CELEX: 51984PC0584
Language: en
Date: 1984-10-25 00:00:00
Title: RECOMMENDATION FOR A COUNCIL DECISION on the stand to be adopted by the Community at the international negotiations on the amendment of certain provisions of the Arrangement on Guidelines for Officially Supported Export Credits (submitted to the Council by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (84) 584
Vol. 1984/0226
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
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Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
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file have been declassified in conformity with Article 5 of the aforementioned regulation.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. September 2003
(ABI. L 243 vom 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit
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 ---pagebreak---                                                                                  C0M(84) 584 f i n a l
       COMMISSION                                                                Brussels, 25 October 1984
          OF THE
EUROPEAN COMMUNITIES                                                             FOR OFFICIAL USE ONLY
    G en eral S ecretariat
                                              RECOMMENDATION FOR A
                                                COUNCIL DECISION
             on the stand t o be adopted by the Community at the i n t e r n a t i o n a l
                   n e g o tia tio n s on the amendment of c e r t a i n p ro v is io n s of the
             Arrangement on Guidelines for O f f i c i a l l y Supported Export Credits
                           (submitted to the Council by the Commission)
C0MC84) 584 f i n a l
 ---pagebreak---                                       EXPLANATORY MEMORANDUM
 BACKGROUND
 1. At the OECD M i n i s t e r i a l meeting of 17-18 May 1984, a wide-ranging
      debate took place on the problem of aid and t r a d e - r e l a t e d concessional
       fina nc e. The r e s u l t s of these d is cu s s io n s are summarised in paragraph 22
      of the o f f i c i a l communiqué of the meeting :
        Aid and Trade Related Concessional Finance
  "  M inist er s affirmed t h e i r commitment to avoid any de j u r e and de fa c to
      financing p r a c t i c e s which give r i s e to t r a d e d i s t o r t i o n s and to
      d iv e r s io n of aid flows from development o b j e c t i v e s and to apply
      f u l l y the guiding p r i n c i p l e s they have agreed upon. They enjoined
      the competent bodies of the Organisation to take prompt a ction
      to improve e x i s t i n g arrangements so as t o strengthen transparency
     and d i s c i p l i n e in t h i s area by a l l a p p r o p r ia te means. Differing
     views were expressed with re spec t to the d e s i r a b i l i t y of including
     increas es in e s t a b l i s h e d minimum grant elements in such a c t i o n .
     They requested these bodies to repo rt on progress made toward
     these ends by the next M i n i s t e r i a l Council” .
2. The terms of the M i n i s t e r i a l d e c l a r a t i o n make i t incumbent on a l l
     OECD p a r t i e s to engage in a s er ious e x e r c is e of r e f l e c t i o n on
     methods of improving both transparency and d i s c i p l i n e in the f i e l d
     of Aid and Trade Related Concessional Finance. As one of the main
    pr oviders        of t h i s type of finance, i t is e s s e n t i a l t h a t the
     Community plays an a c t i v e and leading ro le in t h i s proc es s.
ANALYSIS OF THE SITUATION
3. The d i f f i c u l t i e s of fin ding common guidelines and methods to monitor
    t i e d aid c r e d i t s , a s s o c ia t e d financing and other p r a c t i c e s encompassed
    within the broad framework of the term "aid and tr a d e r e l a t e d
    concessional finan ce" have                   a r i s e n because of c o u n t r i e s ' d i f f e r e n t
    percep tions of the extent of the underlying problem. Indeed i t i s the
 ---pagebreak---         |
                                              -   2   -
    dual a i d - t r a d e func tions of such f i n a n c i a l f a c i l i t i e s t h a t makes
    the issu e so d i f f i c u l t to t r e a t .
4. However, i r r e s p e c t i v e of the p a r t i c u l a r p o s i t i o n s defended by d i f f e r e n t
    OECD Member S t a t e s , i t cannot be denied t h a t , even allowing for
    notable y e a r - t o - y e a r f l u c t u a t i o n s , the a bsolute amount of re sou rces
    devoted to concessional finan cing i s s i g n i f i c a n t .                 Furthermore
    the DAC has recently reported that the pressure for increased
    Associated Financing (combination of tied aid and export credits )
    seems to be mounting.
5. Aside from the question of the a c t u a l volume of resources earmarked
    for t i e d aid c r e d i t s and a ss o c ia t e d fin a n c in g , i t i s important
    to recognise a ls o t h a t the p o t e n t i a l volume               of such finan cing
    f a c i l i t i e s has increased following the s e t t i n g - u p of new programmes
    by the USA,Canada and Sweden, c ountrie s which have t r a d i t i o n a l l y
    absta ined or r e f r a in e d from o f f e r i n g such f a c i l i t i e s .
6. Furthermore, the growth in t i e d aid c r e d i t f a c i l i t i e s may compound
    the d i f f i c u l t i e s experienced by some e xport ers in s e l l i n g to c e r t a i n
    developing country markets on anything other than concessional terms
    (" s p o ile d markets "). Indeed i t has been reported t h a t on some occasions
    o f f e r s unsupported by concessional financing have                             not even been
    considered by the purchasing country.
  7. F in a lly and perhaps most importantly of a l l , i t i s c l e a r t h a t a
       combination of the tre nds mentioned above cannot but weaken
       the impact of the minimum g u i d e l i n e s of the Consensus on o f f i c i a l l y
       supported export c r e d i t s . This development i s a l l the more r e g r e t t a b l e
       given the great e f f o r t s made by a l l P a r t i c i p a n t s to s t a b i l i s e
       the export c r e d i t Consensus in October 1983.
 ---pagebreak---                                             - 3 -
 POSSIBLE APPROACHES
 8.     The above d e s c r i p t i o n of e x i s t i n g tre nds in the f i e l d of aid and
      t r a d e - r e l a t e d concessional finance r e i n f o r c e s the concerns expressed
      by M inister s t h a t some a ction should be taken in t h i s f i e l d . Two
      p o s s ib le approaches appear to be p o s s ib le :
       (a) The immediate in tr o d u c ti o n of wholesale a c r o s s - th e - b o a r d
              measures aimed a t both t i g h t e n i n g d i s c i p l i n e shar ply
              and inc re as ing transparency
      (b) A s t e p - b y - s t e p approach beginning with improvements in
              transpa ren cy.
9. The following suggestions have been made by those c o u n tr ie s in
    favour of the approach o u tlin e d in (a) above :
    - a phase-out of t i e d aid c r e d i t s in the short-medium term;
    - a s u b s t a n t i a l increas e in the minimum grant element (degree
        of c o n c e s s io n a lit y ) of t i e d aid c r e d i t s ;
    - a p r o h i b i t i o n of t i e d aid c r e d i t s to c e r t a i n " r i c h e r " developing
        c o u n tr ie s and in c e r t a i n i n d u s t r i a l s e c t o r s (high technology
        a r e a s , i n d u s t r i e s in oversupply);
    - a ban on t i e d aid c r e d i t s in the form of l i n e s of c r e d i t
    Under t h i s approach the problem of undermatching would be
    d e a l t with as p a r t of a comprehensive package of measures
    to improve d i s c i p l i n e .
 ---pagebreak---                                               - 4 -
10. An a l t e r n a t i v e method of proceeding                would     be to begin
       by addressing the problem of transparency before attempting
       to reach a            consensus on measures to improve d i s c i p l i n e .
       In the view of the Commission t h i s approach has a number of
      d i s t i n c t advantages since improvements in tra nspar ency w i l l
      enable P a r t i c i p a n t s to b e t t e r a p p r e c ia te the s c a le of the
       t i e d aid c r e d i t s    issue     as well as p e rm itt in g          further
       r e f l e c t i o n to be given           to the e f f i c a c y of d i f f e r e n t
      measures to improve d i s c i p l i n e .
       Such an approach would seem j u s t i f i e d a l s o by the f a c t t h a t the Ministers
       themselves could not agree on s p e c i f i c measures to be taken to
       strengthen d i s c i p l i n e , notably with re spect to the d e s i r a b i l i t y
       of incr easing the minimum c o n c e s s io n a lit y              of t i e d aid c r e d i t s .
 COMMISSION PROPOSALS
 ( i ) D e finition of t i e d aid c r e d i t s
11. In the view of the Commission three e s s e n t i a l measures must be
      undertaken in order to improve transparency . In the f i r s t
      place the d e f i n i t i o n of        t i e d aid c r e d i t s must be enlarged
      to cover a l l           de j u r e and      de f a c t o aid and t r a d e - r e l a t e d
       concessional financing p r a c t i c e s o f f er e d by P a r t i c i p a n t s to the
      OECD Consensus. Such a d e f i n i t i o n               should in c o rp o ra te a l l
      " as s oci ated financing" t r a n s a c t i o n s as defined by the DAC, as
      well as pre-mixed c r e d i t s of the Swedish and Austrian type,
      as well as p r a c t i c e s by which development a s s i s t a n c e i s granted
      for one por tion of a p r o j e c t and export c r e d i t s f o r another
      without any formal linkage. In the view of the Commission, f u l l
      transparency must be seen t o be a p p lie d .                    ’    Without t h i s -
      preco nd ition d i s c i p l i n e s w i l l f unc tion in only a p a r t i a l manner
      to the detriment of c e r t a i n P a r t i c i p a n t s . In the process of
      drawing up t h i s d e f i n i t i o n        f u l l use should be made of work
      c u r r e n tly being c a r r i e d     out on t h i s questi on within the framework
      of the 'DAC.
      In a ddition to making improvements in t h i s a r e a , the Commission
      believes'-'that the Community should attempt to a r r i v e                            a t an
      agreement with our Partner s on a common method of c a l c u l a t i n g
      the grant element of t i e d aid c r e d i t s .
 ---pagebreak---                                                           - 5 -
    (iiX        Pç,ior n o t i f i c a t i o n procedures
      12 . The enlargement                    of the d e f i n i t i o n of t i e d aid c r e d i t s should be
             accompanied             by measures to improve tra nspar ency through the
             p r i o r n o t i f i c a t i o n procedures of the Consensus. In t h i s regard
             i t i s worth r e c a l l i n g t h a t a t presen t only those t i e d aid
             c r e d i t s with a gra nt element of 25 % or l e s s a re s u b jec t to
             the p r i o r n o t i f i c a t i o n procedures. In 1983, in f a c t , o n l y
             about a h a l f of a l l t i e d aid c r e d i t s were covered by the p r i o r
             n o t i f i c a t i o n system. The other h a l f , a l l containing grant
              elements of between 25 and 50 %, and including a large number
              of c r e d i t s from c o u n tr ie s such as Austria and Japan, were
              n o t i f i e d only ex post or even not a t a l l . For thes e reasons
              the Commission b e lie v e s i t e s s e n t i a l t o widen the threshold
              of the p r i o r n o t i f i c a t i o n procedures. In a d d i t i o n , in order
              to give other OECD c ountrie s s u f f i c i e n t                            time t o react ,
               the Commission b e lie v es t h e r e ar e grounds f o r extending the duration
             . of the prior notification period beyond the c urre nt l im i t of 10 days.
Cii i U '· Fa ce- to-face c o n s u lt a ti o n s                        ---------- ---------- ------------ -----------------------
  13 . The t h i r d           element to improve transpar enc y /should be the
          in tr o d u c ti o n of ' f a c e - t o - f a c e con su ltatio n s, f o r ___
          important c o n t r a c t s . The Community i t s e l f pift forward t h i s
          idea in i t s c o n t r ib u ti o n to the 7th review o,f t h e functioning
          of the Consensus when i t s t a t e d t h a t
                                                 . . " g r e a t e r attempts shouid be made
                                                        to a r r i v e a t a common a t t i t u d e on
                                                        c re d i^ te rm s for a p a rtic u la r transaction",
           and suggested a l s o t h a t th e r e may be cases where
                                           . . . " P a r t i c i p a n t s should have g r e a t e r freedom
                                                       to c a l l f o r f a c e - t o - f a c e c o n s u lt a ti o n s
                                                      in d i f f i c u l t c a s e s . "
     14. The Community's i n i t i a t i v e was supported by o th e r OECD c o u n t r i e s ,
           and in April 1984 a l l P a r t i c i p a n t s " f ir m ly undertook"
                      ^                    . . . " t o consider favourably f a c e - t o - f a c e
                                                     c o n s u l t a t i o n s i f a P a r t i c i p a n t so
                                                     re quest s in the case of important
                                                     transactions"
 ---pagebreak---                                                            -  6 -
   15. Following the OECD M i n i s t e r i a l meeting and in the l i g h t of
           P a r t i c i p a n t s ' d is c u s s io n s in April 1984, Mr.Wallen, Chairman
          of Consensus P a r t i c i p a n t s , proposed a d r a f t t e x t of a new
           f a c e - t o - f a c e c o n s u lt a ti o n procedure aimed a t encouraging
          the development of common a t t i t u d e s f o r important p r o j e c t s ,
          and improving tr anspar en cy, p a r t i c u l a r l y with re spe ct to t i e d
          aid c r e d i t s . A r e l a t e d aim was the need to r e - e s t a b l i s h mutual
           confidence amongst P a r t i c i p a n t s which had been damaged by the
          malfunctioning of e x i s t i n g procedures in a number of cases .
          In response to the Chairman's i n i t i a t i v e the Community in d ic a te d
          t h a t wh ilst approving the o b j e c t i v e s underlying the proposal :
          i t had a number of t e c h n ic a l questi on s r e l a t e d t o th e p r a c t i c a l
          implementation of the procedure. Other P a r t i c i p a n t s , notably
          Canada, A u s t r a lia , New Zealand and the US a l s o r a is e d a
          number of t e c h n ic a l p o i n t s .
 16. In the view                  of the Commission               p o in ts of a t e c h n i c a l n a tu re should
       not be allowed to obscure the o b j e c t i v e s underlying                                    ;
       f a c e - t o - f a c e c o n s u lt a ti o n s which a re f u l l y in
       conformity with OECD M i n i s t e r i a l d i r e c t i v e s t o s tre n g th e n t r a n s ­
       parency "by a l l a p p r o p r ia te means."                       For t h i s reason the Commission
       b e lie v e s it"             e s s e n t i a l t h a t the Council makes a firm
       p o l i t i c a l commitment to the o b j e c t i v e s and p r i n c i p l e s              of such
       c o n su lt a ti o n s           which wi l l improve e x i s t i n g arrangements in
       the framework of the Consensus and                               the OECD Exchange of
       Information System.
  CONCLUSION
17. In the l ig h t of these c o n sid e r a tio n s the Commission co nside rs the
      implementation of the above propos als t o be an important
     s tep in meeting M i n i s t e r i a l d i r e c t i v e s and in overcoming c urrent
      l i m i t a t i o n s in e x i s t i n g Consensus procedures. Consequently,
     i t i s recommended t h a t the Council a u t h o r i s e s th e Commission
     t o open n e g o tia tio n s on the t h r e e elements h i g h lig h t e d above.
 ---pagebreak---                                                                         NOT FOR PUBLICATION
                         RECOMMENDATION FOR A
                         COUNCIL      DECISION
 on the stand to be adopted by the Community a t the i n t e r n a t i o n a l
 n e g o t ia tio n s on the amendment of c e r t a i n p r o vis ions of the
 Arrangement on Guidelines for O f f i c i a l l y Supported Export Credits
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty e s t a b l i s h i n g the European Economic
Community, and in p a r t i c u l a r A r t i c l e 113 t h e r e o f ,             ✓ '
Having regard to the Recommendation from the Commission,
 ---pagebreak---                                             -   2  -
   Whereas i t is in the Community's i n t e r e s t t h a t the Arrangement on
   Guidelines for O f f i c i a l l y Supported Export Credits should continue
   to play a c e n t r a l ro le in e lim ina ting wasteful export c r e d i t
   and t i e d a id c r e d i t competition and reducing s u b s id ie s ;
   Whereas i t is necessary to take prompt a c t i o n t o improve e x i s t i n g
  arrangements so as to strengthen                        transparency   and d i s c i p l i n e
   in the area of t i e d aid c r e d i t s ;
   Whereas i t is necessary to take such measures in order to ensure
  th a t the Arrangement's g u id e lin e s will not be undermined;
               i
  HAS DECIDED AS FOLLOWS
                                          Sole A r t i c l e
                                                                                               ✓
                                                                                                 ✓
  At the i n t e r n a t i o n a l n e g o t ia tio n s on the amendment of the
  Arrangement on Guidelines for O f f i c i a l l y Supported Export
  C r e d its , the Commission s h a l l express the Community p o s i t i o n
            1
  in accordance with the a tta ch e d d i r e c t i v e s .
, I t s h a l l a ct in c o n s u lt a ti o n with the s p e c ia l Committee provided
  for in A r t i c l e 113 of the Tr ea ty, which s h a l l a s s i s t i t in i t s
 task.
                                                                 Done at B r u s se ls , '
                                                                 For the Council
                                                                 The Pres ident
                 »
 ---pagebreak---                                                                                         ANNEX
                                          NEGOTIATING DIRECTIVES
 1. DEFINITION OF TIED AID CREDITS
     The d e f i n i t i o n of " t i e d aid c r e d i t s " within the framework of the
     Arrangement s h a l l xover               a l l forms of fin a n c in g , whether     in
     the form of O f f i c i a l Development Assistance (ODA) loans,
     ODA g r a n t s , o th e r o f f i c i a l flows, or a s s o c i a t e d financing
     packages defined in the DAC Guiding P r i n c i p l e s , whereby
     procurement i s de f a c t o or de j u r e t i e d to goods and
     s e r v ic e s from one or a limited number of P a r t i c i p a n t s . In
     t h i s framework attempts s h a l l be made to a r r i v e at a common
     method of c a l c u l a t i n g the grant element of t i e d aid c r e d i t s .
2. PRIOR NOTIFICATION PROCEDURES
    For t i e d aid c r e d i t s , the thre s holds f o r the implementation                of the
    p r i o r n o t i f i c a t i o n procedure in the Arrangement s h a l l be adjust ed
    upwards. In such cases an extension of the peri od bef ore a commitment
    can be issued s h a l l be n e g o tia te d .
3. FACE-TO-FACE CONSULTATIONS
    The adoption of common a t t i t u d e s at an e a r l y stag e on important
   p r o j e c t s s h a l l be encouraged and f a c i l i t a t e d by a l l a p p ro p ria te
   means, including f a c e - t o - f a c e c o n s u lt a ti o n s amongst competing
    Participants.