Chapter

IV. Regional Arrangements

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1965
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The six member countries of the European Economic Community (EEC)2 continued to make progress toward establishing a customs union and an economic union. The machinery for monetary cooperation was elaborated with the establishment in April 1964 of the Council of Central Bank Governors of the EEC countries. After certain steps toward a common agricultural policy were taken during the year, the Community reached agreement on December 15, 1964 on common grain prices to be applied no later than July 1, 1967. On January 1, 1965, tariffs on intraregional trade in industrial products were reduced by a further 10 per cent, to 30 per cent of their 1957 level; although many agricultural commodities are subject to Common Agricultural Policy levies, internal tariffs on trade in some agricultural products were reduced to 50 per cent, and on others to 45 per cent, of their original levels. These reductions were also applied to the African States associated with the Community and the Malagasy Republic and, for industrial products, to Greece. A new “acceleration program” has been proposed by the EEC Commission, to make the common external tariff fully effective by July 1, 1967 and to eliminate all internal duties on industrial products in two steps by that date; the customs union would thus be established two and a half years ahead of the schedule set out in the Treaty of Rome. No decision has yet been taken to adopt this proposal.

On June 1, 1964, the Second Convention of Association between the EEC and the African States and Malagasy came into force. A number of the products of the associated countries then entered the member states of the Community duty-free, and the reduced duties of the common external tariff came into operation for these products when imported from third countries. Association Agreements became effective also with the Netherlands Antilles (October 1, 1964) and with Turkey (December 1, 1964), while a three-year trade agreement with Israel was signed in June. The form of Turkey’s association is similar to that of Greece and envisages eventual membership in the Community; a customs union is to be achieved in three stages. The trade agreement with Israel contains EEC commitments with respect to import duties and quantitative restrictions on selected products and an Israeli declaration of intention to increase imports from the Community. On March 9, 1965, the EEC and Lebanon initialed a trade and technical cooperation agreement, the first trade agreement negotiated by the EEC that includes technical assistance.

On December 31, 1964, the member countries of the European Free Trade Association3 reduced their intraregional tariffs on industrial products from 40 per cent to 30 per cent of their 1960 levels. Finland, as an associate member, made the 10 per cent reduction on March 1, 1965. Austria reduced duties on a wide range of consumer goods on October 1, 1964, three months ahead of schedule. During the year, the scope of the tariff reduction process was extended to certain agricultural and fish products that previously had not been subject to that process. Further progress was made in dismantling quantitative restrictions on industrial products from other member countries; such liberalization measures were generally applied also to most nonmember countries.

The five members of the Central American Common Market took further steps toward integration of their economies. The Third Protocol to the Central American Agreement on the Equalization of Import Duties and Charges, which was signed on July 31, 1962 by Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, entered into force for Costa Rica, Guatemala, and Honduras on April 29, 1964, after these three countries had deposited their respective instruments of ratification. The ratifications by El Salvador and Nicaragua were deposited subsequently, in December 1964 and March 1965. This protocol made the Central American common external tariff, which had up to then been applicable to about 50 per cent of the total number of items in the uniform Central American tariff nomenclature, applicable to almost 96 per cent of the items, encompassing, for most of the countries, 70–80 per cent of imports from outside the region. The Fourth Protocol to the Agreement, signed by the same five countries on January 9, 1963, entered into force for Costa Rica, El Salvador, and Guatemala on October 11, 1964. This protocol modified the uniform tariffs and the classification given to some products in the original agreement and subsequent protocols. In February 1964, the presidents of the central banks of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua signed an agreement, which entered into force on March 18, 1964, for the establishment of a Central American Monetary Union.

By the end of 1963, the members of the Latin American Free Trade Association (LAFTA)4 had individually granted each other some 8,000 duty reductions laid down in national lists. The Treaty of Montevideo (February 18, 1960) also provided for a common list which was to comprise the goods on which all duties, charges, and other restrictions relating to intraregional imports must be eliminated by all members before the 12-year transitional period expired; the list is to be negotiated in four stages at 3-year intervals and eventually is to cover all intraregional trade. On December 11, 1964, the first part of the common list and the fourth set of national lists were agreed. The common list, which was accepted by all members, includes 113 products, accounting for slightly more than 25 per cent of present intraregional trade. The tariff reductions in this list will not be enforced until 1973. The eight national lists agreed at the Conference cover some 250 concessions, which took effect on January 1, 1965, compared with some 1,000 concessions negotiated at the previous session. Uruguay did not negotiate a fourth national list.

The Arab Common Market, the establishment of which was agreed in April 1964, came into operation on January 1, 1965. The agreement was signed by Iraq, Jordan, Kuwait, the Syrian Arab Republic, and the United Arab Republic; accession is open to all Arab League States. The agreement provides for the abolition of internal customs duties on agricultural products and natural resources within 5 years, by tariff reductions at an annual rate of 20 per cent. Internal customs duties on industrial products are to be reduced by 10 per cent annually. Provision is also made for the eventual establishment of a common external tariff.

Belgium, France, Federal Republic of Germany, Italy, Luxembourg, and Netherlands.

Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and United Kingdom. Finland is an associate member.

Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, and Uruguay.

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