CELEX: 51981PC0647
Language: en
Date: 1981-11-06
Title: Proposal for a COUNCIL DECISION amending the Decision of 4 April 1978 concerning the application of certain guidelines in the field of officially supported export credits (presented by the Commission to the Council)

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COM (81) 647
Vol. 1981/0194
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 ---pagebreak---                                                                   COM(81)647 final
        COMMISSION                                                Brussels . 6 November 1981
          OF THE
eiionPFAKI COMMUNITIES                                            FOP OFFICIAL USE ON LY
     r*    I C  x •
                                      Propsoal for a
                                     COUNCIL DECISION
               amending the Decision of 4 April 1978 concerning th «
               application of certain guidelines in the field of
                            officially supported export credits
                    presented    by the Commission to the Council
                       A /.7
 ---pagebreak---                     EXPLANATORY MEMORANDUM
                                                                                 \
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       ■■..s'                              "■
1 . At the 15 th meeting of Participants to the Arrangement on guidelines
 – for officially supported export credits (" the Consensus ") held in
    Paris between 5 and 7 October . a         compromise , emerged
    based on the following elements :
    A ) A general rise in the matrix of interest rate minima of 2.5 X
             with the exception of credits with a repayment term greater than
             five years granted to relatively poor countries ( category III )
             for which the increase would be 2.25 % .
            This will bring the minimum interest rates on Category III
             credits to 10 % irrespective of the repayment term .
    B) As regards the low           interest rate countries / i.e. Japan , the
            compromise consists of the Community 's proposal whereby in the
            event of the commercial lending rates of interest for the national
            currency in a Participant 's country falling below the minimum
             rates of the new matrix , any Participant may provide official
             financing support for export credits in that currency carrying
             interest at rates below the guidelines provided that the
             interest rate charged for that portion of the total export
            credit which is being financed with such official support
             is not less than 9.25 % p. a .
    C ) The Community 's position on a managed system of interest rate          •
            minima also forms part of the compromise . Under this system there
            will be both a review and decision by Participants at each
            annual review , in the light of the economic and monetary situation
            prevailing at the time, concerning modifications which might
            prove to be necessary to the matrix of interest rate minima .
            The aim would be notably to bring these closer to market
             rates . Evidently on these occasions , the situation with regard
            to the low interest rate countries will also be examined with
            all relevant factors being taken into account .
 ---pagebreak---              D) The Community 's proposals to modify the Arrangement 's procedures
                  on tied aid credits have also been included in the compromise .
                  These envisage that the granting of tied aid credits
                   ( i ) with a grant element less than 15 % will be subject to the
                         procedure "prior notification with discussion" provided
                         for in paragraph 9 ( a ) ( 1 ) of the Arrangement ;
                 ( ii ) with a grant element greater than or equal to 15 % but less
                         than 25 % will be subject to the procedure " prior notification
                         without discussion" provided for in paragraph 9(b)(1 ) of the
                         Arrangement ;
               ( iii ) with a grant element greater than or equal to 25 % to the
                         prompt notification procedure provided for in paragraph 9
                         ( c)(i)of the Arrangement , without prejudice to the official
                         development procedures administered by the DAC .
          2 . While the terms of the compromise conform to the general conception
               of the negotiating directives stipulated in the Council Decision
              of 28 September 1981 , there are nevertheless differences on two
              points .
              The Commission considers, however , that taking into account the
               realities of the situation the envisaged compromise safeguards
              the essential interests of the Community and avoids the dangers
              the would have ensued from a hardening of the negotiating positions
              of its principal partners and the risk of a credit war . Furthermore
               it should be emphasised that the envisaged compromise is supported
                           rr
              by all           Participants to the Arrangement .
              The differences with the adopted negotiating directives are :
              A) The increase in the matrix of minimum rates for countries in
                     category II ( intermediate countries ) and in Category III
                     ( relatively poor countries ) is greater by an amount of
                     between 0.25 £ and 0.50 % from the limits fixed in the mandate .
                     In effect , during the negotiations the US made it clear, contrary
                     to what had been indicated by its delegation last July during
                     the "exploratory" discussions organised in Paris, that
                     an across -the-board increase in . the matrix of interest rate
                    minima of the order of 2.5 % was the condition for active US suppon
( 1 ) The OECD Secretariat1 is awaiting confirmation of Portugal 's agreement t <
      the comDromise .
 ---pagebreak---                                    - 3 -
               for a solution to the Japanese problem along the lines desired
               by the Community .
               As indicated above , however , it has been possible to mitigate the
               effect of this flat rise in rates in the case of Category III
               countries .
           B) As regards Japan , this country had vigorously contested the
               Community view that the intervention of its Eximbank constituted
               in itself an advantage which should give rise to compensation .
               With US support , however , it has been possible to devise an
               acceptable solution for the Community in the compromise .
               This does not envisage, as stipulated in the mandate, that an
               overt margin will be added to the interest rate charged by
               Eximbank . Instead the Japanese Eximbank will apply henceforth
               a minimum rate of 9.25 % for all categories of countries
               and for all credit periods . This means in reality that the
                                                                   <1 )
               Eximbank will apply the actual Japanese market rate increased
               by a margin of 0.75 % and that the final blended rate
               ( joint financing by Eximbank and commercial banks in line
               with normal financing proportions ) will in practice be
              around 9 Z.
               This figure corresponds in fact to the minimum floor established
               in the negotiating mandate .
       3 . The compromise constitutes a temporary solution which will enter
           into force on the 16 November 1981 for a period of 6 months .
           The Participants will undertake a comprehensive new review of
           the situation at a meeting foreseen for the 10 March 1982 .
       4 . All Participants to the Arrangement have indicated to the OECD Secretariat
               their definitive agreement on this compromise .
           Under these conditions , the Commission presents the
           attached proposal for a Decision to the Council which will lead
           to the conclusion of a modified Arrangement on export credits on
           the basis of the , above-mentioned compromise which has been accepted
           by all Participants .
( 1 ) In the event of a rise in market rates the margin applied to Eximbank
      financing will diminish but the blended rate will be greater than 9 % .
                                                                                 ./.
 ---pagebreak--- . As before, the guidelines / based on Article 113 of the EEC Treaty,
  will apply only to exports going to non-member countries ; official
  support granted by Member States for credit on intra-Community
  sales will continue to be governed by Articles 92 and 93 and acts
  based on these provisions , and by the principles laid down by
  the Commission within the framework of those provisions .
 ---pagebreak---                                                NOT TO BE PUBLISHED
                  ; Proposal for a
                   COUNCIL DECISION
 amending the Decision of A April 1978 concerning the
 application of certain guidelines in the field of
           officially supported export credits
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,
 ---pagebreak---                             - 2 -
Whereas the Community is party to the Arrangement on officially supported
export credits ;
Whereas this Arrangement is the subject of the Council Decision of
4 April 1978 ; whereas that Decision was ^amended by the Decision
of 27 June 1980 and has been extended on a number of occasions .
 most recently - ,• until 31 January 1982 by the Decision of 20 July 1981 .
Whereas , in view of developments in the world economic situation, it
continues to be necessary to minimize counter-productive competition
in the field of officially supported export credits and to reinforce
international co-operation to prevent a worsening of the terms of such
credits ;
Whereas in its Decision of 28 September 1981 , the Council accordingly
adopted directives in accordance with which the Commission . was to
express the Community 's position in the international negotiations
on the amendment of the Arrangement ;
Whereas the results of the negotiations on the amendment of the
Arrangement can be considered to correspond to the interests of the
Community ;
Whereas      the other parties to the Arrangement accept
the results    of the above-mentioned negotiations ;
Whereas it is probable that these results will be implemented in the
form agreed and according to the established timetable;
Whereas , in the interests of the Community and in order to give effect
to the principle_of international co-operation, it is necessary for
the revised Arrangement to be applied in the Community;
Whereas it is desirable for the application of the revised Arrangement
in the Community to be limited to six months in order to enable the
Community to review the situation in the light of its experience    .
of such application or of any other factor which might affect its
assessment of the said Arrangement ,
HAS ADOPTED THIS DECISION
 ---pagebreak---                                                                                                                                           ■1
                                                                                                                                          !
                                               ARTICLE 1
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The Arrangement annexedto the Council Decision of the 4 April 1978 ,                                                                 J jv
                    ■    ■                                                                                                                   '".I
as amended by the                                Decision of the 27 June 1980, is amended                                             3r: ;
as indicated in Annex 1 .                                             '        '       .                *                              h'
                                                                                                                                      Υ
                                            ARTICLE 2
                                                                                                                                       M
This Decision shall apply                                from 16 November 1981 t0 15 May 1982                                          iû
                                            ARTICLE 1
The  Decision of 20 July 1981 is hereby repealed ,
                                           ARTICLE A
This Decision is addressed to the Member States
                                                                                                 Done at Brussels ,             1981
                                                                                                                For the Council
                                                                                                              The President
 ---pagebreak---                                                                       ANNEX   1
                    ARRANGEMENT ON GUIDELINES FOR OFFICIALLY SUPPORTED EXPORT CREDITS
Paragraph 3 now reads as follows :
"3 . MINIMUM INTEREST RATE                                       •  ,
       ( a ) The following minimum rates of interest will apply where Participants
              are providing official financing support by way of direct credit ,
              refinancing or interest rate subsidy :
      Classification                               Number of years in Maximum
           of country                                    Repayment terms
                                      2-5              Over 5 - 8.5         Over 8.5    " 10
      I. Relatively rich              11 .0              11.25 %            not applicable
    II . Intermediate                 10.5 %             11.0 %             not applicable
  III . Relatively poor               10.0 %         ;   10.0 %                10.0 . %
    (b) It is understood that if commercial lending rates of interest for the
            national currency in a Participant 's country fall below the lowest
            minimum level at ( a ) above, any Participant may provide such official
            financing support for export credits in that currency carrying
            interest at < rates below the above guidelines , provided that the
            interest rate charged for that portion of the total export credit
            which is being financed with such official support is not less
            than 9.25 per cent per annum .
    ( c ) Interest on an export credit which is officially supported by way
            of direct credit , refinancing, eligibility for an interest subsidy ,
            guarantee or insurance shall normally not be capitalized during
            the repayment term but shall be payable not less frequently than
            every six months , commencing not later than six months after the
            starting point . If a participant   Intends not to follow the normal
            practice, the Participant will give prior notification in accordance
            with the procedure set forth in Paragraph 9(b)(1 )."
 ---pagebreak---                                                                ANNEX 1
                             - 2 -
   Paragraph 7 now reads as follows :
" 7 . Tied Aid Credits
    'If a Participant intends to support a tied aid credit the Participant
   shall , without prejudice to Official Development Assistance procedures
   administered by the Development Assistance Committee , give notification
   in accordance with the procedures set forth in Paragraphs :
   ( i ) 9(a)(1 ) if the grant element is less than 15 per cent ;
   ( ii)9(b)(1 ) if the grant element is        , 15 per cent or more but less
          than 25 per cent ;
 ( iii)9(c)(1 ) if the grant element is 25 per cent or more .        "
The following changes are made to Paragraph 9 ( Procedures ) :
  - In subparagraph 9(a ) Derogations : Procedure for Prior Notification
       and Discussion , indent 1 , Notification and Discussion :
                   In the third line, after "this Arrangement " insert
                   "or to support tied aid credit having a grant element
                   of less than 15 per cent "
    - In subparagraph 9 (b ). Procedure for Prior notification without
        d.iscussion, indent . 1 (iv)notf reads as follows :
                    " 1:o support a tied aid credit having a grant
                       element of 15 per cent or more but less than 25 per cent
   - .     Subparagraph 9 ( c ), Prompt Notification Procedure, now
        reads . as follows :
             "( ir Notification : As soon as a Participant commits itself
                      to support a tied aid credit having a grant element
                     of 25% or more ,-      . the Participant must notify
                     all other Participants accordingly .
              (2 )   Information on Commitment :' As soon as a Participant
                     commits itself , it must in all cases immediately
                     inform all other Participants accordingly ."
 ---pagebreak---                                                                           ANNEX 1
                                    - 3 -
In Paragraph -11 >" Definitions ahd related provisions /'subparagraph ( a ) indent
( 3 ). now reads as follows :.,    ; v , /
             , "(3 ) 'Tied aid credit means a credit which is provided
                      for development aid purposes ..."/ the remainder
                      of the paragraph reads as in the annex to the
                      Council Decision of 4 April 1978 _7
      Paragraph 13 S Review ,is amended so that after the first      subparagraph
      the following „ subparagraph is inserted :
                    " At each annual review Participants will review and
                      decide in the light of the economic and monetary
                      situation prevailing at . that time modifications
                      which might prove to be necessary to the minimum
                      interest rate provisions of this Arrangement .
                      The aim would be notably to bring ■ the matrix
                      interest rates closer to market rates ."
 ---pagebreak---                                                    ANNEX 2
It is suggested that . the following declaration be included in
the minutes of the Council : ■ ■ H.­
"The Council takes note of the fact that the Participants to
 the Arrangement have made the necessary administrative
 arrangements regarding prior commitments arising from
 an amendment of the guidelines "./