ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(79)402
Vol.1979/0143

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COMMISSION OFTHEEUROPEAN COMMUNITIES
Recommendation fora
COUNCILDECISION
authorizing theCommissiontoopennegotiations withBangladesh
andIndiawithaviewtoconcluding agreements ontradeand
commercial cooperation injuteproductsCOM(79)402final
Brussels/18July1979
f>•
-V?.
/'S'-'
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•AJ
v-^
(submittedtotheCouncilbytheCommission )
C01*1(79)402final.

EXPLANATORY MEMORANDUM
1.TheCommunitycurrently hasagreements withbothIndiaandBangladesh on
tradeandcommercial cooperation injuteproducts;theseremaininforceuntil
31Decemberofthisyear.Forthesetwocountries,whoaretheprincipal Community
suppliers,theagreementsconstitute the"specialarrangements "mentionedinthe
contextoftheCommunity'sofferongeneralizedtariffpreferences withaview
togivingdeveloping countriesthebenefitofpreferences fortheproducts
...1inquestion .
Interalia,thetwoagreements providefor:
-thegrantingbytheCommunityofautonomous,progressivetariffsuspensions,
resultinginzerodutyfrom1January1978;
-voluntaryrestraint byIndiaandBangladesh,atagreedlevels,oftheir
exportsofunbleached (categories 4/5)andbleached(category7)jutefabrics
ofawidthofmorethan150cm;thequantitative restrictions applyingto
thoseproductsinsomeoftheMemberStatesaresuspended;
-maintenance ofthequotasappliedinGermany,FranceandtheUKtoother
juteproducts(narrowfabricsandsacksincategories 1to3);thevolume
ofquotasinGermanyandFranceallowingforannualincreasesinvolume;
-onegeneralandalsoonespecificconsultation clause,thelatterallowingthe
Comm.unity,uponcertainconditions,toaskitspartnerstoexercisevoluntary
restraint ontheirexportsofjuteyarntotheCommunityoranyofitsmarkets;
-thesettingupofaJointCooperation Committeeresponsible interaliafor
investigating possiblities forcooperation inregardto*researchintoand
development oftheproduction andusesofjuteproducts.
Thailandalsoenjoystariffpreferences onitsexportsofjuteproducts.However,
inviewofthevolumeofitsexportstheCommunityfeltabletograntpreferences
withouttakingthesortofmeasuresagreeduponwithitsmainsuppliers.There
wasnevertheless anexchangeofletterswithThailandtotheeffectthatitwould
enterintonegotiations withtheCommunityifnecessary.
Inaccordancewiththatexchangeofletters,consultations wereheldvinDecember
1977toreachagreementonvoluntaryrestraintbyThailandofitsexportsof
juteyarntotheBenelux;thevoluntaryrestrainthaseffectuntil31Decemberofthi'syear.

2.Thecurrentagreementshaveworkedmoresatisfactorily fromthepointofview
ofthetwoexportingcountriesthanpreviousagreements.
a)Withregardtotariffs,duties,whichwereonly50%or60%suspendedin
1976,havebeencompletelysuspendedsince1January1978.TheCommunityagreed
tobringforwardthetotalsuspensionofalldutiessixmonthsfromthedate
of1July1978specifiedintheagreements.
b)Fromthepointofviewoftradedevelopment,Bangladesh's,andparticularly
India'sexportsofgoodssubjecttovoluntaryrestraintshowedanimprovement
inrelationtotheperiodcoveredbytheoldagreements,inparticularforproducts
fallingwith,incategories 4/5.FormerlyonlytheUnitedKingdomshareofthe
Communityceilingwasfullyutilizedeachyear.In1978India'sexportstothe
Beneluxreached65%ofthequota,with100%inthecaseofFranceandtheUK,
71%forItalyand86%forIreland.AsregardsBangladesh,exportstotheUK
weresatisfactory (100%ofthequota),aswerethosetotheBenelux(74%).German
andDanishimports,ontheotherhand,werenegligibleinrelationtothe
possibilities open.BothIndia'sandBangladesh'sexportsofdecorativejute
fabrics(category7)weremuchlessthantheymighthavebeen.Bothcountries
havemadeuseeveryyearofthetransferfacilitybetweencategoriesincluded
intheagreements.
Juteyarns(category6)areliberalisedatCommunitylevel;theyare,
however,coveredbyaconsultation clausewhichenablestheCommunity,under
certainconditions,toaskforvoluntaryexportrestraint (inthecaseofthe
UnitedKingdomandBeneluxconsultations mayberequestedwhere"indicativelevels"
areexceeded).Inthissector,India'sexportstothewholeCommunitygrewby
2400%between1976and1978.ThislargeincreaseismainlyduetoIndia's
Beneluxtrade..In1976,Beneluximported762t,in19773,128t,whilefor
thefirstsixmonthsof1978importshadrisento3,516t^.
1Narrowjutefabricsandsacks(categories 1to3)arenotsubjecttovoluntary
restraint.InGermany(fabricsonly),FranceandtheUnitedKingdom(certain
sacksonly)theyarehoweversubjecttonationalquotas.BangladeshandIndian
exportsoftheseproductshavealsoincreased,andinFranceandtheUKthequotas
areusedupeachyear.ItshouldberecalledthattheCommunityh.isagreedthat,
aspartofitsMTNoffer,thesequotasshculd'-beconvertedintovoluntaryrestraint
measures,theimplementation ofthisundertakingtobediscussedindetailinthe
courseofthenegotiations (seepoint4below).
2ItshouldbenotedthattotalEECimportsofjuteyarn(predominantly fromIndia,
Bangladesh andThailand),whichin1978cameto24,000t,correspondto23.5%of
EECproduction (102,000tin1978).Thefigurefor1976was7%.
riseofthismagnitude,concentrated onasingleCommunityregion,prompteda
requestforconsultations withIndiawithaviewtoachievingvoluntaryrestraint
ofitsjuteyarnexportstoBenelux.Agreementwasreachedonvoluntary ^restraint
+nkp "*iDecemberofthisyear(13,000tfortheperiod i.1-78-31.12*

-3-
Nevertheless,whileIndiaandBangladeshhaveincreasedtheirexportsunderthe
currentagreements,whereproductssubjecttovoluntaryrestraintareconcerned
thequantitiesinvolvedremainbeneaththeceilings,atCommunitylevelrThis
situationisdoubtlessmoreparticularly duetoashrinkingmarketforjute
products ,causedbythegrowinguseofsyntheticsubstitutues andpartlyas
aresultofchangesinpackagingtechniques .Itis,however,truethat,as
IndiaandBangladeshhaverepeatedlypointedout,theallocationofthe
CommunityvoluntaryrestraintceilingsamongtheMemberStatesintheformof
virtuallyfixedshares,offeringnorealscopeforthetransferofunutilizedamounts
fromoneMemberStatetoanother,hasresultedinapartialfreezeonexport
openings.
c)Theresultsofthecommercialcooperation provisionsofthecurrent
agreementshavebeenmodest.InJune1977,however,aroundtablewasorganized
undertheCommission'sauspices,bringingtogetherCommunityandIndianrepresent­
ativesconcernedwithindustry,tradeandresearchinthefieldofjuteproducts.
Amongtheconclusions reachedbytheroundtablewasanacknowledgement ofthe
needforjointactiononresearchandtradepromotion,andalistofpriority
projects.Ithasnotbeenpossibleyet,however,toputsomeofthese^projects
intoeffect(financing).
3.TheCommunityjuteindustry,whichhasbeeninthethroesofrationalisation ,
reconversion andrestructuring foraconsiderable timealready,isstillfacing
gravedifficulties intheformoffallingproduction,factoryclosuresandlay-offs.
In1970,Communityproductioninthespinningandweavingsectorswas300,000
tonnesand176,000tonnesrespectively,butin1978only102,000tonnesand
44,000tonnes.Iftheproductionindexissetat100for1970,in1978itstood
at34foryarnand25forfabricsandsacks.Thegeneraltendencyhasbeenfor
apparentconsumption ofbothfabricsandsackstofallduringthe12yearsfollowing
19£7.^Inthecourseofthelasttwoyearstherehasbeenacertainsteadyingof
themarket,butitistooearlytosaywhetherthiswillbemaintained.Whatis
certainisthatthecorresponding declineinEuropeanproduction,accompanied
byagrowthinimports,hasresultedinamajorriseinthelevelofimport
penetration .Thisreached81%forfabricsandsacksin1978.
Foryarn:1967:362,000tonnes,1970:301,000tonnes,1978;122,000tonnes.
Forfabricsandsacks:1967:342,000tonnes,1970:267,000 tonnes,1978:142,000
tonnes.

-4-
Itshouldbenoted,however,thatonlyonequarter(29,500)ofthetotal
quantitycffabricsands.acksimportedin1978islimitedunderagreementsor
nationallyestablishedceilings,theremainderbeingfree.
Itcannotberuledoutthattheconfirmation ofconsumertastesinfavourof
naturalproductsforcertainuses,thelowerflamabilityofjutecomparedwith
certaincompetingsyntheticsubstituteproducts,andthelikely
priceincreasefortheselatterproductsfollowingariseinpetroleumprices,
maymaintainorevenenhanceCommunitydemandforcertainmorerefinedproducts
suchasthoseusedinsoftfurnishings anddecoration.
ThedropinCommunityproduction canbeexplainedbythecontraction ofthe
market,whichismoremarkedeachyearandcausedprincipally bytheever-greater
useofsyntheticsubstitutesforjute,andnewmeansofpackaging;andisalso
areflectionofthedifficultyofmaintainsufficiently competitive massproduction
inthec?seofthemuchlowerproductioncostsinIndiaandBangladesh.
TheCommunity'sjuteindustryemployedsome13,000peoplein1978,comparedwith
19,000in1973.Thisrepresents areductionofapproximately31.5% In1973
77firmswereinoperation;in1978,only56remained.
Theindustryislocatedinrelativelyundeveloped Communityregions.8,000
ofthe13,000jobsintheCommunity'sindustryareconcentrated inDundeeinScotland,
wheretheyconstitute 8%ofallemploymentinanareawheretherateofunemployment
inFebruary1979was9.3%oftheworkforce.
Despitethefactthattheseregionsareconsideredasprioritydevelopment
areas,andasaresultbenefitfromtheRegionalDevelopment Fund,thelevelof
unemployment remainshighbecausetheopportunities forprovidingalternative
employmentareverylow.Itisthereforelikelythatacontinueddeclinein
activityinthejuteindustrywillincreasethosedifficulties whicharebeing
currentlyexperienced .Inadditiontothis,ifopportunities fortransfersto
otherjobsweretobemadeavailable,theagestructureoftheemployeesin
thejutesectorwouldgiverisetoproblems,becausethemajorityofworkers
areagedbetween40and50.
Itmustalsobeborneinmindthatthethreecountriespreparingtojoin
theEECalsohaveajuteindustry,employing600peopleinGreece,1,100inSpain
and1,200inPortugal,withaproduction ofsome27,000tonnesofyarnand
16,000tonnesoffabric.
*

-5-
4.Thepresentagreementsareduetoexpireon31December,anditistherefore
necessaryto.workoutthearrangements forImportsoftheseproductsfrom
1January1980.IntheLightofthevariousfactors,theCommissionconsiders
itadvisabletoaim,bymeansoffreshagreementswithIndiaandBangladesh,for
asystemconsistingof:
i)continuingquantitative importprotectionforagivenperiodtoallow
theCommunityjuteindustrytoadaptitselftothenewmarketcircumstances .
Thisaimshouldbeachievedwiththeconsentoftheexportingcountries
concernedbykeepingupasystemofvoluntaryrestraintofexports(2)
totheCommunityallowingforalimitedgrowthoftheseexports,and
providingforthesuspensionofrestrictions foralljuteproductsbefore
theexpiryoftheagreements.
Theimplementation oftheMTNoffertoconvertquotasinforceincertain
MemberStatesforcategories 1to3intovoluntaryrestraintmeasures(2)
wouldtakeplacewithinthisframework.
ii)MaintainingthezeroratesofdutyinforceunderGSPsince1January1978.
Thegroundsforthisapproachareasfollows:
a)Withregardtotariffs,theCommunity'sbasicofferonpreferences (GSP)for
jute"includestheelimination ofcustomsdutiesonlywherespecialarrangements
have-beenmadewiththedevelopingexportingcountries".Thedutieshave
nowbeeneliminated andshouldnotbereintroduced .
b)Inthecaseofthetwoexportingcountriesconcerned,theexportofjute
productsplaysanimportancepartinIndia'seconomy,beingconcentrated in
theBengalregionwhichislargelydevoidofotherresources(about20000
areemployedinthejuteindustry).ForBangladeshtheproduction andexport
ofjuteproductsconstitutethekeytothecountry'seconomy,accountingfor
70%ofitsexportearnings.
(1)Thearrangement withThailandforvoluntaryrestraintonitsexportsofjute
yarnalsoexpireson31December. \___
However,sincethiswasanadhoceconomicmeasureadoptedwithinthe
frameworkofanexchangeofletterswhichremainsinforce,theCommission
servicesconsideritadvisabletodealseparatelywiththispoint.Whether
ornottocontinuewithvoluntaryrestraintwillneedtobeconsideredinthe
lightofthesituationontheBeneluxmarketfortheseproductsandofthe
resultsofthenegotiations withIndiaandBangladesh.
(2)WithadoublecontrolsystemusedintheframeworkoftheMFAagreements.

-6_
Bangladeshis,inaddition,oneofthe"Leastdevelopedcountries"which,in
accordancewiththeresultsoftheMulilateralTradeNegotiations/aretobe
grantedspecialtreatment.
c)InthecourseoftheMultilateral negotiations Bangladeshrepeatedlydrewthe
Community'sattentiontothefactthatinitscase,specialtreatmentwould
havenecessarily toconsistofmeasuresinthejutesector,anddetailed
proposalswereputforward(inparticular,theremovalofCommunityimport
restrictions attheendof1981).
Inthiscontext,theCommunity'sMTNoffertoIndiaandBangladesh onjuteproducts,
beingagainthesubjectofnationalquotas,(categories 1to3),andasa
movetowardstheelimination ofquantitative restrictions,wastoconvertthese
importquotasinforceincertainMemberStates(Germany,FranceandtheUnited
Kingdom)intovoluntaryexportrestraintmeasuresasfortheotherjuteproducts
coveredbytheseagreements,withtheexportingcountryadministering the
1ceilings.
AttheendoftheMullateralTradeNegotiations,nofurtherreactionhaving
beenforthcoming fromIndiaorBangladesh,theCommunityagreedtosenda
lettertobothcountries,informingthem:
-thattheCommunitywasmaintainingitsoffer;
-thatthedetailsandimplementation oftheofferwouldbediscussed
againonabilateralbasisatthenextnegotiations .
OnthebasisoftheTokyoDeclarationgenerally,butinparticularofits
sixthparagraphwhichstatesthattheleastdevelopedcountriesshouldenjoy
specialtreatment,itwouldbelogicaltograntsuchtreatmenttoBangladesh
particularly sincejuteproductsindisputablyconstitute aproductionessential
tothiscountry.
1Theinitialreactionstothisofferwereasfollows:Indiacalledfor
liberalisation oftheproductsinquestion(categories 1to3),oratleast
forthenewagreementtccontainconsultation Levelsratherthanceilings,
asiscurrentlythecaseofyarn;Bangladeshagainstressedtheneedfor
"spec'sitreatment"asa"Uastdeveloped"country.

-7-
Inviewofthisdeclaration,andtakingintoaccountthelesscompetitive
natureofcertainjuteproductsmadeinBangladesh incomparisonwithcertain
ofthosemadeinIndia,itisessentialthatthesolutionsenvisagedbythe
Communityinthenegotiations donotinpractise,damagetheinterestof
Bangladesh.
However,inimplementing theoffermadeintheMTN,itwouldnotbeopportune
totreatBangladesh andIndiadifferently andtochangethequantitative
restrictions intoselflimitingarrangements foronecountryandnotforthe
other.
d)Withinthecontextoftherenegotiation ofthejuteagreementswithIndia
andBangladesh,theCommunityenvisagesananalogousrenewaloftheprotection
fortheCommunitymarket(withasuspensionofrestrictions beforetheend
oftheagreements )toallowthejuteindustryenoughtimetocarryoutits
adjustmenttomarketconditions andthememberStatestotackletheserious
problemscurrentlyfacingtheCommunity'sdepressedregionswherethisindustry
islocated. .
5.Inordertoavoidadditionaldifficulties arisingattheendoftheagreement,
whichwouldexacerbatetheproblemsoftheregionsconcerned,theCommission
considersthatitwillbeimportanttoencourageworkontherestructuring ofthis
sectoraswellasthedevelopment ofalternative employmentopportunities .
Inthisrespect,socio-industrial measureswillhavetobeconsideredinorder
tofacilitatereconversion activitiesforthejuteindustry,tocreatenew
employmentinthejute-producing regions,andtoretrainthelabourforceto
enablethemtoworkinothersectors.
Tothis
end,discussions shouldbeheldbetweeninterestedgroupsandtheresponsible
authorities inordertodrawupthegeneraloutlineforthisapproach.
ι
TheCommunityhaveatitsdisposalfinancialinstruments whichcould
facilitatetheintroduction ofsuchmeasures,notably:

-8-
-TheEuropeanSocialFund:thiscan,fromnowonwards,facilitate the
readaptation andtheredeployment ofworkersinthejuteindustrybyfinancing
1vocationaltrainingschemesunderDecision76/206/EEConintervention bythe
EuropeanSocialFundinfavourofpersonsoccupiedinthetextileandclothing
industries .
"TheEuropeanRegionalDevelopment Fund:theFundcouLdinterveneintheeligible
regions,notablyintheDundeeareabywayofits"subjecttoquota"section.
TheeconomicproblemswhichwouldresultfromtheCommunitynegotiations between
IndiaandBangladesh wouldalsoenablethe"notsubjecttoquota"sectionofthe
FEDERtobeused.
TheCommission considersitdesirablethat.theCouncil,whenitadapts
thisRecommendation ,shouldindicateitsinterestinsuchmeasuresbymeansofthe
statement showninAnnexIIwhichwouldbeincludedintheMinutesoftheCouncil's
deliberations .
6.Thereexists,ontheonehand,theneedfortheCommunitytoregulate,
onthebasisofthelinesindicated andtheconsiderations laiddown,the
tradearrangements forjuteproducts;andontheotherhand,forunderstandable
reasons,itisappropriate doingsobymeasureswhicharenon-unilateraUItis
alsodesirablefortheCommunitytotakeastepforwardtowardsmeeting,atleast
inpart,therequestsofIndiaandBangladesh .Itisfurtherdesirablethatcon­
ditionsbecreatedwhichenablethesenegotiations tohavealikelihoodofsuccess.
Itisnecessary,however,totakeintoaccounttheneedtoallowtheEuropean
juteindustry,whichislocatedinregionswhichareeconomically weak,toadapt
tonewmarketconditions .Itseemsappropriate thattheapproachtowardssuch
negotiations shouldenvisage,underacontractual arrangement,asystemofself-
limitation onexports,analogousinitsmajoroutlines,tothatcurrentlyin
forceandthefixing,beforetheendoftheyear,ofagreements suspendingall
restrictions .
TheCommissiontherefore recommendsthattheCounciladopttheannexeddraft
Decision.
O.J.NoL39/39of14.1.1976;modifiedbyDecision77/802/CEE(O.J.NoL337
of27.10.1977,p.100).

RECOMMENDATION FORACOUNCILDECISION
*
authorizing theCommissiontoopennegotiations with
Bangladesh andIndiawithaviewtoconcludingagreements
ontradeandcommercialcooperation injuteproducts
THECOUNCILOFTHEEUROPEANCOMMUNITIES,
HavingregardtotheTreatyestablishing theEuropeanEconomicCommunity,and
inparticularArticle113thereof,
Havingregardtotherecommendation fromtheCommission,
WhereastheCommunity'sofferongeneralizedtariffpreferences providesthatthe
elimination ofcustomsdutiesshouldalsobeenvisagedforjut6products
"wherespecialarrangements havebeenmadewiththedevelopingexportingcountries";
WhereastheEuropeanEconomicCommunityhasnegotiatedagreements ontradeinjute
products,whichconstitutesuch"specialarrangements",withtheRepublicof
India,andwiththePeople'sRepublicofBangladesh;whfereasthesaidagreements
expireon31December1979;
Whereasitisdesirabletoauthorizetheopeningofnegotiations withIndiaand
Bangladeshwithaviewtodeterminingthearrangements tobeapplicableafter
thatdatetotradeinjuteproducts;
HASDECIDEDASFOLLOWS':
SoleArticle
TheCommunityisherebyauthorizedtoopennegotiations fortheconclusionof
agreementsbetweentheEuropeanEconomicCommunityand,ontheonehand,the•
RepublicofIndiaand,ontheother,thePeople'sRepublicofBangladesh,
ontradeandcommercialcooperation injuteproducts.
TheCommissionshallconductthenegotiations inconsultation withtheSpecial
CommitteeprovidedforinArticle113oftheTreatyandinaccordancewiththe
directivescontainedintheAnnextothisDecision.
DoneatFortheCouncil

ANNEXI
NEGOTIATING DIRECTIVES
1.Agreementtobevalidforsixyears,i.e.until31December1985.
2.IndiaandBangladeshtoexercisevoluntaryrestraint ontheirexportsto
theCommunityofjuteproductsfallingwithincategories 1to3,4,5and
7,until31December1984.Thevoluntaryrestrainttotakethefollowing
form:
-forcategories 4/5and7,Communityceilingsbasedonthoseinforce
in1979,withasuitableannualpercentage increase;
-forcategories 1to3,ceilingsforsomeMemberStatesonly,basedon
existingnationalquotasoronimports,wheresuchquotasareexpressed
intermsofvalueorconstituteglobalquotas,withasuitableannual
percentageincrease. '
3.Suspension,asfrom1January1985,ofallthequantitative restrictions
inforceintheCommunity.
4.Arrangements concerning flexibility (betweenquotasharesoftheMember
StatesandbetweenquotasharesofoneWemberState;carry-forward and
advanceddeliveries )analogoustothosefixedinthecurrentagreements .
5.Theconsultation clauseinforceforjuteyarns(category6)underthe
presentagreementstobemaintained .
6.Thezero-dutytariff*suspensionappliedundertheGSPtobemaintained .

ANNEXII
Declaration tobeinsertedintheCouncil'sMinutes
TheCouncilconsidersitadvisabletoencouragethecontinuation
oftherestructuring ofthejutesectortogetherwith,inthepoorerof
theregionsconcerned,thecreationanddevelopment ofnewactivities ..
ItwillexaminefavourablyallsuchCommunityactionasthe
Commissionconsidersitnecessarytoproposetothisend.