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   The ninth session of the EEC-Yugoslavia Cooperation Council will be  held
   in Brussels on 18th December, parallel to the Council meeting on  general
   affairs.  The  Yugoslav  delegation  will be  headed  by  Mr Loncar,  the
   Foreign  Minister,  and  that of the  Community  by  Mr De Michelis,  the
   Council President.  The Commission representative will be Mr Matutes, the
   Member  of the Commission with special responsibility  for  Mediterranean
   All  aspects of cooperation between the Community and Yugoslavia will  be
   looked  at,  in the light not only of changes inside Yugoslavia  and  the
   implementation  of  the  Community's Mediterranean policy,  but  also  of
   operations directed at the countries of Central and Eastern Europe.
   The  Community  and the Socialist Federal Republic  of  Yugoslavia  began
   negotiations  in  1978 on a Cooperation Agreement, which  was  signed  in
   April 1980 and entered into force in April 1983.  This Agreement marked a
   new  stage  in  the development of relations between  the  Community  and
   Yugoslavia, which have been linked by agreements since 1970.
   The Cooperation Agreement, which is in a class of its own, was  concluded
   for  an  indeterminate period and contains provisions  concerning  trade,
   financial  aid  and  cooperation in the areas of  industry,  science  and
   technology, energy, agriculture, transport, the environment and tourism.
   The  trade and financial provisions of the Agreement were implemented  by
   an Interim Agreement, which entered into force on 1 July 1980.
   Under the provisions of the second Financial Protocol and the  Additional
   Protocol to the 1980 Cooperation Agreement fresh negotiations are due  to
   begin with Yugoslavia.  With this in mind the Commission is presenting to
   the  Council  a  communication on the  possible  framework  of  relations
   between  the  Community  and Yugoslavia from 1991/1992  onwards  and  the
   resources to be made available.
   In  its communication, the Commission proposes closer  relations  between
   the Community and Yugoslavia in three areas:
   -  converting the cooperation agreement into an association agreement;
   -  renewing and improving the financial protocol;
   -  Yugoslavia's  eligibility  for  operations by the  Group  of  24  (the
      Council  had decided this in September and in November the  Commission
      decided to finance an initial project).
                                     - 2 -
   Trade cooperation
   The  trade  provisions  of  the  Cooperation  Agreement  were   initially
   applicable for a five-year period (until 30 June 1985), but it was agreed
   to  extend  them  until  the conclusion of  the  protocol  extending  the
   Agreement to include Spain and Portugal.
   On 10 December 1987 three protocols concerning the trade provisions  were
   The first of these was a trade protocol, which improved considerably  the
   access of Yugoslav products to the Community market.
   Secondly,  there were two adaptation protocols (EEC and ECSC),  by  which
   Spain  and Portugal acceded to the 1980 Cooperation Agreement  and  which
   also improved access.
   Upon  the  entry  into force of the Interim Agreement  in  July 1980  the
   Community  abolished  customs  duties and  quantitative  restrictions  on
   almost all ordinary industrial products.  For a small number of sensitive
   products  the  concessions  are  subject  to  tariff  ceilings.  In   the
   agricultural  sector  tariff  quotas were opened  or  tariff  concessions
   granted  for  a number of products which are important for  the  Yugoslav
   economy such as baby beef, tobacco, wine and cherries.
   For  its part Yugoslavia has granted the  Community  most-favoured-nation
   treatment  while  reserving the right to levy customs duties  should  its
   economic development so require.
   Industrial cooperation
   In  the  area  of industrial cooperation the two  sides  have  agreed  to
   promote  all  forms  of industrial  cooperation  by  organizing  contacts
   between economic operators in the two countries and by granting  adequate
   protection to mutual investments.
   The  two  countries have agreed to continue their cooperation  under  the
   COST programme (cooperation on science and technology) and to extend  the
   programme in particular to cover energy.
   Financial cooperation under the Protocol
   Since  1977 the Community has granted Yugoslavia access to the  resources
   of   the  European  Investment  Bank.    By  1980  two  loans   totalling
   ECU 50 million  had  been  granted  to  link  the  Yugoslav  high-voltage
   electricity  distribution network to the Greek and Italian grids and  for
   the construction of part of the trans-Yugoslav road.
                                     - 3 -
   This  financial cooperation was formalized by a financial protocol  under
   the Cooperation Agreement, which provided for loans for a maximum  amount
   of ECU 200 million during the period 1980-85.
   The  ECU 200 million  was used in full by the  Yugoslav  authorities  for
   three  projects, the modernization of the road and rail networks and  the
   extension of the electricity grid.
   This  financial  protocol ran out on 30 January 1985 and a  new  protocol
   (the  most important one with a Mediterranean country) was concluded  for
   the period from 1 July 1985 to 30 June 1991 and endowed with EIB  credits
   amounting to ECU 550 million.  At present more than 50% has been taken up
   to finance road infrastructure.
   The  EIB  has  also  granted a ECU 60 million loan  over  and  above  the
   financial  protocol  to  finance the North-South motorway,  which  is  of
   considerable importance for links between Greece and the other  Community
   Financial cooperation in the context of the Group of 24
   On  28  November  the Commission decided  to  finance  an  ECU 35 million
   programme of reforms in the financial and business sectors.
   The   programme   covers  the  technical  assistance   component   of   a
   USD 300 million financial sector adjustment programme, to which the World
   Bank is also contributing.  This sectoral programme is part of a  massive
   macroeconomic  restructuring programme launched at the beginning of  1990
   with  the  support  of the IMF and the World Bank, which  has  granted  a
   USD 400 million structural adjustment loan.
   Cooperation in the social sector
   Under  the Agreement Yugoslav workers in the Community enjoy a  guarantee
   of  non-discrimination  as  regards  conditions  of  employment  and  the
   Community  and  Yugoslavia will hold consultations on  the  situation  of
   Yugoslav  workers  in  the Community,  in  particular  on  socio-cultural
   Scientific cooperation
   As  regards  science and technology the framework arrangement  signed  in
   December 1988 should make it possible to place existing cooperation on  a
   better footing and develop it further.
                                     - 4 -
   Institutional aspects of the Agreement
   The  Agreement is supervised by a Cooperation Council, which has  general
   responsibility  for  the  development  of  cooperation  between  the  two
   Following the accession to the Community of Greece, and then of Spain and
   Portugal, additional protocols were signed.  They adapt the Agreement, in
   particular the trade provisions, to take account of the new situation.
   Agreement on textiles
   Negotiations  on  a new bilateral textile agreement for the  period  from
   1987  to 1991 were successfully concluded in October 1986.  They  led  to
   the  initialling of a protocol to the Cooperation Agreement defining  the
   basis  for trade in textile products for the following  five  years.  The
   Community  took full account of its special relations with Yugoslavia  by
   granting,   in   comparison   with   earlier   agreements,   considerable
   improvements  as regards the legal aspects and economic substance of  the
   supplementary protocol.
   Yugoslavia  is  the  Community's  second largest  trade  partner  in  the
   Mediterranean area after Algeria and its principal partner for industrial
   products.   90% of industrial imports from Yugoslavia into the  Community
   are  no longer subject to any duty.   Community imports  from  Yugoslavia
   have  increased  considerably in  recent  years  (1982:  ECU 2.8 billion,
   1989:  ECU 7 billion).  The  Community  trade  surplus,  which  stood  at
   ECU 2.2 billion in 1981, has fallen steadily and in 1989 amounted to only
   ECU 34 million.
   EC-Yugoslavia Trade  (ECU million)
                      1985       1986       1987       1988       1989
   EC imports         4783       4893       5251       5891       7000
   EC exports         5834       5853       5398       5713       7034
Balance 1051 960 147 -178 34

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