 
 The instructivos, described above, also include information 
essential to a company wishing to import regulated products. 
However, Urresta asserts that the TBT agreement does not 
require publication of instructivos or public notices of 
changes in the instructivos.  Nor are the instructivos 
published on the INEN website.  They are also not published 
in the official register but take effect immediately upon 
adoption.  Urresta claims that there is no need to notify the 
public of instructivos because they do not change laws or 
regulations, but merely implement them. 
 
Current Process 
--------------- 
 
10. MICIP (at the behest of INEN) initiates a new regulation 
or regulatory change when the INEN sends emails to specific 
stakeholders, reportedly by sending them to various chambers 
of industry, informing them of a proposed regulatory change. 
 INEN does send out an electronic bulletin every three 
months, but it covers activities that occurred in the prior 
quarter.  October 2004 was the last electronic bulletin 
posted on the INEN website.  Though the website has links for 
additional information on numerous standards issues, there is 
no link for technical regulation notifications. 
 
11. MICIP (again through INEN) convenes technical committees 
on specific topics.  According to Urresta, one must be 
&technically qualified8 to participate in these meetings. 
For example, in one case, invitations were sent to 27 
individuals from local industry, chambers of commerce and 
industry, universities and other government officials.  A 
technical committee was formed with 11 voting members, 1 
representing a foreign manufacturer, 7 representing local 
manufacturers and their suppliers, and 1 each from a 
technical university, the college of mechanical engineers and 
MICIP.  Interested parties may send comments to the technical 
committee, but the committee itself decides which comments 
are worthy of consideration.  INEN representatives serve as 
the secretariat for the technical committees, producing draft 
language for review and discussion by the committees. 
Urresta resisted our suggestion to open the technical 
committee meetings to the public. 
 
12. After six-eight months, the technical committee submits 
the to INEN,s Board of Directors (the Consejo Directivo, or 
CD).  The CD reviews the draft and generally forwards it to 
the CIN, who in turn passes it to the Minister of MICIP for 
approval.  On those occasions when the CD suggests changes to 
the draft, it is returned to the technical committee to be 
modified and is then re-submitted to the CD.  The CD sends 
the vetted draft through the CIN to the Minister, who signs 
the new regulation. 
 
13. The GOE modified its notifications procedures in 2004. 
Once a regulation is adopted, the regulation is published in 
the official register and reported to the WTO by the MICIP 
&inquiry point of contact.8  The WTO notification includes 
the address, phone number, fax and e-mail of the inquiry 
point of contact, but not the incumbent,s name (currently 
Arturo Barbosa of MICIP).  The WTO notice does not provide 
direct access to new regulations or other related documents. 
 
14. Urresta said that under the WTO TBT Agreement Ecuador was 
not required to state in its WTO notices where a new 
regulation could be obtained.  Providing a point of contact 
for further inquiries was sufficient, he asserted.  He also 
said that only comments from other governments (not private 
companies or individuals) would be accepted by the GOE during 
the 60-day WTO comment period.  (Note: Andean Community 
countries (CAN) ) Bolivia, Colombia, Ecuador, Peru and 
Venezuela ) by agreement have 90 days under a CAN 
agreement.)  Also, Urresta claims that Ecuador is not 
required under the WTO TBT Agreement to notify or publish 
regulations that are applying internationally recognized 
standards or procedures, which he cites is the case with 
white goods. 
 
Proposed Quality Law 
-------------------- 
 
15. Illingworth told us that Ecuador does have a proposal for 
a new quality law that he helped to draft when he was Vice 
President of the Guayaquil Chamber of Industries.  However, 
given the turmoil in the Ecuadorian Congress (a near 
permanent condition, made worse over the last several 
months), the new law will not be proposed to Congress in the 
immediate future.  (Comment:  We believe it unlikely that any 
serious structural reforms can be passed during the remainder 
of President Gutierrez,s term in office, which expires in 
January 2007.  End comment.)  Urresta touts a 1999 World Bank 
project designed in part to restructure Ecuador,s standards, 
testing and compliance agencies.  However, the World Bank, 
for lack of GOE progress, withdrew the funding. 
 
Comment 
------- 
 
16. What is clear from our review of the Ecuadorian standards 
policy and compliance mechanisms is that INEN controls most 
of the process.  The lack of notification to and 
participation by the public means that INEN can operate as 
the &technical expert8 with little to no checks and 
balances, leaving considerable room for special interest 
interference.  Even the technical committees are stacked in 
favor of local producers, thereby suggesting legitimacy to 
protectionist policies.  INEN has said that the WTO requires 
all previous obligatory Ecuadorian technical standards to 
become voluntary within three years.  Therefore, Ecuador will 
likely move to rewrite its technical standards as technical 
regulations.  In February, for the first time, Ecuador 
notified two new technical regulations. 
KENNEY