D046 SLC008721 DWC- 8002 The New Lome Convention: A Briefing Note Kathleen A. Di Tullio rEC O AUTION A Division Working Paper No. 1980-2 April 1980 Commodities and Export Projections Division Economic Analysis and Projections Department Development Policy Staff The World Bank Division Working Papers report on work in progreSS and are circulated for Bank staff use to stimulate discussion and comment. The views and interpretations in a Working Paper are those of the author(s) and may not be attributed to the World Bank or its affiliated organizations. LB C ACRONYMS ACP Group - African, Caribbean and Pacific Group EC - European Communities eua = European unit of account EDF = European Development Fund EIB = European Investment Bank 1979 rate used in this report one eua = US$1.38 THE NEW LOME CONVENTION: A BRIEFING NOTE April 1980 Prepared by: Kathleen A. Di Tullio Commodities and Export Projections Division Economic Analysis and Projections Depar'tment Development Policy Staff  Table of Contents Page No. INTRODUCTORY SUMMARY ...................................... if I. VOLUME OF FINANCIAL AID .........................1..... II. THE TRADE REGIME .......1............................ III. SAFEGUARDS AND RULES OF ORIGIN ............ ........ 3 IV. FOOD SECURITY ...................................... 4 V. STABEX .............................................. 4 VI. SAFEGUARDING MINERAL PRODUCTION AND EXPORTS TO THE EC . 5 VII. INVESTMENT PROTECTION ...............................6 VIII. INDUSTRIAL COOPERATION .............................7 IX. AGRICULTURE AND RURAL DEVELOPMENT ............ ...... 7 X. LEAST DEVELOPED, LANDLOCKED AND ISLAND COUNTRIES ...... 7 XI. THE ADMINISTRATION OF AID ............................8 XII. NEW AND EXTENDED AREAS OF COOPERATION ............... 8 A. Labor .... ..................................... 8 B. Sea Fishing ................................. 8 C. Sea Transport ... .............................. 9 Appendix I: Profile of ACP Countries: Selected Indicators From WDR II ................................. 10 Appendix II: Global Amount of EC Financial Assistance to ACP Group for Period March 1, 1980 to March 1, 1985 ..................................... 11 Appendix III: Special Undertakings on Sugar ........ ...... 13 Appendix IV: Products Covered by Stabex ........... ...... 14  - ii - INTRODUCTORY SUMMARY i. The Lome Convention is a "trade and aid" agreement between the European Communities (EC) and the ACP Group (a total of 57 African, Caribbean and Pacific countries). 1/ Lome I was signed in 1975 and had a duration of five years (expiration date: March 1, 1980). As provided in the agreement, negotiations for a new Convention began 18 months before the expiration date. ii. The Lome partners found it difficult to reconcile their views on key issues, so that the negotiations became very drawn out. Some of the differences were political, concerning the inclusion in the Convention of EC statements on human rights and ACP statements on the New International Economic Order. Of more economic importance were differences over: (a) the volume of the financial aid package (which led to the suspension of the talks in May 1979); (b) protection of EC investment (that threatened the signing of the Convention up until the last moment); (c) the mineral scheme designed to maintain current levels of ACP production and exports of strategic raw materials to the EC and to increase these exports further by providing incentives to EC investors; (d) indexation of compensatory loans and grants awarded ACP countries through the ongoing Stabex scheme for major ag:icultural exports; (e) ACP management and participation in the European Development Fund (EDF); (f) industrial financing; and (g) equitable tariff treatment. iii. Other country and group-specific issues considered significant enough by the ACP to be part of the final package were: (a) access of ACP countries to resources of the European Investment Bank (EIB); (b) the list of agricultural products to be granted free access to the Community markets (particularly rice); 1/ A profile of ACP countries is given in Appendix I. - iii - (c) investment promotion in the less developed ACP states; compensation for the loss of commercial outlets suffered by these countries; and, more generally, special treatment for the least developed, landlocked and island ACP countries; (d) treatment of French Overseas Departments; and (e) the criteria for the classification of landlocked states (Zaire being an ACP candidate). A number of issues had to be side-stepped or postponed, and only then was Lome II finally signed on October 31, 1979. iv. The ACP Group failed to increase the volume of aid or to increase market access significantly. The negotiations were in fact mainly concerned with issues of minor, and even trivial importance. The Lome partners start off on very unequal footing. One-third of the ACP Group is classified by the UN among the least developed countries of the world. The Group consists of geographically very dispersed countries so that their short term economic interests vary greatly. For example, much valuable negotiating time was taken up on the question of rice exports from Surinam and on the treatment of French Overseas Departments which involves only the Caribbean area, and then only marginally. As an intra-ACP trade-off, more valuable time was given to establishing Zaire as a landlocked state. In short, the ACP Group was not able to establish hard-line priorities where they might have made significant economic gains in the negotiations. Instead, various regional, short term issues were brought to the negotiations so that the EC with little effort took advantage of the "divide and rule" principle. v. Lome II reflects the "crisis" 1970s with its concomitant protectionism. The ECs key approach has been "consolidation, not expansion"; that is, the method of operation of Lome I was to be maintained. Trade could be liberalized at the margin, not more; and the line has been held, or even toughened in some cases, on non-tariff barriers. The aid package for 1980-85 represents an increase in money terms, from $4.3 to $7.2 million; in real terms 1/ there is practically no increase (1.5%) in aid over the 1975-80 period, while the number of ACP countries has increased from 46 to 57. 2/ 1/ Deflated by the US$ GDP deflator for OECD North. 2/ The Kiribati Islands (ex Gilbert) are in the process of becoming the 58th ACP member state. - iv - vi. New directions in Lome II are focussed on promoting the increase of private capital flows from the Euro-Nine to the AOP countries. They include provisions to promote European investments in the mineral and energy sectors; more than proportional increases in risk capital in the European Development Fund replenishment; new arrangements to make co-financing easier; a new and separate chapter aimed at promoting European investment and ACP cooperation in all sectors; and, a joint declaration acknowledging the need "to tap additional financial resources that would lead to substantial capital resources for industrial develop- ments". A thorough-going study of this subject is to be undertaken for submission no later than nine months after the signing of the Convention. A summary of the major changes in the new Convention follows.  I. VOLUME OF FINANCIAL AID 1. The global provision for financial aid through the European Development Fund (EDF) and the European Investment Bank (EIB) is US$7.2 million (5,227 million European units of account [eua]). There are significant shifts in aid allocations. The allocation for EDF project and program aid is decreased, although within this total, the share earmarked for risk capital is doubled. Special loans for mining projects form a new EDF budget heading, and take up most of the shift along with an increase in ordinary loans eligible for subsidy from EIB. (Details of financial aid are given in Appendix II.) II. THE TRADE REGIME 2. Lome I guaranteed free access to the EC markets for 99% of ACP countries' exports. However, 75% of ACP exports to the EC carry no mfn (most favored nation) duties; ACP countries therefore derive no benefit at all from preferential free access. These exports include crude petroleum, iron, copper and other metal ores, phosphates, cotton, sisal, wood logs, oilseeds and oil cake and bulk tea. The remaining 25% of total Lome exports enjoy an average preferential margin of 16%. 1/ Products on which Lom4'producers have a meaningful tariff advantage are bananas, coffee, cocoa, cocoa products, groundnut oil and palm oil, and some gains for tobacco, wood products and aluminum ores. 3. The remaining preferences, on the less than one percent of ACP exports to the EC, are used to discriminate among developing countries mostly with respect to products covered by the Community's Common Agri-ultural Policy (CAP). The EC imports, for example, fruit and vegetables from ACP countries (melons from Senegal; oranges and other citrus fruit from Swaziland and Jamaica; beans and sweet peppers from Kenya and Ethiopia; tomatoes from Senegal). Similar products also enter EC markets from other developing countries associated with the Community, namely the Maghreb and the Mashraq countries. The EC uses its policy of bilateral trade agreements with third countries, or group of countries, to "regulate" competition among them--while protecting and giving even more support to EC producers, e.g., by constraining market access to off-season periods only and enforcing high reference prices, thus suppressing demand for third country products and market size. For many products, the ACP countries were already on a par with the Maghreb countries, and in a more favorable position than the Mashraq group. Where they were not, there has been a broadening of the preferential regime: ACP exports of tomatoes, carrots, onions, arrow root, guava and passion fruit juice and preserves and mushrooms 1/ The results of the Tokyo Round have not entirely been taken into account here. They will of course reduce the margin. - 2 - will have greater off-season access to EC markets, and become more competitive with other Mediterranean countries associated with the EC. 4. The exports of milled rice from Surinam became a cause celebre. It has finally been agreed that the question be studied during the life of the Convention, with a view to solving the problems facing all ACP rice exporters. The issues included the question of whether milling Surinam rice in a French Overseas Department would negate its preferential eligibility for the pur- pose of calculating value added in Lome' rules of origin. The EC contends that some of the problems are of Surinam's own making, for example, export prices are fixed too high to make rice purchases from the country attractive. 5. The annual duty-free quota for beef from four traditional exporters (Botswana, Swaziland, Madagascar and Kenya) will be reduced by 11%, down from the 33,728 tons reached in 1978 (original 1975 quota plus 7% annual growth factor provided in LomeiI) to a fixed 30,000 tons per year for the five years of the Convention. On the positive side, the agreement will last for the duration of the Convention instead of on a yearly basis as before. Country quotas are transferrable among the four and exports may be accelerated or slowed down if there are problems, such as disease or drought, effecting supply in any one year. 6. The annual duty-free quotas on rum remains unchanged, but in the new Convention an effort is made to increase sales of ACP rum on Community markets: (i) the growth rate on markets, other than UK, have been increased from 13 to 18%; (ii) licensing systems administered by EC member governments may not be used to create barriers to entry of rum on their markets; and (iii) a mixed ACP/EC group will be appointed to survey the functioning of the protocol. 7. The protocol on bananas commits the EC to assisting ACP producers to maintain their traditional markets in member countries and to improve producer efficiency. In practice, however, even where the ACP producers receive a preference it is not sufficient to give them a competitive advantage because they are high cost producers. They have thus not been able to gain a foothold in non-traditional markets. The type of assistance EC will provide is clarified (improvement in production, harvesting, handling and internal trans- port conditions) and broadened to include trade promotion and support to a joint organization to carry out the objectives of the protocol. 8. The complex sugar protocol, annexed to the Lome Convention, unlike the other protocols does not expire on March 1, 1980, but continues indefinitely. It is discussed briefly in Appendix III. - 3 - 9. The new Convention earmarks a special allocation of US$55.2 million out of regional cooperation funds for trade promotion schemes. This is additional to individual country schemes which may be financed out of country allocations. III. SAFEGUARDS AND RULES OF ORIGIN 10. The "safeguard" clause protecting EC markets from "disruption" has been retained. The ACP Group also was not successful in its request for liberalization of the rules of origin, although least developed ACP states will be treated more liberally in requests for exceptions to the rules. Origin rules are established as criteria to evaluate whether products are indigenous to the exporting country or are being transshipped by a third country; they are applied in virtually all preferential agreements between the EC and other countries, including EFTA countries, the Mediterranean countries (except Greece and Turkey), beneficiaries of the Generalized Scheme of Preferences (GSP), as well as Lome countries. Since 90 to 95% of ACP industrial exports to the EC are raw materials, the adverse effect of the rules of origin on ACP countries is often underestimated. 11. The main qualification for conferring the status of an "originating" product is that goods are sufficiently processed so that the imported ingredients change the tariff heading. But there are many exceptions: products must contain a minimum of 50 - 60% local value-added (including value-added in imports from EC and other ACP countries); certain processes must be undertaken in the originating country (textiles); simple packaging and assembly are excluded; certain materials must be used in processing (processed foods); substantial ownership/control of venturE; must be exercised by nationals of member states of the Convention (for example, in fishing). 12. Up to May 1978 there were five requests from ACP countries for relaxation of the rules of origin, and all were agreed upon, at least in part, by the EC. The EC argues that this suggests that the present rules strike a reasonable balance between ACP and Community interests. The ACP still perceives the rules of origin as severe restrictions on the potential for manufactured exports. The ACP countries, for example, cannot purchase raw materials in the cheapest markets. With imports of capital goods, parts, semi-finished goods from other (more advanced) developing countries increasing at a faster rate, the burden of the rules of origin has increased. Furthermore, the derogation process is complicated. While all cases were finally allowed by the EC Council of Ministers, the process was always drawn out and, in two cases, limitations were placed on quantity of exports and period of applicability. In sum, the ACP argues that this level of restriction goes far beyond the ECs stated objective of avoiding mere transshipment of goods through ACP countries, and actually inhibits industrial development. 13. Access of ACP states to the French Overseas Departments' (Guadeloupe, Martinique and French Guiana) markets is another issue. Total free access is maintained for beef and rice, and import of corn up to a ceiling of 25,000 tons will be permitted. As before, the three protocols (sugar, bananas and rum) are not applicable to the Departments. The EC reserves the right, during the duration of the Convention, of modifying this free access, depending on economic development needs of these Departments. IV. FOOD SECURITY 14. To assist in the stabilization of prices of ACP countries' food imports, the Community declared its intention to use the instruments of the Common Agricultural Policy to allow sale of EC food surpluses under fixed price contracts, thus avoiding effects of fluctuations in world prices for the period. A controversy developed over this arrangement since the Community refers to these sales as "commercial" transactions whereas the ACP says it never intended to buy these surpluses on a commercial basis, but under preferential arrangements agreed upon by both parties. A compromise was reached whereby such sales would go through commercial channels, but with some flexibility on conditions "which make it possible to achieve greater stability of supplies." V. STABEX 15. The number of products covered by Stabex, the system for stabil4zation of export earnings from agricultural raw materials, has been increased from 34 to 44. The Community has also agreed to study the possibility of including tobacco, sisal products and citrus fruits. (The complete list of Stabex products covered is given in Appendix IV.) Except for rubber, the additions are products of minor economic importance to ACP economies. The country dependence threshold (the minimum share of export earnings the effected product has to account for in relation to total exports to all destinations for the preceding year) and the trigger threshold (minimum percentage drop in annual average earnings over the preceding four years from exports to EC markets, or to all destinations for a select group of states) have both been reduced respectively from 7.5 to 6.5%, and from 2.5 to 2.0% for least developed, landlocked and island countries (44 out of the 57 ACP member countries). -5- 16. Stabex funds have been increased from 382 million eua to 550 million eua 1/ (an increase of 44% in current terms, but a decrease of 1.0% in real terms). As before, Stabex transfers to the 35 least developed countries are made in the form of grants. To other countries they are interest free loans, the repayments on which go towards replenishing the scheme. Under the new Convention, repayment is no longer due as soon as there is a "good" year. The repayment is increased to seven years with a two-year grace period. Recipient ACP countries must inform the EC how it intends to use the funds, but the Community has no direct control over such use. 17. The ACP Group contends that while Stabex has been broadened in coverage, the eligibility for transfers will become more difficult under the new Convention since transfers are not automatic. For instance, where the Commumity finds any evidence of purposeful trade diversion or use of other policies that adversely effect exports to the EC, transfer requests are inadmissable. Also, the new Convention now restricts compensation to the loss suffered in respect of a country's exports of that product to all destinations, rather than just to EC markets; where there is no overall loss, requests for transfers will no longer be admitted. VI. SAFEGUARDING MINERAL PRODUCTION AND EXPORTS TO THE EC 18. SYSMIN, a mineral scheme providing project and program financial and technical assistance to safeguard and develop mineral production in ACP countries and exports to the EC, is a completely new feature of Lome II. One aspect of SYSMIN aims at offsetting disasters adversely effecting production or export capacity to the EC. They may be manmade, natural, or may result from price collapse. US$386 million (280 million eua) of EDF funds has been earmarked for soft loans (40 years, 10 year grace period, 1% interest--0.75% for least developed countries) to projects for minerals covered by the scheme: copper and cobalt, phosphates, manganese, bauxite and alumina, tin and iron ore. 2/ Two criteria (thresholds) have to be met: (a) the country dependence threshold is 15%, on average, of total export earnings from all destinations, over the last four years, and (b) the trigger threshold has been set for the adverse effects of at least a 10% drop in production or export capacity. The provision is retroactive in cases where assistance for recovery from past disasters will not be adequate. 1/ The EC information service reports: By July 1, 1979, 270 million eua had been transferred to 31 ACP states (including 22 grants worth 160 million eua). Stabex came into play for 21 products or subproducts in this period. In most instances this was because of a drop in pro- duction or exports caused by local circumstances (two-thirds of the transfers); compensation for losses of export earnings attributable to the economic situation was paid for only a limited number of products. 2/ The Community did not accept the ACP request to cover chrome, graphite, diamond, clinker and uranium. - 6 - 19. Unlike Stabex, this system does not provide a straight budget transfer, but provides for participation in the financing of projects or programs proposed by the ACP country wishing to restore its potential for exporting to the Community. In order to act rapidly, in anticl- pation of delayed disruptions stemming from accidents, the Community may grant advances to prefinance projects. 20. The second aspect of SYSMIN is to promote mining sector develop- ment in ACP countries and to encourage European private investment in these sectors. Provisions aim at increasing external flows of technology and capital. To encourage private investment flows in mining and energy projects, increased risk capital is provided together with a commitment of US$276 million (200 million eua) of EIB own funds, over and above the contractual appropriations under the Convention itself. Furthermore, investments in mining and energy will be eligible for the same protection and guarantees as provided under the new provisions on investments (see below). VII. INVESTMENT PROTECTION 21. The treatment of EC investments in ACP countries has been one of the thorniest issues in the negotiations. The controversy pivots on the provisions desired by the Community which read: Where an ACP state has entered, or enters into an intergovernmental agreement relating to the treatment of investments with any EEC Member State, it will accord the same treatment to investments from any other Member State. The ACP was prepared to welcome investment if the ACP member state's sovereignty were safeguarded. It was also willing to treat all EC states on the same footing if each state were prepared to accept equality of obligations. However, the ACP regarded retroactivity and automaticity as being out of the question. Both sides now endorse the view that, although existing bilateral agreements may exist between an ACP country and an EC country, these agreements should be used only as reference for agreements with other EC countries (i.e., each new agreement should be subject to bilateral negotiation). The right to non-discriminatory investment treatment will apply to new investments; but, for investments before the entry into force of the Convention, the clause would apply in light of the provisions of the reference agreement. The ACP state will have the right to modify or adapt this treatment when international obligations or other actual circumstances make it necessary. - 7 - VIII. INDUSTRIAL COOPERATION 22. The Centre for Industrial Development (CID) created under Lome I has had its terms of reference broadened and now has an assured budget, with the Community contribution coming from the allocation for regional cooperation. 23. Industrial cooperation has been placed in the context of an "interdependency" relationship whereby trade and industrial links based on "dynamic complementarity" are to be promoted between the partner countries. A "preventive" consultation system will enable the EC to advise ACP countries in advance what sectors/products would not be favorable to the EC. 24. Establishing industries and needed infrastructure are encouraged to create domestic links between the agricultural and industrial sectors and to further regional and interregional links. Special emphasis will be placed on domestic processing of ACP raw materials to achieve a larger and equitable share of processed raw materials in both the production and exports of ACP states. 25. Particular attention will be paid the energy sector, particularly the development of conventional and non-conventional (wind, solar, geothermal) energy potential and self-sufficiency of the ACP states. Investment needs for national and regional energy sources and the development of sites of exceptional energy production for establishing energy-intensive industries will also be included. IX. AGRICULTURE AND RURAL DEVELOPMENT 26. A new feature of Lomi' II is an entire chapter devoted to intensifying ACP/EC cooperation in the agricultural sector, in particular, with regard to policies and projects that could lead to food self-sufficiency and greater exports of agricultural products. A Technical Centre for Agricultural and Rural Cooperation has been established to help facilitate ACP states' access to technical information in the agricultural sector. X. LEAST DEVELOPED, LANDLOCKED AND ISLAND COUNTRIES 27. A separate chapter specifies countries to be considered least developed (35), landlocked (13) and island countries (19). They will receive special treatment under several provisions of the Convention as already noted, e.g., grants under Stabex and lower interest rates on special loans. The ACP request that Zaire be classified as "landlocked" because of its very short coastline and severe transport problems continues to be discussed. - 8 - XI. THE ADMINISTRATION OF AID 28. Several new provisions have been devised to achieve greater speed and efficiency in aid administration procedures. I/ An EC/ACP Committee will have the special task of studying the implementation of financial and technical cooperation both generally and on the basis of practical examples with a view to accelerating and streamlining procedures. Also, advance timetables will be drawn up for each phase of implementation: programming, appraisal and implementation of projects. 29. ACP firms will receive a 10% price preference over competitors for the execution of projects up to a ceiling of 3.5 million eua (formerly 2 million eua). The preferential price for supply contracts remains fixed at 15%, without ceiling. XII. NEW AND EXTENDED AREAS OF COOPERATION A. Labor 30. A joint declaration on the status of "workers who are nationals of one of the contracting parties and are residing legally in the territory of a Member State or an ACP State" tackles the problem of migrant workers for the first time. The provisions are similar to those contained in the cooperation agreements with the Maghreb countries. Workers from ACP countries residing legally in an EC member state are guaranteed the same treatment as nationals of that member state as regards working conditions and pay as well as job-related social security benefits. The ACP States agreed to reciprocal undertakings. There is provision for bilateral negotiations to settle any problems. B. Sea Fishing 31. A joint declaration extends the existing annex on sea fishing in Lome I. Two basic points are to be taken into account here: the Community's established jurisdiction in this area since 1976 and the extension to 200 nautical miles of the fishing zones of most of the coastal ACP States. Besides referring to increased coordination with regard to the conservation and utilization of fishery resources, the general framework for possible bilateral fishery agreements between the Community and the ACP States concerned is outlined. It includes 1/ The EC information service reports that 69% of EDF appropriations were committed as at September 25, 1979. The rates at which appropriations ear- marked for individual ACP countries' programs are committed and disbursed vary considerably. In April 1979 the rate of commitments in 24 of the countries was between 70% and 100%. For EIB loans, commitments have reached 60% of the total. -9- mutual advantages, non-discrimination, and theprinciple of providing Community compensation in additienlto any EDF allocation-in return for fishing rights granted by ACP States to others. I/ C. Sea Transport 32. A joint dedlaration paves the way for an examination of subjects of common interest in the field of sea transport. The Community is prepared to develop this sector in ACP States, including the develop- ment of shipping companies, setting up joint ventures, technical assistance for training and management, and so on. The ACP requested that "the purchase of sea liners" be included, but this extension was refused. 33. The declaration also acknowledges the importance of the Council's decision to recommend that the member states ratify the United Nations Convention on a Code of Conduct for Liner Conferences. Such ratification will enable the UN Convention to enter into force; the developing countries will then be able to benefit from its provisions on the distribution of liner trade. 1/ The first agreement-was concluded with Senegal on April 30, 1979. Negotiations are under way with Guinea-Bissau and exploratory talks are being held with Mauritania and Cape Verde. PROrILE 0F ACP COUMTMIS SE£C"|UE INDICAIORS ,47 per capitta Structur. and Groth of Producl-o Struccur. and Crowth of Merchandis- Trade Dsrbc nof GDU Ave A-nul Grtu% R...s ) shan of T.'aL ('%) Av- Annul Cr-rh Ka. s()- eneo PPplaCion US Ave A-nuL Agrir. Ind... GDP Agrt.. indu.. Fuel., Other vanu. Expr- suot rade iD t II L-i Region..1 e (.illio.. dull.c. Gro~c (%) 1977 1977 1970-77 1970-77 1970-77 1M6X Pri. 1976 1970-77 1970-77 1970-100 lno- Gromp C-unry clas..if md.-1977 1 977 1960- 77 1976 1976 1977 W-st AX:1,a L~w lno- (7) 1 .4 .J 321~ LaiDC 6.1 1 10 1.0 3s 17 3.5 -0.8 8.9 0 99 1 7.4 - 0 101 CaL.edeX 0.3 130 (-4.7) (35) (2) (-2.7) .. (0.6) . Upper valt. L.X 5. 1J0 0.6 37 14 3.3 3.2 7.0 (1975) 96 6 9 2 S 0 9; Utg- LDC 4.9 160 -14 47 17 1. -2.7 9.4 (1975) 91 9 15.0 2.4 78 Sirr Ieoe DC 3. 10 .3 40 19 .9 2.3 .3.2 (17) 42 5 6.8 .5.2 93 SeinDC 3 .2 200 0.2 38 15 2.0 (0 4) . (197 5) L100 . -4.2 5 0 59 Gamia.The LDC 0.6 200 (2 3) . .. CuIn. LDC 1.0 220 1 3 43 (1976) 33 5 3 3.2 10 2 117) 9 4artai DC 1 5 2 7. 3.6 26 37 2.3 -2.3 2.1 (1975) 96 4 2.5 5 4 79 C~ ~81-asa LDC 0 5 280 .- . . . Tog LD .4 30 .3 31 31 (1975) 94 b .J9 4 13 widdle lnom- (.) 1,14O0 . s 6 iiL- Chane 10.6 3 -0.3 319 22 0.4 .0 1 0.8 11 as i -L 9 2 0 93 Lbra17 420 . 30 40 2.7 5 2 .3 (1975) 98 2 0 9 319 Niger9 7. 0 420 .6 4 43 .2 .1.5 10.J 94 3 1 132 3 senga 5.2 430 -0.3 2a 24 2 a 5.2 4. (1975) 78 22 7 2 5 1 95 vryCo_sC 7.53 6910 3.3 25 20 6 .5 3.5 7.9 4 88 a 7.1 9 5 1 18 C_n~ra Afic. 3urund LDC 4.2 L30 22 64 14 1.4 1.0 4.3 .. . . .. . Chad :-DC &.2 130 -1.0 52 14 0.8 (0.5) .. (1975) 100 -2.0 z 3 Rwand LM 4.4 130 1.0 (59) . 3.9 (3.6) (1975) 97 3 4.3 10.9 169 Za:r. 25.7 130 1.1 25 25 .9 22 .6 (1975) 97 L3 -32-9.8 e7 etral Afvrcan EUp, DC 1.92:02 3 36 0. 1.9 4.7 0 32 18 -. .2.':,': 8 124 Equa.toril Gul~e 0.3 330 .. .. . ... .. . . Ca-eroon 7. 34.0 2.9 32 21 3.4 3.5 5.2 6 84 10 0.6 4.9 u26 gSoTted 6. PtI-ciPe MC 0.:1 420 . ... . ... ... Congo P-oPI.'s Rep. 1.4 490 .1 11 34 5.6 0.2 12.7 77 o1 13 13.7 6.9 121 Gabon~ 0. 5 3,5360 .. ... . ... .. . EatAfr-ic. EthiopLÅ LDC 30.2 110 1.7 52 15 2. .7 1.1 0 9 2 -38-3.0 177 SomliaLDC 3.7 110 -0.: (28) (7) .2 ( 7) 7.) (95 97 3 100 13.0 '5 Mala, LDc '5.6 14,0 3 .0 47 la 6 .3 4. 3 6.2 0 96 4 3.0 3.0 127 Tanzania DC 16 .4 190 2 .6 45 16 4.5 3.2 2.9 5 86 - 9 -7.2 -1.J 127 Le...th. LDC 1.3 240 5.8 30 15 5.2 (2.1) . .... Key.4.6 270 2.5 35 20 6. 2. 11.0 18 70 12 L.2 -2. 13 lUgandm DC 12.0 270 0.7 55 a -0.:1 1.3 8.0 2 98 -9.6 -10.4 159 Sudan LDC 16.9 290 0.1 (39) (9) 5.0 (2.3) (4.5) (1975) 99 1 -4.9 1.53 97 4MIl ta-a BotswanaDC .7 40 (12.4) (33) (5) (67) (4.7) (.) .. Za Lbi LL 5.1 450 1.L1:s . 2.1 26' (1975) 99 1 23-5 7 3 9 Djibouct LDC 0.3 580 .... . ... .. . . . Ss~ land LDC 0.5 610 .. ... . ... .. . .. .- lndian 0cea Comr- Wc 0.4 190 (-.) ' (47) (9) (-0.3) .. (2.9) . . . .... Madaasca ISL 8.1 240 .0.2 40 1 9 -0.3 0.7 .) (1975) 95 5 -0.; -5.3 112 UiddI. Inom $ych.,ll.s LDC 0.1 710 .. ... . ... .. . ... M-trtius MS 0.9 760 . . . . . . . . . DominicaLDC Cr-nda S 0.1 520 .. ... . ... . .. . .... jmac 2s 21 1."3 . 9 37 () 1.2 2.0 23 21 56 -1.4 -5.3 87 3-rb.ao 1SL 0.2 1.770 . .. . . . . . . .. Trinidad 6 Tobag. 15L. 1.1 2,380 1.6 3 62 3.4 .0.1 2.8 91 3 6 -0.8 -4.9 113 BaM-s 13L 0.2 3,2 .. ... . .. . .. . ...... Uthariand AnMIle 1S . . . .. . . .1•,. . . .. St. Lucta LDC PacMfi L-w rn-m - S.lomon I.land LDC 0.2 250 . .. . . . . . ... Middle. Incomp W- 5-en ao LDC 0.2 360 . (47) (3) (1.3) . . . . . .. ;.p-a N- Guinea 2.9 6.90 3.4 33 26 5.0 ... 61 38 1 .... tdjt 15xL 0.6 ,210 . .. . . . - • • . .. jang, LDc . (330) .. ... . .. . .. . .. -... T..v tu LC 9 -uee W«rld Develo*F~ ~epor. 1979. APPENDIX II -11 - Page 1 of 2 Global Amount of EC Financial Assistance to ACP Group for Period March 1, 1980 to March 1, 1985* Source of Funds/ Allocation US$ million EUA million European Development Fund (EDF) Project and Program Aid /a 5,123 3,712 of which: Grants (4,041) (2,928) - Special Loans /b (696) (504) Risk Capital (386) (280) STABEX Transfers 759 550 Minerals (Special Loans) 386 280 TOTAL EDF 6,268 4,542 European Investment Bank (EIB) Subsidized Loan Fund /c 945 685 TOTAL Financial Aid 7,213 5,227 Additional Resources Available: EC Budget Delegates Expenses 248 180 EIB Loans for Mining and Energy Projects /d 276 200 Total of Aid under Convention and additional resources available 7,737 5,607 Food Aid 414 300 Grants to NGOs /e 35 25 * One European Unit of Account EUA = US$1.38. /a The percentage of subsidies remains at 80% for special loans and 20% for risk capital. /b Loans with a duration of 40 years, 10-year grace period, and 1% interest rate. In the new Convention for LDCs the interest rate has been reduced further to 0.75%. /c Loans from the Bank's own resources, with a 25 year maximum duration and a 3% interest rate subsidy, the cost of which is charged against EDF. Tne interest rate is the same as the rate charged by the Bank at the time of the signing of each loan contract, reduced by 3% and adjusted auto- matically so that the rate actually borne by the borrower will not be less than 5% nor more than 8%. /d From EIB's own resources with no subsidy; the amount is not specified in the Convention, but is contained in a declaration annexed to the Convention. /e Non-Governmental Organizations (for co-financing). Sources: EC, the Council, Text of the new ACP/EEC Convention, Brussels, August 14, 1979. APPENDIX II - 12 - Page 2 of 2 COMPARISON OF SECTORAL ALLOCATIONS OF FINANCIAL AID: LOME I AND LOME II Lome I (1975-80) Lome II (1980-85) Million eua % Million eua EDF Project and program 2,694 78 3,712 71 aid of which: Grants (2,155) (80) (2,928) (79) Special Loans (444) (16) (504) .(14) Risk Capital (95) (4) (280) (8) Stabex 382 11 550 11 Mineral Special Loans 280 5 EIB 390 11 685 13 Total 3,466 100 5,227 100 Source: The old and the new Conventions (EC draft version). Total aid provided under the original Convention amounted to 3,390 million eua which was increased by 76 million eua to provide for new ACP members. COMPARISON OF FINANCIAL AID IN REAL TERMS Current /a Constant terms (1975=100) /b EUAs million US$ Millions US$ Millions Rate Increase (%) Lome I (1975) 3,466 4,297.8 4,297.8 Lome II (1979) (i) 5,227 7,213.2 4,954.1 1.5 (ii) 5,427 7,489.2 5,143.6 2.0 (iii) 5,607 7,737.6 5,314.2 2.4 (i) Official amount provided in Convention. (ii) Add on 200 million eua from EIB own resources, outside Convention. (iii) Add on Delegate expenses to be charged against the Community budget. /a Exchange rates: 1975 US$1.24 - one eua; 1979 US$1.38 = one eua. The unit of account used in Lome' I represented the equivalent of US$1.24 in January, 1975, as shown in the publication EEC/ACP Dossier Lom4, March, 1975, p. 32. lb Using -US$ GDP deflator for OECD North (1975=100). The deflator for year 1979 = 145.6 (N, W and E Europe). APPENDIX III - 13 - SPECIAL UNDERTAKINGS ON SUGAR The sugar protocol, unlike the other protocols in the Convention, does not expire on March 1, 1980, but continues indefinitely under provisions whereby either party can terminate the protocol at 2 year notice. The situation roughly is the following. The protocol provides for the guaranteed supply by the ACP, and purchase by the EC, of 1.3 million tons of cane sugar 1/ at guaranteed prices negotiated annually within the price range obtaining within the Community. These prices are not related to the world price, but to the Community's intervention prices. There have been difficulties over the annual negotiation of price, which takes place after the CAP (intervention prices) have been agreed. The ACP argues that the agreed price is c.i.f. European ports, which requires ACP to bear transport costs, and that the Community has renegged on its commitment to take account of "all important economic factors" in calculating the ACP sugar price. Although the price obtained by ACP producers from the Community is well above the current world price, the small annual price increases which have been necessary to maintain ACP sugar on a commercial footing within the Community have made it difficult for some ACP producers to meet the costs of production. For 1976-77 ACP indicated their costs of inputs in their sugar production went up 33%; the Community restricted the price increase for that year to 4.6%. For 1977-78 ACP indicated their costs had risen by 16% while the Community restricted the price increase to 2.1%. For 1978-79, the negotiations were postponed when the Community offered only a 2% increase. The European sugar beet lobby was powerful enough to keep the Community out of the International Sugar Agreement that went into effect in January 1978. In the face of a situation where general world demand is probably falling while production is increasing, the Agreement is intended to achieve a more stable balance between supply and demand through a system of export quotas applicable when prices are low and building up stocks with surpluses when prices are high. The Community, through non-participation, has been thwarted in taking any effective steps to reduce its sugar surpluses, the dumping of which has been a major cause of the world depression of sugar prices. 1/ This represented, on average, about 66% of ACP exports of sugar in 1975. For Mauritius, the main producer, the quota represented over 80% of exports. - 14 - APPENDIX IV PRODUCTS COVERED BY STABEX Groundnut products l/ Raw hides, skins and leather 1/ groundnuts, shelled or not raw hides and skins groundnut oil bovine cattle leather groundnut oilcake sheep and lamb skin leather goat and kid skin leather Cocoa products 1/ cocoa beans Wood products 1/ cocoa paste wood in the rough cocoa butter wood roughly squared or half squared, but no further manufactured Coffee products wood sawn lengthwise but not further raw or roasted coffee prepared extracts, essences or concentrates of coffee Fresh bananas Cotton products 1/ Tea cotton, not carded or combed cotton linters Raw sisal Coconut products 1/ Iron ore 2/ coconuts Iron ores and concentrates and roasted copra pyrites coconut oil coconut oilcake Cloves Palm, palm nut and kernel products 1/ Gum arabic palm oil palm nut and kernel oil Pyrethrum palm nut and kernel oilcake palm nuts and kernels Vanilla Wool, mohair Ylang-ylang Additional in New Convention: Rubber Pepper Cotton seed Cashew nuts Shrimp and prawns Oil seed cakes Peas and lentils Squid Tobacco, unmanufactured - The EC agreed, at one point, to consider Sisal products inclusion of tobacco, within the limits of Citrus Fruits a quantitative ceiling for exports to the EC; sisal products depending on results of discussions between producers and con- sumers; and citrus fruits, but with no guarantee of a favorable opinion"resulting. 1/ ACP may choose single product or product family approach for any one transfer request. 2/ Iron ore exports from mines already in operation will continue to be covered - .by Stabex for five years (1979-84).