III. Regional Arrangements

International Monetary Fund. External Relations Dept.
Published Date:
September 1967
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On May 10-11, 1966 the six members of the European Economic Community (EEC) reached agreement on a definite date—July 1, 1968—by which the remaining intracommunity duties on industrial products are to be abolished, the common external tariff is to come into full effect, and free circulation of practically all agricultural products is to be achieved. Thus, the customs union will be completed 18 months earlier than the final date laid down in the Treaty of Rome. At the same meeting, agreement was reached on the financing of the common agricultural policy up to the end of the transition period.

At the beginning of 1966, internal duties on industrial products were reduced to 20 per cent of their 1957 levels; they are to be reduced by a further 5 per cent by July 1, 1967 and are to be eliminated by July 1, 1968. On agricultural products, internal duties were reduced at the beginning of 1966 to 40 per cent (if liberalized) or to 35 per cent (if not liberalized) of their 1957 levels; for a few agricultural products duties on intra-EEC trade were eliminated late in 1966, but for most products the elimination is to be completed at various dates during 1967, or before the second half of 1968. A provisional 20 per cent reduction of the common external tariff level, toward which national tariff levels were to be aligned by stages, had been made for most commodities either in the 1960-61 GATT negotiations, or after July 1, 1963, in anticipation of reductions to be made later. In respect of commodities for which such 20 per cent reductions in the common external tariff level had not been agreed in GATT negotiations, a new approximation of the common external tariff levels was to take place by January 1, 1966. In fact, the new approximation was delayed until July 1, 1966 and was confined to a list of commodities on which special treatment in the Kennedy Round negotiations was being sought by the EEC.

Agreement was reached in January 1967 that all member states should, no later than July 1970, institute a value-added tax, generally comparable to the one already in effect in France, in lieu of turnover taxes now imposed. A date by which the rates of value-added tax must be brought to a uniform level is yet to be agreed upon. The Commission of the EEC submitted to the Council a proposed third directive concerning the liberalization of capital movements.

The Council of Ministers of the European Coal and Steel Community agreed in February 1967 upon an arrangement to enable users of coking coal produced within the Community to compete on an equal footing with those using cheaper imported coking coal. There is to be a national subsidy on local production sold within the market of each member country, and a Community system of compensation for coking coal traded between member countries.

The process of ratification, by national parliaments, of the Treaty signed on April 8, 1965 providing for the establishment of a single Council and a single Commission for the three European Communities,3 was completed on October 25, 1966. The Treaty was not implemented in 1966, pending the selection of the President and Vice Presidents for the new Commission.

An Association Agreement with Nigeria was signed on July 16, 1966 providing for a relationship similar to that previously established with 18 African and Malagasy states by the Yaoundé Convention. The new Agreement, like the Yaoundé Convention, would come up for renewal on May 31, 1969. Negotiations that had been initiated earlier looking toward the association of Austria, Kenya, Tanzania, Uganda, Morocco, and Tunisia were active during 1966 for Austria and the East African countries. On October 4, 1966, Israel applied for association with the EEC, to begin at the expiration of the present trade agreement on July 1, 1967. Exploratory talks concerning possible association were carried out during 1966 with a number of other governments.

For nearly all industrial products, six 4 of the members of the European Free Trade Association (EFTA), reduced their intraregional tariffs to 20 per cent of their 1960 levels at the end of 1965, and then eliminated these tariffs and any applicable quota restrictions altogether at the end of 1966 (three years ahead of the schedule originally agreed). The seventh member, Portugal, at the end of 1966 reduced the tariffs it applies to imports of a number of industrial products from EFTA partners from 70 per cent to 60 per cent of their 1960 levels; it has undertaken to eliminate these tariffs and any quota restrictions on these commodities by 1980. Finland, an associate member, reduced tariffs on most industrial goods, at the end of 1966, from 20 per cent to 10 per cent of their 1960 levels and has undertaken to eliminate these tariffs by the end of 1967. There was also an EFTA decision to the effect that the provisions of the EFTA Agreement concerning public orders, bids, and tenders should be fully implemented from the beginning of 1967.

The agreement of the United Kingdom and Ireland to establish a Free Trade Area became effective on July 1, 1966. To commodities covered by the agreement, the United Kingdom gave duty-free entry beginning on July 1, 1966, while Ireland took the first of a series of steps by which it is to eliminate its duties not later than July 1, 1975.

Under the terms of the Free Trade Agreement concluded by Australia and New Zealand in 1965, tariffs applying to items constituting 60 per cent of the trade between the partners are to be eliminated. Of these tariffs, those not exceeding 5 per cent were eliminated at the beginning of 1966; those between 5 per cent and 10 per cent were cut in half at the beginning of 1966 and are to be eliminated at the beginning of 1968; and those exceeding 10 per cent were cut by one fifth at the beginning of 1966 and by similar cuts every two years will be eliminated by the beginning of 1974.

Implementation of the Automotive Products Trade Agreement concluded in 1965 between Canada and the United States (supplemented by undertakings of the companies which assemble vehicles in Canada) proceeded rapidly during 1966.

The process of ratification by the parliaments of Antigua, Barbados, and Guyana of the agreement negotiated in 1965 to establish a Caribbean Free Trade Association (CARIFTA) was completed on December 29, 1966. This agreement, providing for the eventual elimination of duties and quotas among members and for the harmonization of investment incentives, is expected to become operative in 1967.

Progress was made by the Central American Common Market5 in adding commodities to the list entitled to free circulation within the area, and only 82 items are still subject to duty or to import controls. During the year progress was also made toward the adoption and application of a Uniform Central American Customs Code. Mexico (which is not a party to the Treaty, but which participates in Central American clearings and in the financing of Central American regional development) indicated its willingness to extend tariff preferences to the Central American countries, but the Latin American Free Trade Association (LAFTA) would first have to approve the extension of such preferences by one of its members.

In September 1966, Venezuela completed its adherence to the Treaty of the Latin American Free Trade Association. In December, Bolivia was accepted as the eleventh member of LAFTA;6 the formalities concerning Bolivia’s membership are expected to be completed during 1967. During the annual conference of the Association, the members agreed to adjust their National Lists for 1967 by extending tariff concessions on some 500 products, a somewhat smaller result than the concessions made on some 850 products for 1966.

The multilateral clearing system agreed upon by the central banks of the LAFTA countries in 1965 went into effect in July 1966, with the central bank of Peru acting as agent. In its initial six months only Argentina, Mexico, Peru, Chile, Colombia, and Paraguay, which had agreed upon reciprocal lines of credit, participated in the clearings. It had appeared earlier that the use of these facilities might remain voluntary, but it has been made mandatory in some instances by prescription of currency. Only a limited portion of the reciprocal claims of these six countries in 1966 was presented for settlement through the LAFTA clearing system.

On January 1, 1966 the Central African Economic and Customs Union (UDEAC) entered into force, providing for still closer integration of a group of countries 7 already cooperating closely under previous arrangements. Planning for implementation of the Union, which calls for the unification of all import taxation including the import turnover tax, the unification of customs nomenclature, and exemptions from customs duty, continued through 1966. The Union agreement also calls for harmonization of investment codes and for consideration of a proposal for complete integration of the tax regimes of the member countries.

In May 1966, a special commission, which was appointed to examine the working of the East African common market and Common Services Organization, submitted its report to the Governments of Kenya, Tanzania, and Uganda. A draft treaty is in preparation, based on the commission’s recommendations. These recommendations call for the establishment of an East African Economic Community and Common Market.

Implementation of decisions, taken in 1965, to replace the common East African currency by new national currencies in each of the three constituent countries, began in the summer of 1966.

On May 4, 1966 eight “East African” countries8 signed a cooperation agreement providing for transitional arrangements, looking toward an eventual economic community.

The Afro-Asiatic Council for Economic Cooperation established, early in 1967, a commission to make preparatory studies for a possible common market to include seven Asiatic and seven African countries.9

Implementation of the Arab Common Market continued.10 By successive reductions in 1966 and 1967 the import duties applied to trade among participating countries in goods covered by the agreement have been reduced, compared with the normal rates of duty, by 60 per cent for agricultural goods and by 30 per cent for industrial goods.

India, the United Arab Republic, and Yugoslavia agreed, in December 1966, upon various initiatives toward closer economic cooperation among themselves and with other developing countries. In particular, they agreed upon an early meeting to negotiate an exchange of tariff preferences, which could be extended to other developing countries offering mutual benefits.

The European Economic Community, the European Coal and Steel Community, and the European Atomic Energy Community.

Austria, Denmark, Norway, Sweden, Switzerland, and United Kingdom.

Established under the provisions of the General Treaty for Central American Integration; participants are Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

The other members of LAFTA are Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, and Uruguay.

Cameroon, Central African Republic, Chad, Congo (Brazzaville), and Gabon.

Burundi, Ethiopia, Kenya, Malawi, Mauritius, Tanzania, Uganda, and Zambia signed the agreement; Somalia and Sudan participated in the discussion but did not sign.

Mainland China, India, Indonesia, Iran, Japan, Kuwait, Pakistan, Ethiopia, Ghana, Guinea, Liberia, Libya, Morocco, and United Arab Republic.

Participants are Iraq, Jordan, Syrian Arab Republic, and United Arab Republic.

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