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COMMISSION
OFTHE
UROPEAN COMMUNITIESCOM(80)386 final
Strasbourg -10thJuly1980
FOROFFICIAL USEONLY
GenerolSecretoriat
COMMUNICATION FROMTHECOMMISSION TOTHECOUNCIL
INTERNATIONAL COOPERATION ONCOMMODITIES
THEINTERNATIONAL COCOAAGREEMENT
C0M(80)386final

Communication fromtheCommission totheCouncil
International Cooperation onCommodities
TheInternational CocoaAgreement
Background
In1979threemeetingsoftheUnitedNationsConference onthenego­
tiationofathirdInternational CocoaAgreementfailedtoleadtoan
agreement. '
Progresswasmadeonmanyprovisions ofthefutureagreement,
whichwastobebasedonaninternational bufferstockfinancedbyalevy
ontradeincocoa,asystemwhichunderthefirsttwoagreements hasallowed
asumofaboutUS2230milliontobebuiltup.Howeverthemainobstacle
toasuccessful conclusion ofthenegotiations wasfailuretoagreeonthe
pricelevelatwhichthemarketshouldbestabilized .
TheCommission sentaRecommendation (COM(79)3of17January1979)to
theCouncil,whichadopteda"commonposition"fortheCommunityinthe
negotiations onthenewAgreement (1).TheCommunitynegotiated onthis
basisandadvanced,particularly withregardtoprices,acommon,rather
minimalist,positionoftheMemberStates.
Whenthetwo-foldproblemaroseoftheextensionofthesecond
Agreement beyond31March1980(2).andconsultations intheInternational
CocoaCouncilontherevivaloftheconferencefornegotiating athird
Agreement,theCommission sentafurthercommunication totheCouncil
(COM(80)71of22February1980),drawingitsattentioninparticular
tothefactthatthequestionsatissuewerenotsimplyconfinedtococoa.
Theargumentssetoutinthedocumentof22Februaryhaveallthe
moreforcesincethefearsexpressed bytheCommission haveunfortunately
beenborneoutbyevents.AttheendofMarch,theInternational Cocoa
CouncildidnotextendthesecondAgreementnordiditmakeprovision
fornegotiations ontheAgreementtoresume.
Thisdoubleblowhadconsiderable repercussions in.anumberofregional
andinternational quarters.ItwasdiscussedattheACP-EECministerial
meetinginNairobion8and9May,theMemberoftheCommission concerned
withdevelopment hadtalkswiththePresidentof.theRepublicofthe
IvoryCoast,acountrywhichexercises adecisiveinfluence ontheposition
adoptedbyproducercountries (3),andtheUnctadSecretary-General
attemptedtorestartthedialoguebetweenproducerandconsumercountries.
Becauseofthesenewdevelopments ,the■International CocoaCouncil,which
shouldhavebeguntoliquidatethenowexpiredAgreementatitsmeetingfrom
4to6June,decidedtodelayanydecisiononthissubjectuntilSeptember
soasnottoprejudicetheeffortswhichwerebeingmade,forinstance
atUnctad,torevivethenegotiations (4).
■■•/•••
(1)Document :4435/79(secret)Proba7of29January1979.
(2)The1975Agreement hadalreadybeenextendedforsixmonthsfrom
1October1979toallownegotiations tocontinue.
(3)Communication fromMrCheyssontothe989thmeetingofthePermanent
Representatives Committee (5June1980).
(4)ThesecondAgreement,whichexpiredon31March,laiddownthatif
itwasnotreplacedbyanewagreementwithprovisions coveringthe
bufferstock,theaccumulated funds(aboutUS2230miIlion)would be
paidtotheexporting members.

TheCommunity'sspecialresponsibilities
Inspiteofitsinternaldifficulties ,notablyonprices,theCommunity
hasendeavoured toplayapositive,constructive partinthesuccessionof
negotiations andtheconsultations .-Nevertheless theCommission believes
that,whilepayingaatentiontothetechnical,commercial andeconomic
aspectsofthenegotiation ofa.commodityagreement,theCommunity hasnot
seizedattherightmomentthepoliticaldimensionofthisquestionthus
enabling acompromise onpricestobereached.
TheCommunityistheleadingworldimporterofthiscommodity (over40%
ofthemarket).CocoaisproducedmainlyinACPStates(suchasIvory
Coast,Ghana,CameroonandTogo),whichprovide90%oftheCommunity'ssupply
Thesecountries donotunderstand why,atatimewhentheCommunityis
pursuingpoliciesofclosecooperation withtheACPStates,seekingto
stabilizetheirexportearningsandadoptinginternationally positionsin
favourofcommodityagreements ,itmaintainssucharestrictiveattitude,
notablytowardsthelevelofprizestabilization ,whichrepresents afactor
offundamental importance totheproduction anddevelopment policies
ofthesecountriesinviewoftheirheavydependence oncocoaexports.
ThesetbackoftheCocoaAgreementisfirstandforemost asetbackto
ACP-EECrelations.Itisallthemoreunacceptable thattheabsenceofan
agreement anditsbeneficialeffectsonpricestabilityisboundtohave
theconsequence ofrecoursetotheStabexfundbyACPcocoaexporters ..
Inadditiontothefinancialimpactwhichcouldbeavoidedbytherapid
conclusionofanagreement,amassiverecoursetoStabexbytheseACPStates
wouldreducetheresourcesavailabletocovertheotherremainingproducts
ofinteresttotheACPasawhole.
Inshort,theCommunity'sattitudeinthenegotiation oftheAgreement
isseenas:
.contrarytothemanydeclarations ofprincipleinfavourofcommodity
agreements, .
.inconsistent withtheirrevocable Stabexundertaking tomakeupthe
sharesofearningsfromcocoaexportstoEurope,
.liabletojeopardize thedeveloment ofsomeEEC-associated countries
whenthatsamedevelopment isbeingsupportedundertheLom£Conventions
atconsiderable financial -andeconomicexpense.
Commission proposal •.
TheCommissionbelievesthatcocoaisnowmorethaneveroneofthe
appropriate cases"amongthecommodities coveredbytheUnctadIntegrated
ProgrammeandthattheexpiryoftheInternational CocoaAgreement
diminishestheimpactoftheCommonFund,onwhichnegotiations havejust
beenconcluded.
Theintervention machineryofthefirsttwoAgreementsdidnothaveto
comeinto,operationonthemarketbecausereducedproductionbroughtabout
bythelowpricesobtaininginthesixtiesandearlyseventiescaused
pricestorise.Theproducercountriesachievedthegrowthinproduction
whichtheconsumercountriesaskedofthem.Thisnewproductionisnow
comingontothemarketwhilecostsarerisingincurrentdollarsbecause
ofworldinflation,energyprices,thepricesofinputs(equipment,
fertilizers,insecticides )andareasonablelevelofremuneration for
smallproducersandworkersonthelargeplantations .

-3-
TheCommissionbelievesthattheCommunitymustadoptaLonger-term
viewandplayitsspecialroleinestablishing anofficient,operational
Agreementinvolvingpriceswhiqhwillnotposesupplyproblemsforits
industries andwhichwillprovideexportersindevelopingcountries
withanadequate,stableincomeinconstantterms.
Inviewoftheforthcomingconsultations oftheUnctadSecretary-
GeneralwiththeCommission,andthenwithalltheconsumercountries,
theCommissionproposesthattheCouncilshoulddecidethattheCommunity
isreadytotakepartintheseconsultations sothatanaccurateestimate
maybemadeofthechancesofconcluding athirdagreementrapidly.
Thetermsforfinancingsuchanagreementwouldbethesameasthosefor
theprecedingagreements,withtheexportingcountriesconcernedaccepting
thattheaccumulated fundsbeallocatedtothebufferstockofthefuture
agreement.
Onpricelevels,theCommunityshouldsupportthesuggestion by
consumercountries'spokesmanattheInternational CocoaCouncilmeeting
inLondonattheendofMarchthatthelowerbufferstockintervention
priceshouldbenegotiatedbetween110and120cts/lb,subjectfooverall
agreementbeingreachedonalloutstandingpoints.Itwillberecalled
thatinJuly1979agreementwas\rtrLudllyreachedunalevetofno^cs/lB
asthelowerinterventionpriceforthebufferstock.Afterthenegotiations
fellthrough,inMarch1980,theproducersindependently askedthe
consumersforafirmcommitmentto120cts/lb.DespiteCommunity
hesitations,theconsumercountriesattheinstigationoftheUnitedStates
(thoughthelatterhasnotthesamereasonsastheCommunityforgoing
ahead)indicatedtheirwillingnesstonegotiatebetween110and120cts/lb;
theCommissiondidactuallyinMarch1980proposeatPermanentRepresentatives
CommitteelevelthattheCommunityshoulddecide'onapricehigherthan
110cts/lb.ItisonthisbasisthattheCommissionproposestheCommunity
positionshouldbefixed.