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$Unique_ID{bob00530}
$Pretitle{}
$Title{United Kingdom
External Economic Relations}
$Subtitle{}
$Author{Embassy of the United Kingdom, Washington DC}
$Affiliation{Embassy of the United Kingdom, Washington DC}
$Subject{community
countries
trade
states
european
co-operation
economic
aid
million
agreement}
$Date{1990}
$Log{}
Title: United Kingdom
Book: Britain in the European Community
Author: Embassy of the United Kingdom, Washington DC
Affiliation: Embassy of the United Kingdom, Washington DC
Date: 1990
External Economic Relations
Under the Treaty of Rome the Community, which is the world's largest
trading unit, is pledged to promote world trade, development and peace. In
most international economic negotiations the Commission negotiates on a
mandate from the Council of Ministers. Most countries have diplomatic
representatives accredited to the Community, which in turn has its own
delegations to the United States, Canada, Japan and countries in Latin
America, Africa, Asia, the Caribbean and the Pacific, the Organisation for
Economic Co-operation and Development in Paris and the international
organisations based in Geneva. The Community has observer status at the
United Nations.
Commercial Policy
Article 110 of the Treaty of Rome pledges the signatories to contribute
to the harmonious development of world trade, the progressive abolition
of restrictions on international trade and the lowering of customs barriers.
Article 113 also provides for a common commercial policy, which is applicable
to tariff rates, export policy, and measures to liberalise or protect trade,
such as the elimination of quantitative restrictions or action against
dumping or subsidies.
General Agreement on Tariffs and Trade
Acting on behalf of the Community, the Commission takes part in bilateral
and multilateral trade negotiations, the latter being conducted mainly within
the framework of the General Agreement on Tariffs and Trade (GATT), which has
been in existence since 1947 and aims to reduce and remove barriers to trade
in goods. There are 97 signatories to the agreement and a further 30 countries
apply it on a provisional basis. As a result of the Tokyo Round negotiations
from 1973 to 1979, the Community and the other major developed countries
reduced tariffs by 25 to 30 per cent and the Community tariff dropped to an
average level of 7.5 per cent. The eighth round of negotiations, the Uruguay
Round, was launched in 1986 and will end in December 1990 with a meeting in
Brussels. It aims to strengthen the GATT system and extend it to cover new
areas, such as services, intellectual property and investment.
Britain is committed to the open multilateral trading system and the GATT
and, through the Community, intends to continue to promote the further
liberalisation of international trade. It wants to see all countries taking on
a greater share of GATT obligations, according to their level of development,
and would like to see a reduction in the remaining high tariffs in developed
countries. The British Government would also like the GATT to apply more fully
to trade in agriculture and textiles, and favours stricter rules for the
resolution of disputes between GATT members and the extension of the principle
of open trade to international trade in services.
Multi-Fibre Arrangement
The Multi-Fibre Arrangement (MFA), introduced in 1974, consists of a
series of agreements covering international trade in textiles and clothing
and is designed to balance the interests of importing and exporting countries.
Under the arrangement, the Community has bilateral agreements with 26 low-cost
supplying countries which either limit by quota the import into the Community
of textiles and clothing or provide for the introduction of quotas if imports
rise above certain levels; other suppliers are covered by similar
arrangements. In 1986 the bilateral agreements were extended to the end of
1991. The Community is committed to bringing trade in textile and clothing
products back within normal GATT rules after the present extension expires,
and this is under discussion in the Uruguay Round of GATT negotiations.
Economic Agreements
In addition to the arrangements under the Lom*e Convention (see p 42),
the Community has concluded preferential agreements with Mediterranean
countries and non-preferential co-operation agreements with a number of
countries and groups of countries in Asia and Latin America.
European Free Trade Association
The six EFTA countries (Austria, Finland, Iceland, Norway, Sweden and
Switzerland) together form the Community's largest trading partner. In
1972-73, as part of the accession arrangements for Britain and Denmark, the
Community signed substantially similar agreements with each of the EFTA
countries paving the way for free trade in industrial goods and some processed
agricultural products. In 1984 the Luxembourg Declaration by EFTA and
Community foreign ministers established a framework for further co-operation,
especially in improving the circulation of goods.
In December 1988 the Community reaffirmed its desire to strengthen and
expand relations with EFTA, and a meeting of Community and EFTA ministers
agreed that the Commission should open negotiations with EFTA countries on
methods of achieving this aim. In April 1989 Community and EFTA ministers
agreed on further action to increase co-operation and remove remaining
non-tariff barriers to trade, with the aim of creating a `European Economic
Space' encompassing the Community and EFTA.
Community and EFTA ministers, meeting in Brussels in December 1989,
agreed to the opening of formal negotiations on expanding their relations and
creating a European Economic Space. The principal aims are to achieve the free
movement of goods, services, capital and people; equal conditions for
competition; and greater co-operation in research and development, the
environment, education, working conditions and social welfare, consumer
protection, tourism and programmes for small- and medium-sized businesses.
The United States
The Community has close economic ties with the United States. In 1988
exports to the United States amounted to $84,528 million, and imports from the
United States to $79,392 million. There are also important links through
investment.
The substantial bilateral trade between the Community and the United
States is reflected in the interest which each partner takes in the other's
trade legislation. The Community monitors the activities of the United States
Congress, while the United States has shown a keen interest in the development
of the single market. Trade issues are the subject of frequent high-level
discussions between the two parties. In December 1989 the United States called
for strengthened links between it and the Community and, following a British
initiative, discussions are underway to develop a new transatlantic
consultative partnership.
The Mediterranean and the Middle East
The Community has concluded individual co-operation or association
agreements with virtually all non-member countries with a Mediterranean
coastline, plus Jordan. Their terms vary in detail, but all provide
duty-free access to Community markets for most industrial goods and varying
degrees of preferential access for agricultural products. The Community also
provides development aid - 84 million Pounds in 1988.
In June 1988 the Community signed an agreement with the Gulf Co-operation
Council (the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and
Kuwait). It provides for co-operation in agriculture and fisheries, industry,
energy, science and technology, investment, the environment, training and
trade. Negotiations are underway on a broader agreement based on free trade.
Latin America
Britain supports the establishment of closer links between the Community
and Latin America. Non-preferential framework agreements designed to
encourage commercial and economic co-operation have been concluded with Mexico
(1975) and Brazil (1980). In 1983 the Community signed an agreement with the
members of the Andean Pact (Bolivia, Colombia, Ecuador, Peru and Venezuela)
providing for technical and financial co-operation, strengthened trade
links, and protection for European investment in the area. In 1985 a similar
agreement was signed between the Community and the Central American states of
Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, one of
its aims being to give priority to assisting projects designed to encourage
regional integration. Since 1985 there have been annual meetings to discuss
economic and political issues between the Community, the five Central American
states, and the Contadora group (Colombia, Mexico, Panama and Venezuela).
In December 1989 the Council of Ministers adopted a mandate for
negotiations on a trade, commercial and economic co-operation agreement
between the Community and Argentina.
The Community is Latin America's second-largest customer and
second-largest supplier, after the United States. Trade with the Community
represents more than 23 per cent of Latin America's total trade and 6 per
cent of the Community's.
China
In 1985 the Community signed an agreement with the People's Republic of
China providing for economic co-operation regarding industry and mining,
agriculture, science and technology, transport, energy, communications and
environmental protection. The agreement also provides for the encouragement
of various forms of industrial co-operation, such as joint ventures and the
transfer of technology, and for the promotion of investment. In June 1989,
after brutal repression of political opposition in China, the European Council
adopted a number of measures, including the postponement of new co-operation
projects and a reduction of cultural, scientific and technical co-operation
programmes. It also advocated the examination of new requests for credit
insurance.
Japan
Japan is the Community's third-largest trading partner in terms of the
value of visible bilateral trade, and it is now one of the Community's fastest
growing export markets: exports increased by 20 per cent in 1988. Although
Japan is now an open market for almost all manufactured products, the
Community is pressing for the full liberalisation of those sectors where
restrictions remain, as well as for structural reform of the Japanese economy
which, by stimulating domestic consumption, would help to reduce Japan's
current account surplus in its trade with the Community. Meetings to resolve
trade and economic issues take place regularly at a high level. In recent
years a number of Japanese companies have sited manufacturing plants in the
Community, motivated in part by the development of the single market.
Developing Countries
The European Community and its member states are among the main sources
of official aid to developing countries. Although the bulk of this aid is
provided bilaterally by member states, the Community has an important role,
its main instrument being the Lom*e Convention, which is an aid and trade
agreement with countries in Africa, the Caribbean and the Pacific (the ACP
states). About half of the Community's aid is supplied under the Convention.
In addition, the Community provides aid to developing countries in Asia and
Latin America, and food aid.
The Lom*e Convention
The Treaty of Rome introduced the concept of association for those
developing countries and territories having special relations with member
states. Britain's entry into the Community necessitated further consideration
of Community relations with the developing countries, for, during the
accession negotiations, the British Government was concerned that its
membership should not be detrimental to Commonwealth members in Africa,
the Caribbean and the Pacific and that the interests of those
countries dependent on the export of certain commodities, such as sugar
cane, should be safeguarded. The 1973 Treaty of Accession therefore offered
20 independent Commonwealth countries several forms of relationship with the
enlarged Community, one of these being to join with existing associate
countries in negotiating an agreement covering both trade and aid. This was
accepted by a number of developing countries and resulted in the signature
of the first Lom*e Convention in 1975 between the Community and 46 ACP states.
The co-operation between the ACP states and the Community has been
strengthened and extended under successive Lom*e conventions. The third
convention (Lom*e III), ran from 1985 to 1990, and arrangements for Lom*e
IV, which is to run from 1990 to 2000, were completed in December 1989. There
are 68 ACP signatories, including 35 members of the Commonwealth.
The Convention provides the ACP countries with duty-free and quota-free
access to the Community for all their industrial products (except rum) and
most agricultural products. As a result of special arrangements secured at the
time of Britain's accession, it contains special provisions for sugar, bananas
and beef, reflecting the importance of these products for several Commonwealth
countries. Countries producing cane sugar are granted indefinite access to the
Community market for nearly 1.3 million tonnes annually at guaranteed prices.
Community aid is provided under the terms of the Convention from the
European Development Fund (EDF) and loans are available from the European
Investment Bank (EIB). Some 4,700 million Pounds was made available from the
EDF under Lom*e III - Britain contributed more than 800 million Pounds - and
700 million Pounds in loans from the EIB. During the first five years of Lom*e
IV, 7,700 million Pounds will be available from the EDF and up to 850 million
Pounsa from the EIB; Britain's contribution to the EDF will be about
1,300 million Pounds. These financial arrangements will be reviewed after
five years.
The Convention provides for increased consultation between the Community
and each ACP state to ensure that aid is put to the best possible use within
the context of the recipient country's own policies. Emphasis is placed on
agriculture and food production; raising rural incomes and standards of
living; developing local processing of agricultural produce; ensuring a better
balance between food and export crops; and encouraging agricultural research.
Priority is also being given to measures to combat drought and
desertification. The Convention contains measures to increase the contribution
of the fishing industry to food supply. Aid is also available to help ACP
states finance imports, for regional projects and for emergencies.
Lom*e provides the ACP countries with compensation for shortfalls in
their export earnings from certain agricultural commodities (including cocoa,
coffee, cotton, copra and ground nuts): this is known as the STABEX system.
There is also a special loan fund, known as SYSMIN, which provides loans at
low interest rates to finance projects to increase the export capacity of
mineral producers whose production and income have suffered as a result of
disruptions beyond their control.
Food Aid and Emergency Relief
Over half of the food provided under the Community's food aid programme
is distributed free to vulnerable groups or for emergency requirements. The
rest is provided for sale in local markets, the money received from the sales
being used to support rural development. In 1988 the Community allocated 1.36
million tonnes of cereals, 110,000 tonnes of dried skimmed milk, 34,000 tonnes
of vegetable oil and 25,000 tonnes of butteroil to developing countries. The
programme cost some 384 million Pounds; Britain's contribution was 75 million
Pounds.
Food aid is an integral part of the Community's development policy and is
provided according to the situation of individual developing countries. In
allocating food aid, account is taken of basic food needs, per capita income
and the balance of payments in the recipient country.
Emergency food aid is committed when necessary. For instance, 268,000
tonnes was provided in response to the 1987-88 famine in Ethiopia, and a
contribution of 100,000 tonnes was sent to victims of the floods in Bangladesh
in 1988. The Community committed some 40 million Pounds for non-food emergency
relief measures in Africa in 1988. Community aid to refugees and displaced
persons totalled 130 million Pounds in 1988.
Debt Relief
In 1987 the Council of Ministers approved a special Community programme
worth over 200 million Pounds to assist low-income countries in sub-Saharan
Africa that are particularly afflicted by debt and are prepared to carry out
significant adjustment of their economic structures. Its actions in support
of structural adjustment efforts, in particular those in the agricultural
sector, are closely co-ordinated with those of the World Bank.
Generalised System of Preferences
The European Community's Generalised System of Preferences (GSP) scheme
is designed to increase the export earnings of developing countries, promote
their industrialisation and accelerate their rate of economic growth. It was
introduced in 1971 and revised and extended for ten years from 1981, when it
was decided to focus greater attention on the least developed countries. A
further major review is planned in 1990.
The scheme provides duty-free access to the Community for industrial
products from developing countries, and preferential entry for a limited
range of agricultural products, mainly processed products, often at reduced
rates. Almost all industrial products are granted duty-free access, but there
are some restrictions in the case of very competitive products from the most
advanced developing countries. The poorest countries are exempted from such
restrictions and are granted special treatment for agricultural products.
Non-Associated States
The Community provides aid for the developing countries of Asia and Latin
America which are not covered by the Lom*e Convention: in 1988 this totalled
226 million Pounds, mostly for agricultural and rural development.
The Community has increased its trade and development links with
developing countries in South Asia, and with the ASEAN group (see below). This
reflects the Joint Declaration of Intent, annexed to the 1972 Treaty of
Accession, on extending and strengthening trade relations with developing
Commonwealth countries in Asia, and has led to the conclusion of commercial
co-operation agreements between the Community and India, Pakistan, Sri Lanka
and Bangladesh. Within the granting of GSP tariffs to these countries, special
concessionary arrangements were made for the jute trade.
In March 1980 a non-preferential co-operation agreement was signed with
the Association of South East Asian Nations (ASEAN - Brunei, Indonesia,
Malaysia, the Philippines, Singapore and Thailand) providing for commercial
and economic co-operation. It is designed to encourage collaboration in
science and technology, energy, transport and communications, agriculture and
fisheries. The signatories have also undertaken to extend to each other
arrangements for investment promotion and protection. A special section of the
agreement is devoted to development co-operation. Joint ASEAN-Community
investment committees have been established in the capitals of the ASEAN
states. Britain has always favoured increased cohesion among ASEAN's member
states and continues to support close links between the Community and ASEAN.
There are regular meetings between the two groups.
The Soviet Union and Eastern Europe
The establishment of a common Community commercial policy in 1975 meant
that member states were unable to maintain certain bilateral trade agreements
with third countries which could hinder the implementation of this policy. In
preparation for this in 1974 the Community proposed bilateral trade
arrangements with the Soviet Union and each of the East European members of
the Council for Mutual Economic Assistance (CMEA). In response the CMEA
proposed a full-scale European Community/CMEA framework agreement covering
trade, and a joint commission.
Subsequent discussions foundered in 1981 on problems over the respective
competences of the two organisations. Contacts were renewed in 1984, when the
Community set out its objectives. These were to protect economic relations
with individual CMEA countries, avoiding a bloc-to-bloc approach; to make
clear that trade questions could not be regulated between the Community and
the CMEA, since the latter had no common trade policy; and to reaffirm its
willingness to develop working relations over such issues as the environment,
economic forecasts, statistics and industrial standards.
In 1988 a Joint Declaration was agreed by the Community and the CMEA,
providing for the establishment of official relations between the two bodies
and setting out a framework for future discussions on co-operation between
them. Britain welcomed the move as a contribution towards the wider process
of promoting closer links between Western and Eastern Europe.
Following the establishment of diplomatic relations between the Central
and Eastern European countries and the Community, the Community has negotiated
trade, commercial and economic co-operation agreements with Hungary,
Czechoslovakia, the German Democratic Republic, Bulgaria, Poland and the
Soviet Union. These agreements cover trade concessions and co-operation in
areas such as energy, agriculture, transport and the environment. A similar
agreement with Romania awaits signature. The next state, as economic and
political reform is consolidated, will be the development of closer
association agreements with individual Eastern and Central European countries.
The Paris Summit of the seven leading industrialised nations in July 1989
asked the Commission to co-ordinate Western action to help Poland and Hungary.
Two ministerial meetings of the `Group of 24' (G24) Western nations have so
far been held under the Commission's chairmanship. Under the G24 umbrella, the
Community has provided generous amounts of aid to Poland and Hungary.
Community measures were taken to abolish or suspend quantitative restrictions
on Hungarian and Polish exports to the Community; in addition the Community
adopted a 210 million Pounds package for both countries covering agricultural
reform, environmental protection, investment, economic restructuring and
training, and extended to them GSP status (see p 43). In addition, some
110 million Pounds of free food was provided to Poland. The European
Investment Bank (EIB) has agreed to provide loans totalling 730 million
Pounds, and loans amounting to 146 million Pounds are to be provided by the
European Coal and Steel Community; there is also a medium-term adjustment
loan of 730 million Pounds for Hungary. The Community has established the
TEMPUS student mobility scheme; and the European Training Foundation will act
as a clearing house for Eastern Europe's training needs. The Community agreed
at the G24 ministerial meeting on 4 July 1990 to extend its assistance to
Bulgaria, Czechoslovakia, the German Democratic Republic and Yugoslavia.
In December 1989 the European Council agreed to create a European Bank
for Reconstruction and Development aimed at promoting competitive investment
in Central and Eastern Europe. Forty-two countries and international
organisations hold shares in the Bank. In May 1990 they voted to site the
Bank in London. Eastern European states have shares in the capital of the
new bank. Community
member states, the Commission and the EIB together have a majority
shareholding.
The Community has also addressed the issue of German unification (see
p 46) and the integration of the German Democratic Republic into the
Community. Meeting in Dublin in April 1990, the European Council agreed
guidelines for the negotiations on incorporation, which cover trade,
agriculture, fisheries, the environment and other issues. The Commission is
responsible for drawing up proposals - for decision by the Council of
Ministers - on transitional arrangements which would enter into force
at the moment of German unification. In the period before unification, the GDR
is benefiting from full access to Community aid for Eastern Europe, and EIB
and other Community loan facilities.
European Political Co-operation
Under the Single European Act, member states are committed to the
process of political co-operation under which they formulate and implement
agreed positions on major international issues; their foreign ministers
are required to meet at least four times a year to do this. Foreign policy
questions are also discussed at European Council meetings. European
political co-operation takes place outside the framework of the Treaty
of Rome.
Member states co-operate closely at the United Nations where they vote
in common on most issues and are recognised as one of the most cohesive
groupings. Wherever appropriate, the representative of the Presidency
speaks on behalf of member states.
In recent years the 12 member states have reached common positions
on such questions as East-West relations, apartheid in South Africa, the
Arab-Israel dispute, conflict in Central America, and terrorism.
East-West Relations
The Twelve have warmly welcomed the establishment of democracy in the
German Democratic Republic, Hungary, Czechoslovakia and other countries
in Central and Eastern Europe, and are committed to assisting them in the
change from centrally planned to market economies (see p 44). Britain
has contributed actively to Community discussions on the long-term
relationship with Eastern Europe. In the Government's view, there should
be a political response by the Community to political reforms in order
to encourage the growth and durability of democratic institutions in these
countries and their links with the West. Possible stepping stones in this
process of political rapprochement could be membership of the Council
of Europe and the accession of these countries to the European Convention on
Human Rights.
The Community has agreed to examine the question of economic assistance
to the Soviet Union. Before decisions are taken, an analysis of the size of
the problem will be undertaken by the Commission with the help of
experts from other international bodies. Britain is ready to consider
various forms of assistance, provided that it is clearly linked to economic
restructuring.
Member states consider that the process of the Conference on Security
and Co-operation in Europe (CSCE) has made a significant contribution to
overcoming past divisions between East and West, and are determined to
play a full part at the CSCE summit meeting, proposed for the autumn
of 1990. The Twelve are committed to a secure and stable balance of forces
in Europe at lower levels and hope to see an early and successful conclusion
to the current negotiations on conventional armed forces in Europe.
In December 1989 the European Council issued a statement supporting
German unification as a positive factor in the development of Europe
and stated that this process should take place peacefully and democratically
in a context of dialoque and East-West co-operation.
The Middle East
In 1980 the European Council's Venice Declaration stated that a
lasting solution to the Arab-Israel dispute required the mutual acceptance
of two basic principles - the right of all countries in the area, including
Israel, to secure existence within guaranteed borders, and the right of the
Palestinian people to self-determination. The Twelve support the proposal
for an international peace conference on the Middle East. They have welcomed
the Palestine National Council's recognition in November 1988 of the state
of Israel and its decision to renounce terrorism. Member states have
repeatedly called upon Israel to withdraw from territory occupied in 1967
and, in the meantime, to administer its occupation in accordance with
international law and human rights standards. The Community has a development
programme for the occupied territories and allows direct exports of
agricultural and industrial products from them to the Community market.
In response to Iraq's invasion of Kuwait in August 1990, the Twelve
strongly condemned this action and urged Iraq to comply with UN Security
Council Resolution 660 calling for a withdrawal of its troops. Following
the imposition of sanctions on Iraq by the Security Council in its
Resolution 661, the Community agreed regulations providing for a total
ban by member states on the import or export of all goods originating
in or coming from Iraq or Kuwait.
The Twelve have also consistently emphasised the importance of the
complete withdrawal of foreign forces from Lebanon, except for those
whose presence is requested by the Lebanese Government, and of the obligation
on all parties to co-operate with the UN Interim Force in Lebanon.
Member states welcomed the ceasefire in the conflict between Iraq and
Iran and firmly support the United Nations Secretary General's efforts
to achieve a lasting peace settlement. In February 1989 the Twelve
condemned Iran's incitement to murder the British novelist Salman Rushdie
and suspended high-level official visits to Iran.
Southern Africa
The Twelve have repeatedly called for an end to the system of apartheid
in South Africa. They have applied a policy which combines a programme of
assistance to victims of apartheid and restrictive measures to encourage the
South African Government to take the necessary steps to create a genuine
national dialogue on the country's future. They have greatly welcomed the
significant changes that have taken place in South Africa in recent months,
notably the release of Mr Nelson Mandela and other political prisoners, the
lifting of the ban on the African National Congress and other organisations
and the commitment made by the South African Government to abolish the
apartheid system. Meeting in Dublin in June 1990, the Twelve affirmed their
willingness to consider a gradual relaxation of pressure on the South
African Government once there was further clear evidence of the changes
in the country continuing.
There is a voluntary code of conduct for European companies with
subsidiaries in South Africa. Adopted in 1977, the code is designed to
improve conditions for black employees, including their freedom to join
trade unions, and to remove racial discrimination at work.
The Twelve supported the implementation of the United Nations plan
for Namibian independence, which began on 1 April 1989, and made their own
contributions to the United Nations Transitional Assistance Group set up
to monitor the holding of elections to a constituent assembly. Britain
supplied a signals unit to the Group to assist communications. The Twelve
welcomed Namibia's achievement of independence in March 1990 and its
decision to sign the Lom*e Convention (see p 42).
Central America
Since the late 1970s Central America has been suffering from civil
disorder, principally in El Salvador and Nicaragua. Several initiatives
have been launched to resolve these problems, including the Esquipulas
II agreement signed in 1987 by Costa Rica, El Salvador, Guatemala,
Honduras and Nicaragua. It commits the signatories to initiate dialoque
with their internal political oppositions, arrange ceasefires with their armed
oppositions, promote internal democracy with free elections and political
pluralism, suspend military aid to insurgents and other irregular forces,
and forbid the use of their territories to those seeking to destabilise
other national governments in the region. The five Central American presidents
renewed their commitment to the agreement in January 1988, and in August
1989 a new accord was signed, establishing procedures for ceasefires and
negotiations. Britain and the other members of the European Community
have repeatedly expressed their support for the Esquipulas agreement.
In 1990 they welcomed the free elections in Nicaragua.
The Community has a co-operation agreement with the five Central
American countries and Panama, providing for closer economic and aid
links with the region, and it holds annual meetings at ministerial level with
those countries to discuss these and other regional issues.