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DOCUMENTS "COM"
COM(79)24
Vol.1979/9012

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COMMISSION
DES
COMMUNAUTES EUROPEENNES
Secrétariat généralCOM(79)24 final
Bruxelles ,le„,„31January ±979 •
RESUMPTION OPNEGOTIATIONS ONTHECOMMON FUND
GENEV A ,MARCH
(Communication fromtheCommission totheCouncil )
s#
C0M(79 )24final

VIII/39/79-E
I. BACKGROUND
1. The resumption ,from 14th to30th November last year ,ofthe second
session ofthe Common Fund Negotiating Conference undoubtedly narrowed
thegapseparating thepositions .Inorder torecord this rapprochement ,^
thePresident oftheconference presented hispersonal interpretation of4^^
itintheform ofconclusions that arenotformally binding onanyofth<^
regional groups .The session will resume again from 12th to16th March
inGeneva .
2.InMay,UNCTAD VwillbeheldinManila totackle the^^mercial
andfinancial problems ofdevelopment .Ifthequestion q^fche Common
Fundisnotresolved bythen-inthevainhopethatthefciecessity for
Common Fund negotiations atUNCTAD Vmight distract the Conference from
the other items onits Agenda -this would only increase the danger of
confrontations onthewhole range ofquestior^^including thatofthe
Funditself .Ontheother hand,theestal^^iment inMarch ofa
comprehensive andquantified agreement ^J^the Common Fundwould havea
favourable impact onthecourse ofUNCLAD V,particularly ifitfellto
theConference togive itsseal ofapproval ^(see document COM(79)l4 "Preparations
for UNCTAD V-Policy Guidelines "-adopted bythe Commission atits 501st
meeting on24th January ).
3.Inthe March negotiations the Community should respect thestatements
itmade atBremen and Bonn andplay theeffective role that many expect of
oneofthemai^participants incommodity trade .Inthatspirit ,it
should not^§^rictitself toawait-anct-seeattitude ,butshould work
for the success ofthe conference :
-onthe one hand ,byaccepting that the President 'sconclusions
should serve asabasis fordiscussion ,which does not mean
v acceptance ofthe figures quoted :
–ontheother hand ,bytaking upaposition onthe main points
atissue .

-2- VII1/39/79-E
II.POSITION REACHED IN THE NEGOTIATIONS
4* Thepositions ofthe two sides are based ontwo very different
philosophies ofthe Common Fund (source offinance according to
the Group of77»pooling only ofICAresources according toGroup B)
and asignificant narrowing ofthe gapatthe November session was only
possible when the groups reached the point ofaccepting that their
respective conceptions were not mutually exclusive *
Inthecourse ofthenegotiations ,reciprocal concessions qii^the
practical aspects (notably thefigures involved )havemadeit^&ssible ,
insome .cases ,togetveryclose tocertain points ofagre^H^ht which
each group (oreven each country )caninterpret asitthi&ks fit,without
obliging itspartners togive uptheir ownideas .
Λ
Toensure that these points ofagreement gtjjs firmed upwithin a
coherent whole,theCommunity should adopt^^arpositions onthemain
aspects ofthedossier bypromoting att^^stage inthenegotiations the
establishment ofacompromise that isacceptable toall rather than a
temporary tactical position .
5.Asfarasthemainfina^j^il points areconcerned ,thetwowindows
oftheCommon Fundhavet^^analysed separately sothateachofthem
canbegiven thefinancfs& structure thatisappropriate tothetypeof
needs itmust satisfy :
–inthe^ftase ofthefirst window –help with the international
finatfSlng ofstocks ;
-nithe case ofthe second window -the financing ,inwhole orin
part ,andincoordination with theactivities oftheinternational
financial institutions ,of"other measures "forthestructural
' improvement ofthe markets for the various commodities .
Asfarasadministrative andvoting questions are concerned ,however ,the
main points relate tothe Common Fund asawhole .

-3- VIII/39/79-E
III .THEMAIN ISSUES OPTHENEGOTIATIONS
A. First Window
V
 6.Aolash between thetwoconcepts oftheCommon Fund wasavoided mainly
thanks totheacceptance byGroup Bofdirect contributions from States
totheresources oftheFund andtheacceptance bytheGroup of77of
deposits from theICAs .Thefact remains ,however ,that although thegapx
wasnarrowed appreciably no ■understanding wasreached onthefigures
involved .
6.1Asregards theparticular ,but .central ,problem ofthe^jgjjiosit/
credit ratio ,GroupBnolonger insists thateachIC^^hould deposit
75$inorder tobeabletoborrow 25$andtheGroupS )f77nolonger
insists that each ICAshould beable ,without anyquantified deposit
obligation ,todraw credit equal to100$ ofitsneeds .Theoriginal
gap (0$–75$)hasbeen narrowed to25$ andthefigures of
30$-40$have even been mentioned altJotagh theregional groups
havenotyettaken uppositions on^$em .
6.2 Theacceptance byGroup Boftheprinciple ofdirect contributions
played adecisive roleinpeering theNovember session towards
negotiations rather th^v^olemics .Therearestilldifferences on
thefigures ,howeve^^espite acertain narrowing ofthegap:
–onthesubject ofthetotal amount ofthedirect contributions ,
nofigure hasmetwith general approval ,even though anumber
{^figures havebeenputforward ,including aproposal of
400million from thePresident oftheconference ;
the Group of77hassuggested that thedirect contributions
should behalf intheform ofpaid–upcapital andhalf in
theform ofcapital oncall .Theindustrialised countries ,
ontheother hand ,envisage anelement ofpaid-in capital
ofaround 20$ofthedirect contributions .

-4- VII1/39/79-E
-asregards the fixed contribution toberequired ofeach State
participating inthe Fund ,the Group of77hasraised its
initial proposal for asum ofU.S. 200,000 per country to
U.S.^1or2million (thesumofU.S.$300,000 hasbeen ^
mentioned asapossible compromise ).Itseems that with the
financial assistance ofOPEC (1)the Group of77wants to
increase the weight ofthe "universality "criterion inthe
voting system .
Onthekeyaspects ,theCommunity should propose thefollc^ng
guidelines : ^
–TheCommunity should recognise thatitwould^Te easier toreach
anagreement onthedeposit /credit ratio ifthequestion were
tobeput back inthe overall context ofthe role ofthe ICAs
and oftheir member states .
Itisimpossible totake dueAccount ofthat role without
considering thewhole rang^Sfc inflows intothe Common Fund-
ICA deposits and stock warrants and the commitments ofICAs'
member states (guarantees ,callable capital ,and »where
appropriate ,thelament ofinterest tothe Common Fund).
–Asregards Jflgytotal amount ofdirect contributions ,the Community
could propose ,depending onthe progress achieved inthenegotiations
overall ,that consideration begiven toanamount inexcess of
U.^^300million ,provided onlythatthisweretomakeit
^j^sible totieupother important points suchasthedeposit/
^<^*credit ratioandthevoluntary financing ofthesecond window .
–Itwould beappropriate tolimit the proportion ofthe direct
contributions that would bepaid–inoroncall (theremainder
being callable )totheamounts needed tocover theadministrative
expenses andcontribute totheliquidity needs ofthe Fund's
operations .
Possibly U.S. »^0million .

-5- VIII/39/79-E
–The uniform contribution should reflect theuniversality -
principle without being anexcessive amount that would create
serious problems forcertain countries .Prom that viewpoint
the sumofU.S. $200.000 percountry seems appropriate . ,
B. Second Hindow^
7*Forthe financing ofmeasures other than stocking ,Group Bhasaccepted
the creation ofasecond window but insists that the resources should come
fromvoluntary contributions andthat thesecond window should b^financed
separately fromthefirst .However ,,thenegotiations arest^ijfcSftig ontwo
questions ,thedefinition ofthe"other"measures thatcai^|& approved anthequestion offinancing . ^
8. The Group of77hasaccepted theprinciple ofestablishing anexact
listof"other measures "butnottherestricti^^definition putforward
bytheindustrialised countries (solely res^s&h anddevelopment ofa
general nature ).TheGroup of77iscong^ned toseethesecond window
being squeezed between thedenial ofne^cl ontheonehand anduncertainty
over resources onthe other .
8.1TheCommunity should pi^^fee theinclusion inthelistofmeasures in
addition toresearch^&fl .development ,ofimprovements inproductivity and
inmarketing stru$§tfcres ,solong asthese feature inthecorresponding
Q ICAs.Theinclusion ofother types ofmeasures (which couldfallundertheheading ofvertical diversification )could bedecided bythe competent
bodies o^Jkhe Pond inaccordance with aprocedure tobeestablished .
9*As^jp^ards financing ,thediscussion will becentred ontwopoints :
the idea ofanindicative amount and the nature ofthe contributions tobe
made towards it^..e.statutory ,orvoluntary ,oracombination ofthetwo),
^.lthough anumber ofparticipants areconsidering amounts (around
U.S. $300million )that aremore reasonable than thefigure of
C^S U.S. $1,000 million instatutory contributions initially putforward by
the Group of77•considerable differences still remain onthese two points .
1

-6- VIII/39/79-E
9.1 TheCommunity should stress that theacceptance ofanindicative
amount does notundermine thevoluntary nature ofthecontributions .
Onthat basis ,theCommunity should propose that after theFund has
been operating foroneyear ,theidea ofapledging conference be
examined bytheBoard ofGovernors inthelight oftwofactors : A
–therequests ,admissible under the second window ,that
have been submitted during thefirst year oftheFund 's ^
activity ;
–thelevel ofthevoluntary contributions already c^mitted to
the Fund .
9.2Ontheother hand ,theproposal toallocate aprop^gpaon ofthefixed
contributions tothesecond window does present certain drawbacks even
though calling directly into question neither thevoluntary nature of
thecontributions tothesecond window nor^he separation ofthetwo
windows *Ontheonehanditwould milijai^e infavour ofauniform
contribution levelinexcess ofU.S^p 200,000 and,ontheotherhand,
there would beadanger ofthesq^j&id window being supplied withfunds
for which atthe outset itcould not demonstrate aneed .
C. Administration andvoting ,Irrm x.•_-lj ^ --10.Thenegotiations on^£$ese organisational problems depend ontheresults
achieved regarding th^^her aspects ofthedossier andhavetherefore not
advanced very far.
10.1 Asfarastheadministrative structure isconcerned ,itseems that
agreei^a ^canbereached onthemainfeatures –Governing Council ,
Ex^S^ive Board ,Executive Director -provided thatthefinancial
•i&paration ofthetwowindows does notgiverise toadivision ofthe
administrative structures .Since theGroup of77attaches great
importance toitsconcept oftheFund asasingle entity ,itshould be
given satisfaction onthe "oneness "ofthedecisions-making bodies .
Tothat end,theSpecial Committee ofthesecondwindow proposed by
Group B-which infact implies adivision oftheExecutive Board
should betransformed into aConsultative Committee .This Consultative
Committee (second window )would becomposed ofrepresentatives ofthe
ICAs (orother eligible agreements )andofrepresentatives ofthe
international financial institutions (IFIS).Itsmain task should beto
harmonize theactivities oftheCommon Fund (mobilisation offinance
co-ordination ,consultation )with those oftheIFIs .

-7- VIII/39/79-E
10.2 Regarding the voting structures ,the Community should insist onthe
"basic principle ofadifferent weighting for each ofthe two windows ,
thefirst having amore automatic decision-making procedure *The
introduction ofatwo-chamber system (importers ,exporters )forthe^
first window isdesirable but,inthefinal analysis ,isnotessenti^j ^*since theprotection oftheessential interests oftheCommunity andSof
the various groups could infact beguaranteed inasingle-chamber
system byarule concerning qualified majorities .Thedistribution ofvotes should reflect theneedrecognised byallthegrougfi^o exclude any
possibility ofcountries either systematically blockii^^aecisions orof
beinginaminority position .Thisbeing so,thecj^kribution could
reflect three criteria :
–the financial contribution ofeach State tothe total resources
ofthe Fund ;
–theproportion ofthetrade^Commodities accounted forby
each State ;
–thecriterion ofuniversality .
Ahigh weighting given tothelast criterion –around 20%-would not,
according tothecalculations thathavebeen -carried out,appreciably
change thevotingb^^^e .
IV.THE ROLE OP THE COMMUNITY
11.Although ^occupies amajor roleinthetrade incommodities ,the
Community ha^tfot beenableuptonowtoplayanactive partintheevolution
oftheCq^$^rence .Atthedecisive session inMarch,theCommunity should
playan&stive role-asiswidely expected ofit.
 

-8- VIII/39/79-E
11.1 The Commission therefore proposes that the Council should instruct
the various organs ofco-ordination toevolve anopen-minded Community
position ,accepting theconclusions ofthePresident oftheConference ^
asabasis fordiscussion and-attheappropriate moments –totak^^"
initiatives based onthepositions suggested bytheCommission in<£^*
Section III *
11.2 TheCommission alsoproposes thattheCommunity should jD^fcicipate
assuchintheactivities oftheCommon Fundandshou^^be represented
intheorgans oftheFund .TheCommission considqjgpthat theCommunity
should beinaposition toannounce avoluntary contribution
tothe second window ,this being anaspect ofthe
Fund towhich the developing countries with the strongest links with
the Community (notably inAfrica )atta^^particular importance .