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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)546final
Brussels,24.9.1980
RECOMMENDATION "FORACOUNCILDECISION ONTHENEGOTIATION
OPATHIRDINTERNATIONAL COCOAAGREEMENT
/
(PresentedbytheCommissiontotheCouncil)
"-7
COil(SO)546final

RECOMMENDATION FORACOUNCILDECISION ONTHENEGOTIATION OFATHIRD
INTERNATIONAL COCOAAGREEMENT
Introduction
On10July1980theCommissiontransmitted acommunication tothe
Councilwithregardtotheconsultation meetingconvenedbytheUNCTAD/
Secretary-General inGenevafrom28Julyto1Augustoninternational
cooperation inthecocoasector.Atitsmeetingon22July,theCouncil
basingitselfonthiscommunication :
recognizedthepoliticalimDortanceofsafeguarding international
cooperation betweenproducerandconsumercountries;especiallyasregards
suchanimportantprimarycommodityascocoa;
(ii)agreedthattheCommunityshoulddeclareitselfreadytoresumethe
negotiations whichwereinterruptedattheendofMarch,sincethe
International CocoaCouncilhadbeenunableeithertoextendthe
validityofthesecondAgreementortorecommendafurthernegotiating
conferenceaftertheseriesoffailuresin1979;
(iii)wouldwaittocontinuethediscussions,particularlyonprices,in
thelightoftheresultsoftheGenevaconsultations .
TheGenevameeting
Theproducercountries
(a)wantedtoreachanagreementcontainingeconomicprovisions,particularly
abufferstock,financedasbeforebyalevyontradeintheproduct,

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(b)confirmedtheirintentionoftransferring thebufferstock's
assetsfromthesecondAgreementtoathirdagreement,which
wasconsistentwiththedesireexpressedbytheconsumercountries,
inparticulartheCommunity,forthenegotiations toberesumed;
χ
(c)agreedtoresumenegotiation oftheLowerintervention priceforthe
bufferstockonthebasisoftheproposalmadebytheconsumer
countriesinMarch-i.e.110cts/lb-whileatthesametimepointing
outthattheywouldliketoseepricesreviewedandrevised
annuallybytheCouncil(underathree-yearagreement).
InviewofthecontentoftheCouncildecisions,theEECwasnotin
apositiontoexpressanopiniononthecrucialquestionofthelevelof
intervention pricesforthebufferstockunderafutureagreement,despite
thefactthatinorderforthenegotiations toberesumedwithagood
chanceofsuccess,itwasimportantforitspositiontobesufficiently
clearfortheUNCTADSecretary-General tohaveareasonableideaof
wherethemainpartiesstood.TheEECdid,however,confirmthatit
wouldlikethe-agreementtoincludeasemi-automatic pricerevision %
clause,whichcouldoperatebothupwardsordownwards.
TheUnitedStates,whichistheworld'ssecondlargestconsumerafter
theCommunity,raisedanumberofoutstanding issuesonwhichthere
wouldhavetobeafinalcompromisewiththequestionofprices,and
wereparticularly insistentthatthefutureagreementshouldbelinked
totheCommonFund.ItsupportedtheCommunity'swishfortheagreement
tocontain,alongwithperiodicpricerevisionbyCouncildecision,a
semi-automatic revisionsystemrelatedtomarketconditions andbuffer
stockoperations .(1)
./.
(1)Whiletheyhavenotrefusedtoconsiderthispoint,theproducercountries
demandthatworldinflationshouldalsobetakenintoaccount.

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WithregardtotheLowerintervention pricelevel,theUnitedStates
consideredthatithadtobenegotiatedatbetween100and110cts,
takingintoaccountcurrentandpredictable markettrends.
Theotherconsumercountrieswhichexpressedanopinion(Japan,Sweden,
Switzerlandetc.)agreedtoresumenegotiations onapriceinthe
110-120ctsbracket;theUSSRexpressednoopiniononthisquestion,nor
onanyotherforthatmatter.
Theproducercountriesexpresseddisappointment attheposition
adoptedbytheUnitedStates,andatthelackofaCommunityposition
onprices.Thelatterwasnotcriticizedtooheavilyhowever,since
theCouncilhadreiterateditspoliticalresolveinthisfieldand
expresseditsintentionofquicklyconcludingitsdiscussions .The
contactsthefourACPMinisterspresentinGenevahadhadwiththe
PresidentoftheCouncilhadgivenaclearerideaofthesituation
withintheCommunity.
Theproducercountrieswereparticularly reluctanttoaccepta
semi-automatic pricevariationclause,andmadeitclearthattheir
acceptance,ontermstobenegotiated,woulddependupontheconsumer
countriesadoptingareasonablestanceonthelevelofpricesto
whichtheclausewouldbelinked.
*
* *
Inviewofthefailuretoreachagreedconclusionatthe
consultation meeting,theconferencechairmancompiledhisownconclusions
whichtheCouncilwillfindannexedtothiscommunication .Hismainpoint
istorequesttheUNCTADSecretary-General tocarryonhisconsultations
immediately sothatanewconference canbeconvenedin
October1980.

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Commissionproposal
TheCommissionrecalledinitscommunicationtotheCouncilof10th
July1980andduringthediscussionsthatwereheldduringtheCouncilof
22ndJuly1980,theutmostpoliticalimportanceofthesubjectitself-
afailureofthecocoaagreementwouldbeprimarilyafailurebetweenthe
EECandtheACP.Italsorecalle-dthatthestakesweremoreimportantthan
thecocoafieldalonebecausetherewasaclearriskofinitiating a-
negativeevolutionofthegeneralCommunitypolicyonprimarycommodities
initsrelationship withitsaidpolicytothedevelopingcountries.
Therefore,theCommissiondeemsitessentialthat,duringitsnext
session,theCouncilgivestheCommissionthenecessarydirectivesthat
willallowittoexpressaconstructive viewpointwhichwillmeetthe
mutuallongterminterests,ofboththeconsumersandtheproducers.
Inthisprospect,theCommissionconsidersthatanumberofthenego­
tiatingdirectivesissuedin1979shouldbereviewedgiventheprospectofa
futureconference,inordertotakeaccountofthewaythesituationhas
developedsincetheendofthelastconference (November1979).
ToupdatetheCommunity'sposition,theexpertsmayuseasabasis
theelementsofthecompromisearrivedaton20March(seeAnnexto
Document8085/Proba24of23July)andincorporated bytheconsumercountries
intheirproposaltotheInternational CocoaCouncilattheendofMarch1980.
Withregardtothevitalquestionofprices(levelandrevisionsystem),
theCommission recommendsthattheCounciImodifythedecisionof'6th
February1979andtakethefollowing comDlementarynegotiationdirectives :
(i)thenegotiation ofthelevelofthelowerintervention pricetobe
laiddownin.theagreementshouldbeconfined :toaspaneofa
fewcentsbetweentheextremesquotedduringtheconsultations ;(1)
(ii)theCommunitywillmakeanefforttoreduceasfaraspossiblethe
proposed40ctsdifference betweenthelowerandhigherintervention
prices.Fromthepointofviewofdevelopingindustrialcocoacon­
sumption,thelevelofthehigherpriceisextremelyimportantsince
thebufferstockreleasesitscocoaonthemarketwhenthisisexceeded;
itisequallysofromthepointofviewoftheprofitability ofbuffer
stockoperations,sincefortechnical,economicandfinancialreasons,
cocoamustnotbestockpiledfortoogreatalengthoftime;
./.
(1)TheCommission wiUcommunicate theexactfiguresorallytoCouncil
bodies.

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(iii)theCommunitywillhavetohaveacertainamountofroomformanoeuvrein
\ negotiatingthepricerevisionsystem,whichislinkedtotheletfel♦
¥ ofprices;
«
(iv)inviewoftheproducercountriesdifficulties inacceptingthe
conceptofsemi-automatic pricerevisionandtheactualform
thiswouldtake,theCommunitywillinitiallyhavetomakean
efforttonegotiatesuchasystemintheagreementlinkingitto
thelevelofpricesandtothenumberofrevisionsmadeby
Councildecision;then,shouldthesuccessofthenegotiations be
atriskbecauseofthisissuealone,itwouldhavetotrytoensure
thattheprincipleatleastwasrecognizedintheagreementandthat
theagreementcouncilwasobligedtostudyhowsuchasystem
couldbeputintooperationandpossiblyimplemented beforetheend
ofthefirstyearoftheagreement;
(v)atamoregenerallevel,theCommunitywillhavetolookintoall
possiblesatisfactory compromisesinordertoarriveatanagreement
limitedtothreeyears,whichoughttoenterintoforceassoonas
possible,giventhattheproducercountries-particularly the
ACPones-attachmajorpoliticalandeconomicimportanceto
continuingcooperation withtheCommunityinthisfield,the
UnitedStatesnothavingparticipated inthefirsttwointernational
agreements .

Statement bythe Chairman
AsChairman oftheMeeting onCocoa ,held under theauspices
fUirCTAD 'sIntegrated Programme for -Commodities ,myperception of
heresults ofthediscussions canbesummed upasfollows :
1. ■There isacommon desire among cocoa producing and
cocoa consuming countries tocontinue their co-operation
intheworld cocoa economy ,and tothis end towork towards
arriving atathird agreement oncocoa assoon aspossible .
2.Anew cocoa agreement should ,tothegreatest extent
possible ,build ontheprovisional agreements reached atthe
previous cocoa conference asthey are contained indocument
TD/COCOA .5/R.3''.
3.TheSecretary-General ofUNCTAD isrequested tourgently
pursue hisconsultations with aview toconvening anegotiating
conference inthe first half ofOctober 1980 .
4.AllGovernments areurged tofocus their attention oh
outstanding issues ,particularly thefollowing :
(a)the -level andstructure oftheprice range ;and
(b)themechanism forprice revision . '