ARCHIVES HISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(80)330
Vol.1980/0119

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COMMISSION
OFTHE
EUROPEAN COMMUNITIESCOM(80)330final
Brussels,16June1980
FOROFFICIAL USEONLY
GeneralSecretariat
RECOMMENDATION FORACOUNCILDECISION
ONTHESTANDTOBEADOPTED BYTHECOMMUNITY ATTHE
INTERNATIONAL NEGOTIATIONS ONTHEAMENDMENT OF
CERTAINPROVISIONS OFTHEARRANGEMENT ONGUIDELINES
FOROFFICIALLY SUPPORTED EXPORTCREDITS
(presented bytheCommission totheCouncil)
C0M(80)330final

EXPLANATORY MEMORANDUM
1.Byadoptingitsdecisionof5May1980ontheCommunitystandat
theinternational negotiations .ontheamendmentoftheArrangement on
GuidelinesforOfficiallySupportedExportCredits,theCouncilenabled
theCommunity,whichparticipates assuchintheArrangement,toplay
anactivepartinthenegotiations betweentheParticipants whichwere
heldfrom12to14May.
Theoutcomeofthiswasanagreementtoraisetheminimuminterestrates
intheConsensusby0.75%forrich(CategoryI)andintermediate
(CategoryII)countriesandby0.25%forpoorcountries (CategoryIII),
witheffectfrom1July.
2.Thisdoesnotmeanthenegotiations arecomplete,sincetheParticipants
alsoagreedtocontinuetalksaimedatreachingamutuallyacceptable
solutioncoveringallaspectsoftheConsensusby1December.
Inthisconnection,itshouldbenotedthat:
(i)theCommunity'snegotiatingdirectivescalledforadaptationsto
otherprovisionsoftheConsensusaswell,somedealingwithfinancial
aspects(theminimumlevelofcashpayments,financingoflocalcosts,
maximumrepaymentterms),andothersaimedatincludinginthe
Arrangementprovisionscoveringsectorshithertoexcludedfromits
scope(nuclearpowerstations,agricultural productsandmethane
tankers);
(ii)thereportsubmittedon24AprilbyMrWallen,Chairmanofthemeeting
ofParticipants,whichdealsexclusively withthestructureand
trendofinterestrates,concludesthatinviewoftherigidnature
ofthecurrentgridofinterestrateslaiddownintheConsensusand
thedivergenceofinterestratesonthemarketsofthedifferent
currencies,thereisaneedtomovetowardsamewsystembased

eitheronuniformrateswhichcanberevisedinaccordance with
certaincriteria,oronrateswhicharedifferentiated according
tothecurrencyconcerned;theUnitedStates,Canadian,Austrian
andSwissdelegations havealreadycomedowninfavourofthe
secondapproach
Althoughthelastestdownwardswingininterestrates(e.g._thefour
pointfallintheUSshort-termprimerate)andtherelativelymodest
increases (0.75%or0.25%dependingonthecategoryofcountry)adopted
onthebasisoftheCommunity'sproposalshavedonesomethingtomitigate
theimpatienceofandpressurefromthosedelegations cablingfora
"revision"oftheConsensus,theCommunitymuststilldefineitsposition
asregardsthealternative "models"putforwardbyMrWallen.
3.AsfarastheintrinsicmeritsofMrWal.Len'ssuggestions areconcerned,
giventheliberaleconomictraditiontowhichallindustrialized Consensus
Participants claimallegiance,economiclogicalonewouldappeartomake
thedifferential-rate systemundoubtedly themostappealingintellectually .
Thissolutioncombinesthemeritsof:
(i)truthfulness,inthattheParticipants 1interest-rate commitment
wouldbedirectlyrelatedtotheratesinforceonthemedium-term
marketforeachcurrency,thusputtinganendtothecurrentgap
betweendomesticandexportinterestrates;
(ii)transparency anddiscipline,inthatthecommitmentsofeachParticipant
wouldbeclearlyrecognizedwhateverthemedium-terminterestrate
relatingtoitsowncurrency;andincidentally,thosenational
treasurieswhichunderthecurrentsystemend(upsubsidizingexport
interestratesbyonemeansorotherwouldberelievedofwhatis
anotinconsiderable burdenonthenationalbudget.

4.Butonthepurelypracticallevel,anumberofobjections'tosuch
a"radical"systemhavealreadybeenraisedbysomeParticipants :
(i)thechoiceofthebasicratestobetakenasindicatorsisnot
*
alwayssimpleandstraightforward :incaseswherethereisno
"medium-termrate",theWallenreportadvocatesusingtherate
fornationalbondsofequivalentmaturity,buteventhis"market"
doesnotexistinallcountries,andinadditionithasjustlately
beenpossibletodetecta"flight"of capital'fromthis"market"to
otherswhichofferahigherreturn.
Thesameobjectioncoulddoubtlessbemadeofauniformmobilesystem
buthereitwouldbenullifiedtotheextentthattheConsensusrates
wouldbetheresultofaweightedaverageinwhichanyapproximations
wouldbeamalgamated .
(ii)Theavailability ofthedifferentcurrencies :solongasnotall
currenciesarefreelyandequallyaccessible,iftheConsensuslaid
downadifferentrateforeachcurrencytherewouldbenoguarantee
ofequalityforexporters;
(iii)Inadifferentiated ,periodically-adjustable systemtheproblemof
"priorcommitments "wouldbecomesomewhatcomplicated asaresult
ofanychangesintherelationship bet.weencurrencies andtheir
respectiverates,thusfurthercomplicating matchingprocedures.
Inshort,themaindrawbackofthedifferential-rate systemwouldappear
tobeitscomplexity andtheresultantoperationaldifficulties .One
mightalsopointoutenpassantthattherationaleonwhichthisproposal
»isbased,i.e.thatinamarketsystemthepriceofdifferentgoodsand
servicesshouldbedetermined bythelawofsupplyanddemand,isnot
whollyborneoutinpractice,asthemajorityofgovernments arein

factincreasingly intervening,particularly throughthecentralbanks,
intheoperationofthemoney,capitalandexchangemarkets,for
varyingreasons:tosupportcurrency,combatinflation,orsimplyto
stimulateordampdownthegeneraleconomy.
«
5.ItisworthnotingthattheinitialversionoftheWallenreportput
forwardfourratherthantwopossiblesolutions,thethird.andfourth
beingcombinations (whichcouldbemultiplied ).Thesewerelaterdropped,
butarementionedherebecauseoneofthepossiblevariantswasasystem
ofmultipleratesapplyingtogroupsofcurrencies.Althoughitwas
probablynotwhattheauthorhadinmind,itispossible..to'feelthata
variantofferingadifferential-rate systemwiththeCommunitycommitted
toasingleratebasedonthatresultingfromtheECUmighthavebeen
bothrelativelylogicalanddistinctlyattractivepolitically fromthe
Community'spointofview.
AtatimewhentheCommunityhaslaunchedtheEMSandisattemptingto
bringaboutaconvergence ofMemberStates'economicandexchangerate
policies,itwouldhavebeenlogical -fortheCommunity'scommitment
undertheConsensustohavebeenbasedonaweightedinterestrate
reflectingtheECUweighting.Attheveryleastonemighthaveargued
thattheCommunityshouldnotcommititselfexternallytoasystemwhich
wouldperpetuatedivergences,whileendeavouring internallytobring
aboutaconvergence .
Dependingonfutureprogressinthealignmentofeconomicandmonetary
policies,theapproachindicatedabovemightmeritcloserconsideration .
6.Grantingthatthepresentsystemisprobablytoorigid,sinceit
requiresaformalconsensusbytheParticipants tQmodifytheminimum
interestrates,theCommunityshouldthereforelogicallyoptforasystem
ofuniformmobilerates.

-5-
Themainadvantageofsuchasystem,whichcouldberevisedupwardsor
downwards,wouldbetopreventtheConsensusratesbeingblockedbya
failuretoreachagreementwhilemarketrateswereagainrisingor
falling,andthustoavoidunnecessarily hardortensenegotiations .
Theautomaticadjustmentshouldbebasedonaweightingofcurrenciesin
accordancewiththeSDRweighting (assuggestedintheWallenreport),
withaone-yearinterval,toavoidarapidserie'sofmodifications leading
tounnecessary complications intheadministration ofthesy.stem.
7.ThisCommunitynegotiatingpositionnaturallyimpliesthattheother
Communityproposalsonotherpoints,presentedtotheParticipants on
12May,shouldbemaintained andnegotiatedatthesametime.
»

Recommendation for a
COUNCIL DECISION
onthe stand tobeadopted bythe Community atthe ..international
negotiations ontheamendment ofcertain provisions ofthe
Arrangement onGuidelines forOfficially Supported Export Credits
THECOUNCIL OFTHE EUROPEAN COMMUNITIES ,
Having regard totheTreaty establishing theEuropean Economic Community
and inparticular Article 113thereof ,
Having regard totheRecommendation from theCommission ,

Whereasitisnecessarytodrawupdirectives onthestandtobeadopted
bytheCommunityattheinternational negotiations ontheamendment
oftheArrangement onGuidelinesforOfficiallySupportedExportCredits,
HASDECIDEDASFOLLOWS:
SoleArticle
Attheinternational negotiations ontheamendmentoftheArrangement
onGuidelinesforOfficiallySupportedExportCredits,theCommission
shallputforwardtheCommunity'spositioninaccordancewiththe
directives containedintheAnnex.
TheCommissionshallactinconsultation withtheSpecialCommittee
providedforinArticle113oftheTreaty,whichshallassistitin
itswork.
DoneatBrussels 1980
Far
ThetheCouncil
Président

ANNEX
Negotiatingdirectives ontheamendmentofthe
Arrangement onGuidelinesforOfficially
SupportedExportCredits
Withoutprejudicetothenegotiatingdirectivesadoptedbythe
Decisionof6May1980relatingtocashpayments,localcosts,maximum
repaymenttermsandcertainsectors,theCommissionshouldsuggestto
theotherParticipants thefollowingamendmentstothestructureof
theminimuminterestrategrid.(Theseamendmentsarelargelybasedon
the"uniformmobilematrix"formulaputforwardbyMrWallenin
document TD/Consensus/80.9of24April1980,inparticularpara.14
etseq.):
(a)Thebasicminimuminterestrateshouldbedetermined byreference
totheaveragemonthlymarketinterestratesfortheParticipants'
currencies .Bytheseinterestratesaremeanttheyieldsonthe
secondarymarketofGovernmentorpublic-sector bondsandthe
averageoftheseratesshouldbeweightedinaccordancewiththe
shareoftheParticipants' currenciesinthe.SpecialDrawingRights
(SDRs).(SeeTD/Consensus/80.9,AnnexIof24April1.980);
(b)onthebasisofthebasicminimuminterestrateasspecifiedin(a),
selectiveminimuminterestratesshouldbedeterminedaccordingto
thecategorytowhichthepurchasingcountrybelongs;
(c)amechanismshouldbeworkedoutforautomatically adjustingthe
basicminimuminterestrateannually/byreferencetotheweighted
averageofinterestratesduringthesixmonthsprecedingeach
adjustment/;
./.

-2-
(d)intheArrangement should±>eincludedaprocedurerelatingtothe
dateofentryintoforceofeachchangeinrates,toprior
commitments asresultingfromthesesuccessivechangesandto
methodsofaligningonsuchpriorcommitments;
(e)inthesameway,aspecialprocedureshouldbedevisedfor commit­
mentsenteredintobeforethedatewhentheamendedguidelines
resultingfromthenegotiations comeintoforce,,commitments which
shouldnotinanycasebeaffectedbythesaidamendments .