the necessary regulatory changes and in reviewing U.S. applications, but in 1992 it accredited two major U.S. testing and certification bodies, Underwriters Laboratories and the American Plywood Association. Since then, three additional test laboratories-Architectural Testing Inc., ETL Testing Laboratories, and Dash, Straus & Goodhue Inc., have been accredited. To date, several accreditation applications by U.S. certification and testing organizations remain under review by the Standards Council.

Under its Processed Product Regulations, Canada allows imports of processed fruit and vegetables to be sold only in certain limited-size packages (i.e. consumer sizes) for products where Canadian standard sizes are prescribed. Following three years of formal U.S. government representation, which prompted Canadian regulatory change in November 1993, U.S. exporters have improved access to Canada's hotel, institutional, and food service trade for a wide range of products such as ketchup, french fries, pickles, etc. in sizes larger than those stipulated in the regulations. However, trade remains hindered by strict packaging and labeling rules, from which Canadian manufacturers received a temporary (two-year) exemption, and plant certification requirements. For example, U.S. frozen french fry manufacturers remain unable to capture a share of the Canadian food service market estimated to be worth at least $40 million.

Canadian customs regulations limit the temporary entry of specialized equipment needed to perform short-term service contracts. Certain types of equipment are granted duty-free or reduced-duty entry into Canada only if they are unavailable from Canadian sources. Although NAFTA has broadened the range of professional equipment permitted entry, it has not provided unrestricted access.

Canada restricts the direct export of Pacific salmon by requiring that a portion of the Canadian catch be landed in Canada before being exported. An interim agreement reached following FTA dispute settlement permits direct export (i.e. sale at sea) of a portion of the catch by Canadian licensees. The level of direct exports, however, has been disappointing. Following a mid-term review in February, technical changes were made in the requirements for licensees. A Canadian ban on reexporting unprocessed herring, aimed at Japan, also prevents Canadian processors from using U.S. refrigeration facilities. The U.S. government will continue to monitor developments.

Canadian industries have used Canada's Special Import Measures Act (SIMA) to restrict access to the Canadian market by U.S. companies. Dumping margins in successful cases constitute a significant barrier to U.S. exports.

Canada denies Canadian enterprises tax deductions for the cost of advertising in foreign broadcast media and publications when the advertising is directed primarily at Canadians. Various restrictions on advertising aimed specifically at the Canadian market restrict U.S. access to the Canadian market for publications and print media advertising.

Under the Investment Canada Act, the Broadcast Act, and policies in the energy, publishing, telecommunications and transportation, broadcasting and cable television sectors, Canada maintains laws and policies which interfere with new or expanded foreign investment. As well, foreign investment in the banking and financial services sectors is restricted under the Bank Act and related statutes.

The Investment Canada Act (as amended by the FTA and NAFTA) requires the federal government to review and approve foreign investment to ensure "net benefit to Canada." The Act exempts from prior government approval foreign investments in all new ("greenfield") businesses, and acquisitions worth less than C$5 million (C$150 million for U.S. investors-1992 dollars). The exemption excludes "culturally sensitive sectors" such as book publishing and distribution, film and video, audio music recordings and music in print or machine readable form. Also excluded as "culturally sensitive" are foreign investments to establish new businesses or acquire existing ones for the publication of magazines (including "split-run" editions), periodicals or newspapers. Foreign investment in these sectors is potentially subject to review regardless of size or whether the investment is new or through direct or indirect acquisition.

Further to the legal position on culture embodied in the Investment Canada Act, Investment Canada enforces a federal book publishing policy known as the "Baie Comeau Policy." Canada prohibits the majority acquisition of Canadian book publishing and distributing companies, and requires that foreign-owned subsidiaries in Canada be divested to Canadians within two years if the ownership of the parent changes hands. Exceptions to the policy permit direct acquisition if the Canadian firm is in financial distress and no Canadian buyer can be found. Also, a foreign owner indirectly acquiring a Canadian firm might not be forced to divest it if a transaction of "net benefit" to Canada can be negotiated. Investment Canada also has specific policies regarding foreign investment in the film distribution sector.

In the banking sector, the Bank Act of 1980 made chartering of foreign-owned banking subsidiaries possible for the first time. However, foreign banks are still not permitted to enter Canada as direct branches. Foreign banks are also unable to acquire a domestic Canadian bank, since no single entity (person or corporation) can hold more than 10 percent of a Canadian bank's capital. The FTA eliminated other discriminatory restrictions on U.S. bank subsidiaries in Canada.

In the trust and loan, and insurance sectors, which are regulated by both the federal and provincial governments, foreign investors wishing to establish in either of these two areas may do so, but acquisitions of provincial firms are subject to restrictions preventing foreign control.

Where GATT Government Procurement Code or NAFTA requirements do not apply, Canadian government entities follow preferential sourcing policies favoring Canadian-based firms over foreign-based firms. In addition, Government Services Canada, the major federal procurement agency, maintains a supplier development fund to promote new Canadian sources of supply. Canada's Federal and Provincial crown (government-owned) corporations also follow strong "buy national” or “buy provincial" policies. Products affected include telecommunications, heavy electrical and transportation-related products.

Canada pursues an "industrial benefits policy" which is administered through a procurement review mechanism. The policy is intended to insure that major government procurement projects provide long-term benefits for "the economic or social development of Canada" beyond the immediate impact of the procurement expenditures. Frequently resulting in "offsets," this policy arouses considerable U.S. con

cern.

6. Export Subsidies Policies

Under the Western Grains Transportation Act (WGTA), the Canadian government subsidizes rail transportation of western grown wheat, barley, oats and many other agricultural commodities intended for export. The Free Trade Agreement eliminated subsidies on agricultural products shipped to the United States through West Coast ports, but not on those shipped directly by rail or through Great Lakes ports. Under the terms of the FTA, Canada will terminate all export-based duty remission schemes by 1998. In the interim, Canada has excluded exports to the U.S. in calculating the duty waived. In June, 1994, the GOC announced a proposal to phase out WGTA payments over a five-year period. Instead, the government will make direct income support payments to farmers.

Canada's production-based duty remission program provides for the rebate of customs duties to qualifying foreign automobile firms on their imports of automobiles and original equipment automotive parts into Canada. Under the program, duty remissions are granted in proportion to the amount of "Canadian value-added" generated by these firms in Canada. Under the provisions of the FTA, Canada has agreed to terminate the program by 1996 and to limit application of the program to the four companies with which agreements were already in place. NAFTA will not change these provisions.

7. Protection of U.S. Intellectual Property

The Canadian government has long-standing legislation to protect intellectual property rights, and these laws are effectively enforced.

1987 amendments to the Canadian Patent Act significantly improved protection for patented drugs and was a positive step in resolving some of the complaints voiced by the U.S. pharmaceutical industry concerning alleged Canadian bias in favor of generic drugs. In February 1993 the Canadian government amended the Patent Act to eliminate compulsory licensing for pharmaceuticals, thereby extending patent protection to the standard 20 years.

1989 amendments to the Canadian Copyright Act granted explicit copyright protection for computer programs, and provided a right of payment for retransmission of broadcast programming as required by the FTA.

In 1993 Canada proclaimed the Integrated Circuit Topography Act, a law protecting semiconductor chip design.

In January 1994, the Copyright Act was amended to reflect the changes required by NAFTA, e.g., rental rights for computer programs and sound recordings; protection for data bases and other compilations; and increased measures against all categories of pirated works.

8. Worker Rights

a. The Right of Association.-Except for members of the armed forces, workers in both the public and private sectors have the right to associate freely. These rights, protected by both the federal labor code and provincial labor legislation, are freely exercised.

b. The Right to Organize and Bargain Collectively.-Workers in both the public and private sectors freely exercise their rights to organize and bargain collectively. Some essential public sector employees have limited collective bargaining rights which vary from province to province. 37.5 percent of Canada's non-agricultural workforce is unionized.

c. Prohibition of Forced or Compulsory Labor.-There is no forced or compulsory labor practiced in Canada.

d. Minimum Age for Employment of Children. Generally, workers must be 17 years of age to work in an industry under federal jurisdiction. Provincial standards (covering over 90 percent of the national work force) vary, but generally require parental consent for workers under 15 or 16 and prohibit young workers in dangerous or nighttime work. In all jurisdictions, a person under 16 cannot be employed in a designated trade, or, in other words, become an apprentice before that age.

e. Acceptable Conditions of Work.-Federal and provincial labor codes establish labor standards governing maximum hours, minimum wages and safety standards. Those standards are respected in practice.

f. Rights in Sectors with U.S. Investments.-Worker rights are the same in all sectors, including those with U.S. investment.

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

In 1994 Croatia's economy showed tentative signs of recovery from the disruption it suffered after the breakup of the former Yugoslavia. But the scars of war remain highly visible as Serb forces still occupy one-fourth of Croatian territory. With 2530 percent of its agricultural capacity destroyed, Croatia's 1993 GDP remained around half of its 1990 level. Due largely to the war and the collapse of intra-Yugoslav trade, industrial production remained at 30-40 percent of Croatia's 1991 production level. Despite these figures, a bold economic stabilization program initiated by the government in October 1993 has shown promising results.

The ongoing occupation of Croatian territory by Krajina Serbs continues to retard Croatia's recovery. The Krajina Serbs continue to cut a key railroad link to the coast as well as the Adria pipeline. Energy production suffers while oil fields in Slavonia remain occupied. The war crippled Croatia's profitable tourist industry, which in the summer of 1994 operated at only one third of the pre-war level. Nonetheless tourist activity improved, especially in the Istrian peninsula; in October 1994 Hina reported a 55 percent increase in tourist activity over the previous year's level. Intermittent hostilities and U.N. sanctions restrict trade with Serbia, a major pre-war market. A tentative step towards reconciliation with the Serbian population of Croatia occurred in December 1994, with the signing of an agreement on economic confidencebuilding measures.

The three-phase stabilization program which the government adopted in October 1993 has improved Croatia's economic situation. The unemployment rate continued its three-year decline, yet at 15 percent remains well above the pre-war level of nine percent. Inflation dramatically fell by the summer of 1994 to a monthly rate of 12 percent, one of the lowest in the region. Croatia had increased its hard currency reserves to $1.68 billion by July 1994.

With the signing of the Washington Accords in March 1994, Croatia won key support for multilateral assistance. The World Bank approved a $128 million Economic Recovery Loan in June. Another $100 million for agricultural support and private family support are in the pipeline for approval. The IMF recently approved a Standby Arrangement and Systemic Transformation Facility totalling $192 million. The EBRD will act upon two additional infrastructure project proposals in late 1994, $46.7 million for electricity network reconstruction and $76.3 million for roads and bridges.

Croatia's economy supports over 400,000 refugees and displaced persons from Bosnia and occupied Croatian territories. An estimated 80 percent of refugees have found shelter with families in Croatia; this situation is untenable in the long term. Refugees continue to occupy hotels and fill refugee centers. In September 1994, refugees continued pouring into Croatia at a rate of nearly 500 per week. While the international community has provided the bulk of the food needed for the refugees, the Croatian government pays for medical care and utilities at an estimated daily cost of $1.2 million. Even with such expense, the conditions in many refugee camps are inadequate with a lack of warm water, health care, schools, and other basic ne

The Czech government has continued the tight, IMF-endorsed, economic and fiscal policies begun by the former Czechoslovak government in 1991, and which were devised and initiated by many of the current policymakers in the Czech Republic. Similarly, it has maintained the former government's program of broad privatization and wholesale legal reform in order to permit the continued operation of a viable market economy. The economy is likely to experience growth this year. The government's estimate for this year is 2.5 percent growth, and for the next year is 3.3 per

cent.

The Czech government, having largely adjusted to the economic consequences of the split with Slovakia, is continuing down the road towards European economic integration. Despite notable problems, such as restructuring newly privatized firms, dealing with a shortage of domestic capital, and coping with a generally weak financial sector, statistics suggest that the Czech economy as a whole appears to have bottomed out in late 1992 and remained stable through 1993. The economy is likely to experience growth in 1994, as suggested by the latest data on GDP. Though 3.3 percent growth in the first quarter of 1994 can be ascribed to significant decline in the first quarter of 1993 due to the country's split, 2.2 percent growth over the whole first half of 1994 indicates a real growth trend."

The government completed the first wave of privatization in early 1993, during which approximately 1,500 formerly state-owned large enterprises were transferred to the private sector. This was accomplished through the process of "coupon privatization" whereby citizens over the age of 18 were allowed to acquire shares of enterprises through the purchase of vouchers. Approximately 80 percent of Czechs (and Slovaks, under the former Czechoslovakia) eligible to participate in the voucher program did so, giving this country's population perhaps the highest percentage of stockholders in the world. In addition, approximately 20,000 small businesses were transferred through direct sale. The second wave of privatization is currently underway and is scheduled for completion by the end of 1994. When it is complete, some 80 percent of production will be in private hands. The private sector contribution to GDP is estimated at around 56 percent in the first half of 1994.

The government is likely to meet its target of a balanced budget for 1994 with the contribution of funds acquired through the sale of state enterprises and with restricted expenditures counterbalancing lower than forecast tax revenues. As of August 1994, there was a budget surplus of 19.8 billion crowns. In 1993, the budget had a surplus of 1.1 billion crowns. The 1992 budget for Czechoslovakia was in deficit by approximately $550 million, roughly 2 percent of GDP. This can be attributed chiefly to an overestimation of the turnover tax revenues, an undercalculation of entitlement programs, and off-budget expenditures needed to cover government loan guarantees.

The central bank, or Czech National Bank, is an independent monetary authority which has proven itself capable of withstanding political pressure. Monetary policy in the Republic has stabilized. As the inflow of foreign capital was stronger than expected this year, the central bank, as an anti-inflation measure, increased reserve