III. Regional Arrangements

International Monetary Fund. External Relations Dept.
Published Date:
September 1976
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As mentioned in the previous Report, negotiations between the EEC and many developing countries of Africa, the Caribbean area, and the Pacific region (the 46 ACP countries) 10 were concluded on January 31, 1975, and the Lomé Convention was signed on February 28, 1975, subject to ratification. The agreement succeeded both the Yaoundé Agreements (of June 1, 1964 and July 29, 1969) and the Arusha Agreement (of September 24, 1964), which were to expire on January 31, 1975 but were extended until July 31, 1975. By the end of January 1976, the Convention had been ratified by all EEC members and virtually all the ACP countries. Advance implementation of its trade provisions took place on July 1, 1975. The Convention came into force on April 1, 1976 and will remain in force until March 1, 1980. The Council of Ministers of the ACP countries agreed in Georgetown, Guyana, on June 5–6, 1975, on the formal establishment of the ACP group with a permanent Bureau and a General Secretariat. The Convention is open to other countries having a similar economic structure to the ACP countries. During 1975, the Cape Verde Islands, Papua New Guinea, and São Tomé e Príncipe applied to accede to the Convention.

The EEC has undertaken to eliminate tariffs and quantitative restrictions on products representing approximately 94 per cent of the ACP countries’ exports to the EEC. In contrast to the Yaoundé and Arusha Agreements, the Lomé Convention does not require participating developing countries to grant preferential treatment to imports from the EEC but only treatment at least as favorable as that granted to any other industrial country. A number of ACP countries have recently terminated or reduced their reverse preferences. In order to protect ACP countries’ export receipts against price fluctuations for certain primary commodities, the EEC has agreed to set up a stabilization fund on which ACP countries will be entitled to draw if their earnings from exports of any of 29 primary commodities to the EEC decline by a certain percentage, provided that these commodities account for a certain minimum share in the exporting country’s total export earnings. Finally, the ACP sugar producing countries undertook to supply the EEC annually with 1.4 million tons of sugar, for which a guaranteed minimum price will be maintained for a period of at least seven years, with a minimum price to be fixed annually. Unlike the remainder of the Convention, these arrangements regarding sugar came into force on February 28, 1975, and are to continue with no fixed terminal date.

On March 4, 1975 the Council of the EEC resolved to simplify and improve the GSP scheme applicable to imports from developing countries not participating in the Lomé Convention and to prolong the scheme beyond the expiry date of 1980. On May 7, 1975, generalized preferences were extended to some additional products as from July 1, 1975. A GSP scheme for 1976 was proposed on June 17, 1975 and adopted on November 17, 1975. It represents some further liberalization; the preferential duty on most agricultural imports is reduced by 10 per cent, quotas and ceilings on most industrial goods have been increased by 15 per cent, and those on textiles and coal and steel products by 5 per cent.

Negotiations with Greece on an additional protocol to the association agreement, made necessary by the enlargement of the Community, were concluded on March 7, 1975. The protocol was signed on April 28, 1975 and its trade provisions came into force on July 1, 1975, in advance of ratification. On June 12, 1975, Greece applied for full membership in the European Communities; the application was later endorsed by the EEC Council of Ministers. On July 18, 1975, the Commission of the Communities presented proposals to the Council for the harmonization of agricultural policies with Greece.

The first Trade and Cooperation Agreement under the general Community policy toward Mediterranean countries was signed with Israel on May 11, 1975 and came into force on July 1, 1975. It supersedes the 1970 trade agreement and is of wider scope since it includes provisions for cooperation. Under the trade provisions, there will be complete elimination of all tariff and quota barriers on Israel’s industrial exports to the EEC (except for some sensitive products) by July 1, 1977 and the EEC will reduce tariffs on over 85 per cent of Israel’s agricultural exports. By January 1, 1980, Israel is to eliminate restrictions on 60 per cent of its imports from the EEC, and by January 1, 1985 those on the remainder (with a possible extension up to January 1, 1989).

On June 23-24, 1975, the Council decided in principle on concessions within the overall approach toward Mediterranean countries on imports of some agricultural products, in particular, processed fruits and vegetables, citrus fruits, out-of-season fruits and vegetables, and wine. The relevant regulations were adopted on July 22 and September 29, 1975. Negotiations on trade and cooperation agreements continued with Algeria, Morocco, and Tunisia. On August 6, the validity of the existing trade agreements with Morocco and Tunisia was extended to the end of June 1976. Negotiations with these two countries were concluded in January 1976 and agreements were initialed on March 1, 1976. On January 23, 1975, the Commission proposed that negotiations be started with Egypt, Jordan, Lebanon, and the Syrian Arab Republic with a view to concluding overall cooperation agreements. Discussions of the Commission’s mandate for such negotiations continued throughout the latter part of the year on the basis of guidelines set out by the Council on July 22, 1975. Negotiations started on January 28, 1976. Agreement was reached with Lebanon on September 29, 1975 (and signed on October 13, 1975) on the renewal of the current Trade and Technical Cooperation Agreement until July 1, 1976. In November 1975, the EEC Council discussed the negotiation of long-term trade agreements with Egypt for the supply of foodstuffs.

Negotiations for a protocol to the association agreement with Malta were completed on December 22, 1975 and the protocol was signed on March 5, 1976.

Negotiations with Portugal for a wider agreement than the 1972 Free Trade Agreement reopened on June 11, 1975. On October 7, the EEC decided to establish an emergency financial aid fund for Portugal. The fund is authorized to grant credits up to a total of 150 million units of account for investment projects, at a subsidized interest rate.

Mexico became the fourth Latin American country (following Argentina, Brazil, and Uruguay) to sign a nonpreferential trade agreement with the EEC on July 15, 1975. The agreement, which seeks to encourage trade and economic cooperation, particularly in the area of investments, became effective on November 1, 1975. The 1971 trade agreement with Argentina expired at the end of 1975, but was extended for a further year, pending the negotiation of a new and wider agreement.

On July 22, 1975, a Commercial Cooperation Agreement, closely modeled on that concluded with India in 1974 was signed with Sri Lanka. A further agreement was signed with India on July 18, 1975, guaranteeing EEC purchases of sugar along the lines of the Lomé Convention arrangements. Negotiations on a Commercial Cooperation Agreement with Bangladesh opened on July 2, 1975. A Joint Study Group with the Association of South East Asian Nations (ASEAN) 11 was founded through an exchange of letters on May 7, 1975 and held its first meeting on June 26–27, 1975. Negotiations between the EEC and the members of the League of Arab States 12 (except the Libyan Arab Republic) started in Cairo on June 10, 1975.

Negotiations for a nonpreferential trade and cooperation agreement with Canada opened on March 11, 1976.

As part of its common commercial policy, the EEC some years ago introduced a uniform liberalization list for imports from state trading countries, although each member state maintained autonomously certain quantitative restrictions on such imports. On February 24, 1975, the Commission issued proposals to the Council concerning the further adjustment of these autonomous import arrangements. These proposals, which provided for some additional import liberalization, were adopted by the Council on March 27, 1975. Discussions between the EEC and the CMEA took place in Moscow between February 4 and 6, 1975.

The renegotiation of the terms of membership of the United Kingdom in the EEC was concluded in March 1975, and a national referendum held on June 5, 1975 resulted in approval for continued U.K. membership. Tariffs between the original Community and the three new members (Denmark, Ireland, and the United Kingdom) were reduced by 20 per cent at the beginning of both 1975 and 1976, leaving a final reduction of 20 per cent to take place on July 1, 1977, except for a group of horticultural products for which the deadline is January 1, 1978. On July 10, 1975 Ireland was authorized by the EEC Commission to continue to apply until December 31, 1975 a 10 per cent duty on certain footwear imported from the United Kingdom and on December 22 Ireland was authorized to apply for the period January 1-June 30, 1976 substantially higher duties than should have applied under the Act of Accession to such footwear imported from other sources.

In addition to adopting principles for coordinating the regional aid given by member states, the EEC’s own regional policy was launched in 1975. On March 18, 1975, the Council adopted basic texts allowing the European Regional Development Fund to be established. This Development Fund became operational at the end of June, when it started to receive aid applications from member states. On October 16, 1975 the first tranche of loans amounting to 160.6 million units of account was approved from a total of 300 million units of account authorized for the year 1975, and on December 18 the second and last tranche of 139.3 million units of account was approved.

On January 1, 1975 the third stage of tariff dismantlement under the Free Trade Agreements between the EFTA countries and the EEC came into force. Tariffs on trade between EFTA and EEC members have now been reduced by 60 per cent.

The five Nordic countries 13 in December 1975 signed a treaty, subject to ratification by their parliaments, to found a Nordic Investment Bank with a capital of SDR 400 million. The Bank will finance primarily investment and export projects of common Nordic interest. In January 1976, the central banks of the Nordic countries agreed to certain changes in their mutual swap agreement of 1962 (revised in 1967). Under the new agreement the maximum access to swap credits by each bank is increased by over 50 per cent to SDR 60 million (SDR 10 million for Iceland) and the normal duration of the credits is extended from three to six months.

The treaty establishing the Economic Community of West African States (ECOWAS) was signed in Lagos in May 1975 by the heads of state, or their representatives, of 15 West African countries.14 The Treaty came into force in June when ratified by 7 countries; by November 12, some 12 countries had ratified the agreement. The Community aims at furthering cooperation between members in industry, transportation, energy, agriculture, natural resources, commerce, monetary and financial matters, and social and cultural affairs. It aims at the gradual elimination of tariff and nontariff barriers between member states over a 15-year period. For the first 2 years of operation, the members have committed themselves not to increase existing duties. In the subsequent 8-year period, duties on intra-Community trade will be progressively reduced and eliminated. During the final 5 years of the transition period, external tariffs will be harmonized. A fund for cooperation, compensation, and development will be set up, in part to compensate those members suffering a severe loss of revenue following the reduction in tariffs. Safeguards are also provided for members having sectors adversely affected by the tariff reductions.

The Council of Ministers of the West African Monetary Union (UMOA)15 adopted a new set of directives for banking operations within the Union at a meeting in Dakar on May 2. The Articles of Agreement for a West African Clearing House were initialed by representatives of some 12 West African Countries 16 at a conference of the West African Sub-regional Committee of the Association of African Central Banks in Lagos on March 13.

At a meeting of the heads of state of the member countries of the West African Economic Community (CEAO) 17 on April 7-8, it was agreed to start the operations of the Community Development Fund on January 1, 1976. The Development Fund will be financed from the proceeds of a regional cooperation tax levied on an agreed list of industrial goods produced within the Community. The purpose of the tax and the Development Fund is to transfer revenue from those sectors benefiting from a wider market to those states whose revenue from tariffs has been reduced as a result of the creation of the Community. In mid-June, representatives of Burundi, Rwanda, and Zaïre agreed at a meeting in Kigali on a draft convention for an Economic Community of the Great Lakes Countries (CEPGL). The member countries of the Central African Customs and Economic Union (UDEAC) 18 agreed at a meeting in Bangui on June 20-21 to establish a Central African Development Bank. On November 14, a Commission started work in Nairobi to review the constitution of the East African Community, the structure, composition, and functioning of its institutions and to submit agreed conclusions to the East African Authority within 12 months. An Association to promote intra-African trade was founded in Tangiers on April 4.

The first meeting of the Governing Council of the Arab Bank for Economic Development in Africa took place in January 1975. The Bank has an authorized capital of US$231 million, of which US$55.25 million was paid up by the end of July 1975 and the remainder was scheduled for payment over the next two years. The Bank gave its first loans in November 1975 and in the same month it was decided to authorize an increase in capital to US$500 million.

The question of the creation of an Arab Monetary Fund (AMF) was referred to the Committee of Governors of Arab Central Banks by the Council of Arab Economic Unity, in December 1974. At its meeting in Baghdad on February 22-24, 1975, the Council of Governors agreed in principle to create the AMF with a capital of 750 million Arab dinars (1 Arab dinar = SDR 1), of which half is to be raised initially. Discussions continued throughout the year on the technical aspects of the AMF and at a meeting in Rabat on November 19, the statutes of the AMF were adopted ad referendum by Governors of the central banks of 17 Arab states.19 Among the aims of the AMF are the redressing of members’ balance of payments deficits, the stabilization of members’ exchange rates, the coordination of the monetary systems and policies of members, the liberalization of monetary, financial, and trade relations between members, and the ultimate establishment of a unified Arab currency.

On June 15, 1975 representatives of Bahrain, Kuwait, Qatar, and the United Arab Emirates agreed in principle to work toward the unification of their currencies. At a meeting in Bahrain on November 1-2, the goal of a monetary union of these states was affirmed. On November 13, these four states, along with Oman and Saudi Arabia, announced the creation of a development bank, the Gulf International Bank. The authorized capital of this Bank is US$60 million, with the possibility of raising the sum to US$100 million.

At the Twentieth Session of the Economic Council of the League of Arab States in January 1975, the Arab Fund for Economic and Social Development (AFESD) was called upon to provide long-term loans at low interest rates for infrastructure projects in Arab countries. In April, the AFESD Board of Governors decided to accelerate the call-up of capital so that the full amount of KD 101.95 million would be paid up by February 1976. (At the end of 1974, KD 35 million had been paid up.) It was also decided to raise the authorized capital of the AFESD to KD 400 million, to be called up in eight years starting February 1976.

The Islamic Development Bank, founded in August 1974 and with headquarters in Jeddah, held its inaugural meeting on July 26, 1975. The Bank has 26 members.20 The authorized capital of the Bank was raised to 2 billion Islamic dinars (1 Islamic dinar = SDR 1). It was decided that an initial subscription of 750 million Islamic dinars should be paid in five equal annual installments, starting in 1975. The Bank started its operations on October 20.

On May 3, 1975, the Council of Ministers of the Organization of Arab Petroleum Exporting Countries (OAPEC) 21 agreed to renew the Special Account to Ease the Financial Burdens of the Arab Petroleum Importing Countries for 1975.

The Arab Organization for the Encouragement of Investment was founded by 15 countries 22 on June 1, 1975. The Organization is intended to protect the investments of the signatories and to encourage the movement of capital between them by issuing guarantees. Initial authorized capital is KD 10 million, but this is to be raised to KD 30 million in the future.

Twenty-five Western Hemisphere countries 23 formally established the Latin American Economic System (SELA) at a meeting in Panama on October 17, 1975. SELA is intended to be a permanent regional organization for consultation, coordination, and cooperation for joint economic and social development. A permanent secretariat has been created with headquarters in Caracas. Among the aims of SELA are the defense of prices and markets for raw materials, the creation of Latin American multinational companies, the channeling of financial resources and technology to the region, and the exchange of industrial and monetary experience.

During the course of 1975, the member countries of the Andean Pact reached agreement on a common program for the petrochemical industry. It did not prove possible to agree on the programs for other industrial sectors in particular for the automobile industry, or on a common external tariff by the December 31, 1975 deadline laid down in the Cartagena Agreement. On February 11, negotiations were initiated in Lima on revising the Pact’s foreign investment regulations; these discussions continued throughout the year. An agreement was reached in principle to set up a US$400 million fund to finance balance of payments deficits of member countries. Hitherto, financial cooperation by the Andean countries has been limited to the financing of projects by the Andean Development Corporation.

In 1974, a Draft Treaty establishing a Central American Economic and Social Community was prepared. Discussion of the draft continued throughout 1975 by the High Level Committee established under the auspices of the Permanent Secretariat of the General Treaty for Central American Economic Integration (SIECA). In October, the Central American Monetary Stabilization Fund gave loans of US$25 million each to El Salvador and Honduras, and a loan of US$10 million to Nicaragua. This represents the first use of the Fund since its establishment in 1970.

In October the Caribbean Common Market (Caricom) 24 reached agreement at a meeting in Georgetown, Guyana, on the Common External Tariff of the Common Market. On December 13, a decision in principle was taken to establish a fund of US$350 million to aid members with balance of payments difficulties.

On July 31, the Bangkok Agreement was initialed by India, the Lao People’s Democratic Republic, the Philippines, Korea, Sri Lanka, and Thailand (Bangladesh initialed the agreement later). Under the agreement, the signatories agree to preferential tariff cuts of between 10 and 80 per cent (averaging about 33.5 per cent) and the binding of some most-favored-nation tariff rates on imports from each other of some 131 goods, including many manufactures and some foodstuffs such as sugar, fish, coconut oil, and beans, amounting in value to US$50 million annually. In addition, tariffs will be cut on imports by all signatories on 29 further items imported from the Lao People’s Democratic Republic. Participants pledge to strive to prevent the raising of tariff and nontariff barriers on products of export interest to other participants. Signatories may also give additional preferences to the least developed and landlocked signatories. The agreement will come into force 30 days after ratification by three signatories and remains open to any developing member country of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). It will be administered by a standing committee.

The Asian Clearing Union (ACU) started operations on November 1. The ACU is a facility for the multilateral clearing of payments for some current international transactions between participants (Bangladesh, India, Iran, Nepal, Pakistan, and Sri Lanka). Settlements between India and Nepal and between Pakistan and Iran are excepted. Payments are denominated in Asian monetary units (1 Asian monetary unit = SDR 1), or participants’ currencies. Settlements are made monthly in U.S. dollars or in other mutually acceptable currencies. The operations of the ACU are carried out by the Bank Markazi Iran, as agent.

On October 15, the member countries of ASEAN formed a Council on Petroleum. On November 27, these countries agreed, in principle, on the gradual lowering of mutual tariff barriers and the eventual creation of an ASEAN Free Trade Zone.

Bahamas, Barbados, Benin, Botswana, Burundi, Cameroon, Central African Republic, 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 members are Indonesia, Malaysia, Philippines, Singapore, and Thailand.

The members are Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libyan Arab Republic, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Somalia, Sudan, Syrian Arab Republic, Tunisia, United Arab Emirates, Yemen Arab Republic, People’s Democratic Republic of Yemen (and the Palestine Liberation Organization).

These are 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, Ivory Coast, Niger, Senegal, 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.

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

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

Members are Afghanistan, Algeria, Bahrain, Bangladesh, Cameroon, Egypt, Guinea, Indonesia, Jordan, Kuwait, Libyan Arab Republic, Malaysia, Mauritania, Morocco, Niger, Oman, Pakistan, Qatar, Saudi Arabia, Somalia, Sudan, Syrian Arab Republic, Tunisia, Turkey, United Arab Emirates, and Yemen Arab Republic.

Algeria, Bahrain, Egypt, Iraq, Kuwait, Libyan Arab Republic, Qatar, Saudi Arabia, Syrian Arab Republic, and United Arab Emirates.

Algeria, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libyan Arab Republic, Mauritania, Morocco, Qatar, Sudan, Syrian Arab Republic, Tunisia, United Arab Emirates, and Yemen Arab Republic.

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.

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

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