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DOCUMENTS "COM"
COM(81)429
Vol.1981/0134

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COMMISSION OFTHEEUROPEAN COMMUNITIES
/
COM(81)429final
Brussels.10august1981
s
\c<•;
v,--A
NEGOTIATION OFFRAMEWORK AGREEMENTS
\H-";RELATING TO
""
THEMULTIANNUAL SUPPLY OFAGRICULTURAL PRODUCTS
ν\/
.\
(Commission Communication totheCouncil)
C0M(8l)429final

Inviewofthespecialinterestshownbothinsideandoutside
theCommunityintheconclusionofframeworkagreementsforthemu!bi­
annualsupplyofagricultural products,whichwouldbenegotiated bstw^en
theCommunityandnon-membercountries,theCommission advocated,inics
."Reflections onthecommonagricultural policy"(C0M(80)800)aswellas
inits."ReportontheMandateof30May1980"(C0M(81)300final),the
sjetting-upofthisnewinstrument asoneofthenewideasputforwardon
/agricultural policy.-
Thepurposeof'thispaperistodealwiththatsuggestionin
moredétail.
1.Thedesireforgreatersecurityofsupplyhasledanumberofnon-
membercountrieswhichbuyfromtheCommunitytopressforabetter
\
frameworkforthecontractswhichareconcluded.Theexportpolicy
currentlypursuedbytheCommunity doesnotallowittorespondsatis­
factorilytooneofthemainpointsofconcernofmanyimportingcoun­
tries(andthedevelopingcountriesinparticular),andtheirconcern
isgrowingastheyfinditincreasingly difficulttofeedtheirgrowing
populations):whasthesecountriesareaimingatisthattheyshouldbe
abletopursuetheirownsupplypoliciesonmorepredictable andmore
securetermsthanthoseofferedsofarbytheCommunity.
ItisonlyifthisconditionisfulfilledthatCommunitysuppliesof
foodproductscanfindtheirplaceinanyrealfoodsecuritypolicyor
strategy(eitheratworldleveloratthelevelofeachcountrycon­
cerned)suchaswasrecentlyadvocatedoncemorebytheEuropeanPar­
liamentandbytheWorldFoodCouncilwhenitmetinNovilad.
2-.Communitypolicyonagricultural exportsiscurrentlybased ■nthe
singlemarketingyear,therefundbeingthemaininstrument uj*.-dto
regulatethequantitiesexported,destination andprice.
•/·α*

2.
Thequantitiesexportedinagivenyeardependonalargenumberof
factors,butchieflyonproduction,onimportsofthesameorsubsti­
tuteproducts,andonrequirements,whichareinfluenced bynatural .
conditionsandbytheinternalsupportmeasuresadopted.Thequanti­
tiesexporteddonotthereforeresultfromanysingledecision;they
resultfromtheoverallsupply/demandpositionintheCommunityin
theyearinquestionandarenotbackedbyanysystematicpolicyon
stocks.ItislargelyforthisreasonthatthevolumeofCommunity
agricultural exports,particularly exportsofbasicproducts,varies
appreciably fromoneyeartoanotherandthatfluctuations occureven
withinasinglemarketingyear.
Themaindisadvantages ofsuchapolicy,gearedtothesupplyneeds
oftheinternalmarket,areclear:thecontinuitywhichisessential
foraconsistentexportpolicyismissing;itisdifficulttooptimize
thetiming,volumeandnatureofexportsales;becauseofthevariabi­
lityofCommunitysupplies,privateoperatorscannot,makefirmtrade
arrangements oncertainmarkets;itisalsonoteasyforthemtocom­
peteonnon-Community marketswithotherexportersstronglybackedby
theirgovernments andhavingaccesstootherinstruments ofexport
policynotavailabletoCommunityexporters;lastly/expenditure on
refundsisinflated.
« *
3.Recognizing theimportanceofarrangements wherebythestabilityof
worldmarketpricesandsuppliescanbeensured,theCommunityhas
alreadydevisedvariousmechanismstoremovesomeoftheuncertain­
tiesinherentinworldtradeconfrontingexportersunderthepresent
exportpolicy.SuchactionhasmainlybeentakenatManagement Com­
mitteelevelandhastakentheform,forexample,oftheadvancefixing
ofrefundsandofmonetarycompensatory amounts,thedifferentiation
oftherefundaccordingtointendeddestination oruseandtheuseof
theproductbalancestokeeptrackofexporttrendsthroughoutthe
marketingyear.
However,theexportrefund(whichisintendedtobringthepriceofthe
Communityproductdowntotheworldmarketprice)andtherelatedme­
chanismscannotinthemselvesconstitutethebasisforapolicyon
agricultural exportssuchasthatpursuedbyourtradingpartners.
■/•••

3.
Andwhatever improvements maybemade tothearrangements foritsuse,-
therefund cannot fulfil therole played bytheother instruments and
mechanisms used byother exporting countries .
A.Thegovernment-financed instruments available tooperators inother
exporting countries aremany andvaried :buffer stocks ofgoods for
export ;short -,medium -and long-term credit facilities ;framework
agreements relating tothemultiannual supply ofagricultural products ;
export promotion funds ,etc .
Some ofthese mechanisms already exist intheCommunity and itsMember
States ,although noconsistent use ismade ofthem .The one instrument ,
however ,which ismost clearly lacking atthepresent time andwhich
has,moreover ,come into increasing use inrecent years inallother
countries istheagreement onthemultiannual "supply ofagricultural
products .
5.TheCommission would like tomake the following points clear inconnec­
tion with the scope and content ofmultiannual supply agreements :
<i) First ofall itbelieves that innocase should the conclus-ion of
such agreements bytheCommunity have theeffect ofartificially
inflating agricultural production intheCommunity orofjusti­
fying surplus agricultural production .Inview ofthequantities
available forexport intheCommunity ,there isnorisk ofincen­
tive toadditional production ;levels ofproduction are influenced
byother factors farmore significantly than they would bebythe
moderate use ofmultiannual supply agreements .
Thesole aimofproposing arrangements forconcluding such agree­
ments istoestablish greater order inapart oftheCommunity 's
agricultural exports forwhich supplies seem assured ,sothat the
needs ofcertain countries which buyfrom theCommunity canbe
accommodated more effectively .
With reference 1toitsremarks inthe "Report ontheMandate of
30May1980",theCommission would draw attention once more ,in
connection with theabove considerations ,totheadvantage which
would bederived from basing price policy "onanarrowing ofthe

4.
gapbetweenCommunitypr1c»»indpMeeiappliedbyitsmaincompe­
titorsintheinterestsofcompetitiveness ",inordertoimplement
successfully anexportpolicyforagricultural productswithout
placingadditional burdensontheCommunitytaxpayer-andpossibly
*
makingsavingsinstead. ,
(ii)Theimplementation intheCommunityofframeworkagreementsforthe
multiannual supplyofagricultural goodsshouldbegovernedby:
-existingorforeseeable requestsbyimportingcountries whichare
theCommunity'scustomers whoselevelofagricultural production
traditionally fallsshortofrequirements ;
-Communityagricultural production andthequantities availablefor
export.TheCommission wouldliketostressinthisconnection
thatmultiannual supply\agreements cannot,ofcourse,covermore
thanacertainpartoftheCommunity'sexports.TheCommission
wouldalsoliketostressthatinitsviewthereisnoquestion ,
ofturningsuchframeworkagreementsintoafavouredexportins­
trumentbyusingthemonawidescaleandattheexpenseofall
theotheradjustments neededwithinexistinginstruments ;
-existingmarketingchannelsintheimportingcountries,asthe
Communitymustnotenterintomultiannual supplyagreements with
privatepurchasing companiesormarketingboardsoutsidethepub­
/
liesector.
(iii)Nor,ofcourse,cantheconclusion bytheCommunityofsuchagree­
mentssignifythatitwouldbetakingtheplaceoftheoperators
themselvesforthepurposesoftheexecutionofcommercial contracts
orthatitwouldbepenetrating furtherintocommercial channels.
Bydeliberately choosingtheterm"frameworkagreement",theCommis­
sionintendstomaintaineveryone'spresent ,responsibilities ,with
thecommercial operatorsretainingtheroletheynowplayandthe
Communityitspresentcompetence .
ι
(iv)Theexperience andpracticesofothertradingcountries (United
States,-Australia,Canada,etc.)haveshownthatlong-termagreements
mustbeassimpleandflexibleaspossible.Theprovisions should
relatetothenatureoftheproductorproductsconcerned,thetotal
./...

quantities committedoneitherside(salesandpurchases),thedurationof
theagreement,themeasurestakenbythepartiestoensurefulfilmentof
theircommitments/conditions governingpricesandanysafeguardclauses
required.
-Withregardtopriceconditions,twocommentsmustbemade.Mostagree­
mentsconcluded byothertradingcountriesreferonlytocurrentworld
marketprices/becausetheaimisforthegoodstobesuppliedonconditions
asnearaspossibletonormaltradingconditions ;inaddition,certain
arrangements aregenerallylaiddownforpayment(credit).TheCommunity
shouldbeabletoadoptttjesamegeneralapproach. --
f ■ _
Onthespecificquestionofcreditpayment,marketstudiesshowthatthis
typeofsalehasmushroomed inrecentyearsandthatwherecertaincoun-
II
triesareconcernedtheconclusionofsupplyagreements dependsonthe
inclusionofthisfacility.ItwouldbedesirabletoseekaproperCommu­
nitysolution,butthisisaquestionthatextendsbeyondthematterof
frameworksupplyagreements .Inthemeantime,someformofcooperation
shouldbeencouraged betweentheagenciesaccustomed tothiskindofope­
rationintheMemberStates. ~
-Withregardtoquantities committed,theformulatobeconsidered could
coveraperiodrangingfromthreetofiveyearsandwouldinvolvespeci­
fyingabracket(i.e.minimlimandmaximumamounts),withthequantityto
besuppliedovertwelvemonthswithinthatbracketbeinglaiddownata
certaintimeeachyear..
Accordingly/theseconsiderations wouldrequirethattheframeworkagree­
mentsincludeasafeguardclausereleasingtheCommunityfromitssupply
obligations shouldthequantitiesavailablefalltoapointwhichcould
endangersuppliestotheCommunityinternalmarket.
-Withregardtoproductseligibleforexportundersuchagreements,deci­
sionswouldhavetobetakenineachcaseintheLightofthequantities
availableforexportintheCommunityandtheneedsanddesiresofthe
non-member countries concerned .
* a/••a
1Article 1§3oftheUSA-Chinaagreementsignedon20October1980reads
asfollows:"Purchases/salesofwheatandcornunderthisagreementwillbe
madeatmarketpricesprevailingatthetimeofpurchaseandinaccordance
withnormalcommercial terms".

6.
(v)Long-termagreementsforthesupplyofagricultural productsshould
formpartofapolicytoensuregreatersecurityoffoodsupplies
andinthecaseofcertaindevelopingcountrybeneficiaries they
couldbeimplemented intandemwithmultiannual foodaidagreements.
I;
4
(vi)WhereframeworkagreementsforthesupplyofCommunityagricultural
productsareconcludedwithcountrieswithwhichtheCommunityhas
negotiatedcooperation agreements,theycouldtaketheirplacealong­
sideotherdevelopment cooperation instruments .
6.TheCommissionbelievesthatframeworkagreementsofthistypewillnot
createanyradicaldisturbance inpresenttradearrangements orprocedures
orintheworkingsofthecommonmarketorganizations .Someadjustments
maybenecessaryinthelightofspecificrequestsbyapplicantcountries.
AnychangeswouldbethesubjectofspecificproposalsbytheCommission,
tobeadoptedbeforethelong-termagreementsareconcluded.
7.TheCommissionconsidersthattheimplementation offrameworkmultiannual
supplyagreementsofthetypeoutlinedaboveshouldnotresultinanyin­
creaseinthebudgetaryexpenditureoftheEECandmightevenreduceit.
Inthiscontextitproposestostudyeachyearthebudgetaryconsequences
ofthecostsincurredundersuchcontractsandtoreportonthematterto
theCouncil.
8.TheCommissionconsidersthatthismatterofagreementsforthemultiannual
supplyofagricultural productscouldnowbefruitfullydiscussed.
InthelightofthediscussionsintheCouncil,theCommissionwillcontin­
ue•itsstudyofthemechanismsandproceduresfortheimplementation of
suchagreementsandwillpresentformalproposalswhereappropriate .
Η