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COM(79)143
Vol.1979/9012

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COMMISSION
OFTHE
EUROPEAN COMMUNITIES
GeneralSecretariatCOM(79)143 final
Brussels,19March1979
FOROFFICIAL USEONLY
PREPARATIONS FORTHESECONDSESSION OFTHE
UNITEDNATIONS CONFERENCE ONNATURAL RUBBER
(Communication fromtheCommission totheCouncil)
C0M(79)143final

Preparations forthesecond session oftheUnited Nations Conference on
Natural Rubber
I. IMROIUCTION
1.Thefirst session oftheUnited Nations Negotiating Conference on
Natural Rubber ended inGeneva on8December 1978 without achieving
asufficiently broad consensus for theconclusion ofanInternational
Agreement .
2.TheConference decided tosuspend itswork andasked the
Secretary-General ofUNCTAD toconvene asecond session before UNCTAD V.
Itwasdecided tohold this second session from 27March to12April 1979 in
Geneva *
3.TheCommunity played avery active part inthenegotiations onthe
basis ofacommon position approved bythe Council on21November last
year .TheCommunity wasable toagree inprinciple toacompromise
1document presented bytheproducer countries atthe last sitting ofthe
Conference onthemain economic features ofanagreement for the
stabilization ofnatural rubber prices .This document had thebacking
ofthePeople 'sRepublic ofChina andtheNordic countries andcould be
considered byJapan ,Australia andCanada with certain reservations .However ,itwas
rejected bytheUnited States ,the Soviet Union andtheother Eastern European
countries .
4.Thepurpose ofthis Communication istosuggest additional directives
forCommunity participation atthesecond session oftheNegotiating
Conference .
Conférence Document TD/RUBBER /ex/C.1/CRP10.

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II.STAGE REACHED INTHE NEGOTIATION 'SAND POSSIBLE DEVELOPMENTS
5.Thelast phase ofthenegotiations showed that acompromise between
theproducers and some oftheconsumers waspossible onthe "basis of
Doc.CRP10,atanyrate inrespeot ofthemain matters under discussion ,
•namely :
volume ofthenormal buffer stock :400000tonnes ;
volume ofthecontingency stock :100000 tonnes ;
commitment oftheContracting Parties tothe Agreement asregards
financing ofthetotal volume of500000tonnes ;
application ofaprice mechanism based onthedetermination ofareference
price ,non-intervention andpossible intervention bands,and thresholds twigge -
ring obligatory intervention ;
establishment ofalower indicative price of 1.50 perkilo andan
upper indicative price of 2.60 ;
introduction ofasemi-automatic price revision system triggered off
periodically and/oronthebasis of apercentage ofstock resources
used *
6.This compromise solution wasnotaccepted by:
theUnited States ,which found itincompatible with itsposition ,
particularly with regard tothevolume ofthestock (600000tonnes ),
financing (tobeentirely covered bydirect contributions ),itsrefusal to
accept alower indicative price limit andtheneed toarrange forprior
consultations onthepolicies oftheproducer countries especially in
respect ofexport taxes ;
theSoviet Union andtheother Eastern European countries ,which wanted
financing intheform oflevies onmarketed quantities andanundertaking
from producers togive priority treatment onthebasis oflong-term
contracts toconsumers that were Contracting Parties totheAgreement in
the event ofrubber shortages .
7.Itbecame clear during thefinal stages oftheConference that none of
theparticipants wasprepared tomake anall-out effort toachieve an
agreement ifthis meant excluding theUnited States (22%oftotal imports ).
1Level triggering offcommitment ofthe 100000tonnes contingency stock aswell as
lower limit oftheprice mechanism .

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Theproducers said they were prepared toconsider modifying certain aspects
oftheir position provided that thegeneral balance ofrights and
obligations assetoutinCRP 10remained substantially the same .
8.Obviously thechances ofthesecond session achieving asufficiently
broad consensus toarrive atanagreement depend primarily onthe
willingness oftheUnited States Delegation toagree inprinciple to
compromises oncertain points which areacceptable toalarge proportion
oftheparties tothenegotiations aswell asontheproducers' readiness
toagree tocertain modifications toth,eir last compro^ir3 position .
9«Inthecircumstances ,theCommunity position isavery special one as,
along with China ,itistheonly major economic regie -that hasalready
given itsapproval inprinciple totheproducers *compromise document .
Inthelight ofthis position andtheactive part itbpsplayed inthe
negotiations ,theCommunity should beable tostrike abalance between the
twopositions described above and-while notdiverging from itsbasic
goals -should beable toshow sufficient flexibility tofurther consensus
between theUnited States andtheother parties tothenegotiations .
10.Thesecond session oftheNegotiating Conference for arubber
agreement ,tobeheld inMarch-April ,hasdeliberately been arranged just
before theManila Conference .Thedeveloping countries will obviously
make this commodity atest case forproving the industrialized countries'
commitment totheIntegrated Programme .Failure atthesecond session of
theRubber Conference would therefore bebound toinfluence the climate of
theManila Conference andplace theindustrialized countries inan
uncomfortable situation .Consequently everything possible must bedone to
achieve consensus onthefundamental elements oftheAgreement .
11.Inthecircumstances ,theCommunity should base itsposition atthis
second session onDocument CRP 10,bearing inmind that :
aCommunity position onthis document wasestablished inGeneva ;
theproducers areunlikely ,after allthecompromises they have agreed to
inrelation totheir initial position ,tobeprepared tomodify their
position significantly .

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Itshould ,however ,bepossible fortheCommunity :
toadvocate some degree offlexibility oncertain aspects with aview
tofacilitating consensus ;
toputforward proposals aimed atsimplifying orimproving certain
solutions that were accepted attheprevious session butrequire some
technical adjustments toensure that theAgreement operates more
effectively .
III .ADDITIOML DIRECTIVES
12.Theposition that might beadopted bytheCommunity attheConference
ispresented here intheform ofadjustments totheposition agreed onat
Geneva onthebasis ofthenegotiating brief andtheprogress ofthe
negotiations .Thepurpose ofthese adjustments istomaintain the
flexibility that isneeded with aview toachieving anoverall agreement
taking into account thepositions adopted bytheother parties .Asthe
negotiations proceed ,however ,itmaybecome necessary to
readjust these directives ,inwhich case theCommission will propose
supplementary directives totheCouncil .
A. Main economic elements
13.Reference prices
CRP10provides forareference price ofSingapore /Malaysia $2.05 perkilo
which would ,however ,berenegotiated iftheagreement did notcome into
force until after 31December 1979 *This solution which ,which Leaves some
uncertainty astotheprice level tobeapplied ,should preferably be
changed andobjective price determination criteria adopted .Theprice
should therefore befixed onthebasis oftheaverage price ofRSS 1(or
theaverage ofacomposite price )during theprevious 36months prior tothe
conclusion ofthenegotiations ,expressed inonecurrency only .
14.Price bands
Themethod tobeused forestablishing thewidth oftheprice bands setout
inCRP 10isacompromise between price-fixing onthebasis ofapercentage
ofthereference price andprice-fixing interms offixed nominal values .
This method reduces thewidth oftheprice bands ,andifitwere toprove
impossible toreturn toapercentage-based system ,Drices would have tobe
revised more frequently than the18-month period atpresent envisaged inCRP10.

15.Lower indicative price
This price isoneoftheproducers' major demands ,andit hardly seems possible to
challenge itslevel .Revision ofthis price ,which should take place after
30months following aspecial vote bytheCouncil oftheAgreement ,should
betied ,however ,tothecondition that such revision cannot reduce
theinitial proportional gapbetween theprice inquestion and the
reference price .This istoallow therevision system tooperate normally .
16.Upper indicative price
Theidea ofsuch aprice wasonly accepted forreasons ofcompromise .Itisonly
apparently symmetrical with the lower indicative price since ,with regard tothe
actual possibilities ofdefending itslevel^there isnopractical means of
achieving this objective .Inthecircumstances ,ifitreally hadtobeaccepted
bytheCommunity ,this price should :
bemade independent ofthelower indicative price ;
bedefined asthe level above which the Council will recommend the
producer countries totake anymeasures necessary tostimulate andstep
upnatural rubber production .
17.Revision ofthe reference price
Therevision system described inCRP 10would seem ,onclose examination ,
tobeneedlessly complicated ^involving certain inconsistent elements .
Therequisite adjustments must therefore bemade during thenegotiations
toincrease itsflexibility andmake itsimpler andmore coherent ,with
particular emphasis on:thefrequency oftheperiodical revision ,
elimination ofthemethod restricting thescope ofrevision within a
predetermined band ,theintroduction ofminimum revision percentages ,and a
reduction inthenumber ofrevision operations triggered offbythe level
ofutilization ofstock resources .
18.Volume ofthe stock
Agapof100000tonnes separates theUnited States Delegation andmost of
theother parties .Itwould ,however ,seem tobeakeyfeature ofthe
USposition .Inthecircumstances ,andprovided that asolution that
satisfies everyone isfound toother aspects oftheAgreement ,the
Community mi^it consider accepting amoderate increase inthecontingency
stook ,should thevolume ofthestock betheonly factor impeding the
success ofthenegotiations .

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19.Financing ofthe stock
Document CRP 10only specifies certain aspects oftheelements to "betaken
into account forthis purpose ,namely :
(a)equal apportionment offinancial expenditure (between producers and
consumers );
(b)commitment onthepart ofalltheparticipating governments tothetotal
volume ofthe stock ;
(c)financing ofthe400000tonnes ordinary stock bydirect contributions .
Intheforthcoming negotiations ,other major elements will have tobe
defined,suchas: v
(a)themethod offinancing thecontingency stock :this should befinanced
byloans guaranteed bystock warrantsand/ordirectly byparticipants ;
(b)theapportionment ofdirect contributions fortheordinary stock :this
•should bedetermined asregards 'theparticipating importersonthebasis
oftheir share ofthetotal netimports oftheContracting Parties to
theAgreement ;
(o)themethod forcalling upcontributions totheordinary stock :such
contributions should becalled upgradually asthestock manager requires
them forhisoperations .However ,toguarantee both initial
availability andeffective participation bytheContracting Parties to
theAgreement ,aninitial contribution of10%ofeach participant 's
share inthefinancing oftheordinary stock should bepaid tothe
Council assoon astheAgreement comes into force ;
(d)method ofpayment :contributions should bepaid incash ,inafreely
convertible currency ,unless theCouncil decides otherwise inspecial
situations ;
(e)themethod ofassessing thefinancing required fortheordinary stock :
such assessment should bebased ontheprice level for the lower limit
ofthepossible intervention band ,i.e. thecompulsory level of
intervention ;
(f)relations wi4;h theCommon Pond :asuitable text should authorize the
Rubber Agreement totake anymeasures necessary toderive full benefit -
while satisfying itsobligations inthis context -"from thefacilities
offered bythis Fund .assoon asitcomes into operation .

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B. Other measures
20.Thetexts discussed atthefirst session oftheConference provide forcooperation
within theframework oftheAgreement forthepurpose offurthering research
anddevelopment inthenatural rubber sector .Care should betaken to
ensure that anymeasures that maybeadopted areconsistent with themain
aimoftheAgreement ,namely price stabilization .They will therefore
have tobefocused basically onimproving conditions fortheavailability
ofnatural rubber supplies andtheir quality .Support should begiven
inthis connection tothe setting-up ofaDevelopment Committee within the
framework oftheAgreement with aview tointernational coordination and
promotion ofnatural rubber programmes andoperations .Should such
measures require resources that exceed the scope oftechnical and scientific
assistance ,provision should bemade forthepossibility ofcalling onthe
possible second window oftheCommon Fund .
C. Main administrative provisions
21.Community participation
Suitable clauses should beinserted inthetext oftheAgreement providing
fortheparticipation oftheCommunity .
22.Voting rights
Inprinciple ,voting rights ontheCouncil should bedistributed between
the participants onthebasis oftheir respective shares of
international trade innatural rubber . The number ofinitial votes
tobedivided among importers should therefore bekept aslowaspossible .
23.Contribution tothe administrative budget
Contributions tothis budget should becalculated onthebasis ofthevoting
rights held byeach Contracting Party totheAgreement (basic votes plus
votes distributed onthebasis oftheir relative share ofinternational trade ).
D. Consultation ondomestic policies inthe natural rubber sector
24.FortheUnited States delegation this isoneofthemajor problems to
besettled bynegotiation ,asitisanxious torestrict thelevying ofexport
taxes andtomodify the progressive system geared toprices which is
applied bycertain major exporters .Atthesame time itisahighly
sensitive political issue fortheproducer countries .Inthecircumstances ,
itseem3 advisable fortheCommunity tocontinue totake aneutral stand in

thismatter,leavingillotheUnitedStatestonegotiateandachieve
agreementonthispointwiththeproducers.

FINANCIAL TOTE
The "basic data given inthefinancial note attached totherecommendation
foradecision presented bytheCommission totheCouncil (COM(78)507 final
of5October 1978 )remain unchanged except asregards theinitial
contribution which wasgiven there as25$ofthetotal contribution .
S
Inthepresent Communication ,theproposed initial contribution is
reduced to10$ofthetotal contribution ,i.e. 3to4muc,which would nor­
mally berequired during the1980 budget period .