l
_EUTLETIN-.
-\_\
OF
THE
-e I ,.
\
J
*--l
I
I
,/
----_ -gSecretariat
of
the
Commission
\
I
I
W
VOLUME
5No.
1
- 1972
1
EUROPEAN
COMMUNITTES
ffi.$
'I
.l
I
I
BULLETIN
OF
THE
EUROPEAN
COMMUNITIES
Euiopean Coal
and
Steel Community European Economic Community EuropeanAtomic
Energy CommunityCOMMISSIO*
O'
THE EUROPEAN COMMUNTTIESSecretariat
of the
Commission BrusselsNotice
to
readersFor technical reasons, the last issues
of
the L97l Bulletinswill
be distributed later,The Bulletin of the European Communities gives news of the activities of the Commission
and
of
the other Community institutions.It
is
publishedby
the Secretariatof
tleCommission of the European Communities (20() rue de la Loi, 1040 Brussels) in the four
Qsmmrrnisy languages (German, French, Italian and Dutch) and
in
English and Spanish.I I
,t
I
-1
i
I I
i
,t
I
I
Contents
Page
Europe betwem economic and political union
. .
7(Tbe Freedom of the Ctty of Brussels for
Mr
Hallstein andMr
Rey)PART ONE: FEATURES AND DOCUMENTS
L
lnternational ntonetdryand
comrnercial et)ents(IV)
and relations withinthe the
organization
of
rnonetaryand
financialCommunity
[I.
The place of Japanin
the world econo?nym.
First trade agreefitent between the Cotnmunity anda
lnin
ame-rican country: the Argmtine
IV.
Nd
to shipbui.lding: new Commission proposalsPART
TVO:
COMMLJNITYACTMTIES
IN
NOVEI/AER
1971I.
Theuorking
of the CornmonMarka
-
unrestricted movement of goods-
fiscal policy-
right
companyof
laWestablishment, unrestricted furnishingof
serviqes,-
rapprochement by agreementsof
legislations and creationof
european lawil.
Economic and rnonetary union .-
economic, monetary and financialpolicy
.-
regionalpolicy
.-
social policy-
agricultural policy-
industrial development, technical and scientific policy-
energy policy-
transpoft policy Blutrl.G
t-197215
35
44
47
55 55 56 58
60
62 62
63 65
72
78 80
83
3
i.
I
F
b
I t i I
I
I t
ilI.
Enlargemmt and external relationsof
the Commwnity-
enlargement of the Community-
relationswith
the Mediterranean countries-
relations with Associated African States and Madagascar .-
relations withthird
countries-
commercial policy-
commodities and world agreements-
the Community and the developing countries-
the Community and international organizations-
the Communities' diplomatic relationsIV.
lnstitutions and organs-
European Parliament-
Council-
Courtof
Justice-
Economic and Social Committee .-
European Investment Bank--
Financing of Community ActivitiesPART THREE: INFORMATION
AND
SOURCESI.
From day to dayil.
Published in the Official GazeneilI.
Publications of the Communitiesry.
Just published87 87 90 91 97
t06
106
\
98 100
70L
702
105
779 723 127 130
133
1,37
745
188
L97
, ,,1.\. ": \..
,L/
Supplement
1972
Supplement
ll72z The
enlargedCommunity.
Outcomeof
the
negotiationswith the applicant States.
Suppl€ment hors sdrie
:
Catalogue des publications 1952-1971 des Com-munautds europ6ennes. [Catalogue published in French (to. be publishedin
Germano in Italian and inDutch)
plus
a
list
of
all
publicationsat
presentavailable-and
in
preparation-in
Englishl.r
,,.T r-t t
EUROPE BETWEEN
ECONOMIC
AND
POLITICAL UNION
(The Freedom
of
theCity
of
Brusselsfor
Messrs Hallstein and Rey)On
2
December !97L, the Freedomof
theCity of
Brussels-was conferred onth.
Joir.t
Presidentiof
the
Commission, ProfessorValter
Hallstein andMr
Jean Rey,at a
ceremony attendedby
present President Malfa'tti and a large and distinguished audience.Mr
Lucien Cooremans,the Burgomaster, said in his address that the Freedom of theCity
now being bestowed was repletewith
meaning. I.t yras something-".h
rnor.
than"a
parchmentsignilizing
two
gifted-and
Europe-mindedworkins lives, much more than a token of gratitude for outstanding services to tt
"
p.o-"pt"tof th"
Old
Coritinent:it
was the standing -witnessto
theascen-d*.y
oi th""ot."pt
of European citizenship over regiond compartmentations.To
Professor Hallstein, Presidentfrom
1958to
!967,
Mr
Cooremans said,"Can
we
everthank
you
enoughfor
layingthe
foundationsof
this
newhomeland and.working so vigorously and tirelessly
to
showit
in
operation?\fle of
Brirssels can never be sufficiently gratefulto
you, the more soin
that,oo
,rrrell
soldierins on, obstacles no'rfrthstanding, and that your vision ofihe
future,
to
whicli
Chancellor Brandtpaid
tributein
the
B-undestag in connection with BritaiR's accessionto
the eommon Market,is
still, thanks toyou, the prevailing one in your country.D
To
Mr
Rev.for
some yeafs a Memberof
the Commission and its Presidenthom7967'io 1970,he iecalled thar
"for
you as for your predecessor, the e_arlyDost-war years brought recomition
of
the
conceptof
a
State enlarged to Lrropernscale."
Aid
subse{'uendy,"tg
you,-'mafung-Europe' Be1ntFakqp
Europe
into
one gteat domain wheie all would befull
citizens living happilyand h-armoniously side by side."
Professor Hallstein, returning thanks
for
the higlr honourof
the Freedom of the City, saidit
was givenin
order formallyto
signify Brussels' endorsementof the enterprise whiclihe had served there for close on ten years.
'oDirectly
we
set aboutour
European task,we
recognized, indeed- intend-ed,that
it
should be accomplished in two main stages, one economic and the otherpolitical.
Todaywe
ire
iust
aboutto
movefrom the
first
stagelnto
$e
iecond.
This is-the chiefbf
the many formidable 'must's'that
confronttte
European
Community-to
strengthenits
organization andto
bringnon-eco-nomic matters too under a common European discipline.
Both are absoluteh imperative tod4y.
In
thefust
place our economic togetherness as such has g-one sofar
that its institutional'bearing strucflrre is proving tooweak.
The loadon that
struc-ture, with enlargenient now happ-ily
a
ie*ainty andwith
the internaldevelop-menl of the Community, has gro$rn beyond all measure.
HALLSTEIN, R3Y, MALFATTI _ 2 DECEMBER U'71
In
the-second -placg the international situation absolutely demandsconcentra-tion.of .the plliti_ca!
-potential
of
a
democratic Europein
externalaffairs. It
would be unthinkableto
take part-in
4"
decision-rirakingof
an all-Europeanseclrity conference before
it
is conclusively established thal this Europe ofturs
will
speak there with a single voice.And lasdy, disturbing signs
of
degeneration are developingin
the traditionalC9ry-yiry
structure, which pose a serious threat to cerriin'important functionsof
the institutions as laid dolvnin
the Treaties. Remedialaition
is thereiorivital-for
the council, whose authority and abilityto
decide are beingdan-sgroryly weakened by habituation, in deJiance of the Treaty,
to
unanimi"ty; for the commission, which should have fuller scope to perform its real task,'thai of establishinglln
lrs r_ole of-initiaro-r, wherethi
comiron interest lies, ensuringin iialogue.with t4e council that this is followed
within
thecommunity,;t
upholdingit
-in relationswith
the restof
theworld;
and aboveall
fli
th;
Errropean Parliament, which exists to keep the community democratic and for
th,a.t purpope requires the sanction of being directly eleaed by the
p.opl",
*d
ryhich ought to have a say in the passing of legislaiion and the appiintment
of
the executive.
If
this progress is no_t forthcoming, the whole undertakingwill
be injeopardy-both
the futurefull
political"ry.y
,which remains the"ultimat.
oby.ttir.
ofour efforts, and also what has already been accomplished, which can only be
completely secure in the expectation of total success.
Is,this
Tki"s
too much?I
do not thinksso.
That the organizational stnrcnrre9f the. Community as laid down in the Treaties is on the"right lines is obvious
from its spectacular successes
to
date.
Nor
canI
believe it- second-generationeffeteness that is Breven4ng those
in
charge from revitalizing andrffJ"$li.oing
that structure and extending it to new
fields.
AII that is wani=ed is the w[1. True, thatwill
can be renewed onlyby
recapturingthe
senseof
what
ourre-creation-
of
Europe fundamentally-standsfor-no-t
a
combine formed forreaso-ns
of
technocraticexpedielE
t-o m-anage more efficientlythe
rrpiri--posed individual interests of the Member statei where they happen
t"
.oir.G
but the discharge
of
a duty unequivocally entrusted to us'bybir
p.opl.r,
thri
ot
at last giving appropriate, contemporary political shapeio
the-age-old andto them never wholly vanished unity-of_ !u1ope,
in
ordeito
help,fJr
the sakeof our own and the world's peace, establish our security and aTetter balance
of strength in the world."
Yr. B"y, in
histurn
thanking the Municipalityfor
the honour done him-which, he said, as himself a Belgian he vaiued'in special measure,rot
*t
i.t
tr",.ta.,was being.paid not so much to the individual as ro
the
ni*
B"r"p.r"
office he had held over the years-also went on to make some genEral political
observations.
Ilotin_s *ri4, sari,sfaction that "Europeans have decided'once and
for
all to turntheir bac,ts _on
$e
wars., strugglesin{
sufferingsof
thep".t,
to
r"ita
t"g.E;i
a reconciled and united Coniinent,,' he contin-ued:
HAILSTEIN, REY, MALFATTI _ 2 DECEMBER 1971
"Many
difficultieslie
alongthis
road.
At
this
very moment disagreementsabound
in
the
agricultural, monetary andpolitical
fields.
The
EuropeanCommunity
is only
slowly shapingits
institutions andlaws.
At
the
sametime, however,
it
is
confinually making progress:the
most
recentexam-pE-one
which we have very much atheart-is
the accessionto
the Commu-nity of several European countries, headed by Britain, the mother of democracy and mainstay of freedom.You have been rash enough,
Mr
Burgomaster,to
call on meto
speak, andI
amvery
much temptedto
seizethe
occasion t-o discourseon a
Europeanpolitical programme.
Vhy
has the Community, whichis
already so rich- inresources and, responsibilities, not adopted adequate structures
for
the purposeof
government? 'Whyis
the Commissionnot
endowedwith
the
means to administer the Community, although thisis
obviouslyits
iob?\Fhy
does theCouncil
still
behave asif it
were a diplomatic confegence, whereas the Com-munity hasfor
a long time neededto
berun-like
any oneof
ourcountries-along the lines and
with
the styleof
a government? Why are we so slow tostrengthen the democratic
naflre
of
our
institutionsby
decidingto
elect theEuropean Parliament
by
universal suffrage? Theseare
someof
the
manyquestions
I
should liketo raise.
But this is neither the time nor the place.- Inconclusion, let me iust confirm, on this solemn occasion, that faith in Europe is
iust as much
a
necessity asever.
More than ever before, the time has comefor
Europeansto
join
togetherto
build
a
reconciled, unitedand
geherousContinent,'aware
of
its great obligations towards the restof
theworld.
Ourgeneration will be proud to have taken part in this work."
President Maffaui, speaking the same evening at a gathering
in
honourof
histwo
predecessors,dwelt
on
the
problemsthe
Communitywould
need toresolve
in
the very near futureif it
was trulyto
accomplish its task:it
was, hesaid, currendy facing perhaps the gtavest crisis
in
its history, but-facing too itsgreatest opportunit,'
President
MaUatti
then
reviewedCommunity
policy during
7970
andl97t-the
negotiationsfor
enlargement, now movingto
a
successfulconclu-sion, the opening
of
negotiationswith
those EFTA countries which were not applyingto join
the Community, the moves towards economic and monetaryunion, the introduction
of
the generalized preferences, and also,on
the debitside, the lag on regional, industrial and research policy, and even on the full completion of the Common Market.
Noting that there was now renewed progress-*slow, hesitant, here and there
in
conflictwith
itself,but still
progress"-towards politicalunity,
after thelong standstill since 7962, Prcsident
Malfatti
went onto
speakof
the "Euro-pean selfhood"that
must become"the
central axisof
the
Member States'individual policies . .
.
the
great focalpoint
on
which the
several nationalcourses of action are trained."
HALLSTEIN, R"EY, MALFATTI _ 2 DECEMBER 1971
"It
would be a bad mistaketo
assume blithely from this account that there isnothing
to
worry
about.
On the
contrary, never before havewe
faced somany and such serious problems, such grave dangers, such vital issues
demand-ing decisive handling
in
the nearfuture.
And thisat
a time when,with
tenmembers instead
of
six, the
already slow-moving processof
Communitydecision-making, weighed down by long-standing defects, unresolved complica.
tions and the loss of efficacy of some of the methods used, is likely
to
becomemore cumbersome still.
All this moteover is happening just when the Community is itself
in
the middleof
a serious internal monetary crisis, which is not merely makingit
impossibleto
go
aheadwith
new plans already agreed,but
couldif it
goeson
muchlolger
actually affect the functioningof
the CommonMarket.
And
I
mayadd that we are going through this difficult patch at a rime when we are not
able simply to withdraw.upon ourselves, buCare faced
with
a clear-cut choicebetween playing
an
activerole
in
world
affairsand
allowing ourselves tobecome passive pawns moving at the
will of others.
The impending overall talkswith
the United States, the European Security Conference, the reform ofthe international monetary system and reorganization of world trade, the third LTNCTAD Conference are
all of
them forthcoming major international occa-sions posing,a test and a challenge to the Community.Thgre is no prospect of our rising to these occasions, of our coping
with
theseproblems as we should unless we
fortify
our politicalwill,
our solidarity andour ioint-decision-making.
It
is wholly unrealstic nowadaysto
take refuge in the arbitrary dissociationof
economics frompolitics.
It
is wholly unrealistic to .imagine we can giay a rolein
international affairs without accepting that the Community isa
fac., anda
fac" aheadyof
real importancein
the world.It
is
wholly
unrealisticto
set
out
to
securemore
balanced international relatioirships,to
developthe
continentof
Europein
peace and security, towork
up
closer tieswith
our
principal ally,dte
United States,to
avert thedanger
of
a reversionto
the days of protectionism,to
wardoff
the alarming possibilityof
a generalized recession, simply on the traditional basisof
bilate-ral
dedings betweenStates.
Admittedly,the
bilateral approach does still exist andoperate-partly
because the Community hasnot
yet succeeded in freeing itself from certain constrictions which are a constant impediment and,I may say, a constant irritant to it.
fhs
trthcoming
summit meetingwith
the United States could do a good dealto help secr[e a speedy feturn
to
normal conditions and movement iowards amore balanced state
of
affairs,politicallp
militarily, monetariln economically and commercially. But this process cari only be iuccessfuIly ca:ried througL in a world of which a self-awire Community'E rrope is an integralpart
It"is that European sellhood that must live and grow, and become the central axis of the Member States' iudividualpolicies-not
one aspect zrmongmffiy, but
thegreat focal point on which the several nationd courses of action-are uained.
HALLSTEIN, REY, MALFATTI _ 2 DECEMBER 1'1
To speak
of
policies and coursesof
action is necessadly likerviseto
speak ofinstitutions.
For a Cdmmissionwith
its political characterfor
one reason or another impugned,a
Councilwith its
decision-making character impaired, aEuropean Parliament elected by the people, with no incrpase
in
its powers and,with none of the maior politicians of the Member States sitting in
it,
are presentand future obstacles to Europe's measuring up
to
the demandsof
theexcep-tional times
in
which we are living."[,
t,
t
i
t
f.
t
BulL CE 1-112 t1
I
t
N-I
I I
t
I I
I
,-€'
./,':':
;:..!tL1'ffi
-,,,;;;,,i;it+;r.i:..-u;,t'1
:,._,r1,l*,,i.*l
"
...i-..
,,-::i",:
;'1.r,:;
*.,.Tr$;.';i,!;i'.'.;o-ri.1-.;'-;'
i1;:.1i;
':.;,'.i;'-{
1r
;;ii
;
:;;
;
it+;Ii;
1-:...'
.":f
irt
:.
i;",",,...
"ffi
;
:i1
*1;:..
,; t,
i,i
;;
o'f,h -u, .' . ... ,..!,, ..\
'.; ;. .,. . _' ..'
,:-',
,.-...-T:$'t.:-.-',-,
'.;
t:....-#r'
t-,1,,t':L,.-,;
,::
l'.;;iiorj;,
1,t1''r-'
!+i';-,1,i-"
1,,.,.;1k't,.tiffi,l;';'r-
i'
'..' i.' a., j. r ,,e*
.i iffi..r:
:,'ro.:.*,.,,i _1.-'f ' . ,-. -+
' ;-r.- ,'-.:.::.-Y ': -:i'1."
,-;, -.;-t1.*i.i
*,,1
'
.,:,''j:,'::'l..'
*, , I ;-. : j-- - -. : ,- ,,-:-. -l
li'r;
,
i,',,i,.
:-.;,
.
;lr'.,
ii.'t,
i',+,i;:1
'\,
y;.*.."."
,I,u.u
;'riti;,.
,*
-.,.,i-r,,,
.,
".:;-
=*,r;".1:-iri';',,-$
;:rff'.l'*ri
l't;-.it:j;l.*t'r;;;=;;;=;4
.rr.
1-.*,11.,:'5
I.
INTERNATIONAL
MONETARY
AND
COMMERCIAL EVENTS
(IV)
AND
THE
ORGANIZATION OF
MONETARY
AND
FINANCIAL
RELATIONS
\TITHIN THE
COMMUNITY
The
events triggeredoff
by
the
American measuresof
15August
1971engendered, between November and the end
of
the year, new facts, the mostimportant of which were the fixing of new exchange rates for certain currencies,
including the US dollar and the preparation
of
discussions on uade problems between the Community and the United States.Ministerial conference
of
the Groupof
Ten(30 November -
1
December197L)
oThe Finance ministers
of
the member countries^of the Groupof
Ten (the Sixless Luxembourg Canada, the United States, Great Britain, Japan, Sweden, and
Swieerland as an observer) met
in
Romeon
30 November and1
DecemberL97 7, with
Mr
Barre, Vice-President of the Commission, participating.No official com-uniqud was published after these
talks.
However,Mr
JohnConnalln
speakingas
Chairmanof
the
Group
of
Ten
statedat
a
pressconference
that
the meeting had made possible great progress, although nodecision was taken.
At
this same press conferencqMr
Connally said that the Conference had alsodigcussed trade problems between
the
United States and Japan,the
UnitedStates and Canada, and the United States and the European Community,
in
particular, he emphasized, those problems to which solutions could be found in
the very near
futue.'
On
2
December,Mr
Bare, Vice-Presidentof
the Commission, repofted to thelatter on the work
of
the Groupof
Ten.
He
also stressed*at
prospects foran agreement had begun to emerge.
Preparation
of
trade negotiations between the Community and tfte United StatesFollowing
the
Rome discussions,Mr
Eberl6, special representativeof
thePresident
of
the
United Statesfor
trade negotiations,was
receivedat
his request by the Commission on8
December1971.
Mr
Eberld had talks withMONETARY PROBLEMS
President Malfami and
Mr
Dahrendorf, and thenwith
high
officialsof
theCommission
/At
this
meetingMr
Eberld informedthe
commissionof
the
requestof
the United States Governmentfor
the
openingof
trade negotiationswith
thecommunity
and indicatedthe
points whichhis
Government thought suchnegotiations should cover.
on
9
December the commission sent thecouncil
a
report drawnup
after thesetalks and
which
took
into
accountthe
discusiionsat
the
Romeconference. [n conclusion,
it
recommended to the council,in
conformity withArticle
113(3)of
the
EEC Treaty,thar
it
authorizesthe
openingof'tade
negotiations
with
theunited
Stateson the
basisof
recipro.city and mutual advantage.ln
its
reporr the commission specified the lineson
which suchnegotiations would need to be cgnducred.
At its session
of
L1 and 12 December, the council,
alter having deliberated onthe
basisof
the
commission'sreporr,
adoptedthe
following
text
as
aCommunity declaration of intent.
1,.
The Community is prepared to play its part in the efforts calledfor
by anew fixing of monetary
parities. It
stresses thatin
this wayit
is making animportant and lasting conrriburion
to
the
solutionof
the problemsof
the united states trade and payments' balances, despite the fact that its own trade balance has hitherto remainedin
deficit vis-I-visthe united
states.
The communityfurther
notesthat the
developmentof
international economicrelations has led
to
certain important changes;the
growingrole
of
certaincountries
in
international trade, the new positionof
the developirig countries,which-
has
already been reflectedin
the
introducion
'of
the
system ofgeneralized preferences, the enlargement
of
the
community accompanied by the establishmentof
close relationswith
other countries (European-countries,Mediterranean countries, developing countries), the emergence
of
new factors such as the expension of international financial transactioni.2.
The Community considers that the changes referredto
above calledfor
an overall examination
of
the
structureof
the world
economyand
of
theconditions
for
a new balance at international level which would make possiblean
improvementof
living
standards through an expansionof
internationaleconomic relations and increasing liberalization of world trade.
3.
The particular featuiesof
international tradein
farm products and the growing importanceof
non-tariff
barriersthrow
particularlight
on
theadvisability
of
new
international measuresin
this
field
in
particular byBull. CE t-1972
MONETARY PROBLEMS
facilitadng negotiations on the abolition
of
obstaclesto
tradein
this field, thecommunity's obiective being
to
ensure greater respectfor
the rules of TGATT,to which it remains firmly attached.
4,
The Co,mmunity is therefore ready to participate in global negotiations onthe basis
of
mutual advantages and reciprocal concessions implying an efforton the part of all participants.
5.
At
the
sametime the
Community considersdrat
particular attention shouldbe paid
in
these negotiationsro
rhe
problemsof
the
develqpingcountries. The co-munity
is
preparedto
share, alongwith
the
other industrialized countries, in fresh efforts in favour of these countries.6,
Finally, the Community declares its readinessto
open negotiations with the Governmentpf
the .United Stateson
the basisof
reciprocity and rmrtual advantagewith
a. viewto
settlingin
the near furure certaip specific problemswhich arise
in
commercial relationswith
the United States.It
has taken noteof the requests submitted
in
this maner by the united states Government, the study of which it has already put in hand.The Council has instructed the Committee
of
Permanent Representatives to prepare, on the basisof
the Commission's proposals,a
draft-decision whichwill
enablethe
commissionto
start the
planned negotiationsas
soon aspossible. The commission
will
repoft to the council on the progress of thesenegotiations at its January session.
Any
agreements which might resultfrom
these negotiationswill
only
comeinto force as and when monetary realignment has been ratified
in
accordancewith the procedures required
in
all the States concerned.The
community recallsrhat the
decisionsto
be takenby
the
governmeltsconcerned on mohetary realignment must be accompanied by the cancellation
or
withdrawalof
the commercial and,fiscal measures adoptedor
planned bythe United States Administration since L5 August.
In
conformitywith
the provisionsof
the General Agreemenron Tariffs
andTrade, the community
will
notify GATT of the
Accession Treaties and the agreements plannedwith
the EFTA counrries immediately rhese are signed.The negotiations under Article
xxlv(6), will
be begun after these instrumentshave been ratified.
In conformity with the arrangements laid down by the council, the perhanent
Representatives committee immediately set about elaborating,
with
the aid of representativesof
the
Comrnissionand
on
the
basis
of
the
laffer's recommendation, a draft Council decision for the opening of negotiations withMONETARY PROBLEMS
the United States. The Council adopted this decision by written procedure on
17 December
7977.
The decision authorized the opening of trade negotiationswith the United States and gave negotiating diiectives to the Commission.
Joint Franco-American Declaration
(73 - 74 December 1971)
The talks between the President of the United States and the President
of
theFrench Republic
on L3
and 74 December 197L,n
the
Azores,led
to
anagreement expressed in the following joint declaration, which was read
in
turnby the respective spokesmen for the two Presidents:
'President
Nixon
and President Pompidou reached broad agreementon
the measures necessaryto
achieveas
eady
as
possiblea
setdementof
the immediate problemsof'the
international monetarysystem. In
cooperationwith
the
other
countries concerned,they
agreedto
work
tor
a
speedyredignment
of
paritiesby
meansof
a
devaluationof
the dollar
and therevaluation
of
certain othercurrencies.
In
their
opinionthis
realignment couldbe
accompanied,in
the
present circumstance,by
a' wideningof
thepermitted fluctuation margins on both sides of the new parities.
Being conscious
of
the interestof
measuresof
a
commercial naturefor
alasting equilibrium in the balance of payments, President Pompidou confirmed that France, along with the Governments of the other member countries of the
European Community was engaged
on
workingout
the termsof
referencewhich would make possible the imminent opening
of
negotiationswith
theUnited States to setde the short-term problems currendy pending and
to
draw up an agenda for the study of the basic questions in the trade field.President
Nixon
stressed the contribution which the strict implementation by the United Statesof
measulesto
re-establish internal stabilityof
wages andprices and also
of
productivity, would maketo
international balance and to the defence of the new parity of the dollar.The two Presidents agreed that discussions should be opened without delay in the appropriate agencies to resolve the fundamental problems which are linked with the reform ef ihg igternational monetary
system.'-Reception
by
the Commjssionof
Mr
William
Rogers,United States Secretary
of
StateOn 9
December,Mr
Villiam
Rogers, Secretaryof
Statein
the United Statesddminiss2lien,
attendeda
lunch
offered
in
his
honour
by
PresidentMOMTARY PROBLEMS
Malfatti
and the membersof
the Commission.
This meeting provided anoppornrnity to exchange views on the main problems pending.
In an address after this lunch President Malfatti said, among other things: "The challenge which we must take up concerns our capacity
to
integrate theold
with
thenew.
The new requiresof
us that we should improve the world organizsgisnbf
ttade, that we reform the international monetary system andthat we
achievea
more
balanced sharingof
responsibilitiesfor
defence.However, we must safeguard the basic principles which we have implemented
in
the courseof
the last 25 years, principles such as thoseof joint
defence,freedom
of
trade and the proper functioningof
the
international monetary system.'New
conferenceof
the Groupof
Ten('l7ashington
-
17 I 78 December 197L)As they had agreed
to
doin
Romg the Ministersof
Financeof
the MemberStates of thd Group
of
Ten met againin
\Mashingon, the same persons beingpresent as
in
Rome.
Th'eir discussionsled
to
an
agreemengthe
terms of which are embodied in the press release issued after the meeting.'1.
The
Ministersand
CentralBank
Governorsof
the Ten
countriesparticipating
in
the General Arrangementsto
Borrow metin
'Washington on December 17-1.8, 1971,in
executive sessionunder
the
chairminship ofMr
J.B.
Connally,
Secretaryof
the
Treasury
ot.
the
United
Stares.Mr
P.P. Schweitzer,the
Managing Directorof
the
lnternational Monetary' Fund,took
artin
the meeting, which was also attendedby
the President of the Swiss National Bank,Mr
E.
Stopper, and in part by the Secretary Generalof the OECD, Jonkheer E. van Lennep, the General Manager of the Bank for
International Setdements,
Mr
Ren6Larre,
and the
Vice-Presidentof
the Commission of the EEC,Mr
Raymond Barre.The Ministers and Governors approved a report by the Managing Director o{
the Fund orl a meeting held between the Deputies of the Group of Ten and the Executive Board of the Fund.
2,
The Ministers and Governors agreed on an inter-related,.,
of
-"r.or",
designed
to
restore stabilityto
international monetanl afiangements and toprovide
for
e4pandinginternational
trade;
these
measureswill
becommunicated prompdy to other governments.
It
is the hope of the Ministers and'Governors thatall
governmentswill
cooperatetkough
the lnternational Monetary Fundto
permit implementationof
these measuresin
an
orderlyfashion.
MONETARY PROBLEMS
3.
The
Ministersand
Governors reached agreementon.
a
pattern
ofexchange rate relationships among their
currencies.
These decisionswill
beannounced by individual governments,
in
the formof
par valuesof
"central' rates as theydesire.
Most
of
t'he countriesplan
to
closetheir
exchangemarkets
on
Monday.
The
CanadianMinister
informedthe
Group
that Canada intends temporarilyto
maintaina
floating
exchangerate and
to permit fundamental market forcesto
establish this ratewithout
interventionexcspt as required to maintain orderly conditions.
4.
It
was also agreedthat,
pending agreementon
longer-rerm monetary reforms, provisionwill
be madefor
2125 percent marginsof
exchange rateflucnrations above and below the new exchange
rates.
The
Ministers andGovernors recognized that
all
membersof
the lnternational Monetary Fundnot attending the present discussions
will
need urgendyto
rehch decisions, in consultationwith
the lnternational Monetary Fund,with
respectto
their ownexchange
rates.
Changesin
parities canonly
be justifiedby
an
objeaiveappraisal which establishes a position of disequilibrium.
5.
Questionsof
trade arrangements were,".ogrrir.i
by the Ministers andGovernors as a relevant tactor in assuring a new and lasting equilibrium in the
international economy. urgent negotiations are now under way benveen the
United States and the Commission
of
the European Community, Japan andcanada
to
resolve pending short-term issues ar the earliest possible date, andwith
irhe European Communityto
establishan
appropriate agenda for considering more basic issuesin
a frameworkof
mutual cooperationin
the 'course of 7972 and beyond.The united
states agreedto
proposeto
congressa
suitable means for devaluing the dollarin
termsof
goldto
38 dollars per ounce as soon as therelated set
of
short-term measuresis
availablefor
Congressional scrutiny. Upon passage'of required legislative authorityin
this framework, the UnitedStates
will
proposethe
corresponding newpar
valueof
the dollar
to
theInternational Monetary Fund.
6.
In
consideration-'of the agreed immediate realignmentof
exchange rates,the
U.S.
agreedthat
it
will
immediately suppressthe
recently imposedL0 percenq import sucharge and related provisions
of
the Job DevelopmentCredit.
7.
The Ministers and Governors agreed that discussion should be promptlyundertaken, particularly in the framework of the International Monetary Fund,
to
consider reform of the international monetary system over the longer term.It
was agreed that attention should be directedto
rhe appropriateilor.t"ry
means and division of responsibilities
for
defending stable exchang" rates andMONETARY PROBLEMS
for insuring a proper degree
of
convertibility of the system; rc the proper ro,leof gold, of reserve currencies and of special drawing hights
in
the operationof
the system:
to
the appropriate volumeof
liquidity:
to
re-examinationof
the permissible margins of fluctuation around established exchange rates and othermeans
of
establishinga
suitable degreeof fle;ibility;
andto
otfier measuresdealing
with
movementsof
liquidcapital.
It
is
recognizedthat
decisions ineach of these areas are closely linked.l' ln the monetary fi.eld '
The measures taken by the Member States
of
the Groupof
Ten anda
largenumber
of
other States were embodiedin
a communicationto
the press fromthe International Monetary Fund dated 30 December 1977.
ln the commercial field
The United States immediately abolished the 10
%
surcharge on imports.This
ilecisionwas
announcedby
PresidentNixon
on
20 December 1971following
hiS
first talk
in
Bermudawith
the
British
Prime-Minister,Mr
EdwardHeath.
On this occasion the President of the United States madethe following statement to the press:
"At
my
first
mpetingwith
the British
PrimeMinister he
told
me
that it
would be better
if I
made this statement right away before our official meetingof
this
afternoon.
Today,
I
took the
first
decisionto
implement the agreements concluded at the meetingof
the Groupof
Ten.
After conzultingthe
Secretar,,of
Stateand the
Secretaryof
the
TreasuryI
signed theproclamation rescinding the 10
%
surcharge on importsto
the United States.This is the first stage in the implementation of trhese agreements."
It
now remainsto
apply the clauses which were agreedin
the commercial andmonetary
fields.
Simultaneously and alsowith
immediate effect, the UnitedStates Treasury announced the abolition
of
the discriminatory clauses which limitedthe
tax
facilitiesin
favourof
investments, recendy adoptedby
the United States Congressto
purchasesof
equipment and machines madein
theUnited States (Job Development Credit Act).
Commission communique (21 December 1971)
At
its meetingof
21 December the Commission hearda
reportby
Mt
Barreon the 'Washington.meeting and published the following communiquC:
MONETARY PROBLEMS
"The Commission heard a report by
Mr
Barre on thework of
the Group of.Ten. It
studiedthe
consequencesof
the
T7ashington agreement onintra-Community monetary relations.
It
noted
with
satisfactionthat the new
exchange ratesapplied
by
theCommunity countries embodied
more
balanced relationships betrneen theeconomies of these countries.
.The
Commission considers
that
it
is
necessaryto
establish benn'een theexchange rates
of
Community currencies narrower marginsof
fluctuations than those now authorized at international level, both from the point of viewof
the
proper operationsof
the
CommonMarket and
from
that
of
theCommunity's individual standing
in
the international monetarysystem.
The Commission intendsto
make proposalsto
this endto
the Council during themonth of lanaary."
Declaration
by
M,
Barre, Vice-Presidentof
the Commission,on
the next moves calledfor
(21 December 19771
On the
same day,Mr
Barre, Vice-Presidentof
the
Commission, made the following declaration to the Agence France-Presse:"The decisions taken in'Washington by the Group
of
Tenput
an endto
the insecurity -and uncertainty which were threateningto
have a serious adverseeffect
on
the rhythm
of
economic activity, employmentand
tradein
the"Western
world
during the monthsahead.
However, theywill
demand ofenterprises
in
the Community serious endeavoursto
adapt themselvesto
the new conditions of international competition.ln
this respectit
may be regretted that the restorationof
the external balanceof the United States should be sought
for
chieflyin
an improvementof
this country's trade balance, without anything being doneto
moderate American exports of capital, particularly long-term investmentsAlthough the decisions of the Group of Ten respond to the most urgent needs,
'they
do not, however, constitute any complete solution to the present monetary
crisis.
Considerable problemswill
haveto
be solvedin
the relatively short term,if
we areto
attain lasting stabilityin
international monetary relations.Among
t'hese problems are.the
gradual retrurnto
the
converribility of currencies, regulationof
international capital movements, financingof
the basic United States balanceof
paymentsdeficit-and
realignmentwill.not
make this disappear from one day to the
next-by
methods other than a freshaccumulation
of
dollar balances.MONETARY PROBLEMS
The present circumstances offer the Community and
its
future members anopportunify
to
strengthen,+d
organizetheir
economicand
monetary cooperationin
sucha
way as poform
a
zoneof
convertibility and stabilfty. This obieaive can be achievedif
the States concerned are carefulto
maintain,between their respective currendies, margins of flucnration narrower t'han those
which are now au-thorized at iilternatibnal level,
if
they instruct their Central Banksto
implement a concerted policy regarding their exchange reserves andto
make useof
a unitof
intervention on the exchange market other than theinconvertible dollar, and
if
they protect,by
joint
and effective measures, thestability
of
their
economiesfrom the
disturbing effectof
short-term capital ' movements. Cooperalionof
this'sort would
doubdess constitutethe
mostsolid basis
foi
thai
Economic and Monetary Union which, as the Heads ofState
or
Government are fondof
recalling since the Summitin
The Hague, must be the Community's grand design for the years ahead."Opening
of
negotiations between the United Statesand the European Economic Community
(27 and22 December 1977)
Following the Council decision of.77 December, the negotiations between the
United
States
and
the
European Economic Community opened
on21
December. After the first
meeting berweenthe
two
delegations thefollowing ioint press release was published:
"Negotiations between delegations
of
the
United States andthe
European Communities on ceftain problemsof
their commercial relations took place on2!
and 22 December 7977in
Brussels. The
United States delegation washeaded by
Mr
William Eberl6, special representative of the Presidentfor
tradenegotiatigns.
The
Community delegationwas
under
the
leadership ofMr
Theo Hijzen, Director-General for External Trade.On the occasion
of
thisfirst
meetinB, the Community delegation setout
its viewpointon
the proposals forroulatedby
the United States delegation and itsel-f submitted certain questionsto
whichit
attaches particular importance.The rwo delegations then specified their respective positions.
This
first
meeting was consideredto
haveL..n
"*tt..ely
useful.
T'he trn odelegations were .happy
at
the ftiendly atmospherein
which the negotiationstook place. They agreed to resume their work on L4 lanaary 7972."
MONETARY PROBLEMS
Consequences
of
the Washington decisionson
the funaioningof
agricultural marketsin
the CommunityIn view of the fact that the decisions taken
in
'washington were only reflectedimmediately
for
the Member states by the fixingof
icentral" exchange ratesand
1ot
by
changesin
parities registeredwith
the
International MonetaryFund, the Commission, at its meeting bf 21 December, noted that there was no reason to implement the provisions of regulation 653158, which lays down the
arrangements
to
be
madein
the
eventof
parity
changes,and
that
EECregulation 974177
of
12
May
1971 should conrinueto
apply.
This
latter regulation adopted, afterthe
decisions takenin
May by
Germany and theBenelux countries
to
allow their currenciesto
float, the measuresto
be intro-ducedin
the
agricultural secror followingthe
wideningof
the
margins of flucnrationof
currencies which followed these decisions.However,
in
view
of
the
special featuresof
the
situationat
the
time, theregulation
in
question left each Member State freeto
judge whetherit
would make use of the measures at frontiers whichit
laid down, bothin
the maner of tradewith third
countries-and between membercountries.
As the ItdianGovernment had announced that
it
did not intendto
fix
its
attitude on thispoint
beforeit
had
taken
time
to
think
the
matter over,
the
French Government, on 22 December, asked for the immediate calling of a council of Ministersof
Agricultureto
studythe
situation thuscreated.
However, on29 December, the Italian Government announced that
it
would also make useof
the provisionsof
regulation 974171,, so that the French request was normaintained.
The measures
to
be taken at the frontiersof
the Community andin
relations between tihe Member States were decided on by the commission after hearingthe
opinionsof
the
competent Management committeeson 30
December.They came
into
force on 31 December 1971 and the compensatory amountswere effective beginning
3
January 1972.1'
See Journal officiel L288, 37 Decemberl97t
and, L 5,6
Janaaty L972.MONETARY PROBLEMS
Mernorandum
from
the
Commission
to
the
Counci,l
on the
organi,-zation
ol
nqonetaryand financial relations
within
the Community
(L2
lantaryl972l
As
it
had expressed the intentionof
doingat
the meetingof
21 December7971, tollowing
the
Conferenceof
the
Group
of
Ten
in
'l7ashington, theCommission adopted and immediately sent
to
the
Council,on
12 JanuaryL972, a memorandum and
a
draft resolution on the organizationof
monetaryand
financial relationswithin
the
Community,with
due
regardfor
the 'Washington decision. Thefull
text of this document is given belowtt.
The decisions takenby
the Ministersof
the member countriesof
theGroup of Ten on 18 December 197L comprise:
(i)
Thefixing
of
new exchange rate relationsin
the form
of
parities or "central" rates(ii)
Provisional wideningof
the
fluctuation marginsof
exchange rates tomore or less 2.25 % on either side of the new rates.
These decisions made possible the establishment betrileen the member countries
of
the Communityof
exchange rates relationships which are better balancedthan those resulting from the diversity of the systems functioning since L0 May
797L.
The abolition of
the
surcharge and the discriminatory measures introduced orenvisaged by the United States Government on 15 August L977 completes the
differentiated realignment of currencies.
The Washington Agreements thus put an end to the insecurity and uncertainty' which, in the course of the month ahead, could well have seriously affected the
rhythm
of
economic activity, employment and tradein
the
Western world. However, they donot
constitute any complete settlementof
the internationalmonetary crisis.
The resultant situation poses three main problems
for
the functioningof
theCommunity:
(i) In
tile fust
place,the
widening
of
the' fluctuation
margins now aurhorized at international level would cause considerable difficultiesif
it
were applied to intra-Community exchange relationships. Should theCommunity countries adopt flucnradon margins of 2.25 %, more or,less,
with
respeitto all
cutteniies, includirrg thoseof
their partnersin
theCommunity,
the
variationof
the
exchange relationships between rwo Community currencies could be as much as 9 o/oif
the interventions of the Central Banks on the exchange market continued to be effected usingMONETARY PROBLEMS
the
dollar.
Sucha
situation would consecrate the central roleof
thedollar
in
inua-Community monetaryrelations.
Furthermore,it
would affect the conditionsof
competitionin
tradein
industrial products and services, would disorganize the agricultural common market and wouldbe an obstacle to the convergence of economic policies which call for the balanced functioning of the Communiry and the gradual achievemenr of
an economic and monetary union.
(ii)
In the second place, nothing was donein
'washingtonto
ensure a return to dollarconvertibility.
The problem is simply placed on t'he agenda oflater negotiations.
If
no
change wereto
be
introducedinto
theprocedures
by
which
the
Cenual Banks inrerveneon
the
exchangemarkets, they
would be
obligedto
usean
inconveffible currency forthese operations: the
dollar.
They could then find themselves led to pile up dollar assets without any guaranteeof
being ableto
transform theminto reserve insffuments or other currencies.
(iii)
Finally,
althoughthe idoption
of
realistic exchangerates
and
thewidening
of
the
marginsof
flucaration can helptd
normalize capital movements, no arrangement has been madeto
regulate the intemationalcapital
market.
It
may normally
be
expectedthat
moneraryrealignments
will
provokea
flow of
capital backto
theunited
statesduring
the
comingmonths.
However,the
possibilityis
not
to
beexcluded
that
in
future speculative movementswill
again exert heavypressure
on
certain
European currenciesand
trigger
off in
thecommunity disturbances similar
to
those which have occurredin
thecoufse of recent years.
ln
orderto
copewith
these problems the community,in
conformitywith
theprogramme for economic and monetary union which
it
has putin
hand, must strengthen and efficiendy organize monetary cooperafion between its members, -with
whose actionthe
applicanr countriesand-if
they so
desire-otherEuropean countries could associate themselves.
In th9 gninion
of
the commissionit
would be imporrant that the community should be able on the one hand to establish as soon as possible, and taking into account the studiesin
the Committeeof
Governorsof
the Central Banki andthe Monetary committee an exchange system proper
to
the currenciesof
theMember States and on the other hand provide itself with the means to apply a
concerted policy with respect to excessive inflows of capital.
2.
The exchange sysrem properto
the currenciesof
the Member states ofthe
community could,in
conformitywith
the
indications containedin
thelgpo*
of
the
committeeof
Governors dated1
August 1970, presenr thefollowing feanres:
MONETARY PROBLEMS
(il
(ii)
The margins
of
fluctuationof
exchange rates bet'reen the currencies ofthese countries would be narrower than those at present authorized at international level;
Coordinated intervention using Community currencies as well as dollars would be practised by the Central Bank on the exchange markets;
(iii)
A
Monetary CooperationFund would
be
set
up with
the task
of regularizing exchange operations and using a Europeanunit of
accountfor this pu{pose.
.4.. Narrowing
of
the fluctuation margins allowed between Community currenciesIn
the
conclusionsto
its
studiesof
8
and9
June 1970, andthen
in
itsresolution of
22
March !977, the Council agreed that the Community shouldnot take advantage in exchange relations benveen its member countries
of
anyprovisions allowing for greater flexibiliry of the international exchange sysrem.
In
conformitywith
these decisions,the
normalizationof
intra-Communityexchange relations must include the restoration, as between the currencies of the
member countries,
of
the fluctuation marginsin
for,ce before9
May
1971,that is
to
say 0.75%
on
either sideof
theparities.
This
meansthat
theimmediate gap berween the highest and the lowest rates
of
these currencies may not exceed 1.5 %. Retum to this situation is an objective which should beachieved as rapidly as possible.
If,
in view of the profound disturbances which have affected exchange marketsin
recent months, the Member States should nevertheless tear that immediaterenrrn
to
such margins would provoke certain strains,it
would be possible toadmit wider
margins even
berweenthe
Community curencies
for
atransitional period.
But
it
would be advisablein
this case at leastto
watch that a discrimination whose volume would be considerably increasedif
the margins were widened\Mas
not
maintainedfor
the benefitof
thedollar.
In
this respect,a
neutralsituation would be obtained
if
the maximum instantaneous gap berwecn two Community currencies were fixed at 2.25o/o. In
orderto
makeit
clear that the Community was beginningto
go
its
ownway
in
monetary marters,it
would neverthless be desirable to fix this maximum gap atZ o/o.
In
this
way,
while
introducinga
certainflexibiliry
into
intra-Community monetary relations, the drawbacks for the functioning of the Common Markeg and particulady of. the agricultural common market,of a
wideningof
theMONETARY PROBLEMS
margins, would
be
limited.
In
any
case, ainevitably produce considerable distortion in
trade with third countries.
Whatever happens, the enlargement envisaged
temporary basis.
more ample widening would intra-Community trade and in
should
only be
appliedon
aB.
Coordinated actionby
the Central Bankson
the exchange markets'With
a view to maintaining the rates of European currencies vis-I-vis the dollar within limits of rougly 2.25 Yo on both sides of the central rates, and the rates
of
the
European currencies among themselveswithin
the
limits laid
down below, the Central Banks of the Communitywill
have to engagein
coordinatedintervention on the exchange markets.
These Banks
would
haveto'
be
instructedto
intervene using Communitycurrencies
in
orderto
ensure observationof
the limitsof
fluctuation betweenthese.
Interventionsin
dollars would be reservedin
principlefor
those caseswhere the flucnration limits vis-i-vis the outside world had been reached.
The
Committeeof
Governorsof
the
Central Bankswould
lay
down
theguidelines
of
the
intervention policyto
be
followedon
the
basisof
theseprinciples.
In
orderto
copewith
the problems whichwoqld
arisefor
certain Central Banks if they were not able, because of their Community obligations, completelyto utilize the margins of flucnration authorized on the international plane, the
Committee
of
Governorscould
decideto
shift
the
'Communiry
band"according to an appropriate procedure.
The machinery of short-term monetary support and medium-term financial aid
could be used, under the conditions laid down by the decisions which created
them,
to
offsetany
possible drawbacks resultingfrom the width
of
the"Communify band" and from the position of this band vis-I-vis the currencies
of third countries which would be accepted by these in the common interest.
The Central Banks
of
the Community would be led under the new system of interventionon
the' exchange markeito
hold
in
their
reserves Communitycurrencies along
with
the.various existing reserveinstruments.
This should,however, be subject
to
appropriate limits and conditions fixedin
thelight
of harmonization of the reserve policies of the Central Banks.Br:Jl. CE 7-1972