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DOCUMENTS "COM"
COM(75)458
Vol.1975/0172

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(75)458 final .
Brussels ,10September 1975
Recommendation for aCouncil Decision ,
concerning negociation ofthesecond International
Cocoa Agreement
(submitted totheCouncil "bytheCommission )
2°M(75 )458final .

Introduction
Prom22Septemberto17October1975aconferencewillbeheldin
GenevawithintheframeworkofUNCTAD*Itspurposewillbetonegotiate
therenewalofthefirstInternational CocoaAgreement,whichentered
intoforceon1July1973andexpireson30September1976.Adraft
secondAgreementhasbeendrawnupbyaPreparatory Committeesetupby
theInternational CocoaCouncil,tobesubmittedtotheConferenceasa
workingpaper.
Thepurposeofthiscommunication istoestablishguidelinesfor
Communityactionduringthesenegotiations onthebasisoftheapproach
followedduringthe1972negotiations andsincetheentryintoforce
oftheInternational CocoaAgreement.
Thiscommunication mustbeexaminedandadecisiontakenonit
beforethenegotiations commence(22September)byaprocedurethat
reflectstheurgencyofthematter#

*
i
»
1.Participation bytheCommunity andtheMember States inthe present
Agreement !
TheCommunity andtheMember States aremembers ofthefirst
International Cocoa Agreement ,When theAgreement wasnegotiated in ■
1972 theCommunity caused tobeinserted inthetext specific provisions
regarding theparticipation ,asamember oftheAgreement ,byanyintergo­
vernmental organization having responsibilities inrespect ofthenegotiation ,
conclusion andapplication ofinternational agreements# Theformula worked
*
outduring lengthy negotiations isconsidered satisfactory since ithas
1
served asamodel onthe occasion ofthe renewal ofother international
commodity agreements ,such asthe1968 Coffee Agreement ,extended inApril
1973 »andintheTinAgreement ,renewed inJune 1975 *
Onthebasis ofthe text inArticle 4 the 1972 International Cocoa
Agreement ,entitled "Membership byIntergovernmental Organizations ",and .
onaproposal from theCommission ,theCouncil decided on4January 1973
tosign theAgreement subject tofinal acceptance atalater date .
Pending thecompletion byalltheMember States oftheir ratification
procedures theCouncil decided on26June 1973 ,onarecommendation from
theCommission ,to :
i# give notice oftheCommunity 'sintention toapprove theAgreement ,
il«indicate that theCommunity would apply theAgreement provisionally *
Lastly theCouncil Regulation of9November 1973 (OJNoL324of24
November )made theeconomic andcontrol rules oftheAgreement applicable
intheCommunity#
TheCommunity hastherefore been able toparticipate fully inthe
operation ofthis Agreement inrespect ofquestions falling within its
jurisdiction ,andonallother matters theCommunity andtheMember States
have atalltimes endeavoured toadopt acommon attitude inmost cases
with success ,afact welcomed bytheCommission#

Quiterecentlyinthecontextofthepreparationsforthenegotiation
<ofthesecondAgreement,theCommunityandtheMemberStates:
i«MadeajointdeclarationattheMarch1975sessionoftheInternational
JJocoa.Councilinfavourofrenegotiation oftheAgreement;
ii«submittedjointproposalsinJune1975"tothePreparatoryCommitteeon^
oertainaspectsoftheAgreementrelatingtotheoperationofthebuffer
stock,theconditionsofsupply,controlmeasuresanddurationofthe
Agreement#
SuchactionisfullyinlinewiththeeffortsmadebytheCommunityat
international leveltobringaboutaconstructive attitudeinthecommodities
fieldandstandsoutparticularly inthecaseofthisAgreementsincethe
UnitedStatesisnotacontractingpartyandtheCommunitycarriesconsiderable
weightonthesideoftheimportingcountries(l).
2«Participation inthenegotiation ofthesecondAgreement
Pendingageneralsolutiontothequestionofaformalinvitationtothe
CommunitytoparticipateintheNegotiating Conferences oncommodities ,steps
willhavetobetakenassoonastheConferenceopenstoenablethe
Communitytoparticipateinthework.Whatwasobtainedin1972right
fromthestartoftheConference shouldbealltheeasiertoobtainin
1975sincetheCommunityisamemberofthepresentAgreementandhas
playedanactivepartwiththeMemberStatesinitsimplementation .
TheCommissionconsidersthatthedirectivesitreceivedbydecision
oftheCouncilof6and7March1972forthenegotiationofthefirst
International CocoaAgreementshouldbeadaptedforthenegotiationofthe
secondAgreementinaccordancewiththedraftdecisionsetoutinAnnexI*
Withregardtorepresentation oftheCommunityaidtheMemberStates
theCommissionconsidersthatthepracticefollowedin1975f°rtheTin
Conferenceoughttoberepeated-thatis,thereshouldbetendelegations,
withtheCommissionrepresentative normallyactingasjointspokesmanfor
questionsfallingwithinthejurisdiction oftheCommunitypursuantto
Article113orformatterswhicharethesubjectofcommonactionunder
Article116.
./.
(1)TheUnitedStateshasbeeninvitedtotakepartintheworkofthe
Preparatory Committee;itisdoingsoandwillalsoparticipateinthe
Negotiating Conference.

3*Negotiatingdirectives •
Inthelightofthepreparatory workforthenegotiations theCommission
considersthatthepositiveactiontakenbytheCommunityandtheMember
StatesmustbeactivelypursuedattheConferenceitself.
SomeimportantquestionshavealreadybeenIroachedinthePreparatory ^
CommitteeandtheproposalsformulatedbytheCommunityandtheMember
Stateswithinthatframeworkconstitute,intheCommission'sviewtsound
negotiatingdirectives *TheseproposalsaresetoutinAnnexII*
Otherquestions-inrespectofwhichtheCommunityandtheMember
Stateshave,moreover,reservedtherighttomakenewproposalsduring
thenegotiations-arealsofundamentaltotheconclusionofasecond
International CocoaAgreement;thesearesetoutinAnnexIIIandshould
likewisebecoveredbynegotiatingdirectives *
4*Specialdifficulties ofaMemberState
Therequirements ofItaly'sconstitutional procedureinvolvedelays
intheratification ofinternational agreementswhichentailbudgetary
expenditure (paymentofcontributions totheOrganization'sbudget)*
The1972International CocoaAgreementhasnotyetbeenratifiedbythe
ItalianParliamentandItalyhasagreedtoapplytheAgreementprovisionally
onlyonconditionthatitisnotdeprivedofitsrighttovoteasaresultof
non-paymentofitscontributiontotheOrganization'sbudget(l-)«Accordingly,
inJune1973theCouncildecidedasanexceptional measurethattheEEC
could,whereappropriate ,paythecontributions owedbyMemberStatesunder
thetermsoftheAgreement,subjecttosuchsumsbeingreimbursed *
TheCommissionconsidersthatasolutiontothisproblem–which
wouldseemtoconcernItalyalone-shouldbefoundwithintheframework
oftheinternational commodityagreementsthemselvessothatItalycan
provisionally applytheagreementsinquestionpendingcompletionofits
constitutional ratification procedure:onlywhenthisisdonecanit
-rr-r– */*.
(1)Toensurethatmembersfulfiltheirfinancialobligations,thisprovision
relatingtosuspensionoftherighttovoteintheeventofnon-payment
oftheannualcontributionwithinareasonableperiodoftimeappearsin
allinternational commodityagreementsandcannotbethesubjectofa
waiver*

-4-
undertake tomake itscontribution tothebudget oftheAgreement ,This
problem israised inAnnex IIIreferred toabove .Ifnosolution canbe
worked outatinternational level oneshould befound atCommunity level
based onaformula similar tothat decided upon bytheCouncil inJune
1973 1soastoeisure that Italy canparticipate along with theother
Member States andtheCommunity *

!VIII/443(75)-E
AnnexI
Recommendation foraCouncilDecisionconcerningnegotiation ofthesecond
International CocoaAgreement J
THECOUNCILOPTHEEUROPEANCOMMUNITIES ,
HavingregardtotheTreatyestablishing theEuropeanEconomicCommunity,
andinparticularArticle113thereof;
Havingregardtotherecommendation fromtheCommission ;
WhereastheCommunitysignedthe1972International CocoaAgreementon
15January1973andhasparticipated inthatAgreementsinceitsentry
intoforceon1July1973»subjecttofinalacceptanceatalaterdate;
WhereasthatAgreementwillexpireon30September1976;
WhereasanInternational ConferencewillbeheldinGenevafrom22September
to17October1975withintheframeworkofUNCTADforthenegotiation of
asecondInternational CocoaAgreement ;whereastheCommunityshouldtake
partinthesenegotiations whichinvolvecommoncommercialpolicymatters;
HASDECIDEDASFOLLOWS:
TheCommissionisherebyauthorizedtoconduct,onbehalfoftheCommunity,
thenegotiationofthesecondInternational CocoaAgreement,inrespectof
mattersfallingwithinCommunityjurisdiction.
TheCommissionshallconductthenegotiations withintheframeworkofthe
annexeddirectivesandinconsultation withtheSpecialCommitteeprovided
• ^
forinArticle113»
DoneatBrussels,
FortheCouncil
ThePresident

VIll/443(75)-E
Proposals 'by "theEuropean Economic Community anditsMember States tothepre­
paratory Committee forthesecond international cocoa agreement (9-13June75)
These first proposals concern provisions relating tocertain aspects
onlyofthe1972International Cocoa Agreement ,Theyclearly donotprejudge
thepositions which mayheadopted either during thepreparatory workor
during thenegotiations onthefundamental questions raised "bytheother
Members intheir proposals .Theyarenotexhaustive andaretobestudied
inconjunction withother proposals .Inthelight oftheprogress achieved
inthePreparatory Committee andduring thenegotiations ,wemaywishto
submit other proposals .
1.Légal aspects
Article 74(Durât ionoftheAgreement )
Inview oftheconstitutional obligations ofsome members ,itis
suggested thatprovision bemadeforanagreement ofthree years 'duration
which canbeextended forafurther twoyears ,without negotiations or
amendments ,byspecial vote oftheCouncil .Therelevant provisions
concerning renegotiation andtheamendment procedure would ofcourse be
retained ,aswould those concerning theearly termination oftheAgreement .
2.Economic aspects
a)Article 2(Definitions )
Should theproblem which hisarisen fortheUnited Kingdom concerning
exports ofcocoa powder soldinindividual packages fordirect consumption
notbesettled atthenext session oftheCouncil byamending theControl
Rules ,itisproposed thatasolution befound bymodifying Article 2(b)
toinclude thefollowing phrase "...cocoa cakeandcocoa nibs ,excluding
products packaged fordirect consumption ,aswell as..."
b)Buffer Stock ..
Article 37
Thepresent provisions concerning thevolume andcomposition ofthebuffer
stock(maximum capacity of250.000 tonsofbeans )would beretained .While a
legal analysis oftherelevant texts leaves nodoubt regarding thematter ,
itwould perhaps beappropriate tospecify thatthecocoa purchased and
heldbythebuffer stock istheproperty ofthatbodyandremains under its
control .

-2-
Article 39(Purchases t?ytheBuffer Stock )
Inview oftheforeseeable financial situation ofthebuffer stock upon
expiry ofthis Agreement ,thenewAgreement should provide forthefollowing :
(i)animprovement intheterms ofpurchase andpayments toproducing members
(paragraph 5);X
(ii)from thefirst quota year and,subsequently ,each year theCouncil
should beable todecide ,asfrom thebeginning ofaquota year ,to
maintain orreduce therate ofcontribution inforce ortosuspend the
levying ofsuch contribution (seeArticle 38(l))*
Article 40(Buffer stock sales )
Thewording ofparagraphs 2and 3ofthis Article ought tobeclarified ,
since what isinvolved isensuring both that themaximum price isupheld
andthat importing countries' supplies aresecured ^sales from thebuffer
stock should bereserved forapproved purchasers from importing member
countries (itistobehoped that this problem canbesettled when the
Council adopts theBuffer Stock Rules )*
Similarly ,itshould perhaps bespecified that therate ofsales ,
grades offered andspeed ofdeliveries aretheresponsibility ofthe
Buffer Stock Manager irrespective ofwhere stocks areheld .
Article 41(Withdrawal ofCocoa Beans from theBuffer Stock ) ,
Again forthesake ofgreater clarity ,itshould bespecified that
theimplementation oftheprovisions ofArticle 41presupposes theprior
application ofArticle 36(Redistribution ofShortfalls )*
(c)other provisions relating tosupplies <
Article 34(Adjustment ofQuotas )
Inexceptional situations where theindicator price remains substantially
above themaximum price other arrangements should bemade todefend the
maximum price *Asthequotas aresuspended assoon astheindicator price
isabove theminimum price +/5"~/cents (Article 34(4))»and "theindicator
price isabove themaximum price +Xcents inthis particular case ,the
restoration ofquotas before theendofthequota year could notbe
envisaged * - < ■ .
Itisproposed toinsert anewparagraph between paragraphs (8)and (9)
ofArticle 34,which would read asfollows :
"When theindicator price isXcents above themaximum price ,theprovisions
ofArticle 35(2)andofArticle 41shall besuspended "*

Article44(AssuranceofSupplies)
Withoutprejudgingatthisstagethemeanswhichmightbeemployed,
effortsshould "bemadetostrengthentheprovisionsofthisArticle,in
particularasregardsthedutyofexportingmembersdutytomaketheir
offerstoimportingmemberswithoutrestrictions whentheindicatorprice
isabovethemaximumprice* ,1
Article49(ProductionandStocks)
Intheexceptionalsituationsdefinedinthenewparagraphproposed
aboveforinsertioninArticle34»producingmembersshouldendeavour
toimplementmeasureshavingshort-termeffectsonimprovingcocoa
availabilities . So

VIII/443(75)-B
Arrnex III
«
Among thequestions tobedealt withmnegotiations fortheconclusion of
asecond International Cocoa Agreement there are ,inaddition tothose
mentioned inAnnex II,important points which have moreover been highlighted
during thework ofthePreparatory Committee ,These questions would bethe
subject ofthefollowing directives . >
1*Anmal Export Quotas (Articles 31and34)
Automatic revision ofthequotas inthecourse ofayear ,inparticular
asaresult oftheupdating ofthefigures forthegrindings planned ,might
interfere with implementation ofother provisions oftheAgreement ,such
asquota adjustments t>yreference toprice trends ,therules governing any
surpluses ,theredistribution ofshortfalls ,deliveries tothebuffer stock
andwithdrawals from thebuffer stock .Besides ,Article 34(l)and (2)enables
theCouncil toreview thequotas whenever circumstances sorequire .Automatic
revision should therefore notbeintroduced inthenewAgreement ,However ,
thepresent provision concerning non-reduction ofquotas ormaintenance of
thesuspension ofquotas during the last 45days ofthequota year should
beretained (Article 34(9))«
2,Role oftheBuffer Stock (Article 37)
Theproposal bythemember countries oftheCocoa Producers 'Alliance
regarding thepossibility offunds being allocated from thebuffer stock
forinvestments intheir countries deserves particular attention .This
would represent aradical change intherole ofthat body ,thefunds ofwhich
areearmarked solely forthepurchase ofcocoa beans andforcovering
expenditure relating totheoperation andmaintenance ofthebuffer stock .
Thetraditional concept ofbuffer stocks ismoreover ,confirmed bytheUNCTAD
Secretariat initsproposals foraoverall integrated programme forcommodities ;
oneofthekeyfeatures ofthis isoneormore buffer stocks ofproducts
intended solely forstabilizing markets .Reference ismade however ,tothe
risk ofoverproduction ,inwhich case itisproposed that thestimuli
provided through theoperations ofaninternational stock beused toencourage
theconversion ofresources andpolicies formobilizing resources tostep
upthediversification ofproduction andexports (seeDocument TD/B/C,l/l66),
There istherefore noquestion ofproviding direct financing forthese
operations through thebuffer stocks .

-»-
Withoutprejudgingatthisstagethemanyquestionsarisinginconnection
withtheconditionsgoverningthebufferstockandthedetailedrulesfor
applyingit,ifanewconceptwereacceptedduringthenegotiationsit
wouldbenecessarytoensurethattheCouncilwasaloneresponsiblefor
implementit,aadthatitdidsoinsuchawaythattheprimeobjective
Iofthebufferstockwasnotcompromised.
TheproposalsoftheCommunityandtheMemberStates(seeAnnexII)
onmodifyingthepresenttermsforfinancingthebufferstockaredirectly
relatedtothisquestion,fortherewouldnolongerbeanylimitstothe
foreseeable requirements ofthebufferstockifthefundscouldbe
allocatedto"investments "intheproducingcountries.
3.PaymentofContributions totheBufferStock(Article38s5new)
Theproposaltograntimportingdevelopingcountriesexemptionfrom
paymentofcontributions (inthecaseofcocoacomingfromnon-member
countries)oughttobeconsidered,subjecttothepracticalimplementing
proceduresbeingdeterminedinsuchawayasnottocompromisethe
effectiveness ofthecontrolmeasures.
4.Prices(Article29)
a)Minimumpricelevel:Theinitialpriceinthe1972Agreement(23US
centsperpound),revisedandincreasedto29.5centsin1974,willhavetobe
revisedagaininthenewAgreement.Theextentoftherevisioncannotbefixed
inadvanceanditwillberelatedbothtomarketconditions andtootherprice
factorstobenegotiated,namely.
b)Thegapbetweentheminimumandmaximumprices:(atpresent9cents).
Awideningofthisgapa.nd/or,inanyevent,thepossibilityfortheCouncil
torevisethisgapmustbeenvisaged,ifonlytoavoidoverfrequentadjust­
mentofthequotasbyreferencetopriceswithintherange.Itwillbenoted
herethatthefourquotaadjustments providedforinArticle34aremade
withinapricescaleofonly5centsunlessotherwisedecidedbythe
Councilbyspecialvote.
c)Theconditionsgoverningrevisionoftheminimumprice:frequency-
criteria-automaticmechanismordecisionoftheCouncil.
./

-3-
Abalanced ,solutionshould,besoughtgivings
(i)exportingcountriestheassurancethatpriceswillbereviewedaid
possiblyrevisedatregularintervalsinthelightofinternational
economicandmonetaryeventstobespecified,ifnecessary,inthe
Agreementitself;
(ii)importingcountriestheassurancethatactiontakenbytheCouncil
(decisionbyspecialvote)willnotbeofanautomaticnature
amountingtotheindexingofthepriceofcocoainaccordancewith
givencriteria#
5.Italy'sspecialdifficulties
OnbehalfoftheCommunityandtheMemberStatesasolutionshould
besoughttotheproblemofItaly'sprovisionalparticipation ,andit
mustbeonewhichdoesnotprejudgethedecisionoftheParliamentof
thatMemberStateregardingfinalacceptanceoftheAgreement.
Ifthisproblem,whichisrelatedtothatofthepaymentofthe
contribution totheOrganization'sbudget,cannotbesolvedinthe
Agreementitself(intheformeitherofaspecialprovisionorofa
derogationfromtheprovisionsoftheAgreement),asolutionshould
beworkedoutatCommunitylevelsothattheCommunityandallthe
MemberStatescanapplythenewAgreementprovisionally ordefinitively ,
theirparticipation beingnecessarytopermittheentryintoforceand
theimplementation ofthesaidAgreement#