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EUROPEAN COMMUNITIES

hopes to extend coverage to the four sectors covered by the EC directive and thereby escape its discriminatory impact.

6. Export Subsidies Policies

Agricultural Subsidies: Export subsidies (export restitutions or refunds) are widely used by the EC to offset the competitive disadvantage to EC agricultural exports manifested by high EC internal support prices. EC expenditures on export subsidies exceeded $12 billion in 1990, with cereals, beef, sugar and milk and milk products accounting for the lion's share of expense; fruits and vegetables, wine, tobacco, pork, poultry and eggs also receive the benefit of export subsidies. Export subsidies are a very effective supply control tool for the EC, enabling it to dispose of its surplus production at prices that match, and often undersell, U.S. and other exporters' agricultural exports to foreign markets. The impact on world trade is large and growing limited only by EC budget concerns. As a result, disciplining export subsidies remains a central objective for the U.S. in the Uruguay Round negotiations.

Industrial Subsidies: In recent years, the EC has taken steps to rein in certain subsidies. Examples include steel, shipbuilding and coal. A major sector where difficulties persist is civil aircraft. In this sector, the United States is continuing its effort to achieve effective discipline on the trade-distorting subsidies received by Airbus. The U.S. estimates that the Airbus Governments, France, Germany, the United Kingdom and Spain, have provided $25.9 billion in subsidies for the development and production of Airbus aircraft. These subsidies have enabled Airbus to ignore normal commercial cost considerations while pursuing world market share at the direct expense of U.S. manufacturers. Despite recent consultations with the European Community and a "conciliation" session pursuant to the GATT Subsidies Code, the issue has not been resolved.

If a satisfactory negotiated solution is not reached between the United States and the Community, the United States 'yill ask a GATT Subsidies Code panel to rule on the matter. Also, in another Subsidies Code case brought by the United States against the Community, a panel is due to make a decision soon on the legitimacy of Germany's Airbus-related exchange rate guarantee scheme.

7.

Protection of U.S. Intellectual Property

The European Commission is committed to securing a high level of protection for intellectual property rights in the EC. The Commission believes that completion of the internal market will require harmonization of the scope of IPR protection so that trade within the community will not be distorted based on the absence of or inadequate protection of rights in certain member states. The Commission has proposed directives in certain areas where inadequate IPR is seen as hindering development of EC industry (biotechnology patent, patent term restoration for pharmaceuticals, satellite and cable retransmission of copyrighted material), and has adopted

EUROPEAN COMMUNITIES

directives covering software copyright and semi-conductor topologies. Planned directives will continue to harmonize IPR at the EC level, and eventually community patent, trademark, and industrial design regimes will exist.

In the copyright area, the Council is currently considering proposals for directives establishing rental and lending rights and harmonizing neighboring rights, and creating a system for protecting works transmitted by satellite and cable retransmission. It is unclear at this time whether the directives will give full protection to U.S. rightholders and whether U.S. film producers and the works-for-hire system will be fully respected.

The EC adopted in May 1991 a directive requiring member states to protect software as a literary work within the meaning of the Berne Convention. Member states are required to implement the directive in national legislation no later than January 1, 1993. The directive differs from u.s. law by including a specific exemption from protection for decompilation carried out under certain circumstances for purposes of obtaining information necessary for interoperability. Although U.S. industry was satisfied with the final compromise reached by the Council, it remains to be seen whether the decompilation exemption will deny adequate protection for U.S. rightholders.

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Worker rights are discussed in the individual country sections of the report.

Extent of U.S. Investment in Goods Producing Sectors

U.S. Direct Investment Position Abroad (EC)

on a Historical-Cost Basis - 1990

(Millions of U.S. dollars)

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AUSTRIA

Key Economic Indicators

(Billions of Austrian Schillings (AS) Unless Ot bervas e)

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Income. Production, and

Employment
Real GDP (1983 prices)

1,384.2 1,452.5 3.
Real GDP by sector
Agriculture

45.9 47.4 Manufacturing/mining

395.4 420.7 Energy and water

44.4 Construction

95.1 10.3 Ib.. Trades/hotels/restaurants 235.6 251 - E3.. Transportation/communication 85.5 Banks/insurance/real estate legal services

197.2

14.. Other private services

61.1

5.. Public services

175.6 Import duties and VAT less

imputed bank services Real GDP growth rate (pct)

3.7 Per capita income (USD)

16, 606 27:0 2. Labor force (1,000's)

3,438.2 110.5 Unemployment rate (pct)

5.1

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Austria, member of the European Free Trade Association (EFTA) and the OECD, has a free market economy with a significant but declining state-owned sector. The state-owned sector consists of heavy industries, energy production, railroads, postal services, monopolies such as tobacco and gambling, and some banks. The Grand Coalition Government formed in December 1990 is continuing the ambitious reform program launched by the outgoing Government which pursued federal budget consolidation, deregulation, privatization, industrial restructuring and an impressive income/corporate tax reform. On July 31, 1991 almost two years after the Austrian Government applied for EC membership, the EC Commission issued its opinion (avis) stating Austria's economy would fit well with the Community and that the EC would benefit from Austria's accession. However, formal negotiations on Austria's application are not expected to start before 1993. Meanwhile, Austria will continue moving autonomously to harmonize its laws and regulations with the European Community's. Austria's participation in the European Economic Area (EEA), which the EC and EFTA have agreed to form in 1993 to eliminate economic barriers between the two groups, will give further impetus to this harmonization. Participation in the EEA will require the country to adopt about 60 percent of the existing EC directives and regulations and to amend over 1,200 existing Acts of Parliament. Given Austria's economic policies, the significant stimulus from a reunited Germany, growing exports, and strong investment levels, Austria's economy continued booming with 4.9 percent real growth in 1990.

Efforts to cut the federal budget deficit have slowed. While the government succeeded in reducing the deficit from 5.1 percent of GDP in 1986 to 3.5 percent in 1990, the Federal Government's deficit held at 3.5 percent of GDP in 1991. The budget deficit target is 3.0 percent of GDP in 1992, but defaults on loans to Eastern Europe or refinancing schemes will considerably burden the federal budget. Polish debt reduction alone will cost Austria AS 2.3 billion in 1992, the highest per capita cost among all of Poland's creditors.

With the economic transformation underway in Central and Eastern Europe, Austria has increased trade and investment activities in the region. Austria is also using its companies' long standing experience in Central and Eastern Europe and its geographical position to attract Western companies. Austria has become an important gateway for Western companies interested in that area's markets. In addition, the Austrian Government has launched several loan and guarantee programs to spur direct investments in these countries. One result is that Austria's Finance Guarantee Company (FGG) concluded a cooperation arrangement with its U.S. counterpart, the Overseas Private Investment Corporation (OPIC), to encourage U.S./Austrian joint ventures in Central and Eastern Europe.

AUSTRIA

As a member of the General Agreement on Tariffs and Trade (GATT), Austria affords most favored nation status to other members, including the United States. Austria is actively participating in the Uruguay Round and reduced custom tariffs on about 1,800 items, effective January 1, 1990, as an advance concession in the negotiations.

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The Austrian National Bank's "Hard Schilling Policy" which in effect pegs the schilling to the Deutsche mark, is designed to avoid exchange rate fluctuations vis-a-vis Germany - Austria's most important trading partner and to minimize imported inflation. In contrast to the Bank's previous practice of maintaining interest rates slightly above the German ones to discourage financial outflows, the Bank raised the discount and lombard rates to new levels equaling those set by the German Bundesbank in August 1991 because Austria's economic indicators were stronger than Germany's. The linkage to the mark is not expected to change unless the reunited Germany produces a strong inflationary trend.

In the last of a series of moves begun in 1986 to free international financial flows, the National Bank announced liberalization of all cross-border capital transactions as of November 4, 1991. Austria will maintain only a few reservations to the OECD's Capital Movements and Invisible Transactions Codes, but the remaining reservations are not based on foreign exchange restrictions. Bonds issued by Austrian firms abroad and foreign bonds issued on the Austrian market remain subject to Finance Ministry approval. The requirement for such approval will be waived when the new Capital Market Law becomes effective, most likely on January 1,

1992.

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There are a number of Austrian regulations which create a somewhat rigid business climate and in some cases limit competition. Factors affecting market access and consequently competition include monopolies, business licenses, technical standards, worker safety standards, environmental protection regulations, the Cartel Law, the Price Law, the Law against Unfair Competition, and subsidy programs. The Social Partnership, the system whereby the leaders of Austria's labor, business, and agricultural institutions maintain an on-going dialog and give their concurrence to new economic legislation, means these organizations have a strong influence on the full range of economic policies. Federal purchases are made by the agency concerned on the basis of public tenders.

Government monopolies exist in a few areas. Austrian legislation establishing the salt, alcohol, and tobacco monopolies limits trade in these products. Cigarette imports from the United States were eased with

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