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DOCUMENTS "COM"
COM(77)177
Vol.1977/0072

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COMMISSION OFTHEEUROPEAN COMMUNITIES
amendingRegulation (EEC)NO974/71asregards
thepriceleveltobetakenintoconsideration
forthecalculation ofmonetarycompensatory
amounts
(submittedtotheCouncil "bytheCommission)COM(77)177final.
Stpa^ou^i,rmMayI977.
*7Jetut*.,ksi
Proposalfora
COUNCILREGULATION (EEC)
C0K(77)177final.

EXPLANATORY MEMORANDUM
1.On4February 1977 theFrench Government submitted totheCounoil
andtheCommission amemorandum suggesting various measures relating
tothesystem forcalculating monetary compensatory amounts (MCAs )•
That memorandum proposes inparticular
(a)theadvance fixing ofMCAs
(b)certain methods forreducing theMCAs :
-areduction toallow fortheindustrial aspect ofcertain
products (sugar ,butter ,milk powder )
-areduction toallow forthe fact that some production uses
rawmaterials imported free ofimport charges (soya )
-areduction byincreasing theexemption of1.5points already
provided forunder Article 2(l)(b )ofRegulation (EEC)No974/71
-areduction inrespect ofthespecial import arrangements for
non-member countries .
The Italian Government presented amemorandum atthediscussions on
prices forthe1977/78marketing year .Apart from seeking adevalu­
ation ofthegreen lira ,arequest which hasmeanwhile been granted ,
bytheCouncil ,the Italian Government inthat memorandum requested
that themethod forcalculating monetary compensatory amounts be
reviewed ,inparticular where milk andmilk products ,beef and veal
andpigmeat -were concerned .
2.Theadvance fixing ofMCAs seems tobetheappropriate solution toa
certain extent .Itmust beacknowledged that the situation incountries
within thesnake differs from that incountries with currencies floating
outside the snake .
With regard totrade with non-meraber countries this solution does not
appear topresent anymajor risks ,andindeed hasdistinct advantages in
cases where thelevy ortherefund isalso fixed inadvance .Inother
cases andinparticular inintra-Community trade ,thedanger ofspeculation
and the administrative difficulties necessitate much caution .

TheCommission will continue itswork with aview totheadoption inthe
near future ,ofspecial rules inthematter .
3.High MCAs could create distortions ofcompetition (seeCommission staff
working paper SEC(76 )3702 of18October 1976).Moreover ,MCAs inthem­
selves constitute anobstacle totrade .Anymeasures aimed atreducing
MCAs asmuch aspossible aretherefore intheCommunity 'sinterest .
TheCommission recalls here theproposal which itsubmitted tothe
Council concerning aperiodic revision ofthegreen rates .
Within theMCA system ,itappears possible tomake adjustments in
both directions .Extending theexemption isoneofthepossible
means .This could bedone inoneoftwoways :
-byreducing thepercentage used tocalculate themonetary compensatory
amounts ,
-orbyreducing theintervention price used asabasis forthecalculation .
Theadvantage ofthesecond formula ,which isalready used inthebeef
andveal sector ,(Article 2(3)ofRegulation (EEC)Ho974/71)isthat
itisautomatically applicable tocountries with both strong andweak
currencies whereas areduction inthepercentage used forcalculating
themonetary compensatory amounts canonly beapplied toweak currencies
atthe moment .
However ,areduction inrespect
oftheintervention price should beapplied with great care .There should
benominimizing therisks involved forthesmooth operation ofthe
organization ofthemarkets from MCAs which nolonger cover thedifference
innational currencies between intervention prices applicable intwo
Member States .
Thebasic products subject tointervention should therefore bedealt with
case bycase according tosector ,depending onthefluidity ofthemarket
andtherigidity oftheintervention mechanism .Theattached draft
regulation therefore proposes that theprinciple ofsuch areduction
should henceforth beaccepted ,butthat itshould beapplied inpractice
bytheCommission inaccordance with theManagement Committee procedure .

-3-
Withregardtoprocessedproductsforwhichthemonetarycompensatory
amountiscalculatedfromthatapplicabletothebasicproduct,a
reviewofthemethodforcalculatingthederivedmonetarycompensatory
amountisalsoameansofreducingtheamountsincertaincases*
Inthepast,theCommissionhasalreadyreviewedthederivation
coefficients forcalculatingthemonetarycompensatory amountsin
varioussectors.Itproposestore-examinethequestionintheMan­
agementCommittees.Itconsidersthatincertainsectorsadjustments
couldstill.bemadetoreduce,totheextentstrictlynecessary,the
obstaclestotradeconstituted byMCAs.
4.TheCommissionhasre-examinedthematterofthespecialimport
arrangementsfornon-membercountries(ACPsugar,NewZealandbutter);
itconsidersthatinthesecasesthesystemofMCAsshouldcontinue
tobeappliedasitstands.

Proposalfora
COUNCILREGULATION(EEC)No
of
amendingRegulation(EEC)No974/71asregards
thepricelevelto"betakenintoconsideration
forthecalculationofmonetarycompensatory
amounts
THECOUNCILOPTHEEUROPEANCOMMUNITIES ,
HavingregardtotheTreatyestablishing theEuropeanEconomicCommunity,-
andinparticularArticles28,43and235thereof,
HavingregardtotheproposalfromtheCommission ,
HavingregardtotheopinionoftheEuropeanParliament,
WhereasCouncilRegulation(EEC)No974/71of12May1971oncertainmeasures
ofconjunctural policytobetakeninagriculture followingthetemporary
wideningofthemarginsoffluctuationforthecurrenciesofcertainMember
1t <n1■•fI11>n\««/n/2States,aslastamendedbyRegulation(EEC)No557/76,stipulatesthat
themonetarycompensatory amountsmustbebasedonthelevelofthesupport
price,asingleexceptionbeingprovidedforinArticle2(3)inrespectof
beefandveal;
Whereas,however,itwouldappearpossibletoextendthescopeofthe
exceptionatpresentprovidedforbyintroducingthepossibilityofreducing
theintervention priceincaseswherethiswouldbepossiblewithoutcausing
deflectionsoftrade;whereasmonetarycompensatory amountsshouldnot
defeattheirpurpose,whichispreciselytopreventmarketdisturbance ;
whereasitisthereforeadvisable,whentakingdecisionsonthesubject,to
adoptaprudentattitudeandtosubmitthemtoaprocedureallowingswift
actiontobetaken;
OJNoL106,12.5.1971,P«1
2OJNoL67,15.3.1976,p.l

Whereastheintroduction ofageneralruleofthissortenablesthespecific
provisionrelatingto"beefandvealtoberepealed,
HASADOPTEDTHISREGULATION :
Article1
Article2(3)ofRegulation(EEC)n*974/71isanendedtoreadasfollows:
"Itmay"bedecidedthatthemonetarycompensatory amountsaretobecalcula­
tedonthe"basisofpriceslowerthanthesupportpricesfortheproducts
concernedbyreferencetothedegreeofrigidityoftheintervention mecha^
nismorbyreferencetothespecialsituationofthemarket,inparticular
itsfluidityandthelevelofmarketpricesandprovidedthattheriskof
disturbances fortheproductorproductsinquestionmakethispossible."
Article2
ThisRegulationshallenterintoforceonthethirddayfollowingits
publicationintheOfficialJournaloftheEuropeanCommunities.
ThisRegulationshallbebindinginitsentiretyanddirectly
applicableinallMemberStates.
DoneatBrussels.
PortheCouncil
ThePresident

FINANCIAL STATEMENTI
[ixatzi6.5.77 j
–l
l.Fjnber ofrelevant buddet entry : Chap .78
2.Title of:roject :Proposal foraCouncil Regulation amending Regulation (EBC)
No.974/71asregaxis theprice level tobetaken into consideration forthe
calculation ofmonetary compensatory amounts .
3.ix :Articles 23,43ana225oftheTreaty .
4.A:2s:Introducing into Regulation 974/71thepossibility ofusing incertain
c^3--3 .fo-thecalculation ofKCAs ,prices lower than theintervention prices , ior
which would result inareduction ofKCAs .
5.fmaschi .Implications
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5.2k£.::odofcALCiLATic-Kijjjgfinancial implications will depend ontheactual application
ofthereduction ofMCAs ,which aretobefixed bytheCommission after consulting
theManagement Committee .Aquantitative estimate cannot cons ecruently beBade
atthemoment .However ,astheapplication ofMCAs generally gives rise "to
expenditure charged totheGuarantee Section oftheEAGGP and "toareduction of
receipts intheform oflevies under thesystem ofownresources ,areduction of
theMCAs applied should inprinciple give rise toareduction inexpenditure by
theGuarantee Section oftheEAGGP andanincrease inreceipts intheform of
levies .kui iiarjrr uai tisctaoi ^
5.0.1 ofexpenditure –
5«i.i fculti annual timetable
6,0Cantheproject befinanced froa appropriations entered inthe
r<-•.T ichapter cfcurrent br.f t?YI3/XZ
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*miAppropriations tobeentered infuxure buarcxs ? tee/xx
"a"~"TS1Theintroduction ofadvance fixing ofMCAs ,asmentioned intheExplanatory
Memorandum ,would also give rise tofinancial implications that arenotquantifiablt .
firstly ,theywould depend ontherules tobelaiddown onthesubject (e.g. the
time limit foradvance fixing )andontheattitude ofoperators inagiven
economic /monetary situation toward theoperations (trade )tobeeffected .The
overall effect oftheintroduction ofadvance fixing could beaBlight increase ,
inexpenditive andadecrease inreceipts intheform oflevies .However ,given
certain monetary developments ,thecontrary could also betrue .Advance fixing
would ,moreover ,have favourable effects onthesocalled "equity "system
(exemption fromMCAs incertain monetary situations ).