CELEX: 51987PC0397
Language: en
Date: 1987-08-05
Title: Proposal for a Council decision concerning the conclusion of the Settlement in the form of an Exchange of letters between the European Economic Community and the United States of America on Community exports of pasta products to the United States (presented by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (87) 397
Vol. 1987/0214
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 ---pagebreak---     COMMISSION OF THE EUROPEAN COMMUNITIES
                                               COM(87 ) 397 final .
                                               Brussels , 5 August 1987 .
                         Proposal for a Council decision
         concerning the conclusion of the Settlement in the form of an Exchange
         of letters between the European Economic Community and the United States
         of America on Community exports of pasta products to the United States
                             ( presented by the Commission )
                                           V i
                                   /r [y
                                  ^ ^ ^ 7;:.;
COM(87 ) 397 final
 ---pagebreak---                                                                               fV
                                                                     d oh
                              Explanatory Memorandum
1.     The Agreement between the European Economic Community and the United
       States on the Mediterranean preferences , citrus and pasta(l ), pro¬
       vides that both parties agree to proceed in good faith in seeking a
       prompt solution to their dispute over Community pasta export re¬
       funds . Intensive efforts were made to that effect over the past year
       and both sides reached on 5 August 1987 an ad referendum agreement
       on the settlement of the issue .
2.     The settlement provides for a reduction of the Community export re¬
       fund for pasta products exported to the United States of initially
       27,5% and for the permission of Inward Processing Relief ( IPR ) with
       equivalent compensation for exports of pasta products from the EC to
       the US in conformity with Regulation 3677/86(2 ) in order to promote
       a situation in which 50% of Community pasta exports to the United
       States will be carried out under IPR .
       In order to ascertain that the level of 50% of Community exports to
       the US under IPR is maintained as accurately as possible , the
       settlement provides for detailed adjustment modalities of the export
       refund .
       At the initial stage , four reviews of the effective trade during
       October 87 , November 87/January 88 , February 88/April 88 and
       May 88 /July 88 are agreed upon .
       Following each of these reviews , any necessary adaptation of the
       export refunds will be made and will take effect on the first day of
       the third month following each review period .
       Following these initial review periods , i.e. beginning with the
       six-month period August 1988 through January 1989 , reviews and
       changes will take place on the basis of six-month reference periods .
3.     The Commission proposes that the Council adopts under Article 113 of
        the Treaty the attached decision concerning the conclusion of the
        Settlement in the form of an Exchange of letters between the Euro¬
       pean Economic Community and the United States of America regarding
       exports of pasta products from the Community to the United States .
        The Commission will adopt the necessary implementing regulations .
 ( 1 ) Council Decision ( EEC ) of 3 November 1986 - Official Journal N° L/62
        of 5.3.1987 , page 22
 ( 2 ) O.J. n° L 351 of 12.12.1986 , page 1
 ---pagebreak---                Proposal for Council Decision
concerning the conclusion of the Settlement in the form of an Exchange
of letters between the European Economic Community and the United States
of America on Community exports of pasta products to the United States
The Council of the European Communities ,
Having regard to the Treaty establishing the           European   Economic
Community , and in particular Article 113 thereof ,
Having regard to the proposal from the Commission ,
Whereas the Agreement in the form of an Exchange of letters between the
European Economic Community and the United States of America on the
Mediterranean preferences , citrus and pasta , approved by the Council on
3 November 1986(1 ) provides that both parties agree to proceed in good
faith in seeking a prompt solution to their dispute over Community pasta
export refunds ,
Whereas both' sides reached on 5 August 1987 an agreement on the settle ¬
ment of the issue and therefore this settlement should be approved ,
HAS DECIDED AS FOLLOWS :
                                     Article 1
The Settlement in the form of an Exchange of letters between the Euro¬
pean Economic Community and the United States of America on Community
exports of pasta products to the United States is hereby approved on
behalf of the Community .
The text of the Settlement is attached to this Decision .
                                     Article 2
 The President of the Council is hereby authorized to designate the
person empowered to sign the Settlement in order to bind the Community .
Done at Brussels ,
                                                     For the Council
                                                      The President
 ( 1 ) 0.3 . n   L 62 or 5 March 1987 , page 22
 ---pagebreak---                                                    5 August 1987          f)
                                  DRAFT
        Letter from Commissioner De Clercq to Ambassador Yeutter
I hereby enclose the text and the Annex of the Settlement reached
between our two sides on the pasta issue pursuant to paragraph D of the
US/EC Agreement of 10 August 1986 and subject to the conditions thereof .
I confirm the acceptance of this Settlement by the Community .
I would be grateful if you would confirm acceptance of the Settlement in
the same terms by the Government of the United States of America .
                                               On behalf
                                      of the Council of the European
                                              Communities
 ---pagebreak---                                                     6 Auqust 1987
                                  DRAFT
        Letter from Ambassadeur Yeutter to Commissioner De Clercq
I acknowledge receipt of your letter of duly 1987 to which you annexed
the text of the Settlement on pasta , of which the text is as follows :
"I hereby enclose the text and the Annex of the Settlement reached
between our two sides on the pasta issue pursuant to paragraph D of the
US/EC Agreement of 10 August 1986 and subject to the conditions thereof .
I confirm the acceptance of this Settlement by the Community .
I would be grateful if you would confirm acceptance of the Settlement in
the same terms by the Government of the United States of America ."
I hereby confirm acceptance of the Settlement in the same terms by the
Government of the United States of America .
                                           For the Government
                                     of the United States of America
 ---pagebreak---                                                                      5 August 1987
                                  US - EC PASTA SETTLEMENT
In order to avoid a new conflict between the United States and the European
Community at a particularly critical moment for the world trading system , the US
and the EC have agreed to the following Settlement of the US-EC dispute regard¬
ing EC export refunds on pasta products ( 1 ) exported to the US .
1 . The export refund for pasta exported from the EC to the US will be reduced .
      The initial reduction will be 27,5 per cent of the prevailing level of the
      general refund for pasta exports .
2 . Inward Processing Relief ( IPR ) with equivalent compensation will be permitted
      for exports of pasta products from the EC to the US in conformity with Regu¬
      lation 3677 / 86 . Under IPR , durum wheat will be available for Community produ¬
      cers at world market prices and therefore exports of pasta products for the
      equivalent thereof shall not qualify for export refunds .
3 . Neither the method of calculating the general refund for pasta exports nor
      the regulations on IPR as they existed on 1 August 1987 will be altered in a
      manner which would undermine the effects of this Settlement .
4 . The actions referred to in paragraphs 1 and 2 above are intended to result in
      50 per cent of such exports taking place under Inward Processing Relief
      ( hereinafter referred to as the " agreed level ") throughout this Settlement .
5 . The two sides shall monitor the evolution of EC pasta exports to the US both
      under the IPR system and through the use of export refunds . The EC shall
      report bi-annually on exports in each 6-month reference period , extending
      from August through January and from February through July of each year ,
      within 45 days of the end of the period concerned .
6a ) In the event that EC pasta exports to the US under the IPR system fail to
      reach the agreed level in any 6-month reference period , the percentage
      reduction in the export refund referred to in Paragraph 1 above will be
       increased so as to achieve the agreed level , as it may be modified pursuant
      to sub-paragraph ( c ).
 ( 1 ) falling under CCT n " 19.03 , and with effect from 1.1.88 , HS heading 1902.11
        and 1902.19
 ---pagebreak--- b ) In the event that EC pasta exports to the US under the IPR system exceed the
     agreed level in any 6-month reference period , the percentage reduction in the
     export refund referred to in Paragraph 1 above will be reduced so as to
     achieve the agreed level , as it may be modified pursuant to sub-paragraph
     ( c ).
c ) Starting in 1989 , the EC and the US agree to examine jointly during March and
     September whether during the preceding six-month reference period the actual
     level of pasta exports from the EC to the US utilizing IPR has differed from
     the agreed level . The resulting shortfall or surplus , if any , shall be added
     to or subtracted from the agreed level in the subsequent six-month
     period .
d ) The adjustments referred to in sub-paragraphs a ) and b ) above shall take
     effect on the first day of the month following the 49-day periods referred to
     in Paragraph 5 .
7 . For the duration of this Settlement , the EC shall not introduce any new
     export incentives for pasta exported to the US .        Should any new export
     incentives for pasta exported from the EC to the US be introduced which
     undermine the operation of this Settlement , the US will have the right to
     pursue renegotiation of this Settlement or to terminate it .
8 . For the duration of this Settlement , the US Administration shall refrain from
     unilateral action against pasta imports from the EC and shall not seek
     redress in the GATT Subsidies Code Case on pasta . Should any administrative
     or legislative measures be taken against pasta imports from the EC , the EC
     will have the right to pursue renegotiation of this Settlement or to
     terminate it .
9 . The parties shall consult as agreed in the Annex to this Settlement . In
     addition , consultations will be held at any time at the request of either
     party regarding the operation of this Settlement or any matter pertaining
     thereto . Such consultations will be held within 10 working days of the
     request by either party .
10 . The provisions of this Settlement are without prejudice to the legal
     positions of either party regarding the consistency with GATT of the use of
     export subsidies or export refunds for any product processed from primary
     agricultural products . Both parties agree to seek resolution of the pasta
     export refund issue on a definitive basis in the Uruguay Round of
     Multilateral Trade Negotiations as quickly as possible .
11 . Should either party take any action which would undermine the effects or
     operation of this Settlement , or fail to take appropriate action to implement
     this Settlement , the other party will have the right to terminate the
     Settlement .
12 . The Annex to this Settlement shall constitute an        integral part of this
     Settlement . The provisions of this Settlement and    Annex shall take effect
     provisionally on 1 October 1987 . The Settlement and   Annex shall take effect
     definitively simultaneously with the implementation   of parts A and B of the
     Annex to the Agreement of 10 August 1986 .
 ---pagebreak---                                         ANNEX
A.       In order to promote early and accurate adjustment to the agreed level
of IPR utilization referred to in paragraph 4 of the Settlement to which this
Annex is attached (" agreed level "), the U.S. and the EC agree to a series of
four initial reviews of the functioning of this Settlement .
   1.  The first review shall take place in the first half of December 1987 to
      examine the trade which has taken place during October J987 . On the basis
      of this review , the EC shaLl , in accordance with paragraph 13 beLow , aLter
       the percentage reduction in the export refund referred to in paragraph 1
       of the Settlement to which this Annex is attached ,        either upward or
      downward so as to achieve the agreed level .    This change shall take effect
       from 1 January 1988 .
   2. A second review shall take place during the first half of March 1988 to
      examine the trade which has taken place from November through January . On
       the basis of this second review , the EC shalL , in accordance with
      paragraph B below , alter the percentage reduction in the export refund
      applied between 1 January and 31 March 1988 , either upward or downward so
      as to achieve the agreed level .      This change shall take effect from 1
      April 1988 .
   3. A third review shall take place during the first half of June 1988 to
      examine the trade which has taken place from February through April . On
       the basis of this third review , the EC shall , in accordance with paragraph
      B below , alter the percentage reduction in the export refund applied
      between 1 April and 30 June 1988 , either upward or downward so as to
      achieve the agreed level . This change shall take effect from 1 July 1988 .
   4. A fourth review shall take place during the first half of September 1988
       to examine the trade which has taken place from May through July . On the
       basis of this fourth review , the EC shall , in accordance with paragraph B
       below , alter the percentage reduction in the export refund applied between
       1 July and 30 September 1988 , either upward or downward so as to achieve
       the agreed level . This change shall take effect from 1 October 1988 .
B.     The magnitude of the changes to be made to the percentage reduction in the
export refund referred to in paragraph 1 of the Settlement to which this Annex
is attached as a result of each review referred to in paragraph A shall be
designed to achieve the agreed level in the following period . If the rate of
IPR utilization in any period is more than or equal to plus or minus 10
percentage points from the agreed level , the alteration resulting from that
review shall be a minimum of 5 percent of the general refund , unless otherwise
agreed .    If the rate of utilization of IPR is less than plus or minus 10
percentage points from the agreed level , the alteration shall be a minimum of
one percent of the general refund , unless otherwise agreed . If the rate of
utilisation is at the agreed level , no alteration shall be required .
C.       At the time of the fourth review mentioned above , the EC and the IJ.5 .
agree to examine the amount by which the actual level of pasta exports from the
EC to the U.S. utilizing IPR has differed from the agreed level during the
period from November 1987 through July 1988 . Any resulting shortfall or surplus
shall be added to or subtracted from the agreed level for the six-month period
beginning 1 October 1988 .
D.    Following the initial review periods , i.e. , beginning with the six-month
period August 1988 through January 1989 , in anticipation that EC pasta exports
to the U.S. will be at or near the agreed level , reviews and changes in the rate
of adjustment to the general refund level will take place as provided for in
paragraph    6            of the Settlement to which this Annex is attached .
 ---pagebreak---                     Side letter from Mr De Clercq to Mr Yeutter
With reference to paragraph A.l of the Annex to this Settlement ( first review ),
and taking due account of the technical delays involved for the operation of the
IPR system as well as the lack of representativity resulting from a 1-month
period , I understand that both sides , while committed to an early implementation
of this Settlement , are conscious of the difficulties for EC exporters to adapt
in such a short period of time to the agreed level of trade under the IPR
system . Consequently , the results of the first review should be treated with
caution .