is projected to grow by over 30 percent in 1994; growth for the first nine months of 1994 has been greater than in all of 1993. The prime rate has declined from 14 percent in 1991 to 12 per cent in 1992 and 11 percent in 1993. It will be between 11 and 11.5 percent for 1994. Rates for one-year fixed deposits have declined from 10.5 percent to seven percent over the same period. With the disparity between relatively high domestic rates and declining international lending rates, Thai private sector external borrowing has grown rapidly since 1990, when private external debt was almost $14 billion, reaching $25 billion in 1991, $30 billion in 1992 and $36 billion in 1993. Net capital inflows, almost completely via the private sector, rose from $9.8 billion in 1992 to $11 billion in 1993 and reached $10.5 billion as of August 1994. Total public sector debt was about $13 billion in 1992 and $14 billion in 1993. The total debt service ratio (including private and short term debt) was 10.5 percent in 1991, 11.2 percent in 1992 and 11.3 percent in 1993. The public sector debt service ratio was about four percent in 1993.

5. Significant Barriers to U.S. Exports

Import duties range from zero to 68.5 percent ad valorem, along with other specific taxes of an equivalent or higher rate. These import duties, which have a weighted average of only 16.03 percent, were assessed on all imports in 1993, including agricultural imports, especially processed food products, and many manufactured goods, greatly limiting the market for these goods. The Thai government is pursuing a broad reform of its import regime and customs duties overall will be sig nificantly lower, but it remains unclear how agricultural products will be affected. Thailand has also offered to lower duties on some agricultural products as part of the Uruguay Round. There are presently six classifications of import duties: zero to five percent on raw materials; one percent for special items such as medical instruments, ships and aircraft; up to 10 percent for intermediate products; 20 percent for finished products; 30 percent for special production items; and, 68.5 percent for luxury sedans.

Arbitrary customs valuation procedures sometimes constitute a serious import barrier. The Thai Customs Department keeps records of the highest declared prices of products imported into Thailand from invoices of previous shipments. Those prices can then be used as "check prices" for assessing tariffs on subsequent shipments of similar products from the same country. Customs may disregard actual invoiced values in favor of the check price for assessment purposes, a practice which may particularly affect agricultural products with seasonally fluctuating prices. For products shipped from other than the country of origin, the Customs Department reserves the option of using the check price of either the country of origin or the country of shipment, whichever is higher. These rules are applied to imports from

all nations.

The Thai Food and Drug Administration issues import licenses for food and pharmaceutical imports. This licensing process can pose an important barrier because of its cost, duration and demand for proprietary information. Licenses for importers of food products cost 15,000 baht (about $600). These licenses must be renewed every three years. Licenses for importers of pharmaceuticals cost 10,000 baht (about $400) and must be renewed every year. Sample products imported in bulk require laboratory analysis at a cost of 1,000 to 3,000 baht (about $40 to $120) per item. Food products imported in sealed containers (consumer ready packaged) require laboratory analysis at cost of 5,000 baht (about $200) per item. Registration as "specific controlled food items" is required for 39 food products at an additional cost of 5,000 baht (about $200) per item. Registration of pharmaceutical imports costs 2,000 baht (about $80) per item, with the cost of inspection of each item an additional 1,000 baht (about $40). Although the Thai Food and Drug Administration has made efforts to streamline the registration process, it usually requires three months or more to complete. All controlled items must be accompanied by a detailed list of ingredients and a description of the manufacturing process. Some U.S. suppliers have declined to export to Thailand rather than provide the proprietary information requested.

The Thai Ministry of Commerce requires import licenses on certain raw materials, petroleum, industrial, textile and agricultural products. These licenses can be used to protect uncompetitive local industry, encourage greater domestic production, maintain price stability in the domestic market and for phytosanitary reasons. Import licensing is also used to protect intellectual property rights and to comply with international obligations. Import licensing is required for 43 categories of items. In the food products area, licensing requirements remain for powdered skim milk and fresh milk, potatoes, soy beans and soy bean oil, refined sugar, coffee and others. Corn for animal feed is among those 10 categories which do not need import licenses

but must comply with concerned agencies requirements for surcharges, fees or certificates of origin.

Largely by restricting foreign bank entry, branching and acquisition of Thai banks, Thai authorities limit all foreign banks to a very small share of the total Thai banking market. That share comprises around seven percent of total commercial banking assets at present. Although an existing foreign bank license was bought in 1994, no new foreign bank licenses have been issued since 1978. However, Thai authorities regularly approve representative offices of well established foreign banks. In aggregate, foreigners are limited to a maximum 25 percent shareholding in each Thai bank; no person or group of related persons, whether Thai or foreign, may hold more than five percent of the shares of each Thai bank. The Thai government has indicated it is reviewing its regulations on foreign bank activities as part of the extended Uruguay Round negotiations on services and may allow new foreign bank branches during the next three to seven years.

Foreign banks do not receive national treatment in Thailand. Foreign banks are prohibited from opening branches and are not permitted to operate off-site automated teller machines (ATMs). Recently, regulations were changed to permit foreign banks to participate in the local ATM network. However, they have been unable to negotiate agreements to participate in the ATM network with domestic banks. Foreign banks are allowed to participate in the Bangkok International Banking Facility (BIBF), created to develop an offshore banking industry in Thailand. Thai officials are considering allowing foreign banks participating in the BIBF additional access to the Thai banking market.

Thai law and regulations limit foreign equity in new local insurance firms to 25 percent or less. This denies new U.S. property/casualty and life insurers access to the local market on terms equal to local insurers. A long established U.S. firm, however, controls a major share of the Thai life insurance market.

Under Thai law aliens are forbidden to engage in the brokerage business. A 1979 law limits all foreign ownership of Thai finance and credit foncier companies to 25 percent; however, a maximum of 40 percent participation in firms already licensed when the law was enacted is permitted.

6. Export Subsidies

The Government of Thailand ratified the Uruguay Round agreements before the end of 1994, and became a founding member of the World Trade Organization (WTO). However, it is not a signatory to the GATT subsidies code. It maintains several programs which benefit manufactured products or processed agricultural products and may constitute export subsidies. These programs include: subsidized credit on some government to government sales of Thai rice; preferential financing for exporters in the form of packing credits; and, tax certificates for rebates of taxes and import duties on inputs for products made for export. Thailand established an export-import bank in September 1993 which took over some of these functions, particularly the packing credit program. Thai officials say that Thailand is considering acceding to the GATT subsidies code.

7. Protection of Intellectual Property

Improved protection for U.S. copyright, patent and trademark holders has been one of our most prominent bilateral trade issues over the past several years. Thailand has made significant progress in intellectual property protection over this period. Most importantly, Thailand passed a revised copyright law which addresses most of the U.S. concerns (especially protection for computer software). The law is expected to go into force in early 1995. This will bring the Thai copyright regime into conformity with international standards of the Uruguay Round agreement (TRIPS) and the Berne Convention (Paris Act). In addition, the Thai government has agreed to provide protection through administrative means for certain pharmaceutical products not entitled to full patent protection under Thai law. In recognition of this progress, Thailand was downgraded from the "priority watch list" to the "watch list" in November 1994. The U.S. Trade Representative (USTR) has begun a review of Thailand's status under the Generalized System of Preferences (GSP) program to determine whether to restore any of the GSP benefits lost in 1989 due to inadequate intellectual property protection.

Efforts on the part of the Thai government to enforce existing copyright laws have also improved since 1991, when most enforcement activities against intellectual property infringement were centralized and relatively ineffective. In December 1991 the U.S. formally concluded a Section 301 investigation of Thailand's copyright enforcement in response to a petition filed by three U.S. trade associations. Efforts by both governments to reduce copyright piracy increased in early 1993, with raids by police expanding to cover computer software and into the provinces. U.S. industry

associations have been instrumental in securing more energetic enforcement. While considerable improvements have been made, especially during 1993, copyright piracy of audio and video tapes and computer software remains extensive. The government of Prime Minister Chuan Leek pai has publicly stated its commitment to continuing vigorous enforcement. The Ministry of Commerce set up a special Intellectual Property (IPR) Department in 1992 which is active in coordinating both the legal structure and enforcement efforts against all forms of violation of intellectual property. The Prime Minister receives a weekly briefing on the status of enforcement efforts and has seconded an official to the IPR Department to keep him thoroughly informed.

Concerns remain that Thailand's legal procedures do not provide adequate deterrence against copyright infringement. The government has established a special division in the courts to concentrate on intellectual property matters and has proposed the creation of an entirely separate intellectual property court, with judges trained in intellectual property matters. This court, to be known as the Intellectual Property and International Trade Court, was proposed to the Thai Parliament in September 1994. Thai officials expect that these measures will speed up consideration of copyright and other IPR cases and improve the efficiency of the legal system in dealing with them.

Legislation extending patent protection to pharmaceutical products and agricultural machinery and increasing the length of protection to 20 years became effective September 30, 1992. The United States then formally concluded a Section 301 investigation of Thailand's patent protection of pharmaceuticals, begun in response to a petition filed by the U.S. Pharmaceutical Manufacturers Association. Both governments continue to discuss ways to resolve remaining U.S. concerns over Thailand's patent protection. Chief among these are finalizing measures to provide the transitional protection lacking in the law.

8. Worker Rights

a. The Right of Association.-The Labor Relations Act of 1975, Thailand's basic labor law, guarantees to workers in the private sector most internationally recognized worker rights, including freedom of association. Workers have the right to form and join unions of their own choosing, to decide on constitutions and rules, and to formulate policies without outside interference. Once a union is established, the law protects members from discrimination, dissolution, suspension, or termination because of union activities. In addition, unions have the right to maintain relations with international labor organizations. In April 1991 the government passed the State Enterprise Labor Relations Act (SELRA) which denied state enterprise workers many of the labor association rights they had enjoyed under the 1975 law. The Chuan government, which came to office in 1992, promised to amend the SELRA and restore those rights. The new legislation was introduced in the fall 1994 session of Parliament.

b. The Right to Organize and Bargain Collectively.-The 1975 Act grants Thai workers the right to organize unions and employee associations without outside interference and to bargain collectively over wages, benefits and working conditions. There are about 600 private sector unions registered in Thailand. Until the SELRA is amended, state enterprise workers, like civil servants, may not form unions, but are allowed membership in employee associations. The law currently denies the right to strike to civil servants, state enterprise workers and workers in "essential" services such as education, transportation and health care. In the private sector, collective bargaining usually occurs in individual firms; industry wide collective bargaining is almost unknown.

c. Prohibition of Forced or Compulsory Labor.-The Thai Constitution prohibits forced or compulsory labor except in the case of national emergency, war or martial law.

d. Minimum Age for Employment of Children.-The minimum employment age in Thailand is 13. Thailand restricts the employment of children between 13 and 15 to "light work" in nonhazardous jobs and requires Department of Labor permission before they can begin work. Employment of children at night is prohibited. The government has announced its intent to increase compulsory education from six to nine years in the next few years; this will make possible further raising of the minimum employment age to 15. In the last three years, the government has also more than doubled the size of the labor inspector corps concerned with child labor law to enhance enforcement of those laws.

e. Acceptable Conditions of Work.-Working conditions vary widely in Thailand. Medium and large factories, including those of most multinational firms, generally meet international health and safety standards, although a May 1993 fire in a factory producing toys for export in which nearly 200 workers were killed demonstrates

significant gaps in enforcement. The government has sought to address these gaps by increasing the number of safety inspectors and by increasing the penalties for violations. Eight hour days are the norm and wages and benefits in export industries usually exceed the legal minimum. However, in Thailand's large informal sector, wage, health and safety standards are often ignored. Most industries have a legally mandated 48 hour maximum work week. The major exception is commercial establishments, where the maximum is 54 hours. Transportation workers are restricted to no more than 48 hours per week.

f. Rights in Sectors with U.S. Investment.-U.S. capital investment is substantial in several sectors of the Thai economy, including petroleum (exploration, production, refining, and marketing), electronic components assembly and consumer products. Workers in these sectors, especially those working for U.S. and other western firms, usually enjoy labor conditions superior to those of the average Thai worker: the degree of unionization is greater, wages and benefits are higher, and health and safety standards are better. Child labor is rare or nonexistent among large multinational firms.

Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1993

EUROPE AND NORTH AMERICA

THE EUROPEAN UNION

1. General Policy Framework

The European Union (EU), which includes within its framework the European Community (EC), is a supranational organization which in some cases exercises exclusive authority to adopt legislation and to represent its membership in the international arena, and in other cases shares competence with the authorities of its member states. Its legal capacity is most highly developed in economic areas such as trade, antitrust policy, agriculture, transport, nuclear energy and in the environment. In areas within its exclusive competence, the EU is represented by the European Commission.

The Treaty on European Union (TEU, "Maastricht"), which came into force on November 1, 1993, introduced new areas for coordination among the member states and the EU institutions, such as the Common Foreign and Security Policy (CFSP) and Cooperation in Justice and Home Affairs ("Third Pillar"). Most notably, in the economic area, the TEU establishes a timetable which is to lead to Economic and Monetary Union (EMU) by 1999 at the latest. The aim is to introduce a single currency (the ECU), a common monetary policy, and an economic policy closely coordinated among the member states. The European Central Bank, to be based in Frankfurt, will control the money supply and interest and exchange rates.

The European Union comprises 15 member states: Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, Austria, Sweden and Finland.

2. Exchange Rate Policy

Under the Maastricht Treaty, the European Union (EU) intends to establish an Economic and Monetary Union (EMU) with a common monetary and exchange rate policy no later than 1999. During the second stage of EMU, which began on January 1, 1994 with the establishment of the European Monetary Institute (EMI), the member states continue to coordinate their exchange rate policies through the European Monetary System (EMS) and, specifically, its Exchange Rate Mechanism (ERM). The EMI facilitates and monitors implementation of these arrangements. Member states retain full authority to set monetary policies during the second stage of EMU. The EMS and ERM aims are to promote monetary, price, and exchange rate stability in Europe by limiting the fluctuations of participating currencies within a certain range around bilateral central parity rates. Pressures in foreign exchange markets in September 1992 led the United Kingdom and Italy to suspend their participation in the ERM, and compelled adjustment of the parities for other currencies in subsequent months. In part to relieve these pressures, on August 2, 1993, the ERM fluctuation band was widened from 2.25 to 15 percent.

The EMS and ERM are not aimed at influencing trade flows with the United States or other third countries and are consistent with the Articles of Agreement of the International Monetary Fund. Since the EMS was created in 1979, there have been periods both of U.S. dollar strength combined with a U.S. trade deficit with the EU and of dollar weakness combined with a U.S. trade surplus with Europe. 3. Structural Policies

Tax Policy: Tax policy remains the prerogative of the member states, who must approve by unanimity any EU legislation in this domain. EU legislation to date in this area has been aimed at eliminating tax-induced distortions of competition within the Union. As such, it has focused on harmonizing value-added and excise taxes; eliminating double taxation of corporate profits, interest and dividends; and facilitating cross-border mergers and asset transfers.