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I. Identification
E-commerce transcends geographic boundaries to enable businesses and consumers to conduct transactions from all over the world. This global, economic phenomenon continues to witness the convergence of the telecom and private sectors, permitting numerous ethnicities to participate in the new global economy. Ecuador is one of many emerging markets creating virtual portals to trade their local, indigenous products, such as handicrafts, cocao beans and bananas. Conducting trade via the Internet transforms the traditonal environment of the market place, therefore changing the rules of trade. Issues of taxation and fair trade become particulary important to countries like Ecuador, to ensure their receipt of current and fair market price of their products. Emerging markets must learn to integrate innovative technology, protocols of the global market and their cultural practices to achieve self-sustainability in the new economy.
Description
To date Ecuador has privatized its telecommunications industry, which aided in the development and expansion of ISPs, Internet Service Providers, and businesses searching for venues to conduct trade via the Internet. Numerous companies assist both small and large Ecuadorian entrepreneurs to participate in the global marketplace. B2Becuador.net acts as a virtual marketplace for the importation/exportation of Ecuadorian products. Products mainly exported are flowers, plants, bananas, handicrafts, textiles, and leather, though there is also a demand for other agricultural, manufacturing and wood products. Florastream is another virtual portal that acts as an intermediary for buyers and sellers in the flower industry. Eceurope.com is a virtual business-dating agency that enables both foreign and regional businesses to come together to negotiate product trades.
Privatization legislation and government activism in negotiating and creating trade policies and councils that facilitate the adoption of E-commerce aid the progression of regional to virtual marketplace trade in Ecuador. Participation in several of the international trade organizations permits Ecuador to play a key role in the creation of global E-commerce trade legislation. Currently, Ecuador is part of a consortium in theITU . This committee consists of over 100 countries that work together to create and assist in the deployment of a common E-business infrastructure. This committee works in conjunction and under the mandates established by the ITU, WTO,WTC, Geneva, and WISeKey Partnership.
In addition to Ecuador's partnerships with various international orgranizations regarding E-Commerce, Ecuador is also an active member of fair trade organizations. There is a strong linkage between virtual markets and fair trade methodologies. Fair trade is an ethical business approach in conducting trade and transactions in emerging markets, ensuring that the rural communities realize the accurate, market price for their products. Organizations, such as NRET, work with rural, indigenous communities to promote global, yet equitable trade practice. NRET sponsored projects also work with conventional markets to foster social and economic awareness of emerging markets, as to how fair trade approaches can assist in the development of these non-conventional markets.
Integrated among international trade issues of E-commerce are the legal and cultural issues that companies encounter in the virtual marketplace. There are still several contentious issues in the legal arena of E-commerce, such as taxation differences, security concerns with online transactions and intellectual property rights. The cultural issues are less tangible. Differences in consumer purchasing and trust, business negotiations, as well as more common topics, such as language and infrastructure issues make engaging in the virtual marketplace difficult for all countries regardless of the level of development.
Related Cases
April, 2001
II. Legal
Clusters
Discourse and Status: Agreements and In-Progress
Forum and Scope: Ecuador, Andean Community, ITU, Mercosur, WTO
Decision Breadth: Internet, global marketplace, Ecuadorian business communities
Legal Standing:
There continues to be debate over some services transacted via the Internet. Printed material, software and Internet services still have yet to be addressed by the WTO trade agreements. This is partly due to the difficulty in tracking the transactions as well as implementing copyright legislation. Once the material is posted on the Internet, this material is available to millions around the world. Traditionally, copyright sensitive material, such as books and software that can be classified as educational resources are placed in the "fair use" category. This states that as long as the printed material, software are used for non-profit, educational, research, news reporting means then there is no copyright infringement. However, with the globalization of the Internet, easy dissemination of information and the emergence of distance learning programs, intellectual copyright policies must be applied to e-commerce transaction. The longer it takes for international organizations, WTO, ITU, WIPO, to act on establishing trading clauses under existing agreements, the more likely for countries, such as the United States to place restrictions on Internet material, thus hindering the expansion of the Internet.
Assumptions
E-commerce is used interchangeably with E-business;
Ecuador is active participant in theWTO ,World Trade Organization, and ITU, International Telecommunication Union; Ecuador's Status
To date, Ecuador is an active participant in the WTO and sits on several of the counsel committees in designing and implementing trade policies;
Ecuador is still working on implementing several of the WTO requirements, such as stricter enforcement of intellectual property rights; reduction of import/export limitations on specific product (opening market to foreign investment);
Geographic Locations
a. Geographic Domain: South America
b. Geographic Site: Western, South America
c. Geographic Impact: Ecuador
Sub-National Factors: No
IV.Trade
ClustersType of Measure: Market Access
Direct v. Indirect Impacts: Indirect
Relation of Trade Measure to Environmental Impact
a. Directly Related to Product: Yes, Many
b. Indirectly Related to Product: No, E-Commerce
c. Not Related to Product: No
d. Related to Process: Yes, Rights
Trade Product Identification:
Ecuador continues to conduct trade in the traditional export/import methods. Exports predominantly consist of the country's primary goods, such as bananas, seafood and cocoa products, whereas, traditional import products are capital goods and manufacturing items. Ecuador enjoys free trade relationships with Chile and Colombia, as well as other members of the Andean community via the Andean Trade Preferences Act.
United States: Ecuador is a beneficiary of the GSP, Generalized System preferences;
European Union:Ecuador enjoys similar trade preferences under the European Union Special Tariff Preferences Regime; that acts in conjunction with the Andean Preferential Law;
Latin America: In addition to the free trade areas established among the Andean Community members, Ecuador is also a member of ALADI, Latin American Integration Association; negotiated free trade bilateral agreement; and a member of MERCOSUR that will enable Ecuador to participate more fully in the Latin American markets.
Economic Data
Main Export/ Import Commodities
| Crude Oil | Raw Materials for Industry |
| Banana | Transportation Equipment |
| Shrimp | Consumer Durable/Non-Durable Goods |
| Cut Flowers, Roses | Raw Materials for Agriculture |
| Coffee | Fuels, Lubricating Oils |
| Cacao Products | Computer Hardware |
Source: Central Bank of Ecuador
Impact of Trade Restriction:
The Ecuadorian government prohibits the exporting of cultural, artistic, archaeological and historical items that are part of the country patrimony, in addition to endangered flowers and wildlife. Certain products are subject to export restrictions and quotas. The International Cocoa Agreement of 1993 regulates the trade of cocoa beans and by-products to assist in the,
"stabilization of the world cocoa market in the interests of all of its members by seeking a balanced development of the world cocoa economy and assure adequate supplies at reasonable prices equitable to consumers and producers."
The banana trade is also at the center of debate in the WTO. This debate focuses on the issue of establishing a free trade zone for bananas and a WTO consistency for banana imports to the European Union.
Trade restrictions also directly affect fair trade practices. A fundamental principle of fair trade methodology is the ability to conduct transactions in a equitable manner. The placement of restrictions on particular countries, companies and industry sectors, can potentially hinder the exapnsion of fair trade organizations and affiliates, thus severly limiting the companies that engage in fair trade practices. This ultimately affects the rural communities, which are the individuals most in need of the fair trade organizations to ensure self-sustainability.
Industry Sector: Services
Exporters and Importers: Ecuador, Numerous, Global
Source: Central Bank of Ecuador, 1999
The Internet Economy
The emergence of the Internet into the global market place has transformed the manner and methods of conducting trade and its transactions. Trading on the web removes the human interaction component, replacing it with a shapeless entity, yet the trust, security and product knowledge (all important elements in trade) are to remain the same. Or are they?
This is the question that continues to plague developing countries attempting to enter the virtual markets of the global economy. Businesses want to take advantage of the transparent borders, diverse array of product lines and increased market accessibility. However, they encounter obstacles that significantly hinder their ability to participate in this new economy, referred to as "E-Business."
Ecuador suffers from a weak infrastructure that makes it difficult for businesses to position themselves in the virtual marketplace. However, there are companies that have taken Ecuador's strengths and combined them with developed nations' technology to create their own virtual portals. These portals act as facilitators in the virtual market, thus enabling Ecuadorians, urban or rural, to trade and sell their products.
Ecuador's Virtual Markets
Ecuador's emergence into e-business provides a forum for rural communities and indigenous groups to come together and sell their crops and craft work, whereas before they were stifled by big businesses in the metropolitan cities. E-business permits the tenant farmer growing bananas to the entrepreneur trying to expand his product line to engage in the market as both a seller and buyer.
B2Becuador is one of the first companies in Ecuador to conduct transactions online. This portal acts as an intermediary between buyers and sellers for various product sectors. This marketplace consists of eleven trading communities for those interested in conducting trade and business with vendors, small and large, over the Internet. The vertical trade communities act as industry specific and extensive sources of information, interaction and e-commerce. The vertical trade communities consist of:
Shigras is the first company in Ecuador to initiate online trading to its registered users. Shigras partnered with Mercado Libre to design and execute its regional e-commerce platform. This company acts as a portal for trading Ecuadorian produce.
Eceurope serves as a business-to-business electronic marketplace, via a Trade Bulletin Board System, BBS, a virtual dating agency. Eceurope plays matchmaker between global buyers and sellers who are looking to establish new trade relationships. The focus is on small to medium size businesses to post, search and respond to business-to-business inquiries. However, the actual transaction must take place offline, due to lack of technology in enabling purchasing via the Internet.
Florastream is Ecuador's premier virtual market for linking flora buyers and sellers. Florastream facilitates the establishment of new trading relationships and partners through an online, transaction-enabled process.
Where Now?
The promoters of the banana, cocoa and handicraft industries in Ecuador have made tremendous progress in fostering the development and implementation of e-business. Yet, issues remain to be resolved for Ecuadorian communities to achieve global recognition in the virtual marketplace. Concepts of infrastructure, technology/information accessibility, security and taxation are just some of the more prominent tasks yet to be tackled by Ecuador. To date, only a marginal amount of companies are transaction enabled and characterized as "e-ready."* However, overall Ecuador still requires extreme revamping of their existing infrastructure to add value to its achievements in free-market regulation and activities in the WTO. *According to a report generated by McDonnell International in conjunction with WITSA, Ecuador still remains deficient in the five areas identified as crucial to successful e-business implementation. This report provides guidelines for developing countries to determine their "e-readiness," as well deficient areas that need to be addressed for successful implementation and sustainability in the global economy.
Please find below an excerpt of the report identifying and explaining the five criteria:
McConnell International, Risk E-Business: Seizing the Opportunity of Global E-Readiness. August 2000
Virtual Market's Effects on Fair Trade Co-Operatives
Fair trade co-operatives operate under the premise of the fewer people involved in the transaction and trade of a product, the less costs result and more money going to the owner and re-invested in the rural community. The fair trade practices in Ecuador exist in a vertically integrated market, which rewards those farmers and co-operatives that conduct transactions among those affiliated with the fair trade organizations. One such organization, Maquita Development Organization, works with the farmers and affiliate co-operatives to barter their products for the best price. Maquita trades with the conventional European markets, generally those prescribing to fair trade practices. The tranaction process is as follows:
The emergence of the Internet closely resembles the transaction chain of a fair trade approach. Both eliminate or significantly reduce the presence of the 'middleman' to increase product profitability to the farmers or sellers of the product. Fair trade mechanisms can effectively alter the means of using the Internet to engage in global trade. However, Ecuador along with other emerging markets still encounter obstacles to their full participation in the global economy. Currently, the nature of fair trade exists on the close network of fair trade affiliates. Trading on the Internet necessitates that these companies and co-operatives design a portal to conduct business or at the least be willing to conduct transactionns via the Internet. This leads into the next major hurtle, the Internet itself. Developing communities are lucky to have one land line per village. The Internet requires mulitple land lines and high speed connections. Ecuador has made significant strides in decentralizing the government's role, privatizing its telecom industry and increasing the number of land lines per 100 people. Yet, there still remains demonstrated concers over reliable Internet accessibility, security over the Web and taxation legislation.
V.
Environment ClustersEnvironmental Problem Type: Rights
Name, Type, and Diversity of Species
Resource Impact and Effect: Low and Structure
Urgency and Lifetime: Low and 100 years
Substitutes: Alternative Networks
VI.
Other Factors Culture: Yes
Trans-Boundary Issues: No
Rights: Yes
Relevant Literature
www.shigras.com
1/2001