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No C 339/44 Official Journal of the European Communities 31. 12. 91

Moreover, the Committee does not feel that it is necessary for airport coordinators to be appointed directly by
the Member States and answerable only to them, but
it does support the concept of neutrality and transparency in slot allocation and believes that Member

Done at Brussels, 25 September 1991.

States should be required to ensure the appointment of
neutral coordinators.

Know-how and impartiality are of the utmost importance for this task.

_The_ _Chairman_

_of the Economic and Social_ _Committee_

Francois STAEDELIN

Opinion on EC relations with the countries of Central and Eastern Europe

(91/C 339/12)

On 24 April 1990 the Economic and Social Committee, acting under the third paragraph of
Article 20 of the Rules of Procedure, decided to draw up an additional Opinion on EC
relations with the countries of Central and Eastern Europe.

The Committee's comments on the Community's continuing association negotiations with
Czechoslovakia, Poland and Hungary essentially relate to the position in mid-June 1991. The
Committee reserves the right to comment separately on the most recent developments in
Eastern Europe, with particular reference to the Baltic States and the USSR, and to make
changes, where necessary, to individual passages of the present Opinion.

The Section for External Relations, Trade and Development Policy, which was responsible
for preparing the Committee's work on the subject, adopted its Opinion on 12 September
1991. The Rapporteur was Mr Petersen.

At its 289th plenary session (meeting of 26 September 1991) the Economic and Social
Committee adopted the following Opinion unanimously.

INTRODUCTORY COMMENTS

Given the length of this Opinion the Committee believes
that it would be appropriate to begin by summarizing
its most important views and recommendations on the
European Agreements.

The Committee thinks it imperative to use the present
historic opportunity to establish closer, more stable
relations with the countries of Central and Eastern

Europe and to lay the foundations of a Common European House for all European countries.

The Committee considers that top priority should go
to removing economic and social imbalances between
the Western and Eastern halves of Europe.

The Committee considers that existing trade and cooperation agreements are a possible means of strengthening inter-State dialogue; they are also likely to provide
an economic underpinning for the political reforms now
under way in Eastern Europe.

The Committee welcomes the idea of Association since

it is calculated to secure and promote closer political,
economic and social relations between the European
Community and its Eastern neighbours.

The Association Agreements (European Agreements)
also form an institutional framework for political dia

31. 12. 91 Official Journal of the European Communities No C 339/45

logue, capable of including exchanges of views about
pressing bilateral and multilateral problems.

The Committee considers that it should be possible in
the next few years to build up a network of European
Agreements with the Community's Eastern neighbours.
At the same time, it urges that concrete negotiations be
started as soon as possible with the Baltic States of
Estonia, Latvia and Lithuania with a view to concluding
European Agreements. At the same time, the Committee
assumes that the European Commission will continue
its careful, comprehensive monitoring of political and
economic reforms and will analyze their chances of
success impartially. Only when this has been done
should association negotiations proper be opened. It
would be disastrous if intra-Community-consolidation—Single Market, Economic and Monetary
Union, Political Union—were delayed or even watered
down because the successive steps towards pan-European integration had been inadequately prepared.

The Committee endorses the opening of association
negotiations with Czechoslovakia, Poland and Hungary. It approves in principle the content of the draft
treaties negotiated so far provided that its critical comments and recommendations are duly heeded.

The Committee urges the contracting parties to also
refer in the preamble to the social dimension of European unification and to mention the Community Charter of the Fundamental Social Rights of Workers
adopted, albeit not unanimously, by the Heads of State
or Government of the European Community in
December 1989. Closer relations with our Eastern
neighbours, and Community assistance, should not be
confined to economic, technical and financial fields but
should also adequately take into account the many
different social aspects.

In the interests of establishing the necessary climate of
confidence, the Committee supports the contracting
parties of Eastern Europe in their desire to incorporate
in the preamble their wish to become members of
the Community. However, it does not think that the
preamble should specify a time horizon for membership
applications.

The Committee further proposes that the preamble
contain a statement to the effect that the contracting
parties of Eastern Europe unconditionally accept the
'acquis communautaire' and undertake to approximate
their respective countries as closely as possible to the
current level of Community integration over the two
five-year stages envisaged.

The Committee welcomes the willingness of the contracting parties to uphold the principle of free trade
and abide by provisions of the General Agreement on
Tariffs and Trade (GATT) in particular.

The Committee calls on the contracting parties to
ensure that economic and social interest groups are
brought within the organizational framework embracing institutions of association.

It recommends the creation of a consultative committee,
made up of ESC members and members of a similar
grouping from the associated countries.

As regards the provisions of the European Agreements
covering the free movement of goods, the Committee
would emphasize the following points in particular:

— It regrets the decision taken in the course of negotiations not to apply the two-stage approach (consisting of two five-year periods) to the liberalization
of the movement of goods. As far as foreign trade
in industrial products is concerned, a stage-by-stage
approach—enabling the course of further market
liberalization to be reviewed at the end of the first
five-year period—would have been of intrinsic value
and crucial importance.

— The Committee supports without reservation the
Community's asymmetrical approach to the creation of a free-trade area but wonders whether five
years are needed to throw open the Community's
markets completely to industrial goods from Eastern Europe. Given the major restructuring problems
facing these countries, the Community should consider whether more convincing efforts should not
be made to open up its markets by the time the
treaties come into force.

— In the case of sensitive sectors—textiles, products
of the European Coal and Steel Community (ECSC)
and agriculture—the Committee would draw attention to the relevant GATT provisions that no sector
can permanently be protected from the open
market.

— The Committee wonders whether trade in textiles
might not benefit from a speedier opening up of
markets than originally proposed. The liberalization
process could certainly be speeded up in the case of
outward processing traffic.

— The Committee thinks that the Commission must
get together with the Community's associated partners to draw up as soon as possible a convincing
blueprint with a clearly defined timetable for the
restructuring of the steel industry in Eastern Europe
and a correspondingly gradual liberalization of the
steel markets. The blueprint should not only satisfy
steel undertakings on both sides but should also be
suitable for inclusion in the free-trade area agreements in conformity with GATT.

The Committee believes that the solution to the
problem of steel supplies would be to dispense with

No C 339/46 Official Journal of the European Communities 31. 12. 91

voluntary restraint agreements with our three partners in Eastern Europe after a transitional period
which would make sufficient allowance for the

restructuring and rationalization of their steel industries. At the same time, the Community's Eastern
European partners would have to agree to stop
non-GATT compatible practices in their trade with
Community countries. This would be achieved in
particular by accepting the ECSC rules on aid.

— The Committee understands the reasons for the

compromise proposal to suspend import duties
on coal during the first five-year period of the
European Agreements, after which quotas and
similar measures should be applied more flexibly
—subject to constraints set out in the Agreements—with a view to their complete elimination
by the end of the ten-year transitional period.

— Since agricultural products have a vital role to play
in the foreign trade of the three Eastern European
countries, the Committee agrees with the European
Commission that these three associated countries

and the Community will have to make mutual concessions regarding agricultural products covered by
EC market regimes. In agreeing on concessions,
account will have to be taken of the sensitivity of
the products, the common agricultural policy and
the outcome of the GATT Uruguay Round. In this
connection, the European Commission must ensure
that the difficult problems associated with the common agricultural policy (CAP) are not aggravated.

— The Committee welcomes the accompanying
measures proposed in connection with the creation
of a free-trade area. It assumes that the GATT anti
dumping and subsidy codes will be fully observed.
It also thinks that the Eastern European partners
should align their national competition law as closely as possible on the corresponding Community
rules from the outset. In addition, it endorses their
call for cumulative rules of origin.

The Committee approves the inclusion of policies on
the free movement of persons, services and capital
in the European Agreements, but warns that certain
passages in the Agreements have been made too abstract
in an attempt to achieve a compromise.

In the case of the free movement of persons, the Committee regrets that there are no arrangements covering
workers from Czechoslovakia, Poland and Hungary
working illegally in the Community. Community rights

and obligations affecting residence, employment and
mobility should apply without restriction to legal immigrant workers and their families.

The Committee thinks that the proposal to facilitate
the immigration of workers as from the second stage
of the ten-year transitional period, but under certain
conditions, should be accompanied by a reference to
the fact that the Community has limited scope for
action, even in the medium term.

In view of the redundancies brought about by reform
in the Eastern European States, the West must not only
provide financial and technical aid, but also ensure
sustained support for the necessary training of workers.

Whilst the Committee endorses in principle the arrangements on freedom of establishment, it feels that 'dramatic' reductions in the domestic market shares of

our Eastern partners can scarcely be a justification for
protectionist measures.

With regard to the freedom to provide services, the
Committee supports the proposed liberalization but
assumes that the Association Council will at all times

prevent social dumping.

The Committee regrets that the negotiating parties have
not yet agreed on a timetable for the liberalization of
capital movements which would clearly indicate when
various categories of financial transaction are to be
integrated into a 'fully liberalized system'.

The Committee regrets that the draft agreements fail
to fix priorities for the approximation of legislation in,
for example, the fields of environmental, competition
and subsidy law and in respect of worker and consumer
protection. The 'two-stage concept' should have been
specified in the relevant passages of the agreements.

With regard to economic cooperation, the Committee
welcomes the explicit assurance of the contracting partners that the environmental aspects of economic
measures will be taken into consideration from the

outset. Environmental policy affects the whole of Europe and must be integrated with other policy areas.
At the same time, the Committee feels justified in
questioning whether joint projects can be implemented
in all the (approximately 150 economic) areas specified
in the nineties. It therefore calls for a rigorous action
plan based on attainable priority objectives. In the first
instance, these should relate to such areas as infrastructure, nuclear power and education and training.

The Committee thinks that clear financial cooperation
priorities should likewise be agreed with the Eastern
European partners and taken into account in drawing

31. 12. 91 Official Journal of the European Communities No C 339/47

up multi-year plans. It also calls for the creation of a
Community Task Force to supervise all the aid provided

(a) by the Community (including bilateral assistance),
(b) other countries of the Orgranization for Economic
Co-operation and Development (OECD) and (c) international finance institutions, and to monitor the use to
which it is put, to correlate funding and spending
in the Association Committee and to monitor how

efficiently resources are used in conjunction with the
Eastern European partners. The Association Council
should be regularly informed of the results of these
activities.

1. Introduction

1.1. At a time of major political changes and regeneration in the countries of Central and Eastern Europe,
where the aim is to introduce market economies and

democratic social systems under which these countries
can make serious efforts to liberalize foreign trade and
become an integral part of the world economy, the
Committee believes that the historic opportunity must
be seized to forge closer and more stable relations with
these countries and lay the foundation for a Europe,
for a Common European House which accepts all European countries and leaves no one outside in the cold.

1.2. The Economic and Social Committee has ana
lyzed the radical, complex changes taking place in Central and Eastern Europe in a number of Opinions. The
Committee's aim in the past has been:

— to obtain a picture of the likely economic and social
impact of political reforms in neighbouring Central
and Eastern Europe countries,

— to assess the measures already taken by the European Community (a) as an emergency response and
(b) to put relations with Eastern Europe on a new
footing,

— to draw up recommendations on the economic and
social strategies to adopt towards Central and Eastern European countries both immediately and in the
medium term( [1] ).

In the middle of 1990 the Section for External Relations,
Trade and Development Policy followed these Opinions
up with an Information Report on the current economic
and social situation in eight Central and Eastern European countries ( [2] ). In November of the same year the
Committee delivered an Opinion on the European
Commission's Communication on The Community and

German Unification ( [3] ). This latter Opinion also
emphasizes the Committee's positive attitude to the
reform movements in Central and Eastern Europe.

1.3. Developing and strengthening democratic structures, as well as opening up frontiers, is of vital importance if political, economic and social cooperation with
our Central and Eastern European neighbours is to be
intensified. Only through cooperation will mutual trust
be created and only through cooperation can this climate of trust be consolidated and further improved. In
this respect the prospects for cooperation are now much
brighter than hitherto seemed possible.

1.4. The Committee considers that top priority in
the widest sense of the term should be given to removing
economic and social imbalances between the Western

and Eastern halves of Europe. After the ups and downs
of oil prices in the seventies and the debt crisis of the
eighties, this is the third big challenge of the second
half of the twentieth century. The Committee believes
that if we act with perseverance and if our common
interests are presented convincingly, promising solutions can be found. It nevertheless recognizes that it
will take longer than the present decade to fully meet
this challenge.

1.5. Nothing is more absurd than a situation where
people with exactly the same capabilities, intelligence
and application live in prosperity and enjoy high living
standards in one half of Europe whilst there are frequently shortages and poverty in the other half. The
most striking example of this is the contrast between
the Federal Republic of Germany and the former GDR,
where people with the same history, language and traditions have worked for more than forty years under
different political and economic systems. If the results
have differed so widely, this is clearly not because of
some human factor but because the systems themselves
have varied a great deal in terms of efficiency.

1.6. The growing interdependence of the world economy, the mutual dependence and close interweaving of
political, economic and social aspects, reinforce the call
for a transformation of the systems of Central and
Eastern European countries, for a changeover to free
market economies (with social components). What is
required is a courageous reform policy which does not
get bogged down in small-scale measures. The road
from a socialist command economy to a social market
economy is hard and strewn with obstacles. The setting
of quantitative goals, state planning targets and the use
of money solely as a bookkeeping unit of account (as
happened in intra-Comecon trade for years) have had
all sorts of negative consequences which cannot be
eliminated overnight.

( [J] ) OJ No C 175, 4. 7. 1988, OJ No C 124, 21. 5. 1990.
( [2] ) Doc. ESC 492/90. ( [3] ) OJ No C 41, 18. 2. 1991.

No C 339/48 Official Journal of the European Communities 31. 12. 91

1.7. The European Community should also remember that although the social market economy is rooted
in firm principles, it can be applied flexibly. The social
market economy is a necessary if not sufficient prerequisite for pluralistic democracy, respect for human rights
and freedom of speech. It is also important to bear
in mind that despite many features in common each
individual country runs its economy under different
conditions and in accordance with different traditions.
Diversity on the continent of Europe is a reality, the
result of political decisions and different historical processes. Every European nation will therefore go its own
way and will have to find its own answers to the
challenge of change.

2. Macro-economic prospects in Central and Eastern
Europe

2.1. The democratic and economic reforms in Central and Eastern Europe have made the Eastern economic union, the Council for Mutual Economic Aid
(Comecon), an empty shell. The formal dissolution of
Comecon—decided at its 46th and last plenary session
at the end of June this year—marked the end of a
process of decline which had begun in the mid-Eighties.
Since then, visible intra-Comecon trade had been
shrinking. In 1990, two of its cornerstones (multilateral
cooperation and the co-ordination of national economic planning) were abandoned. German unification
removed one of the reasons for Comecon's existence
and when, in January 1991, the members finally decided
to conduct intra-Comecon trade in dollars rather than
transfer roubles (the common unit of account),
Comecon was to all intents and purposes disbanded.

As yet it is unclear whether the countries concerned
will develop a new form of (close) economic cooperation. There has been a wide variety of proposals.
Many politicians advocate a successor institution, such
as an 'Organization for international economic cooperation', whilst others quote the example of the Western
European Payments Union (EPU), established in 1950,
which provided clearing and credit facilities for its
member countries. It would, however, seem more
realistic in the first instance to establish only a consultative forum to regulate cooperation between former
Comecon members situated in Europe. At the beginning
of February 1991, the three reformist States—Hungary,
Poland and Czechoslovakia—meeting in Visegrad in
Hungary decided on the route to be taken. They agreed
to cooperate closely with a view to bringing their overall
economic performance up to the Western European
level and developing stable democratic relations following the collapse of the communist system. Hungary's
Prime Minister, Josef Antall, defined the common
objective as 'complete integration in the European political, economic, security and legal system'.

2.2. Democracy and dictatorship, the social market
economy and the planned economy are antithetical
concepts which cannot be reconciled by any 'third way'.
Certain Eastern European countries have recognized
this and promptly initiated the indispensable process of
reform, whereas others are still searching for the right
plan. They are struggling with a trial-and-error
approach involving a 'policy mix' based on planning
and control mechanisms combined with half-hearted
reforms. Such a policy cannot solve economic and social
problems. On the contrary, it merely obstructs the
indispensable structural adjustment of the economy,
deferring it to what hardly seems likely to be an easier
future and thus intensifying the problem.

The inherent weaknesses of the Eastern economic system—technology gaps, productivity lag, lack of capital,
wasted resources, environmental pollution, supply
shortages and character deficiencies (independence, creativity)—are obvious and largely undisputed. Moreover, experience in the former GDR confirms that
transition to a social market economy is a far more
radical process than expected—even a few months ago.
Notwithstanding massive economic and financial aid,
the overall economic situation in the new Federal
Lander is still characterized by falling production and
employment. Whether the hoped-for upturn will occur
by the end of the year is far from certain. This makes
it all the more urgent to know how long other reformist
countries are likely to need to switch from a planned
to a social market economy. A Conference Board study
mentions twenty to thirty years, whilst the Centre for
Economic Policy Research suspects 'that ten years is
the minimum time-span that will be required by the ...
East European reform process, with two or three decades being perhaps a more realistic estimate'^).

A more optimistic note is sounded in a Prognos study
which outlines development scenarios for eight Eastern
European countries and provides a qualitative analysis
and evaluation of the individual factors involved ( [2] ).
Proceeding from the (reasonable) assumption that
macro-economic development will follow a J curve,
this Institute distinguishes three phases: contraction, reorientation and growth. The intensity and duration of
the individual phases will differ from country to
country. In addition to the former GDR, Hungary,
Poland and Czechoslovakia enjoy favourable conditions
which should enable them to succeed in the difficult

(*) 'The Impact of Eastern Europe monitoring European Integration', in: _Annual Report 1990,_ Centre for Economic Policy
Research, London 1991.
( [2] ) _Entwicklungspotentiale_ _im Osten_ — _Standorte und_ _Markte,_
Prognos AG, Europaisches Zentrum fur Angewandte Wirtschaftsforschung, Basel 1991.

31. 12. 91 Official Journal of the European Communities No C 339/49

task of transforming the system. The Institute thinks
that the recovery process could produce tangible results
in two to three years in those three countries with the
possibility of significant economic growth (above 4%)
in the second half of the nineties.

Prognos considers that the conditions for economic
stabilization are 'far less favourable' in the case of the

USSR. Here, the economic reform process is complicated and has not become any simpler after the failed
putsch. The construction of a 'new democratic system'
is still in the midst of being carried out. The economic
union which the Soviet Republics would like to see has
so far only been sketched out in rough outlines. No
doubt each of the sovereign Republics will 'work out
and implement its own programme for the transition to
the market system', in accordance with the compromise
programme 'Guidelines for economic stabilization and
transition to a market economy' approved in October
1990. This means that the individual Republics will
move towards the market economy at different
speeds ( [1] ). In fact there is a possibility that in individual
Republics unfavourable political factors (e.g. nationalist conflicts and the resistance of doctrinaire elements)
will also impede the establishment of reliable marketorientated structures. Any attempt to limit, with any
degree of reliability, the time needed for economic
stabilization and the application of market principles
in the USSR, is therefore bound to fail. The words of
Mikhail Gorbachov spoken in February 1991 remain
relevant: 'We cannot change to a market economy
overnight; that would be too risky. Soviet society must
be prepared. There will then be a transitional period,
and this will last for some time.'

The other former European Comecon States ( [2] ) are
Bulgaria and Romania. Since the industries of both
countries were fully integrated in the division of labour
of Comecon, they possess neither 'the technical
resources nor the qualification which would enable
them to participate in future-oriented structural developments'. Prognos thinks that the two economies will
contract for several years, which will involve increasing
scarcity and, possibly, political problems. Although the
two economies could begin to stabilize in the second
half of the nineties, the Institute does not think that
higher growth rates can be expected for the time being.

(*) J. Joudanow, 'Die wirtschaftliche Umgestaltung in der
Sowjetunion: Probleme und Wege zur Losung' in: _Beitrdge_
_zur Wirtschafts- und Sozialpolitik,_ 190, Institut der deutschen
Wirtschaft, Koln 1991.
( [2] ) No macro-economic projections exist as yet for the three
Baltic States with their approximately 8 million inhabitants.
In the Prognos study of December 1990 they are still regarded
as members of the 15 Soviet Republics.

Both countries seem likely to face a race against time
which can be won only if the driving forces of a new
economic and social order are released as quickly as
possible—and at all levels—by a convincing change of
direction.

Obviously, the political and economic imponderables,
the numerous procedural and statistical inadequacies
and lack of knowledge about the depth and extent of
the reforms initiated make it hazardous to try and
define the likely duration of the economic transformation process in Eastern Europe. The probability of
error is certainly far beyond the level accepted in conventional long-term macro-economic projections
which, in the majority of cases, amount to no more
than the extrapolation of (simple) trends. At the same
time, attempts to forecast the intensity and duration of
the reform process have their value. They at least confirm and provide empirical evidence for the belief that
the political and economic transformation of certain
Eastern European countries cannot be completed in the
nineties and seems likely to be prolonged some time
into the next century.

2.3. The Committee has repeatedly welcomed the
wide-ranging support and encouragement provided by
the Community for the reform process, either through
trade and cooperation agreements or under the multilateral support programme of the Group of 24 which the
Commission has been coordinating on behalf of the
Paris Economic Summit since mid-1989. In this connec
tion, the Committee recommends the early establishment of an inventory of all Community aid including
the numerous forms of bilateral aid to Eastern Europe.
Discussions should be held with the Member States

with a view to identifying how this assistance can best
be coordinated and used even more effectively. Such
aid should also be made increasingly available to those
of our Eastern European neighbours which are just
beginning to initiate political, economic and social
reforms. The Committee unanimously agrees that any
EC economic or technical assistance should be made

conditional on respect for human rights, constitutionality and the protection of ethnic minorities.
There are signs that political reform could be used as
an excuse for renewed discrimination against ethnic
minorities in certain Central and Eastern European
countries.

3. From the joint declaration to European agreements

3.1. After year-long efforts a joint declaration was
signed on 25 June 1988 between the European Community and the Council for Mutual Economic Assist

No C 339/50 Official Journal of the European Communities 31. 12. 91

ance (CMEA). Although the declaration was limited to
matters of procedure, the Committee sees the agreement
as a decisive step towards the long-awaited normalization of relations between the European Community and
individual CMEA countries. The Community's twotrack approach had finally won the day: in parallel with
the establishment of official relations between the EC
and the CMEA, each individual CMEA country is able
to take its own decisions on the establishment of diplomatic relations and on the opening of trade negotiations
with the European Community. At the same time this
finally put an end to the CMEA's repeated call for an
EC/CMEA umbrella.

3.2. Diplomatic relations and the conclusion of trade
and co-operation agreements with practically all Central and Eastern European countries over a period of
less than two years (September 1988-May 1990) constitute the foundations of the new European edifice. The
cornerstones of such agreements are the liberalization
of Community imports and the gradual removal of
quantitative restrictions by 1995. The Committee considers that such agreements are a possible means of
strengthening inter-State dialogue; they are also calculated to provide an economic underpinning of the political reforms underway in the countries of our Eastern
European neighbours. At its meeting in Dublin towards
the end of June 1990 the European Council also
'expressed its deep satisfaction at the progress already
made and the prospect towards overcoming the divisions of Europe and restoring the unity of the continent
whose peoples share a common heritage and culture'.

3.3. There is no doubt that first generation agreements have paved the way for the next stage in the
process of pan-European integration, namely the raising
of co-operation with Central and Eastern European
countries to a new and improved level. Our neighbours
in Central and Eastern Europe have, as the European
Commission itself explains, recognised that relations
between the Community and the European Free Trade
Association (EFTA) have been moving in an encouraging direction, and have declared that they too would
like to be involved more closely in a process leading to
the ever-closer integration of the economic areas of the
Community and EFTA.

3.4. Acting in a spirit of solidarity with democratic
forces in Central and Eastern European countries, but
also in the interests of the Community, the European
Commission has drawn up an outline plan for Association Agreements. This outline plan was approved by
a special meeting of the European Council at the end
of April 1990. The main objectives of these new agreements with our Central and Eastern European neighbours are as follows:

— to create a climate of trust and stability favouring
political and economic reforms,

— to consolidate the basis for a new European order,

— to lastingly improve the trade and investment climate,

— to promote the transition towards competitive economic structures and make it easier for them to
be part and parcel of the international division of
labour,

— to improve the transparency and coherence of the
Community's financial aid schemes, and to make
them more flexible,

— to step up the exchange of information and cultural
co-operation.

The Committee welcomes the association concept since
it is, _ipso facto,_ likely to guarantee and expedite the
establishment of closer political, economic and social
relations between the European Community and our
neighbours in Central and Eastern Europe.

3.5. The agreements at the same time form an institutional framework for political dialogue, capable of
including exchanges of views about pressing bilateral
and multilateral problems. The Committee is of the
view that intensive East-West political dialogue, based
on mutual trust, is of paramount importance at a time
when new forms of co-operation are taking shape in
Europe and there is talk of building a 'Common European House'. Taking up this metaphor of the Common
European House, Mikhail Gorbatchov said back in
1985: 'We live in a common house although some use
one entrance and some another. We must work together
to make sure that people in this house talk to one
another.' This statement underscores the Soviet Union's
new policy, adopted at the 27th Congress of the Communist Party of the Soviet Union (CPSU), of focussing
more attention on Europe. A positive role has also been
played by perestroika, the aim of which is of course
the introduction of a series of reforms designed to make
the bureaucratic-dictatorial system in the Soviet Union
'less ossified and more open, transparent, flexible and
effective'.

3.6. The second generation agreements, more correctly termed European Agreements on account of the
inclusion of political dialogue, may in principle be
concluded with any Central and Eastern European
countries for an indeterminate period of time. Naturally, in the case of the Soviet Union (a world power
with global responsibilities) or the Federation of Democratic States (after the entry into force of the new Treaty
of Union), it is necessary to work out a carefully tailored
approach taking into account not only the particular
geographical and economic situation of the Republics,
but also the interests which are likely to be shared

31. 12. 91 Official Journal of the European Communities No C 339/51

between the European Community and the planned
Economic Union.

3.7. The Committee considers that it should be possible in the next few years to build up a network of
European Agreements with the Community's Eastern
neighbours. At the same time it urges that concrete
negotiations be got under way as soon as possible with
the Baltic States of Estonia, Latvia and Lithuania with
a view to concluding European Agreements.

Given the content and political importance of European
Agreements, the European Commission considers that
the appropriate legal base is EEC Treaty Article 238
which empowers the Community to conclude agreements 'establishing an association involving reciprocal
rights and obligations, common action and special procedures'. However, since the concept of 'association'
eludes a universally applicable definition, the European
Commission has come up with a more concrete definition of the content of European Agreements in
advance of the bilateral association negotiations, by
saying that such (preferential) agreements regulate comprehensive mutual obligations whereby the associated
country accepts certain regulations and practices in
existence in the Community.

Before such Agreements can be concluded, two conditions must be fulfilled in the countries applying for
association with the Community: the rejuvenation of
political, social and economic life must be proceeding
satisfactorily in the associated countries and the point
of no return must have been reached with regard to the
introduction of democracy and the market economy.
The Committee takes it for granted that the European
Commission will continue its careful, comprehensive
monitoring of political and economic reforms and will
analyze their chances of success impartially. Only when
this has been done should association negotiations
proper be opened. It would in fact be disastrous if intraCommunity consolidation—Single Market, Economic
and Monetary Union, Political Union—were unnecessarily delayed or even watered down because the successive steps towards pan-European integration had been
inadequately prepared.

3.8. The common framework for European Agreements consists principally of:

— political dialogue,

— free movement of goods,

— free movement of persons, services and capital,

— approximation of legislation,

— economic co-operation,

— cultural co-operation,

— financial co-operation,

— institutions of association.

The advantages of the European Commission's common framework are self-evident. On the one hand it
provides a firm foundation for all European Agreements; on the other hand it is sufficiently flexible to
accommodate the particular features and needs of
associated countries. Only through flexibility can due
account be taken of the varying speeds of economic
change in Central and Eastern European countries and
only through flexibility can the process of forging closer
links with the European Community be tailored to
individual needs. With this in mind our Eastern neighbours have pointed out that, after decades of
oppression, the manner of their linkage to the European
venture should take account of their individual situations and priorities. Ultimately this means that the
main elements of the common framework are to be
found in all European Agreements but may vary in
terms of concrete expression.

4. European Agreements with Czechoslovakia, Poland
and Hungary

4.1. Czechoslovakia, Poland and Hungary declared
at an early stage that they were seeking association
with the European Community and would later be
applying for full membership. As early as late August
1990 the European Community proposed exploratory
talks with these States which had made most progress
towards political democratization. In the meantime all
three States have indicated to the Community that their
political reforms have by and large been completed.

The Committee endorses the opening of association
negotiations with these three States. It approves in
principle the content of the draft treaties negotiated so
far provided its own critical comments and recommendations are duly heeded.

_Preamble_

4.2. The Committee would underline the determination of the contracting partners, as expressed in the
preamble to the Agreements, to establish close and
lasting relations on the basis of mutual interest, to help
the strengthening of political and economic freedoms
and to hold regular political talks on bilateral and
multilateral questions. The Committee particularly
appreciates the willingness of the contracting parties to
act in unison to assist the transition to a new political
and economic order in the young democracies of Central and Eastern Europe. The foundations of this new
order are the rule of law, respect for human rights, the
creation of a multi-party system, free and democratic
(secret) elections, economic liberalization in accordance
with market principles and social justice. The Com

No C 339/52 Official Journal of the European Communities 31. 12. 91

mittee welcomes the explicit support of the contracting
parties for the results of the Helsinki Conference on
Security and Co-operation in Europe (CSCE) and the
principles enshrined in the final acts of subsequent
CSCE conferences. The Committee urges that these
very general passages of the preamble to the European
Agreements be expressed in more concrete terms and
amplified to include declarations by the Bonn CSCE
Conference on 'Economic Co-operation in Europe'.
Merely referring to the conclusions of this conference
is too vague and lends itself to widely different interpretations.

4.3. The Committee would appeal to the contracting
parties to also refer in the preamble to the social dimension of European unification and to mention the Community Charter of the Fundamental Social Rights of
Workers adopted, albeit not unanimously, by the Heads
of State or Government of the European Community
in December 1989. This Charter, as Jacques Delors
himself points out, 'will form a keystone of the social
dimension in the construction of Europe in the spirit
of the Treaty of Rome supplemented by the Single
European Act't [1] ). Closer relations with our Eastern
neighbours, and Community assistance, should not be
confined to economic, technical and financial fields but
should also adequately take into account the many
different social aspects.

Given the social and cultural conditions prevailing in
Europe today, an 'economic area' which is not at the
same time a 'social area' would be unthinkable. This
should be remembered in particular by those politicians
in neighbouring Central and Eastern European
countries who claim that a market economy can be
established without the adjective 'social'. The Committee is convinced that a social market economy and
the spirit of a People's Europe are central pillars of
political and social progress towards European Union.
They must be seen as essential elements of Community
policies. The two factors do much to explain the appeal
which the European Community has for the fledgling
democracies of Eastern Europe.

4.4. In the interests of establishing the necessary
climate of confidence, the Committee supports the contracting parties of Eastern Europe in their desire to
incorporate in the preamble their wish to become members of the Community. Such a step would also make
it clear that both sides are serious about establishing
much closer relations in due course. The Committee,
however, is unable to go along with the European

(!) ISBN 92-826-097.3-1.

Parliament's suggestion that a time schedule for EC
membership applications should be included in the preamble of each European Agreement. It is not yet possible to foresee with any real accuracy what road economic reforms will take in individual Central and Eastern
European countries, so concrete dates for accession
negotiations cannot be fixed at present.

4.5. The Committee further proposes that the preambles should contain a statement to the effect that
the contracting parties of Central and Eastern Europe
unconditionally accept the _acquis communautaire_ and
undertake to approximate their respective countries as
closely as possible to the current level of Community
integration over the two five-year stages envisaged:
What the procedure will be during the period of validity
of European Agreements when European integration
and Community legislative systems move further ahead
remains to be seen. According to existing Treaty legislation, associated countries can neither be 'accepted as
lower-grade' members nor participate meaningfully in
the European Community's decision-taking process.
'The Community's decision-making process cannot be
fragmented without undermining the Community itself
with its delicate built-in balance' ( [2] ). On the other hand
some policy areas require a global European approach
more than ever before, with trans-European networks
urgently needed in the fields of energy, transport and
telecommunications Given this background, Frans Andriessen has recently proposed that applicants for EC
membership be made members (with seats and votes)
for the purpose of those areas (energy, transport and
telecommunications once more) where they are able to
accept the appropriate rights and obligations without
difficulties. The Committee supports this proposal and
calls upon the European Commission to find a way out
of the dilemma and offer a compromise which will both
satisfy European economic policy requirements and be
compatible with Community law.

4.6. The Committee welcomes the willingness of the
contracting parties to uphold the principle of free trade
and abide by GATT provisions in particular. There is
no doubt that GATT will carefully monitor European
Agreements to see whether they are compatible with
the General Agreement on Tariffs and Trade. In view
of the conspicuous problems which have emerged in
the Uruguay Round since early 1987—and which are
still partly the subject of controversy—the Committee
is aware that the contracting partners find themselves
in a difficult situation. Without going into details there
are chiefly two types of problems deserving of particular
attention: (a) provisions governing the material preconditions for the creation of free-trade areas (to be
gone into later); (b) the further expansion of regional

( [2] ) P. Gilsdorf, 'Assoziierungsabkommen der Europaischen Wirtschaftsgemeinschaft: Entwicklung und Perspektiven' _(Vor-_
_trage, Reden und Berichte aus dent Europa-Institut,_ Nr. 220.)
Saarbrucken, 6 July 1990.

31. 12. 91 Official Journal of the European Communities No C 339/53

associations. This phenomenon by no means exists
solely in Europe since regional associations of countries
with similar or identical economic objectives have also
sprung up in other parts of the world. Integrated economic associations have in fact been set up in Central
and South America with the Latin American Free Trade
Association (LAFTA), in Africa with the West African
Economic Community (CEAO), and in Asia with the
Association of South East Asian Nations (ASEAN). All
the signs are that the USA is in the process of setting
up a North American Free Trade Area (NAFTA) which
is intended—as emerged from the mid-term conference
of the GATT Uruguay Round in Montreal—to act as a
counterweight to the creation of a European Economic
Area (EEA) and so be the 'biggest and richest free trade
area in the world'.

In other words, what was intended to be an exception
when GATT was founded has now become the rule,
and the idea of world trade organized on a multilateral
basis is becoming more and more of a farce. The
international division of labour is now increasingly
influenced by the triad of economic giants: the USA,
Europe and Japan. Because of this the European Community has come to bear a special responsibility for
world trade. Article 110 of the Treaty establishing the
EEC explicitly commits the Community, in the common
interest, to a liberal trade policy. As an advocate of
world trade the Community is now under increasing
pressure. It must therefore help to ensure worldwide
that subsidies which distort competition are cut back,
and that strategies which restrict competition under the
infamously-known catchwords of 'laser beaming and
'industrial targeting" are in fact discontinued. Such
practices are in clear contradiction with the verbose
declarations made time and time again in GATT, the
OECD and various 'world economic summits': The
international division of labour will only achieve the
best results for all concerned if it is accepted, without
strings, under conditions of free markets and fair competition.

_Political dialogue_

4.7. Political dialogue within the framework of the
Association Council is designed to (a) make it easier
for the associated countries to settle into the family of
democratic nations, (b) increase the tempo at which the
contracting partners of Central and Eastern Europe
move in the direction of the European Community, and
(c) widen and consolidate the consensus on international issues. Additional instruments and mechanisms help to underpin political dialogue, e.g. full use of
diplomatic channels and inclusion of the associated
countries within the group of countries regularly informed about European political cooperation.

The Committee sets great store by political dialogue
and regards it as a pointer of pan-European integration.

At a time when Eastern European economies and societies are being regenerated from top to bottom, consultation and the exchange of information have a crucially important role to play. Because of the regularity
of the meetings within the Association Council, political
decision-makers find that they have to justify and
explain the decisions and measures they have taken.
Anomalies can be corrected at an early stage and the
discipline imposed by having to respect meeting deadlines tends to mean that measures can be introduced
and implemented which whould otherwise have been
delayed or never even taken because of conflicting
domestic political interests—a problem the young
democracies of Eastern Europe no doubt have to contend with quite frequently.

4.8. The creation of a Parliamentary Association
Committee is welcomed by the Committee without
reservations. As a forum for cooperation between members of the European Parliament and parliamentarians
of the associated countries, its main purpose is to facilitate an indepth exchange of information and ideas. In
the current phase of closer European integration and
multilateral cooperation, the importance of such an
institution of political dialogue cannot be underestimated, especially since the Association Committee is
also entitled to make recommendations to the Associ
ation Council.

4.9. The Committee calls on the contracting parties
to ensure that economic and social interest groups are
brought within the organizational framework embracing institutions of association. Even the Commission
seems to have come to the realization that there is no
chance at all of creating a pan-European economic area
if economic and social interest groups are kept in the
background. Such groups are vital elements of a pluralistic society and pillars of Europe's social and political
life. The Committee therefore proposes that a consultative committee be set up within the institutional framework. The new body, consisting of members of the
Economic and Social Committee and members of a
similar grouping in the associated countries, would be
consulted by the Association Council on economic and
social questions which relate to the European Agreements and are of common interest. The consultative
committee should also be given the right of initiative
so that its members could, on their own initiative, take
up urgent social and economic issues associated with
pan-European integration and put forward constructive
proposals.

_Free movement of goods_

4.10. Generally speaking, the European Agreements
provide for a transitional period of no more than ten
years, divided into two large five-year slices. The Committee is pleased that the Association Council intends
to regularly monitor observance of the Agreements and

No C 339/54 Official Journal of the European Communities 31. 12. 91

keep a permanent eye on the progress of economic
reforms in the associated states, particularly in the fields
of price-formation, subsidies, monetary policy and
foreign trade. At the same time the Committee regrets
the decision taken in the course of negotiations not to
apply the two-stage approach to the liberalization of
the movement of goods. As far as foreign trade in
industrial goods is concerned, a stage-by-stage
approach—enabling the course of further market liberalization to be reviewed at the end of the first fiveyear period—would have been of intrinsic value and
crucial importance.

4.11. A step-by-step, asymmetrical approach is to be
adopted in connection with the setting up of a freetrade area within no more than ten years. The European
Community itself intends to make faster progress
towards free trade, abolishing customs duties and other
trade barriers for its associated partners within a period
of five years, although taking into account the degree
of sensitivity of individual products. Special rules are
to apply to textiles, ECSC products and agriculture. The
Committee supports the Community's asymmetrical
approach without reservation but wonders whether
five years are needed to throw open the Community's
markets completely to industrial goods from Eastern
Europe. Given the major restructuring problems facing
these countries, the Community should consider
whether more convincing efforts should not be made
to open up its markets by the time the treaties come
into force. It should not forget that increased earnings
by the reform-states' export sectors are a crucial precondition for continuing economic reorganization, the
development of the necessary innovative and investment
dynamic and greater competitiveness.

The contracting parties in Eastern Europe will likewise
wish to proceed on a step-by-step basis, but will presumably need the whole ten-year period in which to
liberalize. The Committee considers that adoption of
the Combined Nomenclature in its entirety will ensure
that trade between the contracting parties is conducted
as smoothly as possible. It would be helpful if a timetable for its adoption could be laid down in the Agreements and if the associated states could make a rapid
start on the necessary reorganization of their customs
and foreign trade administrations.

The Association Council would be able to accept derogations in the case of fledgling industries or sectors
having to contend with serious social problems or painful structural adjustments, but only for a limited period
and only provided precise criteria were met. The Committee endorses the derogation provisions but feels that
they should not be applicable beyond the ten-year transitional period.

4.12. Sensitive sectors (textiles, ECSC products and
agriculture) are covered by additional protocols containing provisions which take into account individual
sectoral needs. The Committee would recall in this
connection the relevant GATT provisions, i.e. the
material pre-requisites for the creation of free-trade
areas. In the view of the Committee these provisions
are primarily concerned with the requirement to abolish
customs duties and other trade regulations restricting
trade in both directions between the contracting parties
for 'substantially all trade' (Art. XXIV 8b GATT). In
the long run no sector can be protected from the open
market if there is to be compliance with GATT.

4.12.1. After expiry of the Multifibre Arrangement
(MFA) in mid-1991, and the termination of the associated bilateral voluntary restriction agreements at the
end of this year, a new framework will have to be
created within the European Agreements for trade in
textiles. This must provide for improved market access,
taking due account of developments in visible trade
with the associated partners (including the former
GDR). Initially, there will presumably be 'interim
arrangements', which will remain in force until the
GATT negotiations on the future of the MFA (e.g. a
transitional period in which this is phased out) have
been completed and the inclusion of textiles and clothing in GATT has been decided. Initial reports on the
content of the additional protocol indicate that customs
duties will be phased out over seven years. Discussion
of a further reduction in quantitative restrictions will
commence as soon as the results of the Uruguay Round
with regard to textiles are known. Here, too, the Committee wonders whether a speedier opening up of markets than originally planned might not be beneficial to
both sides. In this case, the Community's three Eastern
European partners would have to expressly renounce
state subsidies and fully open up their textile and clothing markets to Community products, albeit with a
(reasonable) delay.

Particularly in the case of outward processing traffic,
the liberalization schedule could be improved by providing for customs duty exemptions from the time the
Agreements come into force. Measures would nevertheless need to be taken to ensure adherence during the
interim to the basic principles enshrined in the EC
Regulation establishing economic outward processing
arrangements applicable to certain textile and clothing
products ( [1] ).

4.12.2. The steps to be taken to liberalize ECSC
products will be dealt with in a second additional
protocol.

( [x] ) OJ No L 76, 20. 3. 1982.

31. 12. 91 Official Journal of the European Communities No C 339/55

4.12.2.1. In the steel sector, this will involve not
only the dismantling by both sides of customs duties
and charges having an equivalent effect, but also the
abolition of national import quotas in the Community
and the future of the steel-supply agreements with
the Community's Eastern European partners which
expire at the end of this year. These partners are
calling for the complete liberalization of their steel
exports to the Community. In the Committee's view,
however, voluntary export restriction agreements,
national quotas and customs duties are closely intertwined and—bearing in mind the subsidies in Eastern
Europe—must be dealt with as a whole. As it is,
adjustment is already causing the Community's partners in Eastern Europe economic and social problems,
and these would be exacerbated considerably if the
Community steel industry were to be obliged by the
immediate lifting of all import restrictions to take
across-the-board defensive action under GATT against
the dumping of subsidized imports from Eastern
Europe. The Committee therefore thinks that the
Commission must get together with the Community's
associated partners to draw up as soon as possible a
convincing blueprint with a clearly defined timetable
for the restructuring of the steel industry in Eastern
Europe and a correspondingly gradual liberalization
of the steel markets. The blueprint should not only
satisfy steel undertakings on both sides but should
also be suitable for inclusion in the free-trade area

agreements in conformity with GATT.

When the customs duties and charges having a similar
effect are dismantled (the schedule has not yet been
finalized), the fact that external customs duties for
ECSC products are now low by world standards should
be borne in mind. According to reliable estimates their
weighted average is just below 5 % . Given that most
rates of duties in the associated countries have not yet
been bound, the Committee suggests that during the
ten-year transitinal period the requisite harmonization
measures be introduced first as part of the blueprint,
with the customs duties not being completely abolished,
on the basis of reciprocity, until later (e.g. after five
years).

Germany, Italy and the Benelux countries have national
quotas of their own for certain steel imports from
Central and Eastern Europe. These quotas, taken in
conjunction with the Community agreements on steel
supplies, have the effect of setting unduly low quotas for
particularly sensitive products within the framework of
overall ceilings laid down in the steel agreements. The
decision has already been taken at a political level to
extend the trade and cooperation agreements concluded
in EEC Treaty areas to ECSC products, and this will
result in the abolition of these national quotas. Since

the association agreements will probably enter into
force after the extension of the trade and cooperation
agreements to ECSC products, the inclusion of a commitment to abolish national quotas in the additional
protocol for ECSC products is academic.

Decisions about the future of the steel supply agreements are proving to be extremely difficult. The agreements apply, in each instance, for a period of one year
and apart from pricing rules lay down quotas for each
country's exports to the Community Member States.
In return, the Community pledges not to initiate any
anti-dumping or anti-subsidy proceedings. The Commission has repeatedly stressed that current and future
voluntary restraint agreements with Poland, Hungary
and Czechoslovakia will not be affected by the European Agreements. The Committee thinks differently:
in its view, volontary restraint agreements between
partners in a free-trade area are what GATT calls 'grey
area measures' which should be eliminated without

delay. The Committee believes that the only solution
would be to dispense with volontary restraint agreements with our three partners in Eastern Europe after
a transitional period which would make sufficient
allowance for the restructuring and rationalization of
the steel industry in Eastern Europe. At the same time,
the Community's Eastern European partners would
have to agree to stop all non-GATT-compatible practices in their trade with Community countries after the
end of the transitional period. This would be achieved
in particular by accepting the ECSC rules on aid.

4.12.2.2. In the coal sector, the negotiations on the
liberalization of imports from the associated states
appear to be as complicated as the steel negotiations.
Although coal imports have been liberalized in most of
the EC Member States, a general import-authorization
scheme based on quotas is operated by Federal Germany and Spain; this does not apply to hard coal imported
into the former GDR, which is free from duty. In the
UK, import opportunities are also restricted by the
fixed purchasing agreements in the field of coal-based
electricity production.

The Eastern partners are assentially seeking the removal
of the German and Spanish import restrictions, and of
measures having a simular effect. Examples of such
measures are the German Iron and Steel Treaty _(Hiit-_
_tenvertrag)_ and the Century Treaty. In 1985, the former,
which obliges the steel industry to purchase some
25 million tons of German coking coal annually was
extended until the year 2000. Under the Century
Treaty—which runs until the end of 1995—the elec

No C 339/56 Official Journal of the European Communities 31. 12. 91

tricity industry has undertaken to use approximately
4 million tons of German coal per year for electricity
production.

Here, too, a compromise is undoubtedly called for. This
must take account of the difficult structural adaptation
process in coal mining, the expiry date of existing
contracts and the relevant GATT provisions. A variety
of compromises are under discussion. The Committee
understands the reasons for a two-stage approach
which can be fully implemented within the life of the
European Agreement and which is in conformity with
GATT. This would involve suspending import duties
during the first five year period of the European Agreements after which quotas and similar measures should
be applied more flexibly during the second five-year
period—subject to the constraints set out in the Agreements—with a view to their complete elimination by the
end of the ten-year transitional period. The compromise
proposal, which takes account of industrial, employment and social factors should also be acceptable for
our Eastern European partners. At all events the energy
requirements of the associated states will increase as
economic recovery proceeds. At the same time, the
energy supply links between the former Comecon members will be further loosened, so that it might reasonably
be asked whether the associated countries will be in a
position to significantly increase their coal exports to
the Community in the foreseeable future.

4.12.3. Processed agricultural goods not listed in
Annex II to the EEC Treaty will be the subject of special
provisions contained in a third additional protocol.
Although not much is known about them as yet, the
agreements will contain provisions on the dismantling
of customs duties and charges of equivalent effect—and
presumably on the abolition of quotas. Concessions
with regard to trade in agricultural products based on
balance and reciprocity and likewise expected. In the
fisheries sector the Agreement with Poland will embrace
trade, fishing rights and future cooperation, as part of
a single package. Preferences will also take account of
the EC-Poland fisheries agreement.

The Committee is aware that agricultural products have
a vital role to play in the foreign trade of the three
Eastern European countries. It is essential for these
countries—and particularly Poland and Hungary— to
be able to earn hard currency by also exporting to the
European Community agricultural products subject to
EC agricultural market regimes. The Committee agrees
with the European Commission that the Community
and the three associated countries will have to make
mutual concessions regarding agricultural products

covered by EC market regimes. In agreeing on concessions, account will have to be taken of the sensitivity
of the products, the Common Agricultural Policy and
the outcome of the GATT/Uruguay Round. In this
connection, the European Commission must ensure that
the difficult problems associated with the CAP are not
aggravated.

For many years now the Community has had to contend
with structural surpluses in agricultural markets. These
serious difficulties must not be exacerbated by the
importation of particularly sensitive products from
Eastern European countries. The common agricultural
policy is currently in a state of upheaval and it would
be irresponsible to jeopardize further CAP reforms. The
Agricultural Council accordingly finds itself with the
difficult task of having to incorporate in the European
Agreements a politically reasonable compromise which
is consistent both with CAP's long-term prospects and
GATT regulations. Since these Agreements represent a
realignment of East-West economic relations, such a
compromise is likewise of fundamental importance.
Seeking to solve problems by domestic price support,
as in the association agreement with Cyprus, is hardly
advisable. The three contracting partners are agricultural producers on too large a scale for that.

Now the US Congress has voted by a clear majority for
a two-year extension of the negotiating brief for the
GATT/Uruguay Round, the prospects for negotiating
a satisfactory agreement in agriculture have improved
considerably. However, the GATT negotiations are still
a long way away from the original aim of exercising
more discipline in the use of subsidies and other measures directly or indirectly influencing the agricultural market. After more than 40 years of GATT, traditional
agricultural exporting countries are entitled to reliable
international trade rules observed by all countries. Such
rules would be expected to prevent any further
upheavals in world agricultural markets and ensure fair
access to markets for all countries.

The Committee also recommends that a substantial
proportion of agricultural surpluses produced in associated countries be exported to other neighbouring Eastern European countries. The USSR and other former
members of Comecon will need to import large quantities of agricultural products for the foreseeable future.
The Community should make funds available so that
agricultural products from Poland, Hungary and
Czechoslovakia can be exported directly to these
countries for hard currency. Such help should last several years; it would at the same time constitute a positive

31. 12. 91 Official Journal of the European Communities No C 339/57

contribution to the economic development of Eastern
Europe. The Committee also proposes—as it did in its
Opinion on the Community and German unification—that consultations be held with its Eastern

European partners on a set-aside and extension programme to stabilize agricultural production and
improve the environment in rural areas. Such a programme would also have to receive financial support
from the Community within the limits of the funds
available.

4.13. To help create a free-trade area, the European
Agreements contain a number of accompanying measures. These include standstill agreements, consultations
in the case of dumping, safeguard agreements, provisions on competition and state aid, public-sector
enterprises, procedures for solving disputes and the
effective protection of intellectual property. An
additional protocol clarifies the rules of origin, which
will be preferential in kind, whilst yet another protocol
refers to specific transitional provisions contained in
the Acts of Accession of Spain and Portugal. The Committee welcomes the measures since they will help in
essence in the early identification and removal of sources of trade friction, particularly during the ten-year
adjustment period. The frequent reference to the appropriate GATT rules is welcome and the Committee
assumes that any advances in the current round of
GATT negotiations will be automatically incorporated
into the agreements.

4.13.1. The Committee considers that the consul
tation procedures applicable to all cases of dumping
are particularly important. The Committee assumes
that the GATT anti-dumping and subsidy codes will
be fully observed. At the same time the associated
countries should unequivocally state at a suitable point
in the Agreements that they fully support the Community's tough line on subsidies. In the Community's
textile and clothing sectors, for example, there is growing concern, reflected by more and more vociferous calls
for price clauses offering protection against subsidies. It
is not certain, when the 'normal value of goods' is fixed,
whether the associated countries will be treated as

countries without a market economy (as the former
state-trading nations were) or whether they will be
considered, from the time the Agreements come into
force, as belonging to the group of countries with
functioning market economies. The Committee feels
that this issue needs to be clarified.

4.13.2. The Committee finds the provisions on competition and State aid convincing and approves them
without reservation. All agreements and concerted
practices which prevent, restrict or distort competition
are to be prohibited. Any abuse of a dominant position
is also prohibited. State aid which distorts or threatens
to distort competition by favouring certain undertak

ings or the production of certain goods is likewise
to be regarded as incompatible with the Agreements.
Effective rules on competition are the _sine qua non_ for
a properly functioning market economy. Competition
is a central pillar of the Common Market; without it
there is no guarantee that the advantages of the Single
Market can be advantageously exploited. The Committee agrees that, from the very start, the contracting
partners of Eastern Europe should align their national
competition laws as closely as possible on those of the
European Community.

4.13.3. Free-trade arrangements can only be enjoyed
if there is concrete proof of the origin of products
(proof of preference). The requirements to be met by
the concept of 'origin' are laid down in an additional
protocol. During the association negotiations the negotiating partners of Eastern Europe have called for
'multilateral cumulation' and insist that components of
third-country origin (from the three Eastern European
countries as well as EFTA States) should not affect the
origin of the product. The Committee supports the
desire of Eastern European countries to win acceptance
for cumulative rules of origin but asks the European
Commission to clarify whether the rules of origin of all
countries taking part in 'cumulation' must be completely identical. The advantages of multilateral cumulation are undisputed: they not only strengthen the
agreement to establish closer cooperation reached by
Czechoslovakia, Poland and Hungary in mid-February
1991 but also make it easier for the Community's partners in Eastern Europe and the EFTA countries to move
closer together—a necessary condition for achieving
pan-European integration. The Committee would also
point out that the Commission has likewise endorsed
cumulative rules of origin in the Lome Convention
between the Community and the African, Caribbean
and Pacific States (ACP), as well as in the agreement
concluded with the Maghreb States.

_Free movement_ _of persons, services and capital_

4.14. In addition to free movement of goods, the
basic freedoms pursued by the European unification
process are above all freedom of movement for workers,
freedom of establishment, and freedom of movement
for services and capital. As key factors in the creation
of a 'real' single market, they have paramount economic
importance and great symbolic value. The Committee
welcomes the inclusion of such policies in the European
Agreements, but warns that certain passages have been
made too abstract in an attempt to achieve a compromise.

4.14.1. Free movement of persons concerns first and
foremost the integration of workers legally employed,

No C 339/58 Official Journal of the European Communities 31. 12. 91

and their family members legally resident, in the Member States. Over the first five-year period after the
Agreements have come into force, every possibility for
improving the situation of this group of people will
have to be examined and fully utilized. Whilst the
Committee unreservedly supports this proposal it
would also welcome agreements covering workers from
Poland, Czechoslovakia and Hungary who are
employed illegally in the Community. According to
reliable sources, the total has now reached six figures.

The Economic and Social Committee, which has
already discussed migration from third countries in a
number of Opinions _i_ _[1]_ _),_ calls for legally resident immigrants in the Community to be given their full place in
the 'People's Europe'. Steps should be taken to ensure
that Community rights and obligations affecting residence, employment and mobility also apply without
restriction to this category.

In its most recent Opinion on the legal status of immigrant workers from third countries ( [2] ) the Committee
once again tackles the 'internal' aspects of a Community
immigration policy, and calls upon the Member States
and the EC Commission to bring about Communitywide harmonization without significant delay of legal
provisions, instruments and measures necessary for the
social integration of immigrants. In addition, conditions
should be laid down (at last) under which immigrants
from third countries enjoy freedom of movement on an
equal footing with Community citizens. Only in this
way, in the Committee's view, can discrimination be
removed, the operation of the single market supported
and the aim of creating a unified Community labour
market achieved. The dubious alternative would be

national labour markets with legally and socially differing conditions for workers from third countries.

In the second stage of the tansitional period the Association Council intends to examine ways of facilitating
the immigration of workers from the associated
countries. A precondition for this is for the economic
and social factors in the associated states to approximate those of the Community to a considerable extent.
A further condition is the (future) employment situation
in the Community. The Committee regrets the failure
to make specific mention in the Agreement of the fact
that the Community has limited scope for action, even
in the medium term, with respect to freedom of movement. The expectations aroused as a result (including
political hopes) will probably lead to bitter disappointment after a few years. On the one hand, concessions
in existing agreements (Turkey) (already) limit immigration possibilities for workers seeking jobs, while, on

(*) OJ No C 343, 24. 12. 1984; OJ No C 188, 29. 7. 1985.
( [2] ) OJ No C 159, 17. 6. 1991.

the other hand, the evidence suggests that the Community labour market will have no significant need for
additional labour from third countries in the foreseeable

future. According to the most recent estimates, the
Community's rate of unemployment is not likely to fall
for some time. Job losses in the territory of the former
GDR, which are not yet included in the Commission's
data, make matters worse and are by no means at an
end. This assessment is supported by the McKinsey
Report drawn up for the German Federal Government,
which states unequivocally that a reduction in the number employed in the territory of the former GDR from
about 9,25 million (end of 1989) to about 5 million is
to be expected, and is now a certainty, and that the
radical switch from a mismanaged economy to a functioning market economy is making deeper wounds than
any previously known structural change within an economic system.

Against the background of the empirical labour market
figures in the Community, and taking account of the
redundancies brought about by reform in the neighbouring Eastern states, help from Western countries
must be comprehensive and its individual elements must
be rationally coordinated. Not only financial and technical aid is required but also continuing promotion of
the necessary training of workers. This must be regarded as an investment in the future, and must take account
of the new, more stringent, requirements arising over
a broad area from technical change. The Committee
supports in this context the specific proposals made in
mid-May of this year by the Economic and Social SubCommittee of the EFTA Consultative Committee ( [3] ):

— transfer of know-how needed for the establishment

of suitable worker/employer relations and principles,

— organization of training programmes for Eastern
European managers and trade unionists,

— examination of possibilities for temporary employment of workers from Eastern European states (e.g.
under training contracts),

— bilateral agreements (lasting from 12 to 18 months)
designed to give workers additional specialized
knowledge ( [4] ),

( [3] ) EFTA/CSC/ES 1/91 of 13 May 1991.
( [4] ) Agreements of this kind already exist between the Federal
Republic of Germany and Hungary since December 1989,
and the FRG and Poland since June 1990.

31. 12. 91 Official Journal of the European Communities No C 339/59

— agreement on work and service contracts with Eastern European companies (*),

— closer co-operation between national labour market
authorities.

At the same time, the Committee would draw attention
to sectoral initiatives which, in its view, offer opportunities that have been little used to date. The most
striking example is provided by the Community steel
industry, which is seeking to intensify the necessary
transfer of know-how from West to East with a broad
range of proposals. First, it would like to involve Eastern European experts in national and international
Community organizations where notes are compared
on industrial questions. (Concretely, this means inviting
them to participate in the work of the technical committees and the bodies responsible for transport, energy,
the environment and similar issues.) In addition, Western steel works could train both managers and the
workforce in the associated countries and send specialists to advise directly on the reorganization of ageing
plant.

The Committee recommends that the numerous proposals be examined in detail and—if this can be done
quickly—annexed to the European Agreements. At the
same time, the Commission should follow the lead of
the Community steel industry and give greater encouragement to similar broad-based activities in other economic sectors.

4.14.2. As regards the right of establishment, the
Member States would like businesses and nationals in
the associated states to be subject to the same legal
framework as their own enterprises and citizens as
soon as the European Agreements enter into force. The
Eastern contracting parties will make this adjustment
in the course of the ten-year transitional period. The
associated states will be able to make exceptional
arrangements in individual sectors in order to deal with
the constraints of structural adjustment or other serious
difficulties (including social problems). These measures
must be of limited duration (maximum three years) and
terminate not more than two years after the end of the
transitional period. Protective measures will also be
possible in cases where businesses or sectors in the East
are forced to accept a 'dramatic' loss of their domestic
market shares.

The Committee broadly endorses these Arrangements.
Freedom of establishment will facilitate the transition
to a market system and help to create a modern, competitive economy in the associated states. The Committee also appreciates the need for temporary protective measures in certain exceptional situations. At the
same time, 'dramatic' reductions in the domestic market

(*) At present 35 000 workers from East European states are
employed in the FRG under such special contracts.

shares of our Eastern partners can hardly justify protectionism. The Committee thinks that this passage should
be carefully reconsidered and more clearly worded—in
particular the 'relevant' market variables should be
clearly defined.

4.14.3. The Committee approves the (gradual and
mutual) liberalization of cross-frontier services. In view
of the increasing worldwide significance of services
markets, the importance of liberalization in this area
cannot be overestimated. The Association Council will
examine individual measures and take appropriate
action to promote the process. Special provisions apply
to cross-frontier transport services. All administrative,
technical and other barriers to international maritime
traffic, which restrict or could discriminate against the
provision of services, will be removed. Agreements on
air and land-based traffic will be concluded in the light
of the Community's common transport policy, with
traffic development being coordinated. During the transitional phase of the European Agreements, the associated states intend to bring their legislation into line
with Community rules, at least insofar as they facilitate
mutual access to transport markets and promote passenger and goods traffic.

The Committee would both stress and applaud the joint
desire of the contracting parties to seek a satisfactory
result to the Uruguay Round of GATT negociations,
which aims to establish a multilateral framework of
principles and rules governing service transactions, and
to incorporate this framework in the European Agreements at the appropriate juncture.

The Committee also expects the Association Council
to monitor closely the economic and social effects of
liberalization measures on Community frontier regions
and to prevent social dumping. It would be disastrous
if the already difficult recovery process in the former
GDR (particularly in the peripheral areas) were to
be further impeded and delayed by social dumping
practices.

4.14.4. The advantages of a liberalized goods and
services sector from the standpoint of location and
specialization can be fully exploited only if the free
movement of cross-frontier capital is guaranteed. The
free movement of capital will create favourable conditions for monetary co-operation and reinforce stabilization efforts in the associated countries. The Committee supports all agreements which are designed to
increase the free movement of capital between the Community and its partners in Eastern Europe. It particularly welcomes the fact that the contracting parties have
untertaken to guarantee freedom of payments for goods

No C 339/60 Official Journal of the European Communities 31. 12. 91

transactions (though apparently not for services) from
the entry into force of the Agreements. Investment
capital by Community investors will also be liberalized.
In addition, the conditions for the gradual application
of Community provisions on free capital movements
will be created in the first five-year period of the European Agreements. In the second part of the ten-year
transitional period, the Association Council will examine ways of taking over all the relevant Community
provisions. The Committee regrets that the contracting
parties have not yet agreed on a timetable for these
liberalization measures which would clearly indicate
when various categories of financial transaction are to
be integrated into a 'fully liberalized system'.

_Approximation of_ _legal_ _provisions_

4.15. The approximation of existing legal provisions
to Community law represents an important precondition for the economic and social integration of the
associated states into the Community. In the context
of cross-frontier cooperation, Community enterprises
—and those of its Eastern neighbours—are confronted
by three different legal systems. These are national laws,
Community laws, which are also becoming increasingly
important for our Eastern European partners, and the
legislation of the country for which the exports or
investments are intended. The same situations are frequently evaluated differently and regulated in a contradictory fashion. The main losers in this connection are
small and medium-sized enterprises, which often cannot
afford to employ highly qualified legal experts. Thus,
the earlier the legal framework of the associated states
is brought into line with the Community's, the more
favourable will be the 'environment' for East/West
business cooperation and the greater the prospects for
an intensification of cross-frontier traffic in goods, services and capital.

Legislative harmonization clearly represents an
immense task, involving a great variety of provisions
which can be adjusted only gradually and covering such
fields as customs law, social legislation, accountancy
and corporate taxation, workers' safety, financial services, competition, consumer and environmental protection, indirect taxes, technical requirements and standards, transport, industrial property rights and copyright. The associated states have initiated the necessary
harmonization measures but the Committee regrets the
failure of the draft Agreements to fix priorities. Thus
on ecological and competition grounds, the Committee
regards it as urgent for the associated states to transpose
Community legislation on the environment, competition and subsidies. Similarly, the safety provisions of
the Treaty of the European Atomic Energy Community
(EAEC) should be adopted without delay. Action is

also imperative in connection with worker protection
at the workplace and certain consumer-protection
directives (e.g. on product liability).

The lack of a time schedule for legislative harmonization is regrettable. As in other policy areas, the Committee would have liked the concept of a two-stage
transitional period to have been included in those parts
of the Agreements dealing with legislative approximation. Now that the preambles to the European
Agreements expressly mention the desire of the associated parties to become full members of the European
Community at the appropriate time, our Eastern European neighbours have an obvious interest in selectively
transposing the Community's legal framework to their
national context. The Community's undertaking to
provide technical assistance should greatly facilitate the
solution of the problem.

_Economic co-operation_

_4.16._ The European Community and associated
states are proposing to intensify their economic cooperation and go far beyond the limits already fixed by
the trade and co-operation agreements. These joint
activities are to underpin the process of economic and
social transformation and development in the associated Eastern countries and facilitate their assimilation
into the international production system. In addition
to industrial co-operation and the promotion and protection of investment, this action will cover industrial
standards, scientific and technical co-operation, education and training, the agricultural and food industries,
energy, the environment, transport, telecommunications, financial services, regional development, social
co-operation, tourism, small and medium-sized
enterprises, customs, statistics, economics and addictive
substances. All these areas of co-operation are subdivided into specific fields of action (approximately 150).

Attention should be drawn to the express assurance of
the contracting parties to take account of the environmental impact of economic measures from the outset.
In the Committee's opinion, the environment is a panEuropean issue which must be fully integrated with
other policy areas. To this end, it must not be guided
by the lowest common denominator but must provide
for the implementation of all necessary ecological and
economic measures. Consequently, both sides must
agree to monitor such measures jointly.

The variety of the chosen fields of action is extremely
impressive and deserves in principle to be endorsed. At
the same time, the Committee feels justified in

31. 12. 91 Official Journal of the European Communities No C 339/61

questioning whether common projects can be executed
in all these areas in the nineties—even on the basis of

co-operation with Community undertakings. Neither
the manpower nor the financial resources of the Community bodies seem sufficient to ensure satisfactory
implementation of the whole range of activities during
the transitional phase of the European Agreements. Nor
should it be forgotten that these measures apply to
three partner countries which, in the Commission's
view, will be joined by other neighbouring states in the
present decade. The Committee feels that it would have
been more appropriate to draw up an initial (rigorous)
action plan—taking due account of all secondary constraints—which could provide a framework for the
definition of specific objectives (to be achieved in
accordance with a fixed timetable). Only objectives
which, in the opinion of the contracting parties, call
for urgent action should be chosen. In this connection,
the Committee is less concerned with fundamental dis
cussions involving Community bodies or businesses
and economic and social interest groups than with the
precise definition of 'financial' priorities (schemes with
a cross-border impact) which must be initiated by the
Community and its Eastern neighbours or by undertakings in the Member States. Here, the Committee is
essentially thinking of such policy areas as infrastructure, nuclear power, education and training.

In the field of basic public infrastructure, the Committee
believes that the establishment and extension of an

efficient infrastructure constitutes an important precondition for successful structural reorganization in Eastern Europe. This will require an investment policy
capable of meeting higher quality requirements and the
demands of a competitive, market-oriented economy.
Such an approach implies that infrastructural investment in Eastern Europe should already be considered
and evaluated in a European-wide context. It would
foreshadow and flesh out the means to be adopted in
order to achieve common, pan-European infrastructural planning. Against this background, the Economic
and Social Committee has welcomed the Commission

proposal to establish trans-European networks—particularly in the fields of transport, telecommunications,
energy and training ( [!] ). In its earlier Opinion, the Committee calls for an overall, integrated and multi-modal
approach which would make it possible to demarcate
the reference framework, reduce investment risks,
increase the efficiency of Community, national and
regional action and take account of long-term requirements^).

The Committee regards increased power plant safety
in Central and Eastern Europe as a second major objec

(*) Towards Trans-European Networks - For a Community

Action Programme [doc. COM(90) 585 final].
( [2] ) Doc. ESC 805/91.

tive for economic co-operation. The challenge created
by Chernobyl of guaranteeing comparable, optimum
nuclear safety standards in both East and West, has
still not been taken up. Although the agreements on
greater exchange of information and mutual assistance
in the event of accidents represent initial success for the
International Atomic Energy Agency (IAEA), there are
still no binding international agreements on minimum
safety standards.

The Committee would urge the Community to supplement the assistance programmes of the IAEA and
the World Association of Nuclear Operators (WANO)
by providing rapid and 'unconventional' aid towards
the technological improvement of power plants in operation in Central and Eastern Europe. The Committee
sees the Commission's recent decision to provide funding for such action under the Phare programme as a
first (welcome) step in this direction. Although the
former Comecon countries adopted a refurbishment
programme for old VVER-440 MWel pressurized water
reactors in 1989, little was done to implement it. In
addition to the lack of funds, the project was hampered
by the urgent need to operate the plants in the absence
of reserve capacity. Nuclear reactors supply almost
50% of Hungary's electricity and a good quarter of
Czechoslovakia's. Given this situation, the importance
of the Commission's proposed 'European Energy Charter', initiated by the Dutch Prime Minister, Mr Lubbers,
can hardly be overestimated ( [3] ). The Economic and
Social Committee has stressed the extraordinary political scope of this Charter ( [4] ) which, in the Commission's
opinion, will give the countries of Central and Eastern
Europe 'the assistance they need for economic recovery
and for obtaining energy supplies under conditions
allowing a cleaner environment, a better balance
between different energy sources and more efficient use
of energy'.

The third priority for joint action by the contracting
parties should lie in the field of education and training;
workers' training will play a key role in the economic
reform process. Notwithstanding the fact that workers
in the Eastern associated countries have received a

thorough basic education and generally also possess
very good job qualifications, the skills appropriate to
a (former) socialist economy are quite different from
those required in a competitive market economy—as
experience in the new Federal Lander confirms. The
principal shortcoming is the lack—at least on the

( [3] ) Commission Communication on a Community Energy Charter [doc. COM(91) 36 final].
( [4] ) OJ No C 269, 14. 10. 1991.

No C 339/62 Official Journal of the European Communities 31. 12. 91

necessary scale—of knowledge and experience with
regard to the operation of market-orientated systems,
a problem which also applies to the use of modern
production, information and communications techniques. There are also shortcomings of a non-technical
nature, since independence, initiative and creativity are
not called for in a centrally-planned economy. The
ability to act independently and in one's own economic
interests in a constantly changing market environment
has first to be learnt through experience.

There is an urgent need for retraining and further
training at all levels. Whilst the proposals already contained in the European Agreements are to be welcomed,
they are not sufficient. A comprehensive campaign to
improve qualifications is called for. The Committee
therefore also urges the Member States to take steps to
assist and accelerate the efforts of their Eastern partners
to close the qualifications gap. Similarly, Community
businesses, acting in conjunction with their (national/
European) associations should make specific management information and technical know-how available to
employers and workers in their sector in the associated
countries of Eastern Europe. The example of the Community steel industry—to which the Committee has
referred elsewhere—should be noted by other sectors.

_Financial co-operation_

4.17. The challenge of structural adjustment in the
neighbouring Eastern European states and the task of
creating an internationally competitive economy cannot
be successfully confronted without effective Western
aid. All the countries of Central and Eastern Europe
require funds in hard currency; their need for financial
support has grown steadily since the beginning of the
economic reform movement. Between 1986 and 1990
the foreign indebtedness of the three Eastern neighbours
rose from US dollar 57 000 million (1986) to US dollar
77 000 million (1990). The OECD estimates that in 1990
debt servicing amounted to a good 70% of export
earnings in Poland, 65% in Hungary and 25% in
Czechoslovakia. In the meantime several reputable
institutions have attempted to calculate, with the help of
mathematical models, the likely medium-term financial
requirements of the countries of Eastern Europe in
order to restructure their economies. The projections
nevertheless vary enormously. Depending on the particular methodological approach adopted, the results
vary for Hungary, Poland, Czechoslovakia, Romania,
Bulgaria and Yugoslavia, taken as a group of six, from
US dollar 14 000 million to over US dollar 420 000
million.

The draft agreements indicate that the Phare Programme is to be continued until the end of 1992 in the
context of financial co-operation. Thereafter, grants

and Community loans from the European Investment
Bank (EIB) are to be provided—on a multi-year
basis—under Phare or a new financing mechanism. At
the request of its associated partners, the Community
will examine how, in the context of financial co-operation, the transition to currency convertibility can be
facilitated and safeguarded.

The Committee endorses the EC's approach and
agrees that Community aid can be reasonably contemplated only on the basis of a multi-annual plan
extending over a number of years. Initially, at least,
this period should not last more than three to five
years and should form an integral part of the first
stage of the transitional period provided for by the
European Agreements. Whilst there are (officially)
still no proposals with regard to overall funding, the
Committee assumes that the basic amounts will largely
be determined by existing and future Community
financial resources; the ability of the associated
countries to repay EIB loans on time is equally
important. The final Community funding would therefore have to be approved in the light of the absorption
capacity of the East and in the light of the new
agreement on budgetary discipline which is to replace
the current inter-institutional arrangement.

The Council's negotiating brief of December 1990 for
the Association Agreements indicates that experience
gained under the Phare programme will be used to
determine the most pressing needs and absorption
capacity of the contracting States. The Committee
does not agree with this approach without reservations; it would rather reiterate its urgent call for a
clear definition of priorities—in conjunction with the
partners to the agreement—in the broad context of
economic co-operation. These priorities can then
provide a point of reference for the preparation of
the multi-year financial framework and the spreading
of expenditure over individual years in order to ensure
optimum attainment of the goals.

The Committee fully endorses the coordination of
Community funding (including bilateral assistance)
with financial aid provided by other OECD countries
or international finance institutions [International
Monetary Fund (IMF), World Bank and the European
Bank for Reconstruction and Development]. In this
context, it also proposes the creation of a Community
task force to monitor all aid provided and the use to
which this is put on an on-going basis, to correlate
funding and spending in the Association Committee,

31. 12. 91 Official Journal of the European Communities No C 339/63

and to monitor how efficiently resources are used in Association Council should be regularly informed of
conjunction with the Eastern European parties. The the results of these activities.

Done at Brussels, 26 September 1991.

_The Chairman_

_of the Economic and Social Committee_

Francois STAEDELIN

_APPENDIX_

Recent developments in relations between the Community and the countries of Central and Eastern Europe

June 1988: Community and a Comecon delegation sign the Joint Declaration on mutual recognition in
Luxembourg.

September 1988: EC-Hungary co-operation agreement signed.

December 1988: Trade agreement concluded with Czechoslovakia.

July 1989: EC asked coordinate Western aid to Poland and Hungary by the Paris G-7 Summit. 'Group of 24'
created.

September 1989: EC-Poland trade and co-operation agreement signed.

November 1989: EC Heads of Government discuss aid to Eastern Europe at a special summit in Paris. On
the eve of the meeting, EC foreign ministers agree on a joint strategy to facilitate advanced technology
transfer to Eastern Europe.

December 1989: EC Summit in Strasbourg agrees to set up the European Bank for Reconstruction and
Development to provide credit for Eastern Europe. The EBRD was established by 42 countries on 25 May
1990 in Paris. With headquarters in London, it began operating on 15 April 1991.

December 1989: Group of 24 meets in Brussels to adopt an aid programme for Poland and Hungary and
announce its willingness to help other Eastern European countries 'once the necessary political and economic
reforms' have been initiated.

December 1989: EC-USSR trade and economic co-operation agreement signed.

April 1990: Special EC Summit agrees on measures for the integration of the former GDR into the Community.
Senior Community representatives also decide to offer individual Eastern European countries a new form of
association agreement.

May 1990: GDR and Bulgaria sign trade agreement with Community. Limited 1988 agreement with Czechoslovakia updated.

May 1990: Group of 24 agrees to extend Phare programme to other Central and Eastern European countries.

July 1990: GDR enters into monetary, economic and social union with the Federal Republic and thus becomes
a _de facto_ member of the EC Customs Union.

October 1990: GDR-FRG State Treaty enters into force, uniting the two parts of Germany in the Federal
Republic and making the territory of the former GDR part of the European Community.

October 1990: EC-Romania trade and co-operation agreement signed.

No C 339/64 Official Journal of the European Communities 31. 12. 91

November 1990: European Parliament adopts package of measures covering integration of the five new
Federal Lander into the Community.

December 1990: EC Council approves the Community measures.

December 1990: Rome European Council approves food aid worth ECU 750 million to USSR. Aid to other
Central and Eastern European countries increased.

December 1990: EC Council authorizes the Commission to initiate association negotiations with Poland,
Hungary and Czechoslovakia. The negotiations begin in February 1991.

January 1991: Commission announces that Romania now qualifies for aid under the Group of 24 support
programme for reformist Eastern European states.

March 1991: Commission adopts the joint support plan for the new Federal Lander, which will receive
Community aid totalling DM 6 000 million in the 1991-1993 period.

June 1991: Council for Mutual Economic Aid (Comecon) disbanded.

August 1991: Failed putsch in the Soviet Union followed by an acceleration in the process of transforming
the USSR into a Federation of Democratic States.

Opinion on the economic situation in the Community in mid-1991

(91/C 339/13)

On 26 February 1991 the Economic and Social Committee, acting under the fourth paragraph
of Article 20 of its Rules of Procedure, decided to draw up an Opinion on the economic
situation in the Community in mid-1991.

The Section for Economic, Financial and Monetary Questions, which was responsible for
preparing the Committee's work on the subject, adopted its Opinion on 10 September 1991.
The Rapporteur was Mr B.N.J. Pompen.

At its 289th plenary session (meeting of 26 September 1991), the Economic and Social
Committee adopted the following Opinion by a majority vote in favour and six votes against,
with 15 abstentions.

1. Introduction

1.1. _General trends_

Using a number of indicators, this section provides an
account of economic developments over the six-year
period from 1989 to 1994 (see Table 1) ( [2] ). The projec

(*) Because of serious statistical problems the economic data for
the EC and Germany do not include the former GDR.

tions for 1991 and 1992 are the European Commission's,
while figures from the Netherlands Central Economic
Planning Office _(Nederlands Centraal Planbureau)_ have
been taken for 1993/1994 in order to broaden the basis
of the policy assessment. Naturally, these projections
are fraught with major uncertainties, some of which
are discussed in 1.4.