III. Regional Arrangements

International Monetary Fund. External Relations Dept.
Published Date:
September 1969
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Trade arrangements for a common market of the EEC were virtually completed in mid-1968, 18 months ahead of the end of the transitional period provided for in the Treaty of Rome. From July 1, 1968, the application of tariffs to industrial goods traded among EEC countries was discontinued. Also at mid-1968, regulations were adopted completing the common organization of markets on the basis of single prices; thereafter, agricultural products subject to free trade within the Community represented 85 per cent of the members’ agricultural output. On July 1, 1968, all members began applying the common external tariff, adjusted to give effect to two fifths of the reductions agreed in the Kennedy Round. France joined the other EEC members in taking these important steps on July 1, even though, at the time, in order to deal with its balance of payments difficulties, it instituted interim import controls on selected industrial commodities and intensified aid to exports. Thus, France became the first EEC member to invoke the safeguard provisions of the relevant treaties and to consult within the Community concerning balance of payments measures needed temporarily; these procedures were again used when France took special measures to deal with the exchange crisis that arose late in November.

Despite difficulties, the members of the EEC in 1968 took a number of steps to consolidate the Common Market. Agreement was reached on uniform rules of origin and dutiable value, and an antidumping code was adopted. Freedom of movement of labor was introduced 14 months earlier than required by the Treaty of Rome. The application of important elements of a common transport policy began in July.

A directive was adopted near the end of the year, indicating the action to be taken by the end of 1969 to harmonize tax treatment and thus to move toward complete elimination of internal tax frontiers. All EEC countries, with the Benelux countries acting as a unit, signed long-term agreements with India and Pakistan on imports of cotton textiles. In December regulations, effective at the beginning of 1969, were adopted to establish a common trading policy toward third countries. A common import liberalization list was established covering two thirds of the items listed in the Common Customs Tariff and a uniform procedure was adopted for administration of tariff quotas. For the present, members need not apply this common list in trade with state trading countries except in the case of agricultural products subject to a common market organization. A 10-year program for structural reform of agriculture in the member countries of the EEC is under consideration.

During the year, initial preparations were made for negotiations looking to extension of the association of the EEC and 18 African and Malagasy states, based on the Yaoundé Convention. This was scheduled to expire on May 31, 1969, as were also the association agreements concluded with the East African Community and Nigeria, neither of which was ratified. Morocco and Tunisia signed agreements with the EEC for partial association in March 1969; Algeria applied for association early in 1968. Turkey proposed during 1968 that its association with the EEC should move into its second stage—which would involve establishment of a customs union over a transitional period of at least 12 years.

Iceland has applied for membership in EFTA.2

Steps toward implementation of the Latin American Free Trade Association (LAFTA) 3 lagged during 1968, as members were unable to agree on the implementation of major steps scheduled in the Treaty of Montevideo, or of initiatives called for by the American Presidents at Punta del Este in April 1967. In particular, as a step toward elimination by the end of 1973 of all barriers to regional trade, a second addition of commodities to the common list was to have been agreed during 1967. The present list covers only 25 per cent of intra-area trade. Progress toward regional integration was made, however, during 1968 in the form of additions by various members to their National Lists (representing concessions to LAFTA partners), and also in the form of negotiation and implementation of complementarity agreements by subgroups of LAFTA countries having a common interest in the development of local production and trade in specific commodity groups. Other negotiations, carried on actively during the year, were directed to sub-regional trade liberalization for the six countries 4 in the Andean subgroup, and to economic cooperation with the countries comprising the Central American Common Market (CACM).5 The LAFTA payments system was amended to provide for multilateralization of available credit margins, for optional delay in settlements of clearing balances to three months, and for the charging of interest on debit balances. A linking of the LAFTA payments system with that of Central America was proposed.

Moved by balance of payments pressures, members of the CACM signed the Protocol of San José on June 1, 1968; it became effective in most signatory countries on November 8, 1968 but has not yet been ratified by all. It provides (1) that members should impose a linear surcharge of 30 per cent (amounting, on the average, to about 8 per cent ad valorem) to the common external duties of CACM (each member, however, for designated essential goods, retains the option not to apply the surcharge) and (2) that members may levy consumption taxes up to 10 per cent and 20 per cent, respectively, on goods of any origin classed as nonessential and luxuries. The Monetary Council of the Central American Clearing House approved a uniform system of charges to be made by the member central banks on various types of exchange transactions with the public, and recommended that the reciprocal lines of six-month credit be increased from ceilings equivalent to US$500,000 (usually not enforced) to US$2,000,000.

In 1967, a decision was made to form a Caribbean trading unit. On May 1, 1968 four countries formed the Caribbean Free Trade Association (Carifta); by August JL, 1968 virtually all Commonwealth Caribbean countries had joined.6 A regime of free trade among the members of Carifta was established, with effect from May 1, 1968, except that tariffs (not quantitative restrictions) may be maintained for five (or ten) years for a limited number of goods on a reserved list. The members of Carifta, other than Jamaica, also signed an agreement in 1968 to establish a regional development bank.

Kenya, Tanzania, and Uganda continued their economic association as the East African Community (EAC), formalized in the Treaty for East African Cooperation, which became effective December 1, 1967. The members of the EAC also established an East African Development Bank, and provided for the continued joint operation of railroads, airlines, harbors, postal services and telecommunications, collection of income tax, customs, and excise duties, and other services in the territory of the member countries. Applications by Burundi, Ethiopia, Somalia, and Zambia for accession to the EAC were under consideration at the end of the year. An agreement of association of the EAC with the EEC was signed on July 26, 1968 (but was not fully ratified during the year); it was subject to renewal on May 31, 1969.

In April 1968, Chad and the Central African Republic withdrew from the Central African Customs and Economic Union (UDEAC) 7 to join with the Democratic Republic of Congo in forming another regional group (see following paragraph). In December, however, the Central African Republic rejoined UDEAC, and Chad offered to renew its cooperation.

A treaty to establish the Union of Central African States (UEAC) was signed on April 2, 1968 by Chad, the Central African Republic, and the Democratic Republic of Congo. This envisaged a customs union and other forms of close economic cooperation. The intention that UEAC should come into operation on an interim basis on January 1, 1969 was not realized, because the Central African Republic withdrew in December 1968.

Four countries (Guinea, Mali, Mauritania, and Senegal) had been meeting since 1962 to discuss their common concerns arising from the fact that each has territory in the Senegal River Valley. They decided in March 1968 to form an Organization of Senegal River States (OERS), and to undertake a program which would include close economic cooperation, including a multilateral payments system.

A group of nine countries 8 decided on April 25, 1968 to proceed toward the creation of a West African Economic Community; the drafting of a treaty continued during the balance of the year.

The African and Malagasy Common Organization (OCAM) took form in June 1966. It was designed to coordinate development programs and other economic and political activities of its member states. It also represents members’ interests in relation to international agreements, in particular on matters arising in connection with their association with the EEC. At a conference in January 1968, members undertook a program to rationalize their mutual trade in beef, along the lines of the existing agreement covering their trade in sugar.

There have been no major changes in the arrangements for the Regional Cooperation and Development Treaty signed by Iran, Pakistan, and Turkey in April 1967 and described in the Nineteenth Annual Report on Exchange Restrictions.

The ten-year program for the realization (at the end of 1974) of free trade among the participating members of the Arab Common Market9 was advanced during 1968. Duty-free trade and freedom from quantitative restrictions were achieved at the end of 1968 for all nonindustrial products. For various specified groups of manufactured products (representing half of all such trade), liberalization from all restrictions, and tariff reductions of 100, 75, or 50 per cent, were made effective. Planning was intensified during 1968 with a view to the establishment of an Arab Payments Union during 1969; efforts to coordinate industrial development continued.

The present members are Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and the United Kingdom. Finland is linked to EFTA by the Finland-EFTA Agreement.

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

Bolivia, Chile, Colombia, Ecuador, Peru, and Venezuela.

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

Antigua, Barbados, Guyana, and Trinidad and Tobago were founders; Dominica, Grenada, St. Kitts-Nevis-Anguilla, St. Lucia, and St. Vincent then joined, followed immediately by Jamaica and Montserrat. British Honduras contemplates membership.

The other members of UDEAC are Cameroon, Congo (Brazzaville), and Gabon.

The Gambia, Ghana, Guinea, Liberia, Mali, Mauritania, Nigeria, Senegal, and Upper Volta.

Iraq, Jordan, the Syrian Arab Republic, and the United Arab Republic participate, Kuwait participates de facto, Yemen has subscribed, and the Sudan during 1968 began the process of subscribing to the Agreement for Arab Economic Unity.

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