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change Controls Act of 1954-1990. New legislation was introduced in order to ensure, among other things, that the government can continue to impose financial sanctions (i.e, on Iraq and the former Yuguslavia) under its international obligations.

Ireland is a signatory to Article VIII of the International Monetary Fund Agree. ment, regarding freedom of current payments (including payments for goods and services imported) between residents and non-residents. In addition, Ireland subscribes to the Code of Liberalization of Capital Movements and the Code of Liberalization of Current Invisible Operations of the OECD. 3. Structural Policies In October 1991,

the Irish Government adopted a new Competition Act. The legislation marks a shift from the previous system of restrictive practices orders and administrative control, to a system which allows claims of anticompetitive behavior to be pursued in the courts. As a result, the government has revoked price controls on petroleum products and all other restrictive practice orders. Controls on below cost selling of grocery and food items do exist.

Tax Policies: The Irish tax system for corporations favors manufacturing and ex. porting companies. Those companies pay income tax of only 10 percent, compared to the normal rate of 40 percent. This gap encourages the development of export and manufacturing industries, and discourages growth in other industries. The 10 percent corporate tax rate (manufacturing companies) has been extended by the government to the year 2010. Personal income tax rates are relatively high, encouraging tax avoidance at all income levels, which has led to the creation of a black econ. omy" estimated at between IP 1.5 and 3 billion, or between sive and ten percent of GNP.

In the 1994 budget, the standard rate tax band was extended from USD 23,486 to USD 25,092 for a married couple and from USD 11,743 to USD 12,546 for a single person. Together with improvements in personal allowances, this resulted in the threshold for the higher tax rate, in the case of most employees, being increased to USD 33,945 if married, and USD 17,803 if single. While these measures help some lower paid workers, the middle income class still bears a heavy tax burden. Many pay an additional 7.75 percent of their earnings for a variety of social security programs. Value-added tax (VAT) rates are among the highest in the European Union (EU) and were streamlined in the 1994 budget. The national standard rate of VAT remains at 21 percent. The lowest VAT rate of 12.5 percent is to be maintained for labor intensive services, including the construction sector. A zero or 2.5 percent rate, however, will apply to certain items. VAT rates and many excise taxes are the subject of harmonization in the EU. The completion of the Single Market has eased the movement of products between EU member states and has, since January 1, 1993, eliminated many customs controls in Ireland for items of EU origin.

Regulatory Policies: Government investment incentives are weighted in favor of high technology, export oriented companies. Capital grants by the Irish Industrial Development Authority (IDA) reportedly have tendeď to favor capital intensive investments over labor intensive ones. 4. Debt Management Policies

Ireland's total exchequer debt amounted to about IP 30 billion, or about 102 percent of estimated 1993 GNP, from 99.6 percent at end-1992. The increase is attributable to the adjustment of the Irish pound within the exchange rate mechanism (ERM). The downward trend in the debuGNP ratio in evidence each year, from 125 percent in 1987, is expected to resume in 1994 and is now on line to achieve the 60 percent target set by the Maastricht Treaty. While the debt has continued to grow in nominal terms, it has fallen significantly as a percentage of GNP since 1987. The foreign portion of the debt is IP 12.2 billion. As of June 1994, 15.6 percent of foreign debt was dollar denominated, 25.6 percent was in deutsch marks, 16.9 percent in Swiss francs, 11.2 percent in Japanese yen, 10.3 percent was in Sterling, 8.7 percent in European currency units (ECU), and lesser amounts in Dutch guilders, French francs, and Austrian schillings. Debt service costs in 1993 were USD 3.5 billion, about 10.9 percent of estimated Irish exports of goods and services and about 8.4 percent of GNP. In 1991 the government created an independent agency to manage the debt, the National Treasury Management Agency (NTMA). 5. Significant Barriers to U.S. Exports

Ireland maintains a limited number of barriers to U.S. services trade, Airlines serving Ireland may provide their own ground handling services, but are prohibited from providing ground handling services to other airlines.

The Irish banking and insurance sectors are slowly becoming deregulated. Full deregulation in insurance will not occur until 1998. Án immediate opportunity for U.S. companies exists in the Dublin International Financial Services Center (IFSC). This center offers interested U.S. companies the opportunity to establish an EU financial base. The IFSC is attracting international financial services such as asset financing, captive insurance, fund and investment management, and corporate treasury measurement. Qualified financial services companies have a maximum tax of 10 percent, guaranteed by the government through the year 2005. The deadline for granting IFSC licences is December 31, 1994. The special corporation tax rate of 10 percent applies in the IFSC until the end of 2005, but the EU deadline means only companies obtaining licences before December 31, 1994 will qualify for the special tax rate. The United States has the second largest representation at the IFSC with approximately 45 projects.

Exchange controls on foreign travel by Irish citizens have been eliminated. Although they have been liberalized in recent years, Ireland still maintains some of the strictest animal and plant health import restrictions in the EU. These, together with EU import duties, effectively exclude many meat based foods, fresh vegetables and other agricultural products.

The EU directive on broadcasting activities was adopted on October 3, 1989. The primary purpose of the directive is to promote the free flow of broadcasting services across national boundaries. Separately, the Council of Europe agreed to a conven. tion on transfrontier broadcasting which is largely the same as the EU directive. The main components of the directive are (a) general provisions which require member states to ensure freedom of reception of broadcasts from other member states; (b) provisions for the promotion of distribution and production of television programs; (c) provisions for advertising, sponsorship, the protection of minors, and right of reply. Many of the provisions of the directive have been transposed into law under the Broadcasting Act, 1990. Two sets of statutory regulations were used to transpose the remaining provisions, as follows. (1) The EU Communities (Television Broadcasting) Regulations, 1991 Directive requires broadcasters to reserve a majority of broadcast time for productions of EU origin and to reserve at least 10 percent of transmission time or budget for independently produced European programs. (2) The Wireless Telegraphy (Television Program Retransmission and Relay) Regulations 1991 amends the regulations under which cable and multichannel microwave distribution systems (MMDS) licenses

are issued. In short, MMDS operators will no longer require approval in advance of relaying a service. The Irish government is concerned about minority languages and cultures, but has not been a major player on this issue. 6. Export Subsidies Policies

Export sales relief (ESR) was discontinued in April 1990 in line with Ireland's EU obligations. Companies manufacturing goods in Ireland benefit from a reduced rate of corporation tax of 10 percent on their profits. Stockholders of companies eligible for this program paid income tax of only 10 percent on dividends received from the company, rather than the normal tax rate (29-48 percent). This program will expire at the end of the year 2010. There are no tax or duty exemptions on imported inputs except for those companies located in the Shannon Duty Free processing zone and Ringaskiddy Port. Ringaskiddy is Ireland's major deep water port located in the Cork harbor complex. The Shannon Duty Free processing zone benefits from the reduced rate of corporation tax of 10 percent, while Ringaskiddy does not. No duties are levied at Shannon Free Zone on goods destined for non-EU countries.

The Irish Trade Board (Bord Trachtala), provides a single, integrated range of marketing support services for companies selling in Ireland and developing export sales. As of January 1, 1992, the government provides export credit insurance for political risk and medium-term commercial risk in accordance with OECD guide. fines. Export credit insurance for short-term commercial risk is available from the private insurance sector. As a participant in the Common Agricultural Policy (CAP) of the EU, the Irish Department of Agriculture Food & Forestry administers CAP export refund and exchange rate programs on behalf of the EU Commission. 7. Protection of U.S. Intellectual Property

Ireland supports strong protection for intellectual property rights. The government encourages foreign investment, especially in high tech industries. Con. sequently, protection of intellectual property rights has been an important part of the government's business policy. Protection is generally on a par with other developed countries in Europe, and the government is responsive to problems which arise.

Patents: Following the enactment in February, 1992 of the Patents Act, 1992, Ireland ratified the European Patent Convention and the Patent Cooperation Treaty. The Convention and the Treaty entered into force, as did the 1992 Patents Act, on August 1, 1992. The Act updates national law in a number of important respects and the substantive law is in line with that of other European countries that have harmonized their laws on the basis of the European Patent Convention. The new legislation will also facilitate speedier processing of patent applications; it provides for a patent term of 20 years and contains provision for the grant of short-term patents (half the duration of the normal patent) in the interest of small/medium innovators. Legislation extending the term of protection of products covered by me. dicinal patents came into force on January 2, 1993, S.I. 125 of 1993. The amendment of the Constitution approved by the referendum held in June 1992 has cleared the way for Ireland's ratification of the agreement relating to EU patents.

Trademarks: Existing trademark legislation in Ireland does not specifically cover service industry trademarks, although some court cases have extended protection to trademarks in service industries.

Copyrights: Copyright protection in Ireland is generally considered to be good. However, industry sources have indicated that penalties for infringement of copyrights on video tapes are not sufficiently severe to curb pirating. The entire copyright system is under review and new copyright legislation will be introduced in 1995. EU directives will be included in the new legislation. 8. Worker Rights

a. The Right of Association.Irish Workers have the right to associate freely and to strike. The right to join a union is guaranteed by law, as is the right to refrain from joining. The Industrial Relations Act of 1990 provides members and officials of unions immunities for industrial actions taken with regard to terms or conditions of employment. The Act contains some limitations on picketing. A code of practice, drawn up by the Labor Relations Commission, was introduced by the government in June, 1993. It lays down guidelines of duties and responsibilities of employee representatives and the protection and facilities to be granted to them by employers.

About 48 percent of all private sector workers and 52 percent of all public sector workers are trade union members. Police and military personnel are prohibited from joining unions or striking, but they may form associations to represent them in matters of pay, working conditions, and general welfare. The right to strike is freely exercised in both the public and private sectors.

The Irish Congress of Trade Unions (ICTU), which represents unions in both the Republic and Northern Ireland, has 68 member unions with 681,138 members. Mergers have steadily reduced the number of unions affiliated to the ICTU in recent years, but union membership numbers are up by 20,000 since 1987. Both the ICTU and the unaffiliated unions are independent of the government and of the political parties. The ICTU is affiliated with the European Trade Union Confederation,

b. The Right to Organize and Bargain Collectively.—Labor unions have full freedom to organize and to engage in free collective bargaining. Legislation prohibits antiunion discrimination. In recent years, most terms and conditions of employment in Ireland are determined through collective bargaining in the context of a national economic program. Representatives of government, unions, employers and farmers agreed to a new program, the Program for Competitiveness and Work (PCW) in Feb. ruary 1994. It was a major element of the government's success in fostering economic growth. The PCW is Ireland's third centralized pay agreement in recent years and replaces the PESP which expired in 1993. These programs are credited with providing a favorable economic climate for the strong growth in Irish GNP since 1987. The declared aim of the new program, which provides for pay raises amounting to eight percent over three years to employees in the public and private sectors, is to help create a substantial number of new jobs. Pay increases in the private sector will be calculated on the basis of 2 percent of basic pay for the first 12 months of the Agreement; 2.5 percent for the second 12 months; 2.5 percent for the first six months of the third year, and 1 percent for the second six months of the third year. In the public sector, pay increases will be calculated on the basis of 2 percent of basic pay for 12 months starting five months after the expiry date of the PESP pay agreement; 2 percent for the next twelve months; 1.5 percent for the next four months; 1.5 percent for the next three months; and 1 percent for the remaining six months of the Agreement. The government expects the plan to help increase employment by 60,000 over the next three years. It also plans to create 100,000 jobs for the unemployed in community work schemes. Of critical importance to unions and employers are the moderate pay elements of the PCW and the promise of industrial peace. The PCW has been ratified by all the negotiating bodies.

The Industrial Relations Act of 1990 established the Labor Relations Commission which provides advice and conciliation services in industrial disputes. The Commission may refer unresolved disputes to the Labor Court. The Labor Court, consisting of an employer representative, a trade union representative, and an independent

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chairman, may investigate trade union disputes, recommend the terms of settle. ment, engage in conciliation and arbitration, and set up joint committees to regulate conditions of employment and minimum rates of pay for workers in a given trade or industry.

c. Prohibition of Forced or Compulsory Labor.–Forced or compulsory labor is prohibited by law and does not exist in Ireland. However, portions of the 1894 Mer

. chant Shipping Act are considered by the International Labor Organization (ILO) to be inconsistent with the prohibition on forced or compulsory labor.

d. Minimum Age of Employment of Children. Under Irish legislation, the minimum age for employment of children is 15 years. Children over 14 years are permitted to carry out light, non-industrial work during school holidays with the written permission of the parents. Irish laws limit the working hours in any week for young persons aged between 15 and 16 years to eight hours per day up to a maximum of 40 hours in any week. The normal working hours are 37.5 hours a week. Young persons aged between 16 and 18 years may work a normal day of eight hours and a maximum of nine hours in any day. The normal work week is 40 hours, with a maximum of 46 hours. These provisions are effectively enforced by the Minister for Enterprise and Employment. The EU is adopting a new directive on the protection of young people at work. e. Acceptable Conditions of Work.-

There is no general minimum wage legislation. However, some workers are covered by minimum wage laws applicable to specific industrial sectors, mainly those in which wages tend to be below the average. A government submission to an EC Commission white paper on "Growth, Competitive. ness and Employment” suggested that a minimum wage policy could hinder job creation and recommended that the EC assess the potential effects on employment, of any such proposal to regulate the labor market. In 1993 the average weekly wage was USD 371 (in 1993 IRP 1 was equivalent to USD 1.46) for production and transport workers. Working hours in the industrial sector are limited to 9 hours per day and 48 hours per week. Overtime is limited to 2 hours per day, 12 hours per week, and 240 hours in a year. As part of the new national economic pact adopted in 1993, the standard work week is being gradually reduced to 39 hours. The Department of Enterprise and Employment enforces four basic laws dealing with occupational safety that provide adequate and comprehensive coverage.

f. Rights in Sectors with U.S. Investment.-Worker rights described above are applicable in all sectors of the economy, including those with significant U.S. investment.

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

Millions of U.S. dollars)

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1 Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis.


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



1994 1

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Income, Production and Employment:
Real GDP (1985 prices)

605,520 499,186 508,214 Real GDP Growth (pct.) ...

0.7 -0.7

1.8 GDP (at current prices) (billions USD)

1,220 992 1,026 By Sector: Agriculture

42,778 32,992 N/A Industry

349,468 269,830 N/A Energy

32,094 26,507

N/A Construction

71,151 55,088 N/A Services

610,418 497,125 NA Non-Market Services

169,185 137,363 N/A Government

157,127 116,718 N/A Net Exports of Goods and Services

-3,564 27,803 35,694 Real GDP Per Capita (USD) (1985 prices)

13,667 10,612 10,615 Labor Force (000s)


22,743 2 22,453 Unemployment Rate (pct.)


10.4 211.3 Money and Prices: Money Supply (M2)

583,371 543,393 3595,791 (annual pct. growth)


7.9 34.5 Base Interest Rates


12.0 3 11.2 Personal Savings Rate


18.9 Retail Inflation (COL)


3.9 Wholesale Inflation (PPI)


3.4 Exchange Rate (lire/USD aver.)

1,233 1,572 1,600 Balance of Payments and Trade: Total Exports (FOB)

177,969 168,630

489,243 Exports to U.S.

12,393 13,034 *7,071 Total Imports (CIF)

188,249 147,772 79,978 Imports from U.S.

9,847 7,855 43,913 External Public Debt (USD billions) (year end) 44.0 42.9 248.5 Debt Service Payments (billion USD?)


22.7 Gold and Foreign Exch. Reserves (end-period). 45,219 49,221 358,116 Trade Balance

- 10,780 20,858 4 265 Trade Balance with U.S.

2,547 2,741 44,543 NA-Not available. 11994 data are estimates by Italian Government or U.S. Embassy except where data are followed by a footnote, indicating actual data through that period. 2 Figure based on January-July data. *Figure based on January-August data. * Figure based on January-June data. 1. General Policy Framework

The Italian economy is the industrialized world's fifth largest, having undergone a dramatic transformation into an industrial power in the last 50 years. A member of the Group of Seven (G-7), the OECD, the GATT, the IMF, and the European Union (EU), Italy maintains a relatively open economy. Economic activity in Italy is centered predominantly in the North, resulting in a divergence of wealth between North and South that remains one of Italy's most difficult economic and social problems.

The state plays an active role in the economy, not only in the formulation of macroeconomic policy and regulations, but also through state ownership of a number of large industrial and financial concerns. Recent governments, however, have begun a process of privatization that, if continued, should lead to a significant reduction in state ownership. To date, several large financial institutions and a few industrial concerns have been privatized. Key state monopolies in electricity and telecommunications are slated for privatization in 1995. Foreign firms, including U.S. firms, have been active both as purchasers of privatizing companies as well as privatiza


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