ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (78)496
Vol.1978/0182

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(78)496final
Brussel,29September1978
RESUMPTION OPNEGOTIATIONS ONTHECOMMONFUND
(Communication fromtheCommissiontotheCouncil)
M •1
\p~,. .;,j
COM(78)496final

I.BACKGROUND TOTHENEGOTIATIONS . .
I.Thepurposeofthiscommunication istose>out"thelinesofaCommunity
position'fortheCommonFundnegotiatingconferencewhichseemslikelyto
resumeinthelateautumn.-IntheUNCTADcalendarofmeetings,theperiodof
13thto30thNovemberhasbeenprovisionally setaside.
2.North/southdialogue.IntegratedProgrammeforCo:,i-nodities tCommonFund*
Togetherwith-theindividualcommoditiesontheUNCTADlist(l),theCommon
..'V --•'*^•, ••''
FundisoneofthemainpillarsoftheIntegrated .Programmeandthereisa
fundamentallinkbetweenthenegotiations concerningeach(2).Bythe
,.• .>.---■;,,. .. ■-■."*■••-;
sametokenprogressachieved ,onbothsideswouldbe'mutuallyreinforcing.In
thesameway,thenegotiations/ontheCommonFundaswellasonindividual
commoditiesarelikelytobeardirectlyonthebroadernorth/southdebates'
whicharecontinuingintheUnitedNationsCommitte«-of theWhole,atthe
33rdsessionoftheUnitedNationsGeneralAssembly,andatUNCTADV(Manila,
May1979). .':v;
3.Individualcommodities.Therealbutlimitedprogressachievedonthese
suggeststhattheeconomicbasisoftheFundis.likelytobenarrowerthan
originallyenvisagedinthelistof18(including10key)commodities (l).
\-Ofthefiveexistinginternational commodityagreements(IC,As)(3),
therearetwo(tin,Cocoa)whichcontainstockingprovisions,and
.one(coffee)withinwhichastudyconcerninganeventualstockhas
beenputinhand._V' v '
(l),*Fen"key"commodities deemedbytheUNCTADtobestoclcabl'e–cocoa,
coffee,copper,cotton-yarns,hardfibres/products,jute/products,rubb*
sugar,-tea,tinj^"plv.gbananAs,ba-iixite,ironore,manganese,meat,^*
phosphates,timber,vegetableoils.-.-••'
(2)SeeCOM(78)22final,paragraph3•l)• '
(3)Tin,cocoa*ooffee,sugar,oliveollf-'i»e*-notincludingwheat,,which'
doesnotfeaturecj'i-theIntegratedProgi^-jane.' ...

-3-
–Oftheremaining13commodities onthelist,internationally
financedstocksmight "berealisedforafewcommodities (rubber,jute
hardfibres).'Measuresotherthanstocksrequiringinternational*'
financemight "beagreedinrespectofsomemorecommodities .
/
Onthe"basisofthishypothesisitseemslikelythat,inthemedium-term
future,themaximumfinancialneedsoftheCommonFundmay"beintheregion^
ofl/ljg-billion(includingcertaincontributionsforothermeasures(l)).
4-CommonFund.InthemeantimeUNCTAD,sIntergovernmental Committeefor
theIntegratedProgramme(2)hasinvitedtheUNCTADSecretary–Generalto
decideonthedateanddurationoftheresumptionofnegotiations onthe
CommonFund: »
–"inthelightofhisassessmentofdevelopments andprospectsarising
frompreviousandfurtherconsultations...takingintoaccountthe
provisionmadeinthecalendarofmeetings
1 «
Furtherconsultations areneededinadditiontothoseconductedsofarbythe
,f
UNCTADSecretary–General,sincethesehaveindicatedacertainnumberof
difficulties whichithasnotsofarprovedpossibletoresolve,touchingon
thefunctions,modesofoperation,'andstructureoftheFund.Ifthe
Conferenceisresumedwithareasonablechanceof7success,itisessential
thateveryeffortshouldbemadetoovercomethesedifficulties .–
4.1Againstthisbackground,theCommunityshouldnowcompletetheworkof
whichtheCouncilsof7thFebruaryand7"thMarchtooknote(3)^directed
towardstheestablishment ofacommonposition:itshouldberecalledthat
(1)Thishypothesismaybecomparedwiththeround^6billionestimatedby/
theUNCTADSecretariatforstocksforthe10-"key"commodities andfor
,measuresotherthanstockingrequiredforthe18commodities (seepage2,
footnote(l)).
(2)Atitssixthsession,Geneva,10th–15thJuly,1973.
(3)T/l15/78Extra1andRACLAS.

- • -■ :'-A- • :., ■
. . * • • • . ; – J •V
theEuropean Council atBremen resolved that theCommon Fund ,negotiations
should befollowed upwith aview .tobringing them toapositive Conclusion (1)
andthat theBonn Summit broadly endorsed this call .VTheCommunity must
therefore nowdefine acommon position onalltheoutstanding major points-in
awaythat will offer areasonable basis forsuccess innegotiations .«■::„T.> T. -
II.THE ,MAJOR POINTS ATISSUE . ': : ^ ■•>.'
.5•TheCommission -hasalready proposed afive-point package (2)onwhich .v
■'' ''♦ ■'-- 'v ':'■,v '•: ■ -'' 'v '■ ■preliminary discussions have been held (3)tthe .Community must n<Jwfixits
__p' ■ i - *>- * ■ ' :position onthemain elements –functions ,financial 'structure )andmanagement –
oftheFund ,intheform ofanoverall package .This overall package might
'usefully beexpressed interms ofaframework agreement which would allow the
Fund toevolve progressively over time asiiew ICAs deciding' toassociate with *
itaresigned (4). ' - '',,^ \
6.'Functions .There isbroad agreement between allnegotiating parties ;,
that the vCommon Fund should facilitate theestablishment OfnewICAs particularly
those covering -commodities ofspecial irtterest todeveloping countries (5)*' -
Theoperational funotions suggested foritfall under thethree heads of .
stocking ,measures Other than stocks requiring finance ,andactions outside
ICAs .,
Stocking :allagree ,that theFund 'smain purpose istoensure the \-
financing ofinternational buffer stocks . \ "
(l)Conclusions oftheEuropean Council atBremen ,6th/7thJulyl 1970–Extract :
•"Lesnégociations actuellement encours ausujet d'unFonds commun etde
làconclusion dedifférents accords tleproduits devront être poursuivies
envuedeparvenir àdesrésultats positifs .Ilconviendrait d'examiner -
dans cecontexte laquestion de .,1astabilisation desrecettes d'exportation ".
(2)SeeCOM(78)22 final ,Section U. . ;-- .'\ .-;/
(3).SeeI/48/78(DIAL 3)ànd1/98/78(DIAL 11). \
(.4)SeeCOM(77)365 final ,PartVIII . ! 'V /
(5)Text drawn from theGroup Bproposal of7thNovember ,1977–
TD/IPC/CONF.L.5 .. ~

-5-
-Othermeasures:thedevelopingcountrieshaveinsistedthatthe
Fundshould "bechargedwiththefinancing,withinICAs,ofmeasures
otherthan"bufferstocks.
*–ExtraICAmeasures.Thedevelopingcountrieshavealsoproposedthat
theFundshould–"attherequestofdevelopingproducercountries"–
financeemergencystockingandothermeasuresoutsideICAs.
ItisimportantfortheCommunitytotakeaclearstandonthesepoints.
6.1Stocks.TheCommunitymustcontinuetoinsistthattheFundfsmainrole
shouldbetofacilitatethefinancingofinternationally financedstacks,
whether"internationally ornationallyheld,inareliableeconomic,
equitableandviablemanner.
6.2Othermeasures.OnthesetheCommission wouldrecalltherecommendation
whichithasmadethatarolefortheFundinthisareashouldbe
accepted"providedthatitiscarefullydefinedwithreferencetothe
'actualorlikelyneedsofcommodities andtotheroleplayedbyother
agenciesinmeetingthem"(l).Bearinginmindthedefinitionsalready
putforwardbytheCommissionServices(2),theFund'sroleshouldbe
limitedtomeasures,whicharedirectedtowardstheobjectiveofmarket
stabilisation ,agreedwithinICAs(seefollowingpoint)
whichenterintoanappropriateformofassociation (e.g.exchangeof
letters)withtheCommonFund.
6.3TheconceptoftheFundhavingaroleoutsideICAsshouldnotbeaccepted
forthefollowingreasons:
–measurescannotbydefinitionbeheldtorepresenttheinterests
ofproducersandconsumersatlargeunlessagreedbetweenthem;
–theCommonFundshouldnotbegivenafunctionwhichwouldcarry
withittheseriousriskofoverlappingfacilitiesalready
providedorwhichmayinthefuturebeprovidedbytheIMF.
(l)-»SeeC0M(78)22final,Paragraph5»
(2)SeeI/98/78(DIAL11),Annex1.

ThetouchstoneforCommonFundactipnsinstalwaysbethatittakes'place
inthecontextofthejointagreement -ofproducersandConsumers .'
representing themajorpartofthetradein-thecommodityconcerned:V
,towhatextentthisagreementcouldbeexpressedinlessratherthan-
moreformalarrangementsisdmatterforriegotiat-ioxl.
7*'Financialstructure/modesoffinancing.Leavingpossibleearningsonone*
side^fourmodesoffinancinghavebeensuggestedbydifferentpartiestothe
negotiations ,ofwhichonlythelasttwoapplytoothermeasuresaswellas
bufferstocks:r '5^;* ^
–cashdepositsbyparticipating ICAs; . •
–borrowingoninternational marketsonthebasis,ofappropriate
-'guarantees;'/..,.. .* ■
>.–voluntarycontributions ; . .,
–assessedcapitalcontributions fromFund,members. -\
Beforeexaminingtheseinturn*it'fhouldbeunderlinedthattheFundfsoverall
financialobligations,includingitsborrowing,mustinho"oircumstarices exceed
theaggregateoftheobligationsundertakenbyconsumersandproducerswithin
participating ICAs,.Onthebasisofthehypothesisadvancedinparagraph 3,
thiswouldindicateaceilingoff>l/lji-billion;such,afiguremight,however,
wellincreaseasfurtherICAs-join.'V
7.1First(bufferstocking)window..HeretheCommissionbelievesthatICA.
depositsrepresentthebestwayofensuringtheavailability ofcash
••r'*--„ •– 4 _'-i.» '.paripassu ,withneed(i.e.as.ICAsjoin)..Itmust,however,berecogniseid
thatthedeveloping(andsomedevelopedcountries)attachgreat;
importancetothenotionofsomeresourcesbeingsubscribeddirectlyby
themembersoftheFund;theCommissiontakestheviewthattbisdemand-
,canandshouldbeaccommodated withinthe.broadapproachalreadyputv"
forwardbytheindustrialised countries *Itsviewsonthavariousmodes
offinancingis,,thereforeasfollows:.

-ICAdeposits:33>representareasonablecontributiontoask
ICAstomake.Ifthedemand,ispitchedashighasthe75$
currentlyproposed,theFundwillfindithardtofacilitate
newICAsoreventopersuadeexistingonestojoin.Toolow
apercentage ontheotherhandwouldnotprovideasufficient
cashbasis.
'
–Borrowing:aslongastheguarantees .providedaresufficiently
firm,thereisnoreasonwhytheyshouldnotensureaborrowing
capacitysufficienttocovertwo-thirdsoftotalneeds;
GuaranteesprovidedbyICAmembersthroughICAswouldbelikely
♦
tobesounderthanthedirectguaranteesbyFundmembersproposed
bytheGroupof77•Howeveranelementofdirectguarantees
mightalsoberequired(l).
–Voluntarycontributions :anysuchcontributions madetothefirst
windowcouldbeusedforthesamepurposesasdirectassessed
contributions (seebelow):buttheyshouldnotcarryvoting
,■rights(seeparagraph *8.2).
–Assessedcapitalcontributions fromFundmembers.Arelatively
smallelementofdirectcontributions couldandshouldnowbe
envisaged(2).Thecapitalresourcessoprovidedcouldbe
utilisedtomakeloanstoICAsforbufferstockpurchases,
especiallyintheearlyperiodofanICAfsparticipation ..The
interestearned(whetherbyloanstoICAsorotherinvestments)
(1)SeeC0M(78)22final,Paragraph4(iii)*
(2)Thefigureof10$mightbeappropriate:onthebasisofthehypothesis
giveninparagraph3(i.e.p$00milliontofl1;4billionforstocking
purposes)thiswouldmeanbetween$$0millionand$140million,
dividedbetweenallFundmembercountriesaccordingtoakeytob3
agreed. ''

η8··
mightbeusedtoeffectasma.llinterest–ratesubsidy(l)on
loansmadetoICAsprovidedthatthiscanbedoneonanon­
<''> ■V
discriminatory basis*.
•-v.■,• ■ :V- ./T.
7*2Secondwindow.Thefinancingofthiswindowshouldbeentirelyseparate\'■V'•■■■•'-. '/r-*:■■fromthefinancingofthefirst,},itsstructureandmodesofoperation
1shouldbedefinedasfollows:<.■'V-(
–'theFundfs-activitiesshouldnormallytakeltheformofloans -
* ' •s .''' "•v■'.' . ' * -
•,'•(ontermsadaptedtoInternational BankforReconstruction and
'■ , / "- '>> ' '. ''
'Development(IBRD)/lnternational .DevelopmentAssociation(iDA)
normswhichcontributeon&,co–financingbasistooverall;
'!'project'expenses: • .. '
':«'e-■/-■-' ;■■ '-. .-■–contributions shouldbeonavoluntarybasis.TheCommunity %
.should,inprinciple,bepreparedtocontributearidshouldbe
preparedtomakeanannouncement "tothiseffectjifittranspires
'*;• .,-■1;.■'.-.'tthatthiswouldbeasignificantfactorinsecuringagreementon
r ■anoverallCommonFundpackage*. V:
8.Administration/votes.TheFundmustbestructuredinawaythatitwill
pf-ovideforprofessional competenceandenstarethatitdoesnotbecomeaS'. . , v•V
highlypoliticised instrumentcontrolledbyonegroupofcountriesorby;<•
countrieswithnoseriousinterestincommoditytrade.-TheCommunityshould,
-therefore,nowadopt,the.followingguidelinesinthisareaconcerningoverall-
structureandvotingsystems* -
8.1Overall.structure *ThemembershipoftheFundshouldbeopento:V
–countriesmembersofICAsparticipating inthefirstand/or
secondwindowswhichshouldbeadmittedautomatically ;
(l)Ofonetotwopercent*

-9-
–allothercountrieswishingtojoinwhicharepreparedto J
••;'!
contributetotheFund'sassessedcapital,accordingtothekey' j
to"beagreed;
•■ • ' ■ij
–theCommunity,assuch,bearinginmindthedispositions already
». -., · 1
madewithinICAsandtheimportanceofallcommoditynegotiations and
institutions ,inparticulartotheCommunityCommonCommercialPolicy. 1
Clearrulesshouldbeestablishedwithin "theFund'sStatutesgoverningthe !
\ Toperationofthefirstandsecondwindows,guaranteeing asfaraspossible
theautomaticity ofthefirstandtheeven-handedness towardsitsICA
clientsofthesecond.Athree-tierstructureshouldbeenvisagedwith i
anAssemblyopentoallmembers(withrelevantIFIsasobservers),with
••, iarelativelysmallBoardofGovernors,selectedonthebasisof
"constituencies ",ensuringadéquateconsumeraswellasproducer i
representation ,andwithasmallhighlyprofessionalstaff.AnAdvisory
CouncilthroughwhichICAsassuch(seebelow)andIFIsmightmaketheir|
■ '7
specialistviewsknownmightalsobeconsidered. ;
* Ï.
'8.2Votes.Thevotingsystemsapplicabletodecisionsaffectingthefirstand j
secondwindowsshould–mutatismutandis–reflectthefinancialbasisof »___________ /
X• .: I
each,asqualifiedbyanelementofglobalvotesconsistentwith I
. • iestablished international norms.
–Votesinthefirstwindowshouldthusreflectthecontributions
•- . ' _■ ;madebyICAstotheFund'scashresourcesanddirectassessed ,i
1
>contributions finallyagreedwhichshouldprovidethebasisfor
' ' ''.tcalculatingtheelementofglobalvotes.Voluntarycontributions' I
(ifany)shouldnotcarryvotingrights. [

•rVotesinthesecondwindowshould "bebasedonthevoluntary
financialcontributions made;theelementofglobalvotes
allowedtonon–contributory membersshouldbecompatiblewiththat
»agreedforthefirstwindowandshouldnotbedecisive *
Appropriateblockingmechanismsshouldbeintroducedforthefirstand
forthesecondwindow,designedtoprotecttheinterestsofallgroups
ofcountries.Inthefirstwindowthismighttakethe'
- ' ' ν"' '
formofrequiringsimpleorqualifiedmajoritiesofeachofthetwomain
"colleges",(i.e.of'consumerandofproducermembers)or*oftheroverall
membership.Inthesecondwindowasimple,orqualifiedmajorityofthe
votesoffinanciallycontributingcountrieswouldbeappropriate.•.1
Onthebasisoftheguidelinessetoutabove(inparagraphs8.1and8.2)
theCommonFundwouldhaveasingleadministrative structure vtoexpress
itscollectivepersonality andseparatevotingsystemstoreflectthe,
differentstructuresofitstwooperationalarms(firstandsecond•
windows).TheCommunityassuchshouldhave'therighttocastthevotes
ofitsMembers,wherethematterstobedecidedfaj.1withinthe
Community'scompetence.. -