THE
EXPl\1RlENCEO~ T!!E
Efu,oPE4J'PAYMENTS UNION82. Although its ac'·tual~perations coni~~nced on 1 July 1950, the cr-ea sd.on of tl;\e E!.I.ropean PaYllientiOUnion was based on an agreement Whtch.Was signed
·scme seventy days
lat~~:on 10 September 1950. The signatories to t:his agreement were the member States of the OEEC couhtries with t:heexception of.. Ireland, Spain, Finland and Yugoslavia..
83. At the time, the Marshall Plan had be,en in operation for two yearS.
Nevert4·eless, in spite of this American effort, there was still a
co~siderable ·shortige of raw materials, semi~finished materials and eq~lip~
ment.MonetarY"reserves'1iad run low and tllere iere persistent imba.J.ances of payments inside Europa i tselt and espe~iallY between Europe and
tiherest of the world. Currencies were inconvertible and there was a
nEI~work of striot bilateral trade and payments agreements. On the othez-hand the States possessed the manpower, the skill, the technical klloW";' ledge, the managerial skills and the administrative ability alld the political will necessary to organize or reorganize the economy.
84. Turning to the :lmmediate objectives of the European PaYlllents Union, first of all it was basically an organization for regional
diiOcrilliir~tionagainst the dollar area; This was paradoxical since the USA had donated some $350 million which endowed it with its initial working oapital. The US, however, agreed that at the time the primary need was to
re~establishthe productive power of Europe and to accelerate the exchange of goods among the specialized economies of Europe. Next the EPU aimed at the immediate establishment of the transferability of all inconvertible European currencies within the sphere embraced by the Union and thereby abolish all discrimination within Europe based on hardness of currency.
Thirdly, right from the commencement of operations the EPU liberalized 60 per cent of its trade from the fetters of bilateral quanlitative restrictions. The success of this operaticn encouraged it early in 1951 to extend the liberalizing operation to cover 75 per cent of its total trade Which was extended to 90 per cent in January 1955. Undoubtedly,
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- '''tj'''Or-:c'' ~~-Y-'72?'S"'· zr
the prosp'e~t of obtaining balance of payments credit through the Union secured oonsent
~oi(and th~ *~6~litated)'thespeedand
magnitude, of the liberalizationmov~~~nt.Fi~llY,
the EPU aimed at reducing thedis-'. ,,' ::'.i:~).;'>' .,'" ,~·-.'c.):r:-", .. " , '., ', . . ',
equilibrium betw:en Eur?pe and North America. Accordingly, a creditor-na tion
i~ EPU sh~uid
be a b1e\0 use some of its trade surplus wi thin the EPU to~~:ttle
i ts"defioi ts withother~~~t':l
of the world especially Nor tilAmerica-~:;
Marshall Aid had pumped a oeitai:n amount of dollars (and, there-fore, gold) reserves into Europe. Then the US Government provided$350'
lIlillioh,to"the El'Uas and when required to make possible gold paymentsby
thetJ'ki~n
t6 Hi!;c~~di
tor-nations andpythed~btor
nations to theEPU.
',';
J ,\...'-:~
85. The lQechafJismemployed :in achieving these ends is described
iIi
what';;r~',:f or;: .' ". , .-,~;
follows. Three European countries whioh were structural creditors received
,F'-~' ' , ' - , . ' . . "," ':;-'" ,,_,-~J.
$200.6
million in return for which they had to make special non-revokable grants to the EPU. 'These initial debit balances, astheywer~
called,were assets of the EPU. Their amounts and the countri'es grantingtllem were," -"0 . ' , .
Austria $ 80 million
Greece
115 "
EPU oountries were, oL,caq.rse, free to E/cN
.l4/wp • ~(.
4-,",E/CN .14!A.liJJAX\l.2J •
Page 40 '. c
The difference...J)e~:oeen the aggregil-.te.,'If. initial credits anil the aggregate
- .'-, ",. ',.'.-~. ~ -, ,..,',
of initial debi~'l?:,i.8., $113.4",c<).me, out of the $350 million granted by the US Gcver.;runent. Afurtner:';$lOQ
:U~ion
of this gx:antm!<sput a:li the disposal of the EPUfor.:::... -r ..,-.- specialassi.s~""nceto deficit !l!ellll1ers pf the, Union who w01,<J,d, o}herwise not have been',\fble to make. the obligatory gQldpayments.refe~redtolater on•
• 'i. , . •,;."J' ..
earn dollar",jand gOld). in thecQ.:sd~~l!'Y,y.ourSE?
Of
their ',trade with North'-<::~~:- ;.\<:.,. ~ ,":: .-.} ' , " .!,._'.
America..•
.~,....
-86.
The"iupshfTt of thisilil'ithat tliere was'·'a limited flindof dollars and ", gold made','avaflableby thE! US GOVernmeilt to :I!iili:'6pe. :This fund and i t,'c, . alone made i t possible to require settlement (partly in gold) of the net debit positi.ons in thE? EPU-.. :Ij:lis gold, firs:ti;,cpaid by t.he debtor t'Fthe"j'_~J:!'- .., r- _.'., .': ", :) :-:'
Union and subs6'l.1',ently Paid, Jin reduced or inor,e.a",e<i amounts} by the . ',,' .hG'ri:::;c,'"l .. ', ·".'::.',::-.r:'. ":: '''';'-2• ., , "
Unio~" lP;,:~e,c:,i'.Clit<:F' e~able&,cc+',edi tors to difipha:r€<? debts in NO,rth., " .. .' America o,r ill,oth,!"r har-d qyrrenqy countries.
.'
''',,' .", " "" ~-,' ,.-' , '- " 'I'4i§ .JlaS the elem'ent .of' .:convertibili t;y; in t4el'llq.;L,~,,p!1yments union system •.
.-" ~, ,.:'..-.." '..; :'" ", ..".'..-"- ..'
87.
With the above element of ccnvertibility was combined another ele-ment of credit extended in an ~.:;(llr;s:::~'_:s manner to the debtor. Each member oountry was assigned a maximum credit quota known briefly aSCiquota which was equaI to 15 pSI' cent of visible plus invisible ,':'9?orts p'lus imports of the members in 1949.88. The net SUl'Pl\,S,,,? or def;Lci ts of .sach member."couutryvis-a-vis all' ,
' , , ' , : ,,_ "_,' " . ' " L
other member-s of ,the EPI{.:wGre settled in the folJ.owinl!>': way. Creditors' receive part of their net oredit to the Union in gold, but must grant the remaining part to the Ulllon as a loan. Debto~s must pay part of their net debit to the Union iU'g6ld and are ,given a'-loan equal to the
'.:... :..;' i.:
remainder of their net debito
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89. From July 1950 to end June~954 the gold receipts and payments pa~s and credit gTanting and receiving parts of net credit or net debit'·bal-ances were stipUlated as follows:
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"WE"7~ . t - -'g'mT l"!Y'fj( wn',· tt'!e\~ 'n-'m "T'"t"X
~/,',Ql'J, .•
l. 4,',Ivrp..,
2/2-E;!9l'!:;14/AMA/12 Pitge4'L
De'o'yors
,Pay: "" ' Receive Gold to, the Credit from Union equa.L '., the Union
to equal to
--_._.'-" . "\""the whole
1/5 4/5
quotas)' Of the ihciivii' , ..Gola~fioifi;tJ:ie Credi,t to .the dual c~:£iilg,itP.;r qr.g,ePti?~ ·)!niiinCl@qg'fl' Union eq-w.lJ
members' of -EPU" ".".- to.,! to. " '' i " . ~__ ",.,
, i""',
the .jlndermentioned fraet,ipn of each trancliefullyor r.
. .:part:j.ally~ral"1l1P(m'-· .
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,9.9" ",.;oe:f~ci;t;s inexcess, .of,th",qu,otas had to 'be paid wholly, in goLd, 1.}lljJ;J,eJ?s,the ,qmonJilade other ,arranejements' for a ,lebtor
needing~s,sist->" -"\.
ance , ,.The Undon decided in',ev~rYIjaSe-how a creditor1s lOurplus in excess
,.,",- .
of the quota. should 06 settled..
'structura:lo,.de btor countries, he. members, , < "r, -~l. ..Tl:J,' ; ; 'i.l.3.'..'," ScAeme:"is'·ing~p,"1-'.S"
-'"." .., ' ..' " . . ':
_wi
1;h',>.pe:r;s;is tenj;,irribalanc e .be ""weenou-{':'paY)llentsand in-payments were,,:' , " , " "'.'~ ; . ,
O:f,ceol1;t',se", Lno Id.ned')j;p, ,exact the, maxamum credit .from-:the .Union, i, e""
,.. ", . , . . . , ,,', ,:'.-t '.- ,__.', ", ' ,~,',.C, ;,..' '.
the" whole :of their 'o1"ed,it g,uot:".. . . . ' ,'... ,- - , ' " " . . , :Sutthey were deterred from, ., ,-- " , ;'"
" """:t;o,,.'Srn'?-1¥!t
·-,7.i '
dp~ngi:j;',by t);lerequirement ,th",tforever-!fcred:).,:j;,,:receiveei,' they had
" ",:, ',,',', "" ':', cc,..I '_ ' ,,'," . : e , . . . . '":~_ '" , .-, ' ," , ', ' , ' : ,
" ,to§\ur:render a Cl'rtain:amoun:t; of,;!,ol~.: Tili,s is stated in the last two colwnn"pf, the ,>p-ovetable.Ths' fi:r,st trian6he' of c'redi t equal :to 20
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of the i:r credi t per;cen:t; of' tl:teir ' credit
second tranche o:f,credit
qi,lota,pou,ldbe:oMained for 'the ("qgal tQtl:te,nextn.20pior cent
asking. The
qU()~,a)
could be ob tai.nedon~yif
theypq;id' to' the .Unt on one fifth·of j20
per '6ent or4
per'celli' oftheir:~r,edii;;-quota
'ingold and ",0 bn.·Tb.~ l<l-~t tr8;~cl:te
o:f'Qred;i.tc,6~ldbe Qbi;~ined
onl,y,uthey p'lidthe";~,