III. Regional Arrangements

International Monetary Fund. External Relations Dept.
Published Date:
September 1977
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During the period under review there were important developments affecting economic relations between the EEC and certain developing countries of Africa, the Caribbean area, and the Pacific region (the ACP countries)8 under the Lomé Convention, and a further advance toward implementation of the Community’s overall Mediterranean approach. Progress was made in concluding agreements between the EEC and a number of other non-EEC countries.

At the beginning of 1976, the Lomé Convention had been ratified by 7 members of the Community and 39 (out of 46) of the ACP countries. Following the ratification by all members of the EEC and by two thirds of the ACP countries, the full Agreement entered into force on April 1, 1976 (the trade provisions having been in force since July 1, 1975). Three former overseas territories, the Comoros, Seychelles, and Surinam, already associated with the EEC under Part IV of the Treaty of Rome, acceded to the Convention in the course of 1976. Applications from Cape Verde, Papua New Guinea, and Sao Tome and Principe were approved in principle by the EEC-ACP Council of Ministers on July 14, 1976. For these three countries, accession to the Convention will take place after the conclusion of a negotiated agreement with the Community. On June 29, 1976 the Council extended the association under Part IV of the Treaty of Rome to the United Kingdom’s Overseas Countries and Territories. The Council’s decision also gave them direct access to the Community market on the same terms as those granted to the ACP states and set the amounts of aid to be given to the United Kingdom’s Overseas Countries and Territories in the context of financial and technical cooperation and the stabilization of export earnings.

On February 9, 1976 the Council of the EEC stated that it was in favor of Greece’s request of June 12, 1975, to join the European Communities. It instructed the Committee of Permanent Representatives to prepare for negotiations with Greece which opened on July 27, 1976. Meanwhile, in January 1977 negotiations ended between Greece and the EEC on a new financial protocol within the context of the current association of Greece and the EEC. The protocol, which provides for budgetary assistance to Greece of European units of account (EUA) 55 million9 and for lending by the European Investment Bank (EIB) of EUA 225 million, will expire on October 31, 1981.

In May 1976 the Council of the EEC agreed to make EUA 1,250 million available to Mediterranean countries in the period up to 1980, EUA 800 million in the form of loans from the EIB and the remainder to be contributed by member states. Trade and cooperation agreements within the Communities’ overall Mediterranean approach were signed with three Maghreb countries (Algeria, Morocco, and Tunisia) in April 1976. The new agreements define terms for the entry of agricultural produce into the EEC, regulate conditions for migrant workers from these Maghreb countries, provide for financial and technical assistance, and envisage free entry into the community of raw materials and industrial goods that have a specified “Maghreb value-added” content. Provision is made for EUA 339 million of financial assistance to the three countries over a five-year period. These agreements are the first to be concluded with Arab countries under the Mediterranean approach and are of indefinite duration. The new agreements were to come into force when ratified, but the trade provisions came into force on July 1, 1976 under interim arrangements.

Also under the overall Mediterranean approach, a preferential trade and cooperation agreement between the EEC and Egypt was initialed in October 1976. The agreement covers financial assistance, economic and technical cooperation, and trade and replaces the trade agreement of 1972. Agreements with Jordan and the Syrian Arab Republic, as well as Egypt were signed in January 1977. From July 1, 1977, all exports of these countries, except for products covered by the EEC’s Common Agricultural Policy will enter the Community duty free. Temporary ceilings will apply to petroleum products, cotton yarn, certain cotton fabrics, phosphate fertilizers, and aluminum until the end of 1979. In January the EEC also signed a one-year agreement with Egypt on the supply of agricultural products to that country. In March 1976 Algeria informed the Commission that it was ready to begin negotiations with a view to concluding a food supply arrangement with the EEC for several years and in November, an agreement with Israel was initialed which complemented the 1975 agreement and contained a financial protocol providing for the EIB to open a line of credit for Israel of EUA 30 million, as well as a protocol extending the areas of cooperation with Israel. The agreement was signed on December 21, 1976.

At its meeting on January 20, 1976 the Council adopted directives for the negotiation of a further, more comprehensive agreement with Portugal, designed to improve the trade scheme which was previously in effect and extend it to cover economic cooperation and conditions for migrant workers. It would also contain a regular financial protocol to replace the emergency assistance that the EEC made available in October 1975. Negotiations were concluded on June 9, 1976. On July 29, the Council approved a decision to allow further negotiations between Portugal and the Commission for an interim agreement on the application of the trade provisions of the additional protocol. The agreements were signed in September 1976 and the trade provisions entered into force on November 1, 1976. Discussions opened with Spain in April 1976 to prepare negotiations for extending the existing trade agreement to the enlarged Community. In March 1976 protocols were signed adapting the 1970 agreement with Malta to the enlarged Community and extending it to cover agriculture and economic cooperation. The agreement will remain in force until June 30, 1977, before which time a further agreement is to be negotiated to achieve a free trade area within five years.

On June 30, 1976 the Commission adopted proposals for the EEC’s generalized tariff preferences scheme for 1977. The 1977 scheme provides greater benefits to developing countries than that for 1976 with the volume of preferential imports from developing countries to rise from EUA 4,600 million to EUA 6,500 million. A larger number of agricultural imports, in particular those of special interest to the least developed countries, are to be granted preferential treatment than in 1976. Ceilings for industrial imports other than textiles, footwear, and some steel products are to be based on 1974 import levels; this is expected to increase the value of imports qualifying for preferential treatment by 51 per cent. The ceiling on textile imports has been raised by 5 per cent and certain innovations have been made to liberalize such imports from the least developed countries. New rules of origin will apply in 1977 requiring sufficient processing in the country of origin to allow a change in tariff position. Cumulative origin will be allowed for goods originating in the Association of South East Asian Nations, the Central American Common Market, and the Andean Pact.

Some of the more important measures in the area of the common agricultural policy again related to beef and veal. On January 19, 1976 the EXIM procedure matching the import of bovine meat into the Community to the quantity exported was replaced by one making the issue of import licenses conditional on equivalent purchases from the intervention stocks. It was expected to result in an increase in imports. Special facilities were created for imports of beef and veal from ACP countries; these were extended in June until December 31, 1976. In December, a decision was adopted to lift the import prohibition for beef and veal on April 1, 1977, when a combination of orientation prices and import levies would apply.

On January 1, 1976, further reciprocal tariff cuts were made between the countries of the EFTA and the EEC under the free trade agreements. On December 1, 1976 some changes in the rules of origin under these agreements came into effect.

In January 1976, the central banks of the Nordic countries10 agreed to certain changes in their mutual swap arrangements of 1962 as revised in 1967, including an increase in the maximum access to swap credits by each bank. The Nordic Investment Bank10 commenced operations on August 1, 1976.

At the eleventh extraordinary session of the Council of Ministers of the Organization of African Unity on December 6–10, 1976, a resolution was adopted on the creation of an African Economic Community in 25 years. The session also recommended that an African Payments Union be established.

The treaty founding the Economic Community of West African States (Ecowas)11 was signed on May 28, 1975. The first ministerial meeting of Ecowas took place in Accra July 20–23, 1976. It was decided in November 1976 to locate the headquarters of the Community in Lagos and those of the Community Fund in Lomé.

The agreement establishing the West African Clearing House (WACH),12 was ratified in mid-1975. The Clearing House began operations on July 1, 1976 and the first clearings of payments between member countries took place on July 30.

The second meeting of heads of state of the West African Economic Community (CEAO)13 took place in Dakar on April 8–9, 1976 and approved the 1976 budget. A ministerial meeting of the CEAO took place in Ouagadougou on May 28–29. It was decided that two thirds of the Community Development Fund should be used to compensate members for falls in the prices of their exports, and the remainder for development projects in Mali, Mauritania, Niger, and Upper Volta. In January 1976 the second phase of the reform of the West African Monetary Union (UMOA),14 agreed in May 1975, was introduced. Under new regulations, credit ceilings are allocated on a national basis, rather than bank by bank. Banks are now expected to rely more on their own resources and on the call money market and the central bank may intervene by giving priority to preferential operations.

In April, The Gambia and Senegal agreed to establish a River Gambia Development Organization (OMVG) and its formal creation took place on October 5, 1976. At a meeting of the heads of state of the Mano River Union15 in Monrovia on July 10, protocols were signed on the participation of other West African States in the organization, on mutual trade, and on trade with third countries. On November 24, 1976 Algeria, the Libyan Arab Republic, and Niger decided to create a commission to study the possibilities for increased regional cooperation. The convention creating the Economic Community of the Great Lake Countries (CEPGL) was signed in Kigali by the presidents of Burundi, Rwanda, and Zaïre on September 20, 1976. A provisional fund of US$3 million has been established for the organization.

On January 1, 1976, as provided for by the Lomé Convention, the tariff preferences for imports from member states of the EEC were eliminated from the external customs tariff of the Central African Customs and Economic Union (UDEAC).16 At a meeting of ministers of UDEAC on April 30, 1976 it was decided to set up a Development Bank of Central African States (BDEAC). The Bank will finance the UDEAC 10-year plan and 50 per cent of its resources will be devoted to community projects.

At a meeting in Rabat on April 26–27, 1976 the finance and economy ministers of the 21 members of the League of Arab States17 signed a convention creating an Arab Monetary Fund (AMF) to be based in Abu Dhabi. The Fund will have a capital of 250 million Arab dinars (one Arab dinar = SDR 3). Among the aims of the AMF are the restoration of balance of payments equilibrium among the member countries of the AMF, the stabilization of their exchange rates, the coordination of the monetary systems and policies of members, the liberalization of monetary, financial, and trade relations between its members, and the ultimate establishment of a unified Arab currency. Operations will start after the convention has been ratified by members having 55 per cent of the total capital subscription. The first meeting of the AMF took place on April 18–20, 1977.

In August 1976, it was announced that the first stages of a common external tariff for the Arab Common Market18 would come into effect in 1978.

The Gulf International Bank19 opened formally on December 15, 1976 with the aim of financing the trade of the Gulf states. On February 19, 1976 the countries in the Gulf Common Market20 agreed to conclude a series of bilateral trade agreements with the ultimate aim of establishing a common market with a unified currency. Discussions continued throughout the year among the monetary authorities of Bahrain, Kuwait, Qatar, and the United Arab Emirates on the establishment of a common currency. In January 1976 a preliminary move was made by fixing the exchange rate relationship between the U.A.E. dirham and the Bahrain dinar at Dh 10 = BD 1 for specified travel transactions. In September, the Qatari authorities announced that visitors from the United Arab Emirates could, up to specified limits, use their own dirhams in Qatar at par with the Qatar riyal. The U.A.E. authorities agreed to a reciprocal arrangement. On August 21, 1976 Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates signed an agreement with Egypt providing for the establishment of a US$2 billion Gulf Organization for Development in Egypt.

At a meeting in Izmir on April 21–22, 1976 the member countries of the Regional Cooperation for Development (Iran, Pakistan, and Turkey) agreed to establish a free trade area through the gradual reduction in tariffs over a 10-year period and to set up a common investment bank.

The Latin American Economic System (SELA) was founded in October 1975, when ministers from 25 Western Hemisphere countries21 signed an agreement in Panama. The first meeting was held in Caracas on January 12–15, 1976 and it was agreed to encourage the creation of Latin American multinational companies, in particular in the areas of food, aluminum, sugar, and fertilizers. The convention came into force on June 7 when ratification was completed by a majority of signatories.

The authorities of the member countries of the Latin American Free Trade Association (LAFTA)22 decided in March to issue Latin American negotiable bills (Aceptación Bancaria Latinoamericana or ABLA), guaranteed by the region’s central banks, on U.S. financial markets. An issue designed to mobilize short-term finance began in September 1976. The Executive Committee of LAFTA met in Montevideo in April 1976 to appraise the results of 16 years of LAFTA activity. At the sixteenth ordinary conference on November 3–26, 1976, a further 924 customs concessions were negotiated. Industrial cooperation agreements in the chemical, pharmaceutical, petrochemical, photographic, and paint and varnish industries were expanded and an agreement was concluded on trade in surplus and deficit products of the chemical industry. A total of 79 special concessions was made by members to Bolivia, Ecuador, Paraguay, and Uruguay under the arrangements for assistance to less-developed members.

During 1976, Peru made use of a line of credit granted under the provisions of the Agreement of Santo Domingo, which established the LAFTA Multilateral Compensation and Reciprocal Credit Mechanism. The credits were made available to finance a disequilibrium in Peru’s balance of payments.

On January 1, 1976 the fifth tariff cut of 10 per cent on trade in 3,470 products with other Andean Pact23 members came into force in Chile, Colombia, Peru, and Venezuela. In March the presidents of the central banks of the Andean Pact countries drew up the constitution for a monetary fund (Fondo Común de Reservas) to finance the balance of payments deficits of member countries and an agreement to this effect was signed in November 1976. This Fund will have an initial capital equivalent to US$240 million, of which 75 per cent will be contributed equally by Colombia, Peru, and Venezuela over four years and the remainder by Bolivia and Ecuador over eight years. Credits will be granted for one year, renewable up to three years. On April 9, 1976 it was agreed to amend the foreign investment regulations of the Pact (Decision No. 24) in order to attract more foreign capital. It was also agreed to amend other provisions of the Cartagena Agreement and extend by two years the deadline for the industrial programs and the common external tariff. Chile failed to sign the amending protocol and withdrew from the organization on October 30, 1976. In the light of Chile’s withdrawal, the remaining members signed an additional protocol on October 30, 1976 to extend the above-mentioned deadlines by a further year.

In the early part of 1976, negotiations continued within the Central American Common Market (CACM)24 on a proposal of its High Level Committee for a new integration agreement to replace the 1960 Treaty of Managua. On March 23, 1976 the Committee presented to the presidents of the member countries a draft treaty to restructure the CACM as a Central American Economic and Social Community (CESCA).

On January 1, 1976 the common external tariff of the Caribbean Common Market (Caricom)25 came into force, resulting in the elimination of the remaining Commonwealth preferences granted by participating countries. The East Caribbean Common Market (ECCM)26 countries are to eliminate Commonwealth preferences early in 1977 in order to come into line with other Caricom countries. At a meeting of the heads of government of Caribbean Commonwealth countries on March 26, 1976 it was agreed to establish a foreign exchange safety net to assist members with balance of payments difficulties. The fund will consist initially of SDR 60 million provided on the basis of specified quotas by all Caricom members with central banks (i.e., Barbados, Guyana, Jamaica, and Trinidad and Tobago), which will be able to use its resources. These four countries also agreed to a common protective policy to increase mutual trade in certain products. On January 1, 1977, new rules governing intraregional trade came into force in Caricom.

The Urupabol27 countries set up a permanent secretariat in 1975. In March 1976 Paraguay and Uruguay agreed to remove tariff barriers and to harmonize industrial and investment legislation. Uruguay is to remove all tariffs on Paraguayan goods within one year, while Paraguay is to dismantle its tariffs on Uruguayan goods over a five-year period.

In the first half of 1976, four signatories (Bangladesh, India, Korea, and Sri Lanka) ratified the Bangkok Agreement.28 On June 17, 1976 the first cut in tariffs on mutual trade among these four countries was introduced. In November 1976, Burma applied for membership in the Asian Clearing Union (ACU)29 and joined in February 1977. At its annual meeting in February 1977, the Board of the ACU approved some technical changes in the functioning of the facility.

The heads of state of the Association of South East Asian Nations (ASEAN)30 member countries met on February 23–24, 1976 and signed a Declaration of ASEAN Concord and a Treaty of Amity and Cooperation in Southeast Asia. These agreements provide for cooperation in the political, economic, social, and cultural fields and the establishment of a permanent ASEAN secretariat in Jakarta. Economic collaboration is to consist of cooperation on basic commodities, particularly food and energy, cooperation in establishing large-scale industrial projects, trade cooperation (including long-term contracts with regard to quantity, financial support for purchases at preferential interest rates, preference in procurement by government agencies, and the extension of tariff preferences), and a joint approach to international commodity problems and other world economic problems.

The economic and planning ministers of ASEAN, meeting on March 8–9, 1976 initiated feasibility studies for the immediate establishment of certain plants, designated as “ASEAN industrial projects,” which would be eligible for preferential trading arrangements. (Guidelines for their control were drawn up at a ministerial meeting on August 11, 1976.) It was also decided to establish preferential trading arrangements for rice and crude oil. Early in 1977 the Philippines and Singapore, and Thailand and Singapore, in separate arrangements, agreed to implement mutual across-the-board preferential tariff reductions of 10 per cent of existing tariffs on all products traded between them to promote bilateral and intra-ASEAN cooperation.

On April 23, 1975, Working Group 1 on ASEAN Monetary Arrangements was reconstituted as the Subcommittee on ASEAN Monetary Cooperation. Its terms of reference included the study of the mechanism and economic implications of an ASEAN Clearing Arrangement. The second meeting of the working group in January 1976 continued the study of the structure and workings of present trade and payments arrangements within ASEAN and also the workings of the Asian Clearing Union. Discussions centered on proposals for (1) an ASEAN Clearing Arrangement; and (2) a reciprocal currency (“swap”) arrangement. It was expected that the latter could be signed in 1977. An ASEAN Banking Council was founded in Singapore in August 1976 with the aim of promoting the region’s economic development.

On April 1, 1976, Australia and New Zealand renewed for a further 12 months their interim agreement guaranteeing tariff preferences in each other’s markets. On September 29, they agreed to extend the New Zealand-Australia Free Trade Agreement for ten years from the beginning of 1976. In April 1977, the interim agreement was renewed for a further six months pending the conclusion of the longer-term agreement. On November 6, 1976 Australia and Papua New Guinea signed a Trade and Commercial Relations Agreement establishing a free trade area.

The original ACP countries were Bahamas, Barbados, Benin, Botswana, Burundi, Cameroon, Central African Empire, Chad, People’s Republic of the Congo, Equatorial Guinea, Ethiopia, Fiji, Gabon, The Gambia, Ghana, Grenada, Guinea, Guinea-Bissau, Guyana, Ivory Coast, Jamaica, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, Somalia, Sudan, Swaziland, Tanzania, Togo, Tonga, Trinidad and Tobago, Uganda, Upper Volta, Western Samoa, Zaïre, and Zambia. The Comoros, Seychelles, and Surinam joined during 1976.

The value of the unit of account is calculated daily on the basis of a basket of the currencies of the members of the EEC.

Denmark, Finland, Iceland, Norway, and Sweden.

Benin, The Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo, and Upper Volta.

Benin, The Gambia, Ghana, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo, and Upper Volta.

Ivory Coast, Mali, Mauritania, Niger, Senegal, and Upper Volta.

Benin, Ivory Coast, Niger, Senegal, Togo, and Upper Volta.

Liberia and Sierra Leone.

Cameroon, Central African Empire, People’s Republic of the Congo, and Gabon.

The League’s membership comprises Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libyan Arab Republic, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syrian Arab Republic, Tunisia, United Arab Emirates, Yemen Arab Republic, and People’s Democratic Republic of Yemen.

Egypt, Iraq, Jordan, Syrian Arab Republic, and Yemen Arab Republic.

Bahrain, Oman, Qatar, and United Arab Emirates.

Bahrain, Kuwait, Qatar, and Saudi Arabia.

Argentina, Barbados, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay, and Venezuela.

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

Bolivia, Colombia, Ecuador, Peru, and Venezuela.

Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

Antigua, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts-Nevis-Anguilla, St. Lucia, St. Vincent, and Trinidad and Tobago.

Antigua, Dominica, Grenada, Montserrat, St. Kitts-Nevis-Anguilla, St. Lucia, and St. Vincent.

Bolivia, Paraguay, and Uruguay.

Bangladesh, India, Korea, Lao People’s Democratic Republic, Philippines, Sri Lanka, and Thailand.

Bangladesh, India, Iran, Nepal, Pakistan, and Sri Lanka.

Indonesia, Malaysia, Philippines, Singapore, and Thailand.

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