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SETTLEMENT in the form of an Exchange of Letters between the European Economic Community and the United States of America on Community exports of pasta products to the United States
A. Letter from the Community
Brussels,....
Sir,
I hereby enclose the text and the Annex of Settlement reached between our two sides on the pasta issue pursuant to paragraph D of the United States/European Communities Agreement of 10 August 1986 and subject to the conditions thereof.
I confirm the acceptance of this Settlement by the Community.
I would be grateful if you would confirm acceptance of the Settlement in the same terms by the Government of the United States of America.
On behalf of the Council of the European Communities
B. Letter from the United States of America
......
Sir,
I acknowledge receipt of your letter of 5 August 1987, to which you annexed the text of the Settlement on pasta, of which the text is as follows:
"I hereby enclose the text and the Annex of the Settlement reached between our two sides on the pasta issue pursuant to paragraph D of the United States/European Communities Agreement of 10 August 1986 and subject to the conditions thereof.
I confirm acceptance of this Settlement by the Community.
I would be grateful if you would confirm acceptance of the Settlement in the same terms by the Government of the United States of America."
I hereby confirm acceptance of the Settlement in the same terms by the Government of United States of America."
I hereby confirm acceptance of the Settlement in the same terms by the Government of the United States of America.
For the Government of the United States of America
5 August, 1987
UNITED STATES/EUROPEAN COMMUNITIES PASTA SETTLEMENT
In order to avoid new conflict between the United States of America and the European Communities at a particularly critical moment for the world trading system, the United States of America and the European Communities have agreed to the following Settlement of the United States of America/European Communities dispute regarding European Communities export refunds on pasta products (1) exported to the United States of America.
1. The export refund for pasta exported from the European Communities to the United States of America will be reduced. The initial reduction with be 27.5% of the prevailing level of the general refund for pasta exports.
2. Inward Processing Relief (IPR) with equivalent compensation will be permitted for exports of pasta products from the European Communities to the United States of America in conformity with Regulation (EEC) No 3677/86. Under IPR, durum wheat will be available for Community producers at world market prices and therefore exports of pasta products for the equivalent thereof shall not qualify for export refunds.
3. Neither the method of calculating the general refund for pasta exports nor the regulations on IPR as they existed on 1 August 1987 will be altered in a manner which would undermine the effects of this Settlement.
4. The actions referred to in paragraphs 1 and 2 above are intended to result in 50% of such exports taking place under IPR (hereinafter referred to as the 'agreed level') throughout this Settlement.
(b) In the event that European Communities' pasta exports to the United States of America under the IPR system exceed the agreed level in any six month reference period, the percentage reduction in the export refund referred to in paragraph 1 above will be reduced so as to achieve the agreed level, as it may be modified pursuant to subparagraph (c);
(c) Starting in 1989, the European Communities and the United States of America agree to examine jointly during March and September whether during the preceding six-month reference period the actual level of pasta exports from the European Communities to the United States of America utilizing IPR has differed from the agreed level. The resulting shortfall or surplus, if any, shall be added to or subtracted from the agreed level in the subsequent six-month period;
(d) The adjustments referred to in subparagraphs (a) and (b) above shall take effect on the first day of the month following the 45-day periods referred to in paragraph 5.
7. For the duration of this Settlement, the European Communities shall not introduce any new export incentives for pasta exported to the United States of America. Should any new export incentives for pasta exported from the European Communities to the United States of America be introduced which undermine the operation of this Settlement, the United States of America will have the right to pursue re-negotiation of this Settlement or to terminate it.
8. For the duration of this Settlement, the US administration shall refrain from unilateral action against pasta imports from the European Communities and shall not seek redress in the GATT Subsidies Code Case on pasta. Should any administrative or legislative measures be taken against pasta imports from the European Communities, the European Communities will have the right to pursue renegotiation of this
9. The parties shall consult as agreed in the Annex to this Settlement. In addition, consultations will be held at any time at the request of either party regarding the operation of this Settlement or any matter pertaining thereto. Such consultations will be held within 10 working days of the request by either party.
10. The provisions of this Settlement are without prejudice to the legal positions of either party regarding the consistency with GATT of the use of export subsidies or export refunds for any product processed from primary agricultural products. Both parties agree to seek resolution of the pasta export refund issue on a definitive basis in the Uruguay round of Multilateral Trade Negotiations as quickly as possible.
11. Should either party take any action which would undermine the effects or operation of this Settlement, or fail to take appropriate action to implement this Settlement, the other party will have the right to terminate the Settlement.
12. The Annex to this Settlement shall constitute an integral part of this Settlement. The provisions of this Settlement and Annex shall take effect provisionally on 1 October 1987. The Settlement and Annex shall take effect definitively simultaneously with the implementation of parts A and B of the Annex to the Agreement of 10 August 1986.
ANNEX
A. In order to promote early and accurate adjustment to the agreed level of IPR utilization referred to in paragraph 4 of the Settlement to which this Annex is attached ("agreed level"), the United States of America and the European Communities agree to a series of four initial reviews of the functioning of this Settlement.
1. The first review shall take place in the first half of December 1987 to examine the trade which has taken place during October 1987. On the basis of this review, the European Communities shall, in accordance with paragraph B below, alter the percentage reduction in the export refund referred to in paragraph 1 of the Settlement to which this Annex is attached, either upward or downward so as to achieve the agreed level. This change shall take effect from 1 January 1988.
2. A second review shall take place during the first half of March 1988 to examine the trade which has taken place from November through January. On the basis of this second review, the European Communities shall, in accordance with paragraph B below, alter the percentage reduction in the export refund applied between 1 January and 31 March 1988, either upward or downward so as to achieve the agreed level. This change shall take effect from 1 April 1988.
3. A third review shall take place during the first half of June 1988 to examine the trade which has taken place from February through April. On the basis of this third review, the European Communities shall, in accordance with paragraph B below, alter the percentage reduction in the export refund applied between 1 April and 30 June 1988, either upward or downward so as to achieve the agreed level. This change will take effect from 1 July 1988.
4. A fourth review shall take place during the first half of September 1988 to examine the trade which has taken place from May through July. On the basis of this fourth review, the European Communities shall, in accordance with paragraph B below, alter the percentage reduction in the export refund applied between 1 July and 30 September 1988, either upward or downward so as to achieve the agreed level. This change shall take effect from 1 October 1988.
B. The magnitude of the changes to be made to the percentage reduction in the export refund referred to in paragraph 1 of the Settlement to which this Annex is attached as a result of each review referred to in paragraph A shall be designed to achieve the agreed level in the following period. If the rate of IPR utilization in any period is more than or equal to plus or minus 10 percentage points from the agreed level, the alteration resulting from that review shall be a minimum of five per cent of the general refund, unless otherwise agreed. If the rate of utilization of IPR is less than plus or minus 10 percentage points from the agreed level, the alteration shall be a minimum of one per cent of the general refund, unless otherwise agreed. If the rate of utilization is at the agreed level, no alteration shall be required.
C. At the time of the fourth review mentioned above, the European Communities and the United States of America agree to examine the amount by which the actual level of pasta exports from the European Communities to the United States of America utilizing IPR has differed from the agreed level during the period from November 1987 through July 1988. Any resulting shortfall or surplus shall be added to, or subtracted from, the agreed level for the six-month period beginning 1 October 1988.
D. Following the initial review period, i.e., beginning with the six-month period August 1988 through January 1989, in anticipation that European Communities pasta exports to the United States of America will be at or near the agreed level, reviews and changes in the rate of adjustment to the general refund level will take place as provided for in paragraph 6 of the Settlement to which this Annex is attached.
Side letter from the European Communities to the United States of America
Sir,
With reference to paragraph A 1 of the Annex to the Settlement (first review), and taking due account of the technical delays involved for the operation of the IPR system as well as the lack of representativity resulting from a one-month period, I understand that both sides, while committed to an early implementation of the Settlement, are conscious of the difficulties for European Communities exporters to adapt, in so short a period of time, to the agreed level of trade under the IPR system. Consequently, the results of the first review should be treated with caution.
Information regarding the signing of the Settlement between the European Communities and the United States of America on Community exports of pasta products to the United States of America
The English version of the Settlement in the form of an Exchange of Letters between the European Communities and the United States of America on Community exports of pasta products to the United States of America (2) was signed by the plenipotentiaries of the two Parties (Mr. Willy De Clercq on behalf of the Council of the European Communities and Mr. Clayton Yeutter for the Government of the United States of America) in Brussels and Washington respectively on 12 August and 15 September 1987.
1. Falling within CCT heading No. 19.03 and with effect from 1 January 1988 HS Codes 19.02.11 & 19.02.19
2. See page 37 of this Official Journal.
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