ITALY The While Italy remains relatively open to foreign investment, acquisition of existing entities by foreign investors can become a political issue and produce national solutions. 1990 anti-trust law gives the Government the authority to block mergers over a certain size involving foreign companies under certain conditions. Thus far, however, the anti-trust authority has not acted against foreign investment, concentrating instead on promoting increased competition in Italian markets. Italian structural policies are increasingly being made within the framework of the unification of the European market in 1993. The degree to which these policies affect demand for U.S. exports will to a large extent be determined by the orientation of the unified market after 1993. Italy is committed to achieving economic and monetary union within the EC. The fiscal and monetary policy objectives are set with this in mind. Even so, there is still strong political opposition to the economic policies necessary for Italy to converge its economy with the other members of the EC as required by the European Monetary Union (EMU) process. 4. Debt Management Policy Though Italy has not had external debt or serious balance of payments difficulties since the mid-1970's, its domestic public debt is extremely large. It is financed principally through domestic capital markets, with various securities ranging in maturity from three months to ten years. Major U.S. credit rating agencies downgraded Italy from their top category during 1991. Italy's foreign assets and liabiilities are substantial. Its net external position was negative in the amount of $111.2 billion at the end of 1990. Italy's banking system had claims on the heavily indebted developing countries amounting to $5.6 billion at the end of 1990. Italy's banking system is considerably less exposed to the debtor countries than those in other Group of Seven countries. 5. Significant Barriers to U.S. Exports and Investment Government procurement is fragmented, under-publicized and almost impossible to access by U.S. exporters without a good Italian representative. In May 1991, Italy was singled out for early review under the 1988 Trade Act's Title VII procedure. Through its ownership of holding companies the Italian Government directly or indirectly controls hundreds of enterprises, including the electrical, water and gas utilities, and telephone companies. None of these is required to adhere to the terms of the GATT Government Procurement Code. Tendering procedures do not usually give satisfactory deadlines. Tenders, other than those also published by the EC, are only in Italian, and bids must be in Italian. Although not officially stated, there is a strong "Buy Italy" pressure from the electronics industry to increase the percentage of Italian-made electronic and computer equipment in the lucrative Central Government modernization plan. On large automation contracts, there have been examples of tenders awarded to the bidder offering the highest price but not the best technical qualification. Implementation of the EC utilities directive ITALY will change Italian procurement practices in the telecommunications, transport, water, and energy sectors, but may not improve treatment of U.S. suppliers. U.S. agricultural exports to Italy are covered under the EC's Common Agricultural Policy (CAP). In addition, some Italian imports from the United States continue to be subject to quantitative restrictions or variable levies. Agricultural imports face numerous health and phytosanitary barriers, either at the EC or the national level, that result in the exclusion or restriction of certain U.S. products including beef, some seeds for planting, citrus (other than grapefruit), non-citrus fruit including apples and pears, and selected vegetables including tomatoes, eggplants and peppers. Telecommunications services are still tightly regulated by the state, which maintains a monopoly on voice telephony and the infrastructure, including all switching. Enhanced services must be offered over the public switched network or through dedicated leased circuits. Resale of leased line capacity remains prohibited until 1993, when it should be liberalized in accord with the EC Directive on Telecommunications Services. Multi-user networks are officially outlawed, but sometimes tolerated where need is demonstrated. Mobile phone services are at present the monopoly of the state-owned telephone utility, SIP. The granting of a second operating license has been discussed but, as of October 1991, neither a specification nor a process for awarding a license has been set. The Parliament in August 1990 passed a law which would require that a majority of TV broadcast time for feature films be reserved for EC-origin films, in keeping with the 1989 EC Broadcast Directive. Another law making its way through the Parliament contains regulations requiring movie theaters to exhibit EC-origin films a minimum number of days per quarter. Present regulations, widely ignored, include a 25 day-per-quarter quota. Access to the Italian standards-setting process is limited, and Italy does not accept test data from foreign sources. In sectors such as pollution control, standards vary in each region, creating a labyrinth of certification requirements for U.S. exporters. Some professional categories (eg. architects, lawyers, accountants) are restricted from practicing in Italy because of the requirement to either possess Italian nationality or to have received an Italian university degree. This should change as Italy adopts new EC guidelines. Rulings by local customs authorities, often arbitrary or incorrect, can result in denial or delays of entry of U.S. exports into the country. Considerable progress has been made in correcting these deficiencies, but the problems generally arise on a case-by-case basis. While official Italian policy is to encourage foreign investment, all industrial projects require a multitude of approvals and permits from the many-layered Italian bureaucracy, and foreign investments often receive close scrutiny. These lengthy procedures can, in and of themselves, ITALY present extensive difficulties for the uninitiated foreign investor. There are several industry sectors which are either closely regulated or prohibited outright to foreign investors, including domestic air transport, aircraft manufacturing, banking and the state monopolies (e.g., railways, tobacco manufacturing and electrical power). While privatization of state-owned enterprises is under intense political debate, there seems to be little chance of foreign investors taking a major stake in these companies. Recent examples in the food and chemical sectors show that there is a strong preference for a "national" solution. The expansion of modern distribution units, such as chain stores, department stores, supermarkets, hypermarkets, and franchises, is severely restricted by local practice and national legislation which subjects applications for large retail units above a certain merchandising surface to a lengthy and cumbersome authorization process. Investment incentives consisting of tax breaks and other measures were implemented to attract industrial investment to depressed areas, especially in the south of Italy. In September 1990, the Italian Parliament approved an anti-trust law. The new law gives the government the right to review mergers and acquisitions over a certain threshold. The government has the authority to block mergers involving foreign firms for "reasons essential in the national economy" if the home government of the foreign firm does not have a similar anti-trust law or applies discriminatory measures against Italian firms. A similar provision in the law applies to purchases by foreign entities of five or more percent of an Italian credit institution's equity. 6. Export Subsidies Policies Italy subscribes to EC directives and Organization for Economic Cooperation and Development (OECD) agreements on export subsidies. Through the EC, it is a member of the GATT Subsidies Code. Italy has an extensive array of export promotion programs. Grants range from funding of travel for trade fair participation to funding of export consortia and market penetration programs. Most programs are aimed at small-to-medium size firms. Italy provides direct assistance to industry and business firms to improve their international competitiveness. This assistance includes export insurance through SACE, the state export credit insurance body, as well as direct export credits. 7. Protection of U.S. Intellectual Property The Italian Government is a member of the World Intellectual Property Organization, and a party to the Berne and Universal Copyright conventions, the Paris Industrial Property and Brussels Satellites conventions, to the Patent Cooperation Treaty, and to the Madrid Agreement on International Registration of Trademarks. Intellectual property rights protection is marked by inadequate enforcement of copyrights, including widespread record, video and computer software piracy. Because of the serious piracy problems, in May 1991 Italy was again placed on 53-153 0 92 - 11 ITALY the U.S. Trade Representative's "Watch List" under the Special 301 provision of the 1988 Trade and Competitiveness Act. In past years, software piracy has been the intellectual property problem of particular concern to U.S producers. However, the approval of the EC Software Directive should create a new set of circumstances in the European software market. In October 1991, a bill was introduced into the Italian Parliament to make the EC Software Directive a part of Italian domestic law. The Italian software industry appears to be supporting early adoption of the bill. Italy is a net importer of intellectual property, particularly patents. We are unaware of any major cases in the last year that have arisen due to alleged patent infringement. In order to allow for an adequate period of patent protection for pharmaceutical producers, including many U.S. companies operating on the Italian market, a law was passed in the summer of 1991 permitting pharmaceutical producers to obtain a special certificate that extends patent protection beyond the usual 20 years. It is nearly impossible to accurately estimate the value of foregone exports of U.S. intellectual property due to the problems of patent infringement, copyright piracy and counterfeiting. However, U.S. software producers put the cost of software piracy alone at around of $750 million annually. 8. Worker Rights a. The Right of Association The Workers' Statute of 1970 provides for the right to establish a trade union, to join a union and to carry out union activities in the workplace. Trade unions are not government controlled, and the Constitution fully protects their right to strike, which is frequently exercised. In practice, the three major labor confederations have strong ideological ties to the three major political parties and administer certain social welfare services for the Government, which compensates them accordingly. Perhaps as the result of a 1990 law limiting the right to strike in essential public services, Italian workers went on strike much less in 1991 than in previous years. The number of hours lost to strikes declined by 40 percent in the first four months of 1991. b. The Right to Organize and Bargain Collectively The right of workers to organize and bargain collectively is protected by the Constitution and is freely practiced throughout the country. Labor-management relations are governed by legislation, custom, collective bargaining agreements, and labor contracts. A key element of labor-management-government cooperation affecting the industrial relations climate is the 1986 agreement on indexing wages (scala mobile) to the cost of living every six months. National collective bargaining agreements in fact apply to all workers regardless of union membership. ITALY The law prohibits antiunion discrimination by employers against union members and organizers. A new law in 1990 encourages workers in small enterprises (i.e., fewer than 16 employees) to join unions and requires "just cause" for dismissals from employment. C. Prohibition of Forced or Compulsory Labor Forced or compulsory labor, which is prohibited by law, does not exist in practice. d. Minimum Age for Employment of Children Under current legislation, no child under 15 years of age may be employed (with some specified exceptions). The Ministry of Labor, having consulted with the labor organizations, may, as an exception, authorize the employment on specific jobs of children over 12 years of age. Minimum work and safety standards are established by law and buttressed and extended in collective labor contracts. The Basic Law of 1923 provides for a maximum workweek of 48 hours no more than 6 days per week and 8 hours per day. The 8-hour day may be exceeded for some special categories. Most collective labor agreements provide for a 36- to 38-hour week. Overtime may not exceed 2 hours per day or an average of 12 hours per week. There is no minimum wage set under Italian law; basic wages and salaries are set forth in collective bargaining agreements. National collective bargaining agreements contain minimum standards to which individual employment agreements must conform. In the absence of agreement between the parties, the courts may step in to determine fair wages on the basis of practice in related activities or related collective bargaining agreements. Basic health and safety standards and guidelines for compensation for on-the-job injury are set forth in an extensive body of law and regulations. In most cases these standards are exceeded in collective bargaining agreements. f. Rights in Sectors with U.S. Investment Conditions do not differ from those in other sectors of the economy. |