Quito, January 30, 2003

TECHNICAL REPORT
OILSEEDS AND OILS

 

Andean Distortions

1.  The limited Andean tariff harmonization in this important agribusiness system is distorting the region’s competition and trade flows.  There are five distorting elements:

2.  The Andean Community member countries and their corresponding oil business systems have agree the necessity to harmonize tariffs in order to avoid tariff differences and thus, eliminate distortions; however, although all things done for reaching this harmonization, there is much more to do.

3.  The use of special regimes in sub-regional trade is a flagrant violation of the Andean standards.  The oil private sector and the Ministry of Agriculture have accused the prejudice caused to national production by oil imports from Colombia and Venezuela under the Plan Vallejo and ATPA regimes; moreover, the prejudice caused to the national market by the Bolivian oil trading strategy and the Bolivian trade margins between raw and refined products shall be technically sustained.  Bolivia provides Ecuador raw materials and rough oils at very high prices, and at the same time it damages the Ecuadorian market introducing low priced refined product.

4.  At present, a concerted Andean solution has not been found against unfair trade which generates the use of special regimes for exporting intrasubregionally, although many national and Andean working meetings on this matter have been held.

5.  During its first meeting on April 2002, the Oil Agribusiness System Ad-hoc Group, analyzed the distortion generated by using the ATPA in the intrasubregional trade, however, it reached to no solution; moreover, a second proposed meeting has been postponed many times.

 

Oil Safeguards from Colombia, Ecuador and Venezuela

6.  Colombia maintains a 20% safeguard to the Ecuadorian exports, which prejudices, deduces competitiveness and limits them.  On the other hand, through Decree 1504 of the Ministry of Foreign Affairs of Colombia, dated July 19, 2002, quoted in article 109 of Decision 406 of the Cartagena Agreement, applies “a safeguard measure in the form of an extra tariff levy of twenty nine (29) percentage points to soybean and sunflower refined oil and refined vegetable oils, which are included in the 1507.90.00.00, 1512.19.00.00 and 1517.90.00.00 tariff subheadings, originated from the Andean Community Member Countries”.  Lately, Colombia reduced the safeguard imposed to a 20% tariff levy.

7.  Ecuador maintains a 20% safeguard.  Through the COMEXI Resolution No. 159 issued in the Registro Oficial (Official Record) No. 657 dated September 6, 2002, Ecuador applied “a six months period provisional safeguard measure to imports coming from or originated in the Andean Community Member Countries, consisted of a 29% tariff levy to imports of those products included in the following tariff subheadings”: 1507.90.00: Other soybean oils; 1512.19.00.00: Other sunflower oils; 1516.20.00:                                        Vegetable fats and oils and its fractions; 1517.10.00: Margarine, except liquid margarine; and, 1517.90.00: Other fats and oils food mixtures or preparations; originated in the Andean Community Member Countries.  Lately Ecuador reduced the safeguard imposed to a 20% levy.

8.  Venezuela maintains a 29% safeguard to Ecuadorian exports, and by means of Resolution 826, the Ministry of Finances of Venezuela, on October 23, 2001, and based on Article 102 of the Cartagena Agreement, imposed a 29% tariff to imports of those products included in tariff subheadings: 1507.10.00: Rough soybean oil, including degumed; 1507.90.00: Other soybean oils; 1511.10.00: Rough palm oil; 1511.90.00: Other palm oils; 1512.11.00.10: Rough sunflower oil; 1512.19.00.10: Other sunflower oils; 1516.20.00: Vegetable fats and oils and its fractions; 1517.10.00: Margarine, except liquid margarine; and, 1517.90.00: Other fats’ and oils’ food mixtures or preparations originated in Bolivia, Colombia, Ecuador and Peru.

9.  The CAN Secretariat pronounced against the safeguards imposed by Colombia and Ecuador, however, neither country has eliminate their measures.

10.  Moreover, the Embassy of Ecuador in Venezuela informed that that country will liberate imports from third countries of many products of the basic basket, including oils, i.e., it will import with 0% tariff from any third country; which will cause a triangular trade prejudicing the Ecuadorian production.

 

Recommendations

11.  The ATPA regimes were created as an export promotion mechanism towards third countries others than the CAN; at the moment its conception is been infringed and they are been used for exports inside the CAN and adversely affecting the member countries’ competition and distorting trade flows, all of which generates damage to tax authorities basically due to tariffs not collected and lack of corrective rights.

12.  The Ecuadorian oil producing and industrial sectors, an strategic area for the country’s economy is been adversely affecting and needs an urgent solution to counteract the negative effect of ATPA regimes misuse in intrasubregional trade.

13.  Ecuador should not eliminate its oil safeguard (Resolution No. 159), nor any other corrective instrument until a definite Andean solution is found against unfair trade, which generates the use of special regimes for intrasubregional exports.  Moreover, Colombia and Venezuela still maintain its own safeguards waiting for a concerted solution.

14.  The Ecuadorian Oilseeds and Oil Agribusiness System private sector represented by ANCUPA and APROGRACEC, supports the oilseed safeguard and is not willing to accept its annulment until an Andean solution, preventing the Special Regimes adversely affecting the ingrasubregional trade, is given.

Octavio Recalde
The SICA-MAG/IBRD Project

   Oilseed and Vegetable Oil

Oilseed and Vegeetable Oil Agribusiness System Responsible's e-mail orecalde@sica.gov.ec