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pressed its interest in membership in the "COCOM successor" regime currently under negotiation.) The Bulgarian government has declared that it grants licenses within three days of application, without fees, and in a non-discriminatory manner. The U.S. Embassy has no complaints on record from U.S. exporters that the importlicense regime has affected U.S. exports.

The Bulgarian government states that its system of standardization is in line with internationally accepted principles and practices. Imported goods must conform to minimal Bulgarian standards, but in testing and procedures imported goods are accorded treatment no less favorable than that for domestic products. Bulgaria accepts test results, certificates or marks of conformity issued by the relevant authorities of countries signatories to international and bilateral agreements to which Bulgaria is a party. All product imports of plant or animal origin are subject to veterinary and phytosanitary control, and relevant certificates should accompany such goods.

Under the January 1992 Foreign Investment Law, Bulgaria grants national treatment unless otherwise provided for by law or international agreement. Foreign investors may hold up to 100 percent of an investment. Foreigners may not own agricultural land, real estate, or natural resources, but may lease for up to ?0 years. Foreign persons may freely repatriate earnings and other income from their investments at the market rate of exchange. Although capital gains are less clearly covered in the law, Bulgaria committed itself to their free repatriation in the U.S.-Bul. garian Bilateral Investment Treaty signed in September 1992. Since the 1993 re peal of special tax incentives, foreign investors have been subject to the same 40 percent Profits Tax as Bulgarian enterprises.

Foreign investors are required to obtain a license to own or have controlling interest in banking or insurance; in firms manufacturing arms, ammunition, or military equipment; in so-far unspecified geographic areas; and in research, development and extraction of natural resources. À U.S. tobacco company complained of the lack of transparency in the issuing of cigarette manufacturing licenses and privatization in the tobacco sector.

There are no specific local content or export-performance requirements nor specific restrictions on hiring of expatriate personnel. Bulgaria committed itself in the U.S.-Bulgarian Bilateral Investment Treaty to international arbitration in the event of expropriation, disinvestment, or compensation disputes.

U.S. firms complain that the inflexible or rigid enforcement of tax and other regu. lations inhibits investment plans. U.S. tobacco companies complain that the arbitrary classification of cigarette brands for excise-tax purposes seriously limits the incentives to invest. A major U.S. company complained that the inflexibility of the Bulgarian bureaucracy delayed the startup and increased the cost of a major invest. ment project.

There is no legal requirement for the Bulgarian government to procure only local goods and services. Government procurement works mostly by competitively-bid international tenders. There have been problems of lack of clarity in many tendering procedures (e.g. the extension of the E-80 su perhighway from Plovdiv to the Turkish border). U.S. investors also are finding that, in general, neither remaining state enterprises nor private firms are accustomed to competitive bidding procedures for supplying goods and services.

Bulgaria's new harmonized tariff schedule increased average tariffs, although a 15 percent import tax was eliminated. (The import tax remains on 10 agricultural commodities.) The new schedule did reduce the overall range of tariff rates and eliminated spikes. Customs duties are paid ad valorem according to the tariff schedule. A one-half percent customs clearance fee is assessed on all imports and exports. Bulgaria applies the single administrative document used by European Community members.

Imports from the United States are assessed at the most- favored-nation (MFN) rate. Bulgaria's Association Agreement significantly lowered tariffs and modified quantitative restrictions on goods orignating in the EU. Just over 25 percent of U.S. exports to Bulgaria for January-June 1993 were put at some price disadvantage by these changes.

The United States is seeking significant reductions in Bulgarian tariffs on U.S. goods as part of Bulgaria's accession to the GATT. 6. Export Subsidies Policies

The Bulgarian government does not subsidize exports. 7. Protection of U.S. Intellectual Property

The adoption in 1993 of new Patent and Copyright Laws brought the Bulgarian IPR system up to international standards generally, but enforcement is seriously deficient. The most serious problem with current IPR legislation is the lack of retroactive copyright protection for sound recordings, which are protected internationally by the Rome and Geneva Conventions, to which Bulgaria is not a signatory. Until Bulgaria does sign, sound recordings copyrighted prior to August 1, 1993 are not protected. Bulgaria's third major piece of IPR legislation, the Trade Mark and Industrial Design Law, is in need of updating but considered adequate overall. Production and trade secrets are nominally protected under Art. 14 of the “Protection of Competition Act."

Enforcement of IPR laws is problematic. Authorities have not established a record of vigorous enforcement to make the laws credible. Video and computer program piracy are widespread. One major U.S. company estimates that it is losing 15-20 percent of its sales volume due to trademark infringement. This firm does not regard the fines or the publicity given in several successful prosecutions of piracy as susticient to deter future infringement. The U.S. Embassy is not aware of any cases of patent violation. For 1992, the International Intellectual Property Alliance estimated total trade losses for the U.S. of 47 million dollars due to piracy in Bulgaria. 8. Worker Rights

a. The Right of Association.—The 1991 Constitution guarantees the right of all workers to form or join trade unions of their own choice. This right appears to have been freely exercised in 1994. Estimates of the unionized share of the workforce range from 30 to 50 percent. Bulgaria has two large trade union confederations, the Confederation of Independent Trade Unions of Bulgaria (CITUB), and Podkrepa. CITUB is the successor to the trade union controlled by the former Communist regime, but now appears to operate as an independent entity. Podkrepa, the independent confederation created in 1989, was one of the earliest opposition forces, but is no longer a member of the Union of Democratic Forces (UDF). The two confederations cooperate on some tactical issues, particularly in the country's tri-partite body, the National Social Council, which includes employers and government. The Labor Code passed in December 1992 recognizes the right to strike when other means of conflict resolution have been exhausted, but “political strikes” are forbidden. Military, police, energy production and supply, and health sectors are defined as essential services, and workers in these sectors are restricted from striking. There were two major national strikes in 1994, by students and miners; both ended without major concessions by the government.

b. The Right to Organize and Bargain Collectively.—The Labor Code institutes collective bargaining, which is practiced both nationally and on a local level. Only Podkrepa and CITUB are authorized to bargain collectively. This led to complaints by smaller unions, which may in individual work places have more members than either of of the two larger confederations. Smaller unions also complained that they are excluded from the National Social Council.

c. Prohibition of Forced or Compulsory Labor.—Many observers agreed that the practice of shunting minority and conscientious-objector military draftees into work units which often carry out commercial construction and maintenance projects is a form of forced labor.

d. Minimum Age of Employment of Children.—The Labor Code sets the minimum age for employment of children is 16, and 18 for dangerous work. Employers and the Ministry of Labor and Social Welfare are responsible for enforcing these provi. sions. Underage employment occurs in the informal and agricultural sectors, but does not seem to be either widespread or systematic.

e. Acceptable Conditions of Work.—The national monthly minimum wage was ad. justed twice in 1994, and at year's end stood at approximately 33 dollars (1,814 leva). Inflation in 1994 dramatically increased the cost of living. The minimum wage was not enough for a single wage earner to provide a decent standard of living for a family. The Constitution stipulates the right to social security and welfare aid

and assistance for the temporarily unemployed. The Labor Code provides for a standard workweek of 40 hours, with at least one 24-hour rest period per week. Bulgaria has a national labor safety program with standards established by the Labor Code. Conditions in many cases are worsening owing to budget stringencies and a growing private sector over which labor inspectors have not yet achieved effective supervision.

f. Rights in Sectors with U.S. Investment. Overall U.S. investment is relatively small as of late 1994. Of the nine sectors covered in the Trade Act Report, only the "Food and Related Products," "Electric and Electronic Equipment," and "Other Manufacturing sectors have an active U.S. presence as of late 1994. Conditions do not significantly differ in these sectors from the rest of the economy.

CANADA

Key Economic Indicators
(Millions of U.S. dollars unless otherwise noted)

1992

1993

1994

1

Income, Production and Employment:
Real GDP (billions of 1986 USD)

462.0 442.3 1435.2 GDP Growth Rate (pct.) .........

0.6
2.2

23.9 Real GDP by Industry: (millions of 1986

USD).
Manufacturing ....

72,077 70,889 170,561 Finance Insurance/Real Estate

67,142 64,577 162,589 Trade

49,390 48,371 149,088 Community/Business/. Personal Services

49,785 47,686 145,965 Transportation Communications

33,185 32,010

131,998 Construction

22,624 20,184 119,892 Mining

16,795 16,817 1 16,875 Agriculture

8,221 8,231 18,037 Utilities

13,144 12,541 112,416 Logging/Forestry

2,158 2,182

12,159 Per Capita Personal. Disposable Income

13,843 13,149 12,618 Personal Savings Rate (pct.)

9.6
9.1

18.9 Labor Force (000s)

13,797 13,946 314,133 Unemployment Rate (pct.)

11.3
11.2

3 10.2 Money, Interest Rates and Prices: (end of pe

riod)
Money Supply (M2)

282,323 273,333 4 262,426 Bank of Canada Rate (pct.)

7.36
4.11

55.54 Chartered Banks' Prime Rate (pct.)

7.25 5.50

57.00 90-Day Commercial Paper (pct.)

7.46 4.03

55.40 Consumer Price Index (1986 100)

128.1 130.4 E 130.8 Annual Percent Change

1.5
1.8

20.3 Industrial Product Price Index (1986 = 100). 109.1 112.7 E118.8 Annual Percent Change

0.5
3.3

5.4 Exchange Rate (one C$ = US cents) (average annual noon rate)

82.76 77.53

574.58 Balance of Payments and Trade: Merchandise Exports

128,935 140,594 6 147,492 Exports to U.S.

99,724 112,734 6 124,782 Merchandise Imports

123,396 133,217 6 141,285 Imports to U.S.

87,564 97,495

6 108,183 Merchandise Trade Balance

5,539 9,377 66,208 Trade Balance with U.S.

12,160 15,240 6 16,599 Current Account Balance

-21,917 -23,805

6 -21,971 Balance with U.S.

- 1,849 -1,671

6-410 Gold Holdings (millions USD)

478.0 287.0 5210.0 Official Int'l Reserves (millions USD)

11,909 12,776 6 15,790 Total Federal Debt:. Accumulated Deficits (billions USD)

386.0 396.2

405.0 Federal Deficit

FY91-92: FY92-93: FY93–94: (billions USD)

33.5
32.6

? 29.2 Note: Converting the data from C$ to US$ distorts actual growth and trend lines. BEmbassy projection. 1 Second quarter (IQ) 1994 (actual data), seasonally adjusted at an annual rate. 2 Percent change between IIQ 1994 and IQ 1993.

Third quarter average.
*M1 + chartered banks non-personal notice deposits + personal savings deposits, as of 8/31/94.
6 Third quarter end of period.

.................

& First half of 1994 annualized.
? Federal Govt projection for FY1994–95. Canada's fiscal year covers the period April 1 to March 31.
1. General Policy Framework

Canada is the world's seventh-largest market economy. Production and services are predominantly privately owned and operated. However, the federal and provincial governments are significantly involved in the economy. They provide a broad regulatory framework and redistribute wealth from high income individuals and regions to lower income persons and provinces. While the government has made progress on privatization, government-owned Crown Corporations such as the Canadian Broadcasting Corporation, the Canadian National Railway, the Canadian Wheat Board, and provincial electric utilities still play an important role in the economy.

Canada is the most important trading partner of the United States. Although natural resources and related products remain important components of the Canadian economy, the economy is now fully industrialized and produces highly sophisticated consumer goods and capital equipment. As of August 1994, Canada's annualized merchandise exports to the United States were US$140.5 billion, and annualized merchandise imports from the United States were US$118.2 billion. Motor vehicles and parts account for approximately 20 percent of U.S. merchandise exports to Canada, followed by exports of machinery and equipment and industrial equipment. The stock of total foreign direct investment in Canada in 1993 was US$ 113 billion, of which US$70 billion or 62 percent was U.S. foreign direct investment. Roughly 40 percent of the assets of Canadian manufacturing companies are foreign-owned; of this total, about 75 percent belong to U.S. firms.

Federal government economic policies since late 1984 have emphasized reduction of public sector interference in the economy and promotion of private sector initiative and competition. Both federal and provincial governments also undertook privatization of selected Crown Corporations.

The deficit and related expansion of government debt are the most pressing problems facing fiscal policymakers at the federal and provincial levels. Net public debt in FY1993–94 exceeded 74 percent of Gross Domestic Product. Government options to reduce deficits are constrained by high levels of non-discretionary spending. Statutory social transfers to individuals and to provincial governments account for over 40 percent of the federal budget, and public debt service payments account for about an additional 25 percent of spending. Further reductions of subsidies for regional development and other remaining discretionary programs such as defense, agriculture and foreign aid would require the government to make difficult political decisions. Nevertheless, the government has stated firmly that it intends to reduce the deficit to three percent of GDP by the April 1996-March 1997 fiscal year.

The Bank of Canada is Canada's æntral bank. The governor of the Bank is responsible for conducting monetary policy. The Bank's main monetary policy tool is management of cash balances with the chartered banks. Other tools used to control the money supply include open market operations, such as purchase and resale agreements with money market participants, and the bank rate (the interest charge on central bank advances), which is set 25 basis points above the average yield on 90-day Treasury bills at the weekly auction conducted by the Bank. The Bank may participate in the auction to influence its outcome. 2. Exchange Rate Policy

The Canadian dollar is a fully convertible currency, and exchange rates are determined by supply and demand conditions in the exchange market. There are no exchange control requirements imposed on export receipts, capital receipts, or payments by residents or non-residents. The Bank of Canada operates in the exchange market on almost a daily basis to maintain orderly trading conditions and smooth rate movements. 3. Structural Policies

Prices for most goods and services are established by the market without government involvement. The most important exceptions to market pricing are government services, services provided by regulated public service monopolies, most medical services, and supply-managed agricultural products (eggs, poultry and dairy products).

The principal sources of federal tax revenue are corporate and personal income taxes and the goods and services tax (GST), a multi-stage seven percent value-added tax on consumption. Federal personal and corporate income tax rates are comparable to U.S. rates.

Federal government regulatory regimes affect foreign investment (see section 5 below) and also U.S. firms in the financial services sector. Although foreign-owned bank subsidiaries are subject to federal restraints on their operations and growth, U.S. banks have been exempted from most of these restrictions under the U.Š.-Canada Free Trade Agreement (FTA). This continues under NAFTA. However, the federal government still prohibits the entry of direct branches of foreign banks. In mid. 1992 Canada implemented further financial sector reforms, which fargely eliminated remaining barriers among banks, trust companies and insurance companies.

87-414 O - 95 - 6

Transportation policies: The pro-competitive National Transportation Act and its companion legislation, the Motor Vehicle Transport Act, entered into force in 1988. While underscoring the continuing need to maintain high safety standards, this legislation introduced a greater degree of deregulation in the Canadian transportation industry.

Aviation is not included in the NAFTA. Based on a mutual desire for a liberalized North American market, in October 1990 the U.S. and Canada announced a joint initiative to negotiate a new open skies” agreement covering transborder air services. The last round of negotiations was held in December 1992. On September 27, 1994 U.S. Transportation Secretary Pena and Canadian Transport Minister Young appointed personal representatives to explore the possibilities of reopening negotia. tions. Formal negotiations were subsequently scheduled for January of 1995 with the objective of rapid market liberalization.

Telecommunications Policies: Canada's long-awaited Telecommunications Act was proclaimed in force on October 25, 1993. Among its provisions, the legislation allows the federal regulator, the Canadian Radio-television and Telecommunications Commission, to forbear from regulating competitive segments of the industry, exempts resellers from regulation, and limits foreign ownership of telecommunications firms to 20 percent. Carriers which operated in Canada prior to 1987, but which do not meet the Canadian ownership requirements, are grandfathered under Section 16 of the legislation. 4. Debt Management Policies

Canada's net public and private external indebtedness rose from US$89 billion (26 percent of GDP) in 1984 to US$243 billion (44 percent of GDP) in 1993, a relatively high figure for an industrialized country. While foreigners have been receptive to holding Canadian securities and such purchases contribute to the strength of the Canadian dollar, the sharp rise in external indebtedness has made the Canadian dollar and economy increasingly vulnerable to shifts in international investor confidence. 5. Significant Barriers to U.S. Exports

On January 1, 1989, Canada and the United States began to implement a free trade agreement to eliminate, over a ten year period, virtually all tariff and nontariff barriers to trade between the two countries. The Canada FTA was suspended on January 1, 1994, with the entry into force of the North America Free Trade Agreement (NAFTA), which expands the free trade area to include Mexico. The NAFTA provisions go beyond the CFTA in the areas of services, investment and government procurement. Canada passed implementing legislation for the Uruguay Round agreement under the General Agreement on Tariffs and rade, and joined the World Trade Organization as a founding member.

Nevertheless, a number of Canadian practices remain which constitute barriers to U.S. exports to Canada.

Canada applies various restrictions to imports of supply-managed products (dairy, eggs, and poultry), fresh fruit and vegetables, potatoes, processed horticultural prod. ucts and live swine. The US continues to pursue these issues bilaterally. Regarding the supply managed commodities, bilateral talks will be necessary to resolve contradictions between Canada's Uruguay Round implementation and its obligations under NAFTA.

Provincial legislation and Liquor Board policies regulate Canadian importation and retail distribution of alcoholic beverages. The Canada FTA addressed a number of these policies (listing, distribution, and pricing) and provided dispute settlement procedures. Provincial beer distribution practices had been grandfathered under the FTA but were challenged by the U.S. under the GATT. The U.S. and Canada concluded a Memorandum of Understanding in August 1993 which significantly im. proved access to the Canadian market for U.S. beer. However, U.S. exporters have remained unhappy about provincial minimum import price requirements and costof-service issues hinder the importation of U.S. wine.

Although some progress has occurred, problems remain in the area of standards and labeling: The FTĂ chapter on technical standards provides for the accreditation of U.S. certification organizations and testing laboratories in Canada. The Canadian accreditation agency, the Standards Council of Canada, has been slow in effecting

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