ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(79)277
Vol.1979/0107

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(79)277 final.
Brussels-30May1979
COMMISSION COMMUNICATION TOTHECOUNCIL
pursuanttoArticle29oftheInternal
Agreementonthefinancingand
administration ofCommunityaid
REPORT
ontheoperationduring1977ofthesystem
setupbytheLoméConventionforstabilizing
exportearnings
t
Λ^m
'l&'-f '•<fcf**b-ft':I\fj«-■iS0t::>.-J
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6â.../<'.1
C0MC79)277final.

INTRODUCTION
1.UnderArticle29oftheInternalAgreementonthefinancingand.
administration ofCommunityaid,theCommission"shallprepareanannual
comprehensive reportontheoperationofthesystem(forstabilizing
exportearnings),indicatinginparticularitseffectontheeconomic
development oftherecipientcountriesandonthedevelopmentof
externaltrade".
2.Thiscomprehensive reportisconcernedwiththeapplication ofthe
systemduring1977totheACPStatessignatorytotheLome'Convention
andsupplementsthepreviousreport,whichwasfor1976.Italsogives
information aboutoperationsrelatingtoformerOCTsthathaveacceded
totheLomeConventionbutwhich,asfarasthesystemforthe
stabilization ofexportearningsisconcerned,arestillcoveredbythe
OCTallocation.
3.Thecooperation machinerydescribedinthefirstcomprehensive
reportshasbeenfunctioningsatisfactorily onthewholeandhencedoes
notcallforanydetailedremarks.
4.InthisreporttheCommissionwillexamineinturn:
theactivitiesoftheACP-EECinstitutions andthedevelopment of
thesystem;
thethirdyearofapplicationofthetextsandtheresults;
theeffectofthetransfersontheeconomicdevelopment ofthe
recipientcountriesandonthetrendofforeigntrade.

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PARTONE;ACTIVITIES OFTHEACP-EECINSTITUTIONS ANDDEVELOPMENT OFTHE
SYSTEM
ChapterOne;Activities oftheInstitutions
§1TheACP-EECSubcommittee ontheStabilization ofExportEarnings
5.TheACP-EECSubcommittee thatdealswiththeStabexsystemmeton
7February1978,primarilywithaviewtopreparingforthemeetingof
theACP-EECCommitteeofAmbassadors andthethirdmeetingoftheACP-EEC
CouncilofMinisters.Themeetingprovidedtheopportunity tocarry
outaninitialexaminationof(a)therequestssubmittedbytheACP
Statesconcerningtheadditionofnewproductstothelistin
Article17(1)oftheConventionand(b)threeapplicationsfortransfers
fromcertainACPStatessubmittedin1977for1975*whichtheCommission
hadnotbeenabletoentertain.
Discussions alsotookplaceontheACP-EECCouncilofMinisters
Resolutionof14April1977ontheattainmentofcommonobjectives
regardingcommodityexportsandonadraftCommissionquestionnaire on
theutilization ofthetransferredresources,intendednotfor
monitoringthefundstransferred butforharmonizing thepresentation
oftheACPStates'reports;asdesiredbytheSubcommittee ,astandard
formwasfinalizedandadoptedbytheexpertsoftheACPStatesandthe
Commission .
§2TheACP-EECCommitteeofAmbassadors
6.Atitsmeetingof28February1978,theCommitteeofAmbassadors
expressedtheopinionthattheStabexsystemwasoperatingsatisfactorily
onthewhole.
TheACPStatesdid,however,pointoutthedifferenceofopinionthat
stillexistedwiththeCommunityasaresultoftheCommission'srefusal
toentertaintheapplications fortransferssubmittedfor1975byGabon,
KenyaandMali.Theyalsoexpressedthedesiretohavesesameseed,
tobacco,sisalproducts,cashewnutsandsheakernelsaddedtothelist
ofproductscoveredbythesystem.
Emphasiswasplacedontheimportanceofclosecooperation betweenthe
CommunityandtheACPStatesatthevariousinternational meetingson
copper,phosphatesandrubber,pursuanttotheResolutionoftheACP-EEC
CouncilofMinistersontheattainmentofcommonobjectivesregarding
commodityexports.

-3-
§3TheACP-EEC Council ofMinisters
7®TheCouncil |which meton13and .14March 1978 *examined theproblem of
belated applications fortransfers for1975 *Onaproposal from theACP
States itagreed toinitiate ,viathetwoCouncil Chairmen ,thegood
offices procedure provided forinArticle 8l(2 )oftheConvention .
Following this decision ,therepresentatives ofthetwoCouncil Chairmen
jointly drew upamemo concluding that theCouncil ofMinisters should be
recommended toinvite theCommission toexamine thethree applications in
question because ofthedifficulties raised bytheadministration ofthe
system 'sfirst year ofapplication .They did ,however ,stress that infu­
ture ,noapplications inrespect ofthose years forwhich the31March
deadline fixed bytheCommittee ofAmbassadors hadexpired could beenter­
tained andthat ,forreasons ofequity ,these three applications could not ,
insofar asmaking funds available wasconcerned ,enjoy aprivileged posi­
tion compared with other applications submitted within theprescribed time
limit .
During itsmeeting of22March 1979 »"theCouncil took note ofandagreed
totheresults ofthis goods offices procedure andinvited theCommission
toexamine theapplications presented byGabon ,Kenya andMali forthe
year 1975 «
8.TheCouncil asked theCommittee ofAmbassadors tocontinue itsexamina­
tion oftheACP States' request concerning theaddition oftheproducts
referred toatthelast Committee ofAmbassadors meeting .Sesame was in
fact theonly product which could beexamined bytheCommittee ofAmbassa­
dors ,and theCouncil decided ,during itsmeeting of22March 1979 »"toput
sesame onthelist ofproducts covered bythesystem ,from 1stJanuary 1979 *
Asfortheinclusion ofmining products other than iron ore ,theACP States
pointed outthat they were hoping tobring this question upagain inthene­
gotiations for thenext Convention .
§4TheACP-EEC Consultative Assembly
9.Attheendofthesession held from 27to29September 197° ,theACP-EEC
Consultative Assembly adopted aresolution containing thefollowing points
onthesystem forthestabilization ofexport earnings :
"invites theACPStates andtheCommunity towork outtogether solutions
"tothedifficulties arising intheoperation oftheStabex system ,inpar­
ticular asregards thetransfers towhich certain ACPcountries canlegi­
timately layclaim ;
"calls forthesuccessor Convention totheLome Convention tomake special
"provisions foraiding theACPStates toresolve theproblem ofmarketing
fining products (particularly copper andphosphates )andrubber ,atstable
"andremunerative priced ,according totheStabex method ,orbyother approp­
riate means ."

§5TheEuropeanParliament
10.TheEuropeanParliament'sCommitteeonDevelopment and.Cooperation
askedMrAignerin1977"toprepareareportontheinitialexperiences
ofthefunctioningoftheStabexsystem.Onthebasisofthisreport,
theEuropeanParliamentadoptedaResolutionon17February1978,which
wasattachedtotheprecedingcomprehensive report.
§6TheCourtofAuditors
11.Initsreport,theCourtofAuditorsexaminedtheadministration of
thesystemduring1975and1976andpointedoutanumberofgapscon­
cerningthecif/fobfactorinparticular.
TheremarksoftheCourtofAuditorsandtherepliesgivenbytheCom­
missioncanbefoundinAnnex4ofthisdocument.
ChapterII:Development ofthesystem
AccessionofnewStatestotheConvention
12.Thescopeofthesystemhaswidenedwiththeaccessionofnew
StatestotheLomeConventionin1978*TheaccessionoftheSolomon
Islands,TuvaluandDominicadidnotconstitutetrueenlargementsince
thoseStateswerealreadycoveredbythesystemsetupfortheOCTsand
continuetocomeundertheOCTallocation.
TheaccessionofCapeVerde,PapuaNewGuineaandSaoTomeandPrincipe,
however,ledtheCommunity^CouncilofMinisterstoincreasethe
amountsallocatedtothesystemby5millionEUAforthethreeyears
remainingbeforetheLomeConventionexpires.Thisdecisionwastaken
pursuanttoArticles89and90of"theLomeConvention,wherebythe
accessionofnewStatesmaynotadverselyaffecttheadvantages
accruingtotheACPsignatoryStatesfromtheprovisions onthe
stabilization ofexportearnings;moreover,theaccedingACPStates
enjoyimmediately uponaccessionthesamerightsandaresubjectto
thesameobligations astheotherACPStates.

-5-
Accordingly ,5million EUAwasadded tothefunds already allocated to
thesystem .Itwasassumed that thesystem would apply tothose States
forthethree years ofapplication 1977 ,1978 and1979 ,andsoforeach
ofthose years theannual instalment isincreased to76,666.667 EUA .
13.Inthis context ,Cape Verde wasable toreceive atransfer forbananas
for 1977 .
PART TWO !THIRD YEAR OFAPPLICATION OFTHE SYSTEM AND THEFAULTS
Chapter One sApplication ofthesystem
§1Closure ofthe1975 financial year
14*Following thesettlement ,inapplication ofArticle81oftheConven­
tion ,bytheACP-EEC Council ofMinisters ofthedispute concerning theap­
plication oftheConvention with regard totheapplications presented in
1977 "theyear1975byGabon ,Kenya andMali ,theCommission initiated
theexamination ofthese application .
This examination resulted intwotransfers ,theexamination oftheKenya
case having ledtotheconclusion that there wasnocase foratransfer
for this country ,asnolosses ofexport earnings from sisal were expe­
rienced onanall destinations basis .
Gabon hadexperienced ,along with most oftheother African timber exporting
countries in1975,adrop inearnings due tothefall inEuropean demand .
Onthebasis ofthecross-checked statistics ofGabon and theCommunity ,a
transfer forEUA6,703,311 hasbeen effected .
ForMali ,theapplication concerned are-examination ofthetransfer al­
ready paid for1975,asaresult ofastatistical adjustment .Theexamina­
tion revealed that therequest wassoundly based andresulted inanaddi­
tional transfer ofEUA496,501 *
Theprocessing ofthese late requests submitted for1975 leads therefore
totransfers totalling ELJA7,199,812 forthetwocountries concerned ,
which brings thetotal amount oftransfers executed for1975 to
HJA75,985,877 -
15.Concerning theattribution ofthefunds ,theACP-EEC Council ofMinisters
has taken thefollowing decision :
"If,asaresult ofthis examination bytheCommission ,itisnecessary to
"proceed with financial transfers ,theCouncil ofMinisters authorizes the
"Commission toreconstitute the1975 allocation forthis purpose and ,if
"thefunds available onthis allocation appear insufficient ,toutilize
"the1976 allocation tocover thenecessary amounts uptothelimit of
"20 ofthis allocation ".

Asaconsequence ofthis decision ,theattribution offunds hasbeen made
asfollows :
-EUA2,2l3t935 from the1975 allocation (total oftheavailable funds on
this allocation ):
-EUA4»9°5i°77 from the1976 allocation ,this sumbeing considerably below
thelimit of20°/oofthis allocation .Theremaining balance
from 1976 isthus reduced from EUA37,864,064 toEUA32,878,187
which iscarried over asofright ,byvirtue ofArticle 18(3)
ofthe Lome Convention ,tothe 1977 operation .
§2Closure ofthe1976 financial year
16.InJune 1977 "theRepublic ofKali submitted anapplication foratrans­
ferunder thesystem for thestabilization ofitsexport earnings from gum
arabic for1976 .This request followed thedecision oftheACP-EEC Council
ofMinisters meeting(13to14April 1977 )"toinclude gumarabic inthelist
ofproducts covered bythesystem .
Examination ofthis matter first ofallled totheapplication being refused ,
since gumarabic didnot represent 2.5 °i°ofMali 'stotal export earnings .
Following revision oftheexport statistics ,theMalian Government submitted
afurther application pointing out that thedependence threshold laid down
inthe Lome Convention had been reached .
TheCommission departments then proceeded tocheck customs documents ,asa
result ofwhich itwas found that the request was eligible .
Thecross-checking ofMalian andCommunity statistics was thus able totake
place .Itresulted inthesignature on17July 1978 ofatransfer agreement
forthesumofEUA848,489*
17-This transfer brings thetotal amount paid outin1976 toEUA37?135»936
and thebalance carried forward automatically to1977 »pursuant toArticle
18(3)oftheLome Convention ,toEUA40,077»999 «
§3Replenishment oftheresources made available tothesystem
18.Regarding thereplenishment oftheresources ,theCommission ,inaccor­
dance with Article 21(3)oftheLome Convention andwith thepractical
arrangements laid down intheletters exchanged when each transfer ismade ,
hasmade thenecessary calculations inrespect ofthe five transfers ef­
fected for1975 andthefive transfers effected for1976 tocountries that
are required tocontribute tothereplenishment ofthe system 'sresources .
These calculations revealed that inseven cases theconditions setbythe
Convention fortriggering off theprocess ofreplenishing resources had
notbeen met onthebasis ofthe1977 results .TheACP States concerned
have been notified ofthis inwriting .

-7-
19*However,in"thecaseoftwocountries(involvingthreetransfers),theconditionsrelatingtoreplenishment weremetforthefirsttime
onthebasisofthe1977results.ThusCameroonwasinvitedto
payback100$ofthetransferof463558EUAforcocoapastein
respectof1976,andfulfilledthisobligation.
InthecaseofFiji,theconditionsweremetforreplenishingthetwo
transfersforcoconutoil,oneofthemreceivedinrespectof1975,
theotherinrespectof1976.Forthefirstofthesetransfers,
replenishment was100$,i.e.615140EUA,forthesecond83.57%of
theamounttransferred (1499834EUA),i.e.1253399EUA.
Thereplenishment oftheresourcesmadeavailabletothesystem
totalled2332097EUAin1978.Thecorresponding amountswerepaid
intheMemberStatecurrenciesusedforthetransfers,i.e.forFijiinDeutscheMark(1975transfer)andinPoundsSterling(1976transfer)andinFrenchfrancsforCameroon.
20.ThecaseofFijigivesfoodforthoughtinsofarastheconditions
governingreplenishment weremetin1977forthewholeofthe1975transferandfor84%ofthe1976transfer,obligingFijitopayback
1868539EUAtothesystem.Nowthismaybeperfectlylogicalinsofar
asimplementation oftherulesisconcernedbutitisquestionable
whetheritiscompletelyinaccordancewiththespiritofthesystem,
sincethelatterisbasedonthedesiretoenabletheACPStatesto
programmetheirfinancingofprojectstobefundedfromexport
earnings:thisispossiblesincetheyareinapositiontoknow
theirreferencelevel.Tobeconsistent ,however,theyshouldalso
beabletoprogrammetheircontributions tothereplenishment but
thisispossibleonlywhenthefiguresrelatingtothelastexports
inDecemberareknown,aconditionwhichitisobviouslyimpossible
tomeetinpractice.
Tothiscanbeaddedthefactthat,oneyear,acountrymaybe
obligedtoreplenishallorpartofanumberofprevioustransfers.
Itfollowsthatthepresentsystemmayincertainextremecaseshave
adestabilizing effectthatisbadfortheStateconcernedand
contrarytotheveryobjectivesofthesystem.
Forthatcountryasmallbalance(13761EUA)stillremainstobe
paid,owingtomisinterpretation bythefinancialagentofthe
RepublicofCameroonregardingthetransferordergivenbythe
CameroonianauthoritiesfortheequivalentinFrenchfrancsof
463558EUA:thismatteriscurrentlybeingregularized .

-8-
§4Six–monthly advances (financial year 1978 )
21.Forthefirst time in1978 theCommission received applications
foradvances under Article 19(6 )oftheConvention ,theaimofwhich
istomaximize the system 'sstabilizing effect bymaking payments as
near aspossible tothe time when the drop inearnings isfelt .
22.When examining the seven applications for advances received in
1978 ,theCommission estimated theloss inearnings forthat year
with two objectives inmind :tomake rapid payment ofsufficient
amounts tokeep upthe financial flows inthe sectors inquestion
andtoavoid unwarranted orexcessive payments which could lead to
overpayments having toberecovered once the final results ofthe
year were known .
Itisthe latter concern which ledthe Commission toaccept only one
ofthethree applications submitted bytheGambia ,since adrop
inearnings from groundnut oiland oilcake sufficient totrigger
offthe fluctuation threshold seemed rather questionable .Asfrom
17July 1978 ,thefollowing advances were paid :
COUNTRY PRODUCT AMOUNT INEUA
The Gambia Groundnuts 1510 000
Mauritania Iron ore 7000 000
Senegal Groundnut oil 16000 000
Groundnut oilcake 3000 000
Tonga Bananas 160000
27670000
23.These advances ,tobesetagainst the annual transfers tobe
made for1978 ,have hadanimpact ontheeconomies ofthecountries
concerned with which theCommission hasevery reason tobesatisfied .
Inthecase ofSenegal inparticular ,theadvances have helped to
mitigate the consequences which would have resulted forthe economic
stability ofthe country from the collapse ofgroundnut production
following the drought ;this isagood example oftheusefulness of
the system .
§5Applications refused (financial year 1977 )
24.(a)Oneapplication ,that ofNiger forgroundnut oilcake ,was
refused because the dependence threshold had notbeen reached .
(b)Five applications were refused because thefluctuation threshold
had notbeen reached .These were applications from Gabon for wood
intherough ,from Guinea-Bissau forgroundnuts andpalm nuts and
kernels ,from Mali forgroundnuts andfrom Tuvalu forcopra .

-Q_
(c)Twoapplications (l),onefromFapua NewGuinea forcopra andonefrom
Uganda fortea ,were refused because theearnings from exports toalldesti­
nations hadbeen higher than thereference level calculated onthebasis
ofexport toall destinations .
25-TheCommission wishes toreaffirm itsattachment totheprinciple of
confining compensation under theStabex system toacountry 'slosses on
itsexports toalldestinations .Thearguments oflav;andequity onwhich
this principle isbased were developed inthepreceding annual report :
they canbesummarized bysaying that thecompensation received byan
ACPState maynotbehigher than that received byStates covered bythe
derogation referred toinArticle 17(4)»forwhich thecontracting parties
wished toreserve themost favourable treatment .
Itisinkeeping with thespirit ofthesystem andthelogic behind itthat
theCommission will notpaycompensation ifnoloss issustained .Ifearnings
from exports ofaproduct towards alldestinations have been ,fortheyear
ofapplication ,higher than their average level during theperiod ofrefe­
rence ,even ifthere isaloss ofearnings onexports totheCommunity
following achange inthebreakdown ofexports between traditional coun­
tries ofdestination ,theACPStates inquestion have notinthat case
suffered anyloss which would warrant paying compensation .
TheCommission hasrecommended that this principle oflimiting compensation
totheloss suffered inrespect ofexports toalldestinations bewritten
into the future Convention .
§6Application ofArticle 17(l)
26.Initsfirst report onthefunctioning ofthesystem ,theCommission
described themethod used forcross –checking theCommunity 'sandtheACP
States' statistics .Itpointed outthat since the same method hadbeen
used forthefive years (reference period andyear ofapplication )itfol­
lowed that ,ineach case ,thesame method should continue tobeused .
27«Forthe1976 transfers ,this rule ofsimple logic wasapplied inall
cases where anapplication was examined concerning aproduct forwhich the
statistical cross-checking hadalready been done inthepreceding year .
The same applied torequests for 1977 ibutwith oneexception ,the one of
Upper-Volta ,which has received atransfer forgroundnuts in1975 »andsub­
mitted anapplication concerning the same product for 1977 *Since theCom­
mission hadnoted fundamental changes inUpper Volta 'ssystem formarketing
this product ,itwasagreed inthelight ofthis newfactor tochange the
bases forcross-checking used from 1975 (Voltaic quantities andvalues )by
adopting EEC values andquantities .
§7Application ofArticle 17(4)
28.Four ofthecountries covered bythesystem fortheir exports irres­
pective ofdestination received atotal of12.6 %ofthetransfers made for
1977 :Cape Verde forbananas ,Guinea-Bissau forsawn wood ,Samoa forbana­
nas and Swaziland for iron ore .
(l)Afurther application ,from Uganda forcotton for1977 »isalso being
examined .

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29.Cape Verde ,like Guinea-Bissau ,thecase ofwhich isdescribed inlast
year 'sreport ,iscovered byboth Article 17(4)andthedeclaration made
attheACP-EEC Council meeting inApril 1977 onthereference period .
Ifitwere notforArticle 17(4)»this State ,which ,like Guinea-Bissau ,
exports almost exclusively toPortugal ,could never qualify forthesystem .
Also ,while thepresent Convention hasbeen inforce ,along period of
drought hasmeant that anymeaningful basis forreference quantities was
non-existent between 1971 a"d1975 creven 1976 .This iswhy ,basing its
action onthedeclaration adopted inFiji onthereference period ,theCom­
mission felt that itwasequitable and inaccordance with thespirit ofthe
system toextrapolate thereference quantities from thequantities exported
byCape Verde ,inthepast .Hence thereference levels include thequanti­
ties fortheyears 1967-70 andtheunit values forthenormal reference pe­
riod of1973-76 .The "quantity "element inthereference level will embody
theactual figures year byyear and theperiod taken into consideration will
become normal infour years .
§8Article 19 (4)(a)a^d(b)
30.(a)Initsexamination ofthetransfer applications presented ,theCom­
mission hasnot found that any "fall inearnings ... istheresult ofatrade
policy measure oftheACPState concerned adversely affecting exports tothe
Community inparticular Ithasnotbeen necessary ,therefore ,toapply
Article 19(4)(a)«
31.(b)TheCommission ,having found initsexamination ofthetotal exports
ofanumber ofapplicant States that there were significant changes ,held
consultations with four ofthem ,which led toareduction inthetransfer
for thefollowing reasons :
-considerable increase inownconsumption (Benin :palm oilandcotton );
-reduction intheshare ofthetotal exports oftheproduct inquestion
traditionally supplied totheCommunity (Benin :cotton ,Tanzania :sisal );
-total loss less than theloss toCommunity destinations (Sudan :ground­
nuts ).
32.However ,intwocases ,theeffect ontheamount ofthetransfers was
reduced despite thesignificance ofthechanges pointed outabove totake
thefollowing into account :
-asregards cotton from Benin ,thelowrainfall ,which resulted inafall
inproduction leading totherelative increase inownconsumption ;
-asregards sisal from Tanzania ,adrop intheCommunity demand forthis
product .

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ChapterII:Theresults
§1Overallresults
33-Duringthethird,yearofapplicationoftheStabexsystemtherewere
13operationsfor10ACPStatescovering9products;thetransfersre­
mainedwithintheannualinstalmentlimitof75millionEUA,plusfunds
carried,overfromthefirstyearofapplication .Totheseshouldbeadded
fourtransferstoACPStatesthathadaccededtotheLom£Conventionon
thebasisofArticle89.
34»Theoverallresultsareasfollows:
TRANSFERS FDR1977
RESULTSOPTHE1978OPERATION BYACPSTATE
RECIPIENT ACPSTATE PRODUCT AMOUNTOFTRANSFER
INEUA
BENIN Cotton 2083137
Palmoil 1467364
Palmnutandkerneloil1.211826
CAPEVERDE Bananas 347712
GUINEABISSAU Sawnwood 146839
MAURITANIA Ironore 36O5602
NIGER Groundnuts 2412379
Groundnutoil 7383280
SAMOA Bananas 99313
SUDAN Groundnuts 968825
SWAZILAND Ironore 3368878
TANZANIA Sisal 8176614
UPPERVOLTA Groundnuts 1169977
32441746
FAULTSOFTHE1978OPERATION FORTHEACPSTATES
ACCEDINGTOTHELOMECONVENTION UNDERARTICLE89
RECIPIENT ACPSTATE
COMOROS
DJIBOUTIPRODUCT
Coprah
Cloves
Ylang-ylang
Rawhides,skinsand
leatherAMOUNTOFTRANSFER
INEUA
367784
552547
170596
169629
1260556

-12-
§2Resultsbycountry
35.Allthetransfersfor1977werepaidtoleastdevelopedcountries,
whicharenotrequiredtocontributetowardsthereconstitution of
theresourcesmadeavailableforthesystem.
Thesituationhasthereforechangedconsiderably comparedwiththetwo
previousyearsofapplicationofthesystem,wheninspiteofthe
preponderance ofgrants,loansaccountedfor44%for1975and37%for
1976.
Forthethreeyearstogether,grantsaccountfor71%ofpayments.
§3Resultsbyproduct
36.Fortheindividualproductstheresultsareasfollows:
1.PRODUCTS AMOUNTSINEUAî
Groundnuts 4551181 14.03
Bananas • 447025 1.38
Sawnwood 146839 0.45
Cotton 2083137 6.42
Groundnutoil 7383280 22.76
Palmoil 1467364 4.52
Palmnutandkerneloil 1211826 3.74
Ironore 6974480 21.50
Sisal 8176614 25.20
32441746 100.00
2.Ofwhichfproductsaffectedtry;
theeconomicsituation11J82216 36.22
localcontingencies 20659530 63.68
37*Ofparticularnoteistherelativedropinrelationto1976(from
79%to64%)intransfersoccasionedtylocalcircumstances andan
increase(from21%to36%)intransfersoccasionedbytheeconomic
situation,which,however,fallfarshortofthe1975record(68$).
(a)Onlytwoproductswereaffectedbytheeconomicsituationin19771
sisalandironore.Forthelatterproduct,therecessioninthe
Europeanironandsteelindustryaffectedonlyoneofthetwo
countriesreceivingtransfers,namelyMauritania (Swaziland,covered
bythederogationofArticle17(4)»exportsexclusivelytonon-member
countries).

-13-
(b)Amonglocalcircumstances ,particularmentionshouldbemadeof:
climaticconditions (prolongeddroughtinCapeVerde,cyclonein
Samoa,diseaseandbadweatherinNiger,UpperVoltaandBenin);
effectonproductionofnon–economicfactors(Benin)j
transportproblems(insufficientrollingstockfortransportingiron
orebyrailfromSwazilandtotheportofembarkation)."
38.Theindividualandaggregateresultsforthefirstthreeyearsof
applicationaregiveninanannextothisreport.Theseshowthatthe
systemisperformingitsdualtaskefficiently,givingprotectionfrom
thevagariesoftheeconomicsituation-wherenecessary-andfrom
fallsinearningsresultingfromadropinproductionduetolocal
circumstances .
39.S4Financialresults
wayoffinancialresults,accountshouldbetakenofthefollowing:
thedataontheCommunitycurrenciesdrawn,giveninAnnex1;
thedataontheutilization ofthefirstthreeannualinstalments
(partIVofAnnex2);and
thefollowinginformation onthefundstobecarriedovertothe1978year
ofapplication .
InaccordancewithArticle18(3)oftheLomeConvention,theunused
balancefor1977»namely:
75000000EUA(first1977annualinstalment)
+1666666EUA(1977annualinstalmentfornewmembers)
+32878187EUA(balancefrom1976)
+2332097EML(replenishments )-32441746EUA(transfersfor1977)
79435204Wk
willbecarriedforwardautomatically to1978,subjecttotheMounts
whichcouldbepaidasaresultofanapplicationfor1977alreadysub­
mittedbutwhichhasnotyetbeenexamined.

-14-
PART THREE :EFFECT OFTHE TRANSFERS ONTHEECONOMIC DEVELOPMENT 0^THE
RECIPIENT COUNTRIES AND ONTHE TREND OFFOREIGN TRADE
Chapter 1:Effect onthe economic development ofthe recipient countries
§1.Economic impact ofthe transfers
40.Inrelation totheexport earnings oftherecipient countries ,the
relative size ofthecontribution made bytransfers effected under the
system varies according totheextent ofthelosses sustained ,the
importance ofthe product orproducts concerned interms ofthe
country 'soverall exports andthestructure oftheexports (Community
share oftotal exports ).
Inanumber ofcases ,this contribution reaches remarkable proportions .
Thus transfers ,expressed asapercentage oftotal export earnings
(allproducts –alldestinations –1977 )were asfollows :23%for
Cape Verde ,19$forBenin ,14$fortheComoros ,8%forDjibouti ,etc .
41.The impact ofthe transfers obviously appears farmore clearly
when one looks atthe transfers made for aspecific product and the
export earnings (alldestinations )corresponding tothat same product
(1977)•Thefollowing percentages illustrate this :
Upper Volta (groundnuts )85% Benin (cotton ) 31%
Comoros (copra ) 77% Belize (sawn wood ) 24%
Bénin (palm oil) 72% Benin (palm nutandkernel oil )21%
Comoros (cloves ) 53% Comoros (ylang-ylang ) 8%
Tanzania (sisal ) 37% Mauritania (iron ore ) 3%
Swaziland (iron ore ) 37%
These data reveal that extent ofthecompensatory flows provided bythe
system forthesectors inquestion andconsequently oftheguarantee
inrespect oftheACPStates' export earnings ,particularly forthe
least developed countries .
42.Over theyears experience ofapplying this system increasingly
confirms theview that theguarantee comes into play mainly asaresult
ofadrop inthequantities exported ;falling prices arenot ,contrary
towhat might besupposed ,adetermining factor inthedecline in
export earnings noted forthe products covered .
This phenomenon isborne outfirstly inthesize ofthe share of
transfers effected following falls inproduction caused bylocal
circumstances :49%onaverage forthethree years ofapplication ,but

-15-
8C$for1976and64%for1977(l).Furthennore,analysisofthestatistics
revealsthedecisiveroleofthedropinquantitiesexportedeveninthe
caseoftransferspaidbecauseofthedepressedeconomicsituation:for
example,withwoodintherough(47?"offundstransferredfor1975)»there
wasaslumpinquantitiesexportedcomparedwiththereferenceperiod,where­asunitvaluesremainedhigherin1975thanaverageunitvaluesforthesame
referenceperiod1971-74iexactlythesameappliesinthecaseofironore*
Generallyspeaking,thisleadsonceagaintotheconclusionthattheStabex
systemsetupundertheLomeConventionisclearlydistinctfrom,although
complementary to,thestabilization ofpricesattemptedatworldlevel*
§2Utilizationofthetransfers(financialyear1976)
43.Article20oftheLomeConventionstipulatesthattheStatesreceiving
transfersareobligedtoinformtheCommissionannuallyoftheuseto
whichtheyhaveputtheresourcestransferred (2).
44.InordertomakeitclearhowArticle20oftheLomeConventionisto
beimplemented ,thetextofthetransferagreementcontainsanarticle
statingthattheinformation ontheutilization oftheresourcesistobe
providednotlaterthantwelvemonthsafterthesignatureoftheagreement.
Onthewholethereportsfor1976reachedtheCommissionwithinthepres­
cribedtimelimit.Itshouldhoweverbepointedoutthatthreecountries,
namelyBenin,MaliandUganda,havestillnotlettheCommissionhaveany
informationregardingtheutilizationofthefundstransferredfor1976.
45.Thequalityofthereportsreceivedhasimprovedconsiderably compared
withlastyear'sreportsbecauseoftheuseofthemodelreportdrawnup
bytheACPStates*expertsandtheCommission.
Exceptfortwocountrieswhichdrewuptheirreportparticularly early,
themodelreporthasbeenwidelyusedandhasresultednotonlyinmore
informationofthesamekindbeingreceivedbutalsoingreaterprecision
bothasregardsoperationscarriedoutandtheanticipatedeffects.
46.Thereportsreceivedcoverthesumof29128780EUA,thatis78$
oftheamountstransferredfor1976.
(1)SeeAnnex1,PartII,1and2.
(2)InaccordancewithArticle29oftheInternalAgreement,theCommissionwillforwardtotheMemberStatesthereportsithasreceived.

-16-
Ofthistotal,only67%ofthefundshadbeenused,forthreecountries-
Guinear-Bissau ,MadagascarandSierraLeone–earmarked88%,100%and71%
respectively ofthetransfersreceivedforfutureprojectstobecarried
outinthesectorsinrespectofwhichthetransferwasmade.Inthe
caseofSierraLeone,thefundsareintendedfordiversifying the
miningsector,thepartalreadyutilizedhavinggonetowardsbuying
backassetsoftheformerironoreminingcompany.Utilization of
theunexpendedbalanceswillbethesubjectofanadditionalreport.
47•Alittlemorethanhalf(51%)ofthefundsutilizedwenttowards
developingtheproductsinrespectofwhichthetransfersweremade,
asagainst20%thepreviousyear;thisisasignificantdifference
anditisnoteworthythateachofthecountriesconcerned,withone
exception,haddirectlyearmarkedatleastashare,varyingbetween
13%and100%,ofthetransfers,tomaintainingandstrengthening the
sectorinquestion.
Ofthetotalfunds,19•5%wasallocatedtoagriculture :inNiger,to
theCaissedeStabilisation andtocompaniesmarketingagricultural
products;intheCentralAfricanEmpire,forthetrainingandprovision
ofextensionservicestofarmers(100%ofthetransfer);in
Guinea-Bissau ,tosafeguarding thefishingsector.
Capitalexpenditurerepresenting 27.4%ofthetotalfundshasbeen
madebythreecountries:Tanzania(construction ofacementworksand
mineralprospecting *,87.4%ofthetransfer);Samoa(publicworks:
16%ofthetransfer);Niger(equipmentforlarge–scaleworks:7«8%
ofthetransfer).
Lastly,theremaining2.1%oftheamountstransferredandutilizedwas
spentoneducationandhealth,bySamoa.
48.Generallyspeaking,theCommissionhasnotedthattheusemadeof
thefundstransferred forthesecondfinancialyearisinaccordance
withtheobjectivesofthesystem.Inparticular ,thefactthatall
themoneyhasbeenallocatedtodevelopmentorimprovingagricultureorspecificoperations andnottoboostcashresourcesisparticularly
satisfying .
49-Astotheeffectofthetransfersoneconomicdevelopment ,the
reportshighlightfirstofallthestabilizingeffectontheeconomy
ofmaintaining andstrengthening thesectorsinwhichexportearnings
havefallen.Theincreaseinincome,particularly forthepeasant
farmers,withitsconsequences onthemarketandonbudgetaryresources
wasstressed.Moreover,therenewalandmodernization ofagricultural
infrastructure thathavetakenplacearereferredtoasfactorswhich
willhelppromotedevelopment .
Around20%ofthetransfersfor1975wereusedtoboostcashresources.

-17-
Moat countries have also sought todiversify their economies byschemes
aimed ateither maintaining agricultural production which isnotnecessari­
lycovered bythesystem ,oratindustrialization ,themost striking
example being that ofTanzania (see§46above ),whose report states :
"thedevelopment ofTanzania depends onthedevelopment ofthebuilding
industry and ourdependence onagriculture forourexports hasproved
unreliable .This chanelling oftransfers towards diversification andin­
dustrialization isofparticular interest andgoes some waytowards dis­
pelling theidea that theeffect ofthesystem would betofreeze
existing economic structures .
Chapter XI iEffect onthedevelopment offoreign "trade
50.Thereports ontheutilization offunds transferred in1976 frequently
refer tothefavourable effect oftransfers onthebalance oftrade and ,
consequently ,onthebalance ofpayments .Theinjection offoreign ex­
change ,byimproving theexchange reserves ofthecountries concerned ,
prevents thebalance ofpayments from deteriorating further andpermits
ahigher level ofimports .
Also ,theallocation oftransfers toexporting sectors increases theex­
port potential andmaywell boost foreign trade .
51.Nevertheless ,itisfitting tonote that ,inthemajority ofcases ,
theamounts paid over arenothigh enough toreach acritical mass which
would make itpossible tohave permanently asignificant influence onthe
economic policy oftherecipient countries ,especially asthetransfers
arenormally used tobenefit anumber ofsectors ,thereby minimizing their
sectoral impact .
While transfers therefore certainly dohave afavourable influence ,notably
onforeign trade ,their influence cannot bequantified nor can itbedes­
cribed asspectacular .
CONCLUSION
52.Stabex operations for 1977 were relatively limited but thesystem ful­
filled perfectly well its role ofproviding "sickness benefit "and "unemploy­
ment benefit "inthecase ofadrop inearnings caused respectively bynatu­
ralcatastrophes orbyadownturn intheeconomic situation .Moreover ,it
functioned very well inthese tworoles which arebeing performed for the
first time ,andthis istrue both fortheCommission andfortheACPState :
thespeedy disbursement ofadvances showed theCommission 'sconcern tomake
thesystem aseffective aspossible ,andthereplenishments made proved
theACP States' attachment totheprinciples onwhich thesystem isbased .
53.Thesuccess ofthesystem inperforming thetask forwhich itwasdesigned ,
itsextension tonewproducts andnewcountries ,augur well forthefuture
role which will beassigned toitinthecurrent negotiations forthefuture
Convention ,which will draw onpast experiences both toremedy thedeficien­
cies which have appeared and tobroaden itsscope .

ANNEX1
BREAKDOWN OFSTABEXTRANSFERS FOR1975,.1976AND1977
ACCORDING TOCURRENCY REQUESTED BYACPSTATES
CURRENCYAMOUNTSINEUA
1975I
% 1976 X 1977 .% Total X
Frenchfrancs 4312530459.25 1702447245.84 1994574963.37I
80095525
ι
ι56.65
DeutscheMark 2695458737.03 1197256532.24 361835811.50 4254551030.09
PoundSterling 12205191.68 615089416.56 790881425.13 1528022710.81
Belgianfrancs 14856552.04 848489 2.28 2334144 1.65
Dutchguilder1139516 3.07 1139516 0.81
TOTAL 72786065100.00 37135936100.00 31472921100.00 141394922100.00

ANNEX 2 1.
CUMULATIVE TRANSFERS FOR1975 ,1976 AND1977
(Amounts inEUA )
I.CUMULATIVE RESULTS BYACP STATE
ACP STATE PRODUCT Amount 1975 Amount 1976 Amount 1977 Total
1)BENIN
TotalGroundnuts
Coffee
Cotton
OiIcake
Palm oil
Palm nut and kernel oil464 330
1174 883
4299 556
1191 0792750 347
765 5762083 137
1467 364
1211826464 330
1174 883
9133 040
1191 079
2232 940
1211826
7129 848 3515 923 4762 327 15408 098
BURUNDI
TotalCotton
Raw hides and skins965 602
520 053965 602
520 053
1485 655I
i
1485 655
CAMER00N
TotalWood inthe rough
Cocoa paste3601 423
463 5583601 423
463 558
4064 981
CENTRAL AFRICAN
1)EMPIRE
TotalCoffee
Sawn wood353 108
549 807353 108
549 807
902 915
1)ACP States referred toinArticle 48ofthe Lom6 Convention .

ANNEX 2 2.
ACP STATE PRODUCT Amount 1975 Amount 1976 Amount 1977 Total
CONGO Wood inthe rough 7361 677 7361 677
IVORY COAST Wood inthe rough 15000000 15000000
ETHIOPIA
TotalCoffee
Raw hides and skins9339 683
5080 3649339 683
5080 364
14420 047 14420 047
FIJI Coconut oiI 615 140 1499 834 2114 974
GABON Wood inthe rough 6703 311 6703 311
GHANA Wood inthe rough 5176 408 5176 408
UPPER VOLTA
TotalI
Groundnuts
Cotton685 239
175 936
J1169 977 1855 216
175 936
1
861 175 2031 152
1)MALI
TotalCotton
Gum arabic1145 004
848 4891145 004
848 489
1993 493
1)NIGER
TotalGroundnuts
Raw hides and skins
Groundnut oiI
OiIcake5441 294
507 747
6755 991
153 2692412 379
7383 2807853 673
507 747
14139 271
153 269
5949 041 6909 260 9795 659 22653 960
1)ACP States referred toinArticle 48ofthe Lom6 Convention .

ANNEX2
ACPSTATE PRODUCT Amount1975 Amount1976 Amount1977 Total
SOMALIA
TotalBananas
Rawhidesandskins1296907
6352381296907 ι
635238
1932145 1932145
1)SUDAN
TotalGroundnuts
Rawhidesandskins 1658579968825 968825
1658579
2627404
TANZANIA
TotalCotton
Sisal1887082
5165208 81766141887082
13341822
15228904
1)TOGO Coffee 2680324 2680324
UGANDA
TotalCotton
Tea1748932 2249791
13999533998723
1399953
3649744 5398676
1)SAMOA
TotalCocoa
Copra
Woodintherough
Bananas276978
1331544
348993
99313276978
1331544
348993
99313
1680537 2056828
1)ACPStatesreferredtoinArticle48oftheLom6Convention .

ANNEX 2
ACP STATE PRODUCT Amount 1975 Amount 1976
IAmount 1977 Total
MADAGASCARI
Sisal
Cloves1762 943
1139 5161762 943
1139 516
Total 2902 459 2902 459
SIERRA LEONE Iron ore 3977 274 3977 274
GUINEA-BISSAU Groundnuts
Palm nuts and kernels
Sawn wood4442 437
626 966
146 839
i4442 437
626 966
146 839
Total 5069 403 5216 242
1)TONGA Copra
Bananas831 721
72719831 721
72719
Total 904 440 904 440
CAPE VERDE Bananas 347 712 347 712
MAURITANIA Iron ore 3605 602 3605 602
SWAZILAND ' Iron ore 3368 878 3368 878
I
GRAND TOTAL 79985 877 37135 936 32441 746 149 563 559
1)ACP States referred toinArticle 48ofthe Lome Convention .

ANNEX2
II.CUMULATIVE RESULTSBYPRODUCT
1975 1976 1977 Total
Product
Amount XAmount Amount X Amount X
Groundnuts 65908638.24 4442437I
11.96 455118114.03 15584481 10.42
Groundnut onL 675599118.19 738328022.76 14139271 9.45
0iIcake 11910791.49 1532690.41 1344348 0.90
Cocoa 2769780.35 276978 0.18
Cocoapaste 4635581.25 463558 0.31
Coffee 1354799816.94 13547998 9,06
Cotton 1022211212.78 500013813.46 20831376,42 17305387 11.57
Copra 21632655.82 2163265 1.45
Coconutoil 6151400.77 14998344.04 2114974 1.41
PalmonI 7655762.06 14673644.52 2232940 1.49
Palmnutandkernels 6269661.691.2118263.74 1838792 1.23
Rawhidesandskins 840198110.50 8401981 5.62
Woodintherough 3784281947.31 3489930.94 38191812 25.54
Sawnwood 5498071.48 1468390.45 696646 0.47
Bananas 12969071.62 727190.20 4470251.38 1816651 1.21
Tea 13999533.77 1399953 0.94
Sisal 692815118.66 817661425.70 15104765 10.10
Ironore 397727410.71 697448021.50 10951754 7.32
Cloves 11395163.07 1139516 0.76
Gumarable 8484892.28 848489 0.57
Total 79985877100,00 37135936100.00 32441746100.00 149563559100,00

ANNEX2
Product 1975 % 1976 X 1977 % Total %
-affectedbythe
economicsituation
(1)(2)(3) 5646691270.60 7.47795820.141178221636.32 75727086 50.63
-affectedbyLocal
contingencies 2351896529.40 29657.978 79.862065953063.68 73836473 49.37
79985877100.00 37135936100.00 32441746100.00 149563559100.00
(1)Woodintherough,rawhides,skinsandleather,cottonin1975
(2)Sisal,sawnwoodin1976
(3)Sisal,ironorein1977

ANNEX2
III.NATUREOFTRANSFERS
1975 % 1976 % 1977 % Total %
Grants
Loans41527918
3845795951.92
48.08I
28292811
884312576.19
23.8132441746100.00
0102262475
4730108468.37
31.63
79985877100.00 37135936100.00 32441746100.00 149563559100.00
UTILIZATION OFANNUALINSTALMENTS
Expenditure
Balance
Annualinstalment1975 % 1976 % 1977 % Total %
79985877
-4985577
75000000106.65
-6.65
!
100.00
i37135936
32878187
7500000049.51
43.84
100.0032441746
j
44224920
7666666642.32
57.68
100.00149563559
77103107(1
22666666665.98
34.02
100.00
(1)Tothisbalanceshouldbeaddedreplenishments in1978.

ANNEX28.
REPLENISHMENTS
1978
ACPState ProductYearinrespectofwhich
thetransferwasmadeAmount
ofreplenishments
(inEUA)
CAMEROON Cocoapaste 1976 463558
FIJI CoconutoiI 1975 615140
CoconutoiI 1976 1253399

ANNEX3
ListofdrawingsundertheInternational MonetaryFund'scompensatory
(1)paymentssystemin1978
COUNTRY MillionSDRs
Gambia 4.50
Samoa 1.25
Sénégal 21.00
26.75
(1)ListrequestedbytheEuropeanParliament'sCommitteeonDevelopment
andCooperation .

30.12.78 OfficialJournaloftheEuropeanCommunities NoC313147
C–STABILIZATION OFEXPORTREVENUE
.(STABEX)
Introduction'44-96%and82-51%.Ybctransfersweremadeupof
grantsof70920830EUAandloansfor43251384
EUA.Attheendof1977,asinglereimbursement was
received'fromanOCTStateamountingto61133
EUA.
66.TitleIIoftheLomeConvention,relatingto
therevenuearisingfromtheexportofprimary
products,Representsthebi^Restinnovationin
comparisonwiththeYaoundeConventionsof1963
(secondEDF)and1969(thirdEDF).Itisdesignedto
bringaboutthestabilizationofrevenuearisingin
respectofexportsfromtheACPcountriestothe
Community (';onwhichtheireconomicsdependtoa
considerableextent,andwhichareinfluencedby
markedfluctuationsinpriceand/orquantity.
67.TheStabexsystemisgovernedbythree
limitingconditions:
(i)Regionallimitation:theACPsignatoryStatesof
theLomeConventionandtheOCTarethesole
beneficiaries .
»•
(ii)Itappliedtotwelvemainproductsatthetimeof
thesignatureoftheConvention ;sevenmore
wereaddedattheEEC'ACPCouncilmeetingin
April1977.
(iii)MaximuminterventionbywayofStabexis
limitedforthedurationoftheConvention
(1V5-19S";to^95m:liionF.l'Aincluding20
millionfortheOCT.Thissumisdividedinto
yearlytranchesof75millionEUAfortheACP
and4millionfortheOCT.Anybalancesare
automatically carriedforwardtothefollowing
year.69.AnanalysisofthemanagementoftheStabex
systemrevealsacertainnumberofdeficiencies.
ACT/EECdejects
70.ThecalculationofStabextransfersispartly
basedontheimportstatisticsoftheMemberStates
oftheCommunityandpartlyontheexportstatistics
oftheACPStates.Th-»sometimesincompleteand
inaccuratenatureofthefiguresobligesthe
administration touseestimates,whicharedifficultto
assess,especiallysincethesefiguresarenotsubjectto
on-the-spotchecks.
KepiyoftheCommission
■TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph70asfollows:
Theseestimatesreflectthesumtotalof
experienceacquiredonthesubjectandareoften
cross-checked uithinformationfromcommer­
cialagents,international bodiesresponsiblefor
tradeintheproductconcernedandtheMember
States'StatisticalOffices.
Inaddition,onseveraloccasionswhenthe
Commissionhasaskedforfurtherparticulars
concerningspecificimportfigures,corrections
havebeenmadebytheMemberStatef
StatisticalOffices.
68.Asat31December1977,29ACPandOCT
Stateshadbenefitedfortheyears1975and1976(*),
fromtransferstotalling114172214EUA(')in
respectof19products.Theutilizationoftheannual
trani.hcsfortheACPcountriesis9705%forthe
implementation year1975,and48-38%for1976.For
theOCTthesepercentagesamountrespectivelyto
(■)SomeStatesbenefitfromtheStabexsystemrelating
toexportsirrespectiveofdestination.
(*)SeeAnnexI,DiagramsNos12and13.
(*)Includingasuraof1273640EUAfortheSalomon
Isle*lotwhichthesigningprocedurewasinprocess.Differenceinnomenclaturemthestatisticalsystems
71.TheEECstatisticsareclassifiedbyproducts
accordingtotheF.F.Charmoni/ednomenclature for
externaltradestatistics(Nimexe)system,whileACP
statisticspartlyfollowtheclassificationofstatistics
andtariffs(CST)system.Forsomeproductsfromthe
listofgoodspcrt.iiningtotheLomeConventionthis
presentationpreventsthereaderfrompickingoutthe
correctdataforwantofsuitablesubheadings .Suchis
thecase,forexample,ofthevariousclassificationsof
oil,rawsisal,mohair,pyrethrumandYlang-Ylang
oO.Inaddition,thesubdivisionsoftheNimexeand

NoC313/148 OfficialJournaloftheEuropeanCommunities30.12.78
CSTnomenclaturesdonotalwayscorrespond.These
imprecisionsincreasethedifficultyofimplementing
theStabexsystem.Measuresshouldbetakeninthis
connectionduringthepreparationofanynew
Convention .
KeplyoftheCommisston
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph71asfollows:
Theproduct'sonthelistinArticle17(1)have
beentransposedintermsoftheNimexesystem
bytariffexpertswithintheCommission.The
EECcannotinfluenceeitherthechoiceorthe
breakdownofthetariffsystemsadoptedbythe
ACPStates;furthermore ,thedifferencesarein
factminimal,andexperienceofspecificcases
showsthattheACPfiguresare'pure'.AnACP
Statewhichonlyproducesgroundnutswillnot
exportanysoya-beanoil,theoreticallyincluded
inthesamesubheadinginthetariffcodewhich
ithasadopted.
Thec.i.f.(cost,insuranceandfreight)andf.o.b.(free
onboard)factor
72.Thedeterminationofthec.i.f./f.o.b.factor,
requiredtoconvertEECimportstatistics,expressed
inc.i.f.values,consists,infact,ofan'estimate'based
onfictitiousvaluesinrespectoftheyears1971to
1974butprojectedtotheyears1975to1977.This
factorisdeterminedinahappy-go-luckymanner,
althoughitisofgreatsignificancefortheoperation
ofthesystem.
KeplyoftheCommission
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph72asfollows:
Thedeterminationofthec.i.fJf.o.b.factorisnot
basedon'fictitiousvalues'norisitdoneina
happy-go-luckymanner".Yearbyyear,itisdone
onthebasisofacomparisonoftherealunit
valuesofexportsandimports,includingtheye^r
ofimplementation .Thismethodwasproposed
byStatisticalOfficeexpertswhohadopposedadifferentapproachbasedontheinformation
neededtoestablishpaymentbalances.
Examinationofthemethodofcalculatingthe
c.i.f./f.o.b.factors
73.Anexaminationintendedtodeterminethe
c.i.f./f.o.b.factorsusedbytheCommission,following
thecommentsdrawnupinthepreviousyearbythe
AuditBoard,aimedmainlyatoptainingconfirmation
ofthemethodofcalculatingthefactorsbythe
Commission ,revealssignificantdifferencesinrelation
tothefactorsappliedalthoughthestudyisbasedon
thesamef.o.b.andc.i.f.figures.Thisexamination
hasrevealedpreviouslyestablishedanomalies,such
asnegativefactors,i.e.lowerthanunity,which
practicallyamountstosayingthatgoodsdelivered
c.i.f.atHamburgwouldbeworthlessthanatf.o.b.
shipmentfromtheACPState.Infact,therealfreight
andinsurancecostshadpotbeencalculatedasthey
shouldhavebeen,buttheci.f.valuesweresimply
dividedbythef.o.b.values.
Thestudyinquestion,financedbythefourthFund,
wasentrustedbytheCommissiontoprivate
consultancyfirmsatacostof145157EUA.The
questionariseswhytheStatisticalOfficeofthe
EuropeanCommunitieswasnotaskedtocartyoutat
leastthefirstparrofthisstudy.
KeplyoftheCommission
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph73asfollows:
fromtheoutset,theadministeringdepartment
wasinadifficultpositionoverthisc.i.fJf.o.b.
factor.Apartfromcertainclearcases,prudent
administration wascalledforhere.The
Commissionhasendeavouredtodischargeits
responsibilitiestothebestofitsability.The
Commissionarrangedforthestudymentioned
bytheCourt–withtheACPGroups
agreement–inordertoimproveitsknowledge
onthematter.AttheCommission'srequest,the
consultancyfirmsusedtwomethodsinthis
study:Q)themethodusuallyfollowed,i.e.a
comparisonoftheunitvaluesofexportsand
importsexpressedinasinglecurrency(the
dollar),and(ii)themethodofintenieiimg

30.12.78 OfficialJournaloftheEuropeanCommunities NoC313/149
shipownersandinsurerswheneverthefirst
methoddidnotproducesatisfactoryresults(').
However,inviewofthecomplexityofthe
marketandthediscretionobservedbythe
shipowners,itisnotaneasytasktodetermine
therealcostoffreightandinsurance.
Nevertheless ,inthemainthestudieshave
producedsatisfactoryresultsandinfuturethe
coefficientswillbeusedonabetter-founded
basis.
Thisstudywasentrustedtoprivateconsultancy
firmsinordertotakeaccountoftheneedfor
theagreementoftheACPcountries;itwas
thereforeappropriatetohaveitcarriedoutby
privatefirmsratherthanbyanEECdepartment <
TheOfficehasreceivedcopiesofthesestudies
andallthefiguresused.
Cross-checking ofEEC/ACPstatistics
74.Article17oftheLomeConventionlaysdown
thatthestatisticsusedfortheimplementation ofthe
systemaretobethoseresultingfromthe
cross-chccking oftheEECandACPstatistics,taking
accountofthef.o.b.values.TheCourtofAuditors
hasthefollowingcommentsonthiscross-checking :,
(i)TheCommissionalwayssetsasinglec.i.f./f.o.b.
factorforthewholeoftheEEC,irrespectiveof
theratesoffreightandinsurance,accordingto
theponsofdestinationandthegoods
transported,howevermuchtheyvary.
(ii)Neitherisanycross-checking carriedoutby
comparingvaluesofexportsfromtheACP
countryintooneofthenineMemberStatesof
theEECwiththeimportvaluesincludedinthe
statisticsoftheMemberState,whichwould
showupanydisparitiesmoredistinctly.Instead,
theCommissionoperatesonthebasisofthevalueofglobalexportsfromtheACPStates
towardstheEECincomparisonwiththeglobal
EECimports,thewholebeingrecalculatedinto
f.o.b.values,incorporating alltheabovemen-
tionederrors.Itisclearlynecessarytotakeinto
accountthefactthatallthegoodsdonotremain
inthecountryoftheponofdestination.
ReplyoftheCommission
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph74(i)and(ii)as
follows:
TheCommissionfailstoseetheneedfor
cross-checking MemberStatebyMemberState
incaseswhere,fortheCommunityasawhole,
thetotalimportfiguresmatchtheACPexport
figures.TherearemanysuchcasesInall
othercaseswherethereareunacceptable
discrepanciesbetweenimportfiguresandexport
figures,cross-checking consistsofacomparison
ofthtfiguresMemberStatebyMemberStateto
pinpointthesourcesofthediscrepancy .Inmost
casesthediscrepanciesareduetore-exportation
tothirdcountries.
Ascross-checking onthebasisofCommunity
figur%isperfectlyadequateinmostcases,there
wouldbenojustificationforapplyingc.i.j./f.o.b.
coefficientsMemberStatebyMemberState.
Moreover,itshouldbeemphasizedthatthe
distancefactor,playsanalmostnegligiblerole
amongthecomponentsofthefreightrates,i.e.
thespecificvalueofthe'goods,the
weight-volume ratio,thenatureofthegoodsetc.
(iii)TheCommissiondocsnotchecktheaccuracyof
thesefiguresbycarryingouton-the-spot
analysesof,forexample,productionorthe
market.
(')Moreover,acoefficientlowerthanunitydoesnot■
meanthatgoodsdeliveredc.i.f.atHamburgwould
beworthlessthanatfo.b.shipmentfromthe
ACPState.Arithmetically ,thisresultcouldbe
obtained,correctly,inacaseinwhich–ina
periodofsubstantialpricefluctuations–theunit
statisticalvaluesdonotrefertothesamedeliveries
becauseofatemporarydiscrepancyinthenoti-„
ficationofunitvaluesofimports,wheredefinitive
importationfromawarehouseiseffected,for
example,eighteenmonthsafterthearrivalofthe
goodsmtheport.(*)Ofcourse,thisisAoobstacletothemonitoring
ofintra-Community tradeinaparticularproduct.
TherearecaseswhereACPexportstoaMember
Stateexceedthetatter'simportswhereasthe
converseistruefortheotherMemberStates.This
stateofaffairsisattributabletoagentsinthefirst
MemberStatereexportingpartoftheirimports
tootherMemberStatesfromwarehouses .Inthese
circumstances ,thegoodsretaintheoriginofthe
ACPStateonfinalimportation.

NoC313/150 OfficialJournaloftheEuropeanCommunities 30.12.78
KepiyoftheCommission
TheCommissionhasrepliedto,thecomments
madebytheCourtinparagraph74(iii)as
follows:
Ashasalreadybeensaid,wherethereliabilityof
theACPfiguresmaybemdoubt,the
Commissioncross-checksthesefiguresnotonly
withtheimportfiguresbutalsowith
publicationsinthespecialistpress,thestatistical
bulletinsofthemarketorganizations ,and
informationfromdelegates,inotherwordsall
theinformationavailableataparticulartime.
Since1975nearlyalltheACPStateshavebeen
visitedbyCommission officials.In1977a
missionwassenttoMalitoexaminecertificates
oforigininacaseofdoubt.fortheimplementation years1978and1979,
therearegroundsforcross-checking,i.e.when
thetransferrequestsinquestionconcern
situationsforwhichtheCommissiondoesnot
yethavecross-clyeckedfiguresandforcasesin
whichthebasesforcross-checkingarenot
Communityimportstatistics.
TheCommissionemphasizesthatrequestsare
examinedinthelightofArticle19(4)inall
cases.Thefactthat,inmostcases,theprovisions
ofthisparagraphhavenotbeenapplieddoesnot
meanthatnoexaminationhastakenplacebut
ratherthattherewasnojustificationfor
applyingthem.Whereareductionhasbeen
madeinthebasisforatransfer,thedelegations
havemadevalidcontributions maccordance
withtheircapacities.
(iv)Therehasbeennoexplanationforthediversity
inmethodsofcross-checking used.Inonecase
theACPdatawasusedtocalculatethe
transferredsums;inanothertheEECstatistics
wereusedandinathirdcaseitwasthemean
averageofthesetwostatisticalvalues.Moreover,
therehasbeennosystematiccheckbythe
Commissionoftherequestsfortransferaslaid
downinArticle19(4)oftheLomeConvention .
Thereshouldhavebeenaninvestigationintothe
extenttowhichtheCommissiondelegations
couldbemoreactiveinthisrespectintheACP
countries .CommentoftheCourtofAuditors
WhilewelcomingtheCommission **intentionof
drawingupcross-checking reportsforallcases
inwhich,fortheimplementation years1978and
1979,therearegroundsforsodoing,theCourt
feelsimpelledtomentionthatthiswillingness
seemstobethefirstpracticaloutcomeofa
Councilrecommendation ,dated30October
1978,atthetimeofgivingdischargeinresf)ect
oftheoperationsofthefourth£DFforthe
financialyear1976.
ReplyoftheCommission
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph74(iv)as
follows:
Cross-checking ,aftercarefulexaminationofthe
ACPfiguresbythedepartment,takestheform
ofnegotiationswhereconsiderablediscrepancies
arefound.Ameasureofflexibilityisessentialm
ordertosecureanacceptableoutcomefrom
suchnegotiations .Insuchcasesanoptimum
solutionhastobefoundwhich,htthelightof
considerations oftime-savingandfinancial
resources,issatisfactorybothforthe
CommissionandfortheACPState.
Furthermore ,theCommissioniswillingtodraw
upcross-checkingreportsforallcasesbtwhich.Inthisrecommendation theCouncilconsidered
thatanypossibledisparitiesbetweentheEEC
andACPStates'statisticsmustbedulyjustified
inanotewhichexplainsthechoiceofquantities
andvaluesadoptedforcross-checking andnot
merelybyreferringtooverallnegotiations .
TheCourtcanbutsupportthisprocedurewhich
hasbeenrecommended bytheexternalaudit
bodysincetheinitialoperationoftheStabex
system.
Furthermore ,theCourtdrawstheComission's
attentiontothedifficultiesarisingfromthe
provisionsofArticle17(1)oftheLomi
Convention,whichrequiretheassessmentofthe
f.o.b.valuesforwhichtheACPstatisticsarethe
onlysource;thesameparagraphstipulates
cross-checking withtheEECimportvalues,for

30.1178 OfficialJournaloftheEuropeanCommunities NoC313/151
whicnthereisalsoonlyonesource,namelythe
EECstatistics.
Thecalculation ofthec.i.f./f.o.b.factor
continuestoposemajorproblems,aboveall
sinceitisofgreatfinancialsignificanceforthe
functioningofthesystem.Inaddition,detailed
implementing provisionsappeartobe
indispensable .
Averageunitcosts
75.Onecancalculatetheaveragecostpertonne
ofexportsofanACPcountrytoeachmember
countryfromthedeclaredquantitiesandvaluesof
exports.
Whencomparingtheresultingunitcostsbetween
membercountries,extremedisparitiesarcapparent,
asareabnormalresultssuchas,insomecases,unit
costsoflargequantitiesbeingfargreaterthanthose
ofsmallquantities.
KcpiyoftheCommission
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph75asfollows:
ThispointconcernstheexportpolicyoftheACP
Statesandtheimportpolicyoftheagentsinthe
MemberStates.TheCommissiondoesnotfeel
entitledtointerveneintradewhichiscarried
out,asamatterofprinciple,onafreemarket.
Utilizationofthefunds
76.AsStabexisoperatedatpresent,accountis
nevertakenofstructuralchangesinthemarket,for
exampleadropindemandforcottonowingtoan
increaseduseofman-madefibres.Butthisaspect
shouldnotbeoverlookedbytheACPcountrieswhen
theyutilizetheamountsallocated.Inthisconnection
itshouldbenotedthatArticle20oftheLome
ConventionprovidesthattherecipientACPcountries
shouldforwardanannualreportontheutilizationof
funds.TherecipientACPcountriescouldobviously
usetheCommunitygrantsmoreeffectivelyifthe
Commissionprovidedtechnicalassistanceintheform
ofananalysisofthemarketsandproducts
concerned.ReplyoftheCommission
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph76asfollows:
Thispointtouchesonanimportantproblem
which,inthepresentstateofaffairs,concerns
tradepromotion .Inabroaderframework,it
underpinstheCommission'sproposalconcern­
ingamandatoryprocedureforperiodic
consultations betweenthe,EECandtheACP
Stateswiththeparticipationoftheeconomic
andsocialcirclesconcerned .Thisideadoesnot
seemtohavebeenfavourablyreceivedbythe
ACPStates.
Liaison
77.TheliaisonofficersofthevariousACP
countriesplayanespeciallyimportantrolein
drawingupandforwardingthestatisticsoftheACP
countries,inparticularinestablishingtheoriginof
exportedgoods.TheCourtofAuditors,havingonly
justreceivedthelistoftheseofficers,isnotyetina
positiontomakeanassessmentofthesystem.
ReplyoftheCommission
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph77asfollows:
TheCommissionconsidersthattheappointment
ofaliaisonofficerforthesystemisthe
responsibility oftheACPStateconcerned.
Furthermore ,relations ,betweentheliaison
officersoperatingatpresentandtheCommission
areentirelysatisfactory.
Specificcomments
^8.InthecalculationoftransferstoNigerandto
Togoin1975theCommissionusedanexchangerate
USdollar/nationalcurrency,whichafterwardsthe
InternationalMonetaryFunddeclaredasinaccurate
andconsequentlycorrected.DespitetheCommission
havingbeeninformedofthisbytheAuditBoard,the
calculationoftransfershasstilltoberectified.
79.Duringthecalculationoftransferstothe
RepublicofJibutiin1976,itbecameapparentthat
the1975calculationshadfailedtotakeinto

NoC313/152 OfficialJournaloftheEuropeanCommunities 30.12.78
considerationthedirectparitybetweentheJibuti
francandtheUSdollar.The1975accountshavestill
notbeenrectified.
80.FortheoperationoftheStabexsystemthe
Commissionworkedouteachyeartheaverageofthe
monthlymeanvaluesatarateof1EUA/1USdollar.
Thesemeanvaluesweresubsequentlyprovedtobe
inaccurateandhavebeencorrectedbythe
Commission .Theapplicationofnewvaluesshould
notmerelybeconfinedtocalculationsoftransfersfor
1977;correctionofthe1975and1976transfersmay
alsoberequired.'
ReplyoftheCommission
TheCommissionhas;repliedtothecomments
madebytheCourtinparagraphs78to80at
follows:
Thefiguresusedweretheonlyvalidfigures
knownatthetime.Clearly,(heprincipleof
usingthemostrecentfiguresatthetimeofthe
proposal,asregardsratesofexchangeetc.;isthe
onlypracticalmethod.Itshouldbeaddedthat
thedepartmentmakesuseoftheseofficial
figures,e.g.thoseofthc*IMF,withoutany
chatty.sincetheyhavebeenestablishedby
specialistauthoritiesmoreskilledatthistask
thanthedepartmentresponsiblefotadmin­
isteringtheStabexsystem.
TheCourtofAuditorswantsretrospective
correctionstobetnadeinallcaseswhere
exchangerates(orothervalues)havebeen
'correctedafterthetransferdecisionhasbeen
takenandthefundstransferred.Inthe
Commission'sopinion,thisattitudeisneither
realisticnorpracticableand,inmostcases,
wouldamount'toaninfringementoftheLotne
'Convention .
Itmayhappenthattheauthoritiesconcerned
correcttheratesseveraltimesorafteraperiod
ofafewyears.Thiswouldentailaseriesof
differentamountsforthesametransferorthe
changingofanamountofa-transferdecided
someyearsbefore.Itgoeswithoutsayingthat
themakingofadditionalpaymentsand!or
reimbursements ,continuallydelayedbyafew
years,icouldnotonlyhaveadministfativeand■
accountingdisadvantagesanddiminishthe
Commission'scredibility,butalsocause,theACPStatesdifficultieswherethe'final*amountisless
thantheamounttransferred.
.Thesedisadvantages wouldappeartobeoutof
allproportiontoanyadvantagesthatthere
mightbeinimplementingtheCourt'sproposals
onthismatter.
IftheCommissionquestionedamountsalready
decidedonandpaidover.thiswouldopenthe
doorto'amended'requestsbytheACPStates.
Thedepartmenthashaddifficultyinrefusing
suchapprqachesinthepast.
Fromthepointofviewoflegalandbudgetary
securityitisessentialthatafinancialyearshould
beclosedatsomespecifictime.Thisideais
expressedinArticle18(3)whichstipulatesthat
'Whateverbalanceremainsatthee/idofeach
yearofthefirstfouryearsoftheapplicationof
thisContentionshallbecarriedforward
automaticallytothefollowingyear'.Inpractice
thismeansforexamplethattheinstalment
intendedtocoverlossesofexportearningsfor
theyear1976lapseson1January1978.
Theoutcomeofusingthemostrecentdatais
that,inallthecasesmentionedinthefirst
paragraphoftheCourt'sreport,theexchange
rateshavebeencorrectedinthetransfersrelating
.totheyears1976andJ977.Thesameappliesto
transferstotheRepublicofJibuti.■.
Thesoundnessoffinancialmanagement
81.TheCourtofAuditorsrecognizesthe
difficultiesthattheoperationoftheStabexsystem
involvesfortheCommissionandfortheACP
countries.Itisfullyawareofthefactthatthe
implementationofthissystemrequiresspecialefforts,
aboveallintheinitialstages.Giventhatanew
conventionisbeingprepared,theCourtconsidersit
advisabletoanalysetheweakpointsshownbythe
presentsystem.Inparticularstrictimplementing
provisionsgoverningtheoperationofthesystemare
needed.TheCourtofAuditorsconsidersitpreferable
toawait;heclosureofthe1977transferoperations
beforeconsideringthequestionofanyrepercussions
ontheeconomiesofthevariousrecipientACPand
OCTStatesinvolvedintheimplementation ofthe
Stabexsystem.Thispointwillbedealtwithinits
nextreport.
ReplyoftheCommission
TheCommissionhasrepliedtothecomments
madebytheCourtinparagraph81asfollows:

JO.URS OnicialJournalo(theEuropeanCommunitiesNuC31VIS»
Ibifstatistics-based system,theproductof
difficultresolutions,presentscertainproblems
inday-to-daymanagement .TheCourt's
observationsrefertotheseproblemsandtheir
consequences .
TheCommissionemphasizestheprinciplesof
administration uhichithasfollowedfromthe
outsetanduhich-itregardsasessentialforthe
siruiothfunctioningofthesystem:
(a)Eienuithamuchbizzerstaffcomplement,
itwouldbeimpossibletoexamine ,the
absoluteaccuracyofeachstatisticalitem.In'
thesearchforstatisticaltruththerecomesa
timewhenonehastotakeastatistic,inits
currentdecreeofaccuracy,asa*
unquestionable magnitude.
(b)Itwouldheapurecoincidenceiftheexports
ofaparticularproductfromcountryAto
countryBequalledtheimportsofthatsame
productintocountryRfromcountryA.
Thisc»utdonlyhappeninthetheoretical
caseofperfectlyplannedcountrieswhere.
.thestjtistnalfiguresharemoretodowith
plansthanwithreality.Inallothercases,
jlhtchcanbeveryvariedinnature,import
andexportfiguresareencounteredwhich
aredifferentorevencontradictory,despite
considerableeffortandinvestigation..
TheCommissionisconvincedthat,asthings
standatthemoment,onlyaprapnaticapproach
>canguaranteethesmoothfunctioningofthis
system,regardedbyallconcernedasan
exemplaryeffortinthefieldofrelationsbetween
theindustrializedandthedevelopingcountries.
TheCommissionisalsoconvincedthatasimple
accountingexercisecouldshowthatthe
expenditureneededtomakethestatisticsas
accurateastheycouldbewouldhaveno
economicjustification.Thelawofdiminishing
returnsappliesheretoo.^