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       Three main issues will be dealt with at this Council meeting:
       -   civil aviation
       -   intra-Community road haulage
       -   transport infrastructure
       1.  Civil aviation
       Negotiations on a Community policy for civil aviation are expected  to
       dominate  this  Council meeting.  In June 1986  the  European  Council
       agreed  on the need for a Community system which would provide a  more
       competitive environment for intra-Community air services and  accepted
       the  principle  of a three-year transitional  period.  Following  this
       period,  further  measures would be agreed for the years up  to  1992.
       The  Council discussion will concentrate on the arrangements  for  the
       first three-year phase.
       The  Commission's first proposals for civil aviation were sent to  the
       Council  in 1984 and were then spelled out in more detail in June  and
       July  1986.  In  October  the British  Presidency  presented  its  own
       outline   proposals  at  the  informal  Council  in   London.  Further
       discussions  have since taken place within Council working groups  and
       in  COREPER  which  have helped to  identify  the  different  national
       positions,  while  at the same time indicating a willingness  to  seek
       agreement.
       Discussions  will  concentrate  on air fares,  capacity  sharing,  the
       chance  for  new  companies  to  have access  to  air  routes  and  on
       application  of the competition rules.  On air fares, one  significant
       issue  concerns  the definition of costs to be taken into  account  in
       determining whether an airline fare is commercially  reasonable.  Half
       the  Member States can accept a definition relating to  the  airline's
       own  commercial figures, whereas the other six believe that the  costs
       of competing airlines should be taken into account.
       There  is  a  multiplicity  of views on  the  conditions  under  which
       airlines  can  fix discount and deep discount  fares  without  needing
       authorisation  from  governments.  Several governments  are  resisting
       proposals which would give airlines the right to fix discount fares on
       all  off-peak  services.  This  issue  is  fundamental  to  the  whole
       negotiations.
       As  far  as capacity is concerned, there is general agreement  in  the
       Council  that the share of seats on a particular route could  move  to
       45/55 per cent in the first two years of the new legislation; movement
       after that time is still a difficult issue.  The Presidency has argued
       for  a  40/60  split in the third year, whereas the  Irish  and  Dutch
       governments argue for abandonment of such seat-sharing agreements.
       Access  to  the market takes on special importance to the  Irish,  who
       regard  it  essential for the peripheral regions of the  Community  to
       have  "fifth  freedom"  rights,  which  entitle  an  airline  to  make
       intermediate stops en route to its final destination.  Ministers  will
       discuss the possibility of including in the basic regulation the right
       for  airlines  to provide flights between first  and  second  category
       airports.  This raises a subsidiary question over the size limit which
       should  be  set for the aircraft permitted to  provide  such  services
       without affecting the capacity-sharing formula.
       On  the  group exemptions from the competition rules  which  would  be
       applied to the aviation sector, the Irish, UK and Netherlands  reserve
       their  position  to await the outcome of negotiations on  tariffs  and
       capacity.
       The Commission has reserved its own position on several aspects of the
       compromise  ideas  now being discussed, but will continue  to  make  a
       contribution to the search for a satisfactory negotiated solution.
       2.  Intra-Community road haulage
       In June the Council of Ministers decided in principle on a 40 per cent
       annual increase in the number of Community quotas for road  transport.
       With  such an annual increase there should be enough Community  quotas
       by the end of 1991 to meet demand from road hauliers and to allow  the
       disappearance of the bilateral quotas which are applied by some Member
       States  and  which were declared illegal by the Court  of  Justice  in
       1985.
       The  Commission  has  just presented comprehensive  proposals,  to  be
       discussed in the forthcoming Council, which would put this 40 per cent
       annual  increase  into  effect  as from  1987,  would  provide  for  a
       safeguard  mechanism  allowing measures to be taken in  the  event  of
       market  disturbance and would lay down the conditions under which  the
       licences  could be granted.  As from 1992 all quotas  would  disappear
       and licences for carrying loads to other Community countries would  be
       based on qualitative criteria.  The safeguard mechanism would continue
       to exist.
       3.  Transport infrastructure
       The  Commission believes in the need for a medium-term  programme  for
       transport  infrastructure.  It  has been pressing this case  for  some
       years and presented detailed proposals to the Council of Ministers  in
       July  1986.  It  has  therefore decided to  seek  a  declaration  from
       Ministers  which would support the main lines of the programme  before
       it will  propose a regulation to allow 90m ECU from the 1985 budget to
       be spent on particular projects.
       There  is  likely  to  be  some  discussion  in  the  Council  on  the
       desirability  of  a Community transport infrastructure fund  (the  UK,
       Germany  and France are not convinced of the need) and  some  pressure
       for committing the funds during the current year.
        
        

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