SWEDEN European Economic Area (EEA) between the EC and EFTA will result in close harmonization of Swedish legislation and practices with those of the EC. Domestic economic policy goals are aimed at regenerating economic growth while striving for a reasonable degree of price stability and low unemployment. The policy instruments used to achieve these goals are the traditional monetary and fiscal ones, as well as an active labor market policy (retraining and structural adjustment) and regional development policy (support to economically weak areas). the past few decades, these policies brought the level of the country's national debt, as at mid-year 1991, to 44 percent of GDP. Roughly one-eighth is financed by foreign loans, the remainder by government bonds, treasury notes, a national savings scheme, and so forth. Over In late 1991, Sweden found itself in the trough of a recession, with unemployment at the unprecedentedly high level of around 4 percent. The official outlook for 1992 remains bleak. 2. Exchange Rate Policies Between 1973 and 1977, Sweden linked its currency to those in the European Common Market's monetary "snake" system. The krona was thereafter pegged to a trade-weighted "basket" of foreign currencies in which the U.S. dollar was accorded double weight because of its importance for international trade in such commodities as oil, pulp, and paper. Wage-cost pressures during the early 1980s, however, brought two successive Swedish devaluations of 10 and 16 percent. By 1991, there was again speculation that the krona might again be devalued. In consequence, the krona weakened against other currencies. To prevent foreign exchange from fleeing the country, the Central Bank intervened in the money market to keep interest rates high. In order to lay the ghost of devaluation permanently to rest, the Central Bank, with the Government's blessing, announced in May that the krona would henceforth be tied to the European Currency Unit (ECU) at a benchmark of SEK 7.4 to the ECU, plus or minus 1.5 percent. Sweden applied a battery of foreign exchange controls until the international deregulation process, particularly that occurring in the EC, forced it to follow suit in the latter half of the 1980s. Following liberalization in mid-1990, the only remaining restrictions of this legacy involve the requirement that Swedish government bonds acquired by interests outside the country must be deposited in a Swedish bank or with an authorized stockbroker, and the stipulation that Swedish individuals (and some Swedish firms) are still prohibited from making deposits in foreign banks and from paying unlimited life insurance premiums to insurance companies outside the country. Various transaction requirements remain in place to maintain statistical coverage and ensure satisfactory tax control. There are no restrictions on remittances of profits, of proceeds from liquidation of an investment, or of royalty and license fee payments. Similarly, a subsidiary or branch may SWEDEN transfer fees to a parent company outside of Sweden for management services, research expenditures, etc. In general, yields on invested funds, such as dividends and interest receipts, may be freely transferred. A foreign-owned firm may also raise foreign currency loans both from its parent corporation and credit institutions abroad. The Swedish tax burden is the highest in the OECD, with government receipts (direct/indirect taxes and social security) equivalent to about 64 percent of GDP, versus an OECD average of 38 percent. Since 1982, approximately nine-tenths of Sweden's economic growth has been taken by increased taxes. The marginal tax rates levied on personal income inched up over the years to levels which are now recognized as being detrimental to the efficient working of the economy. A broad tax reform of 1990-91, by reducing marginal income tax rates, is increasing the real disposable income of most Swedes. On the corporate side, effective taxes are comparatively low and depreciation allowances on plant and equipment are generous, though social security contributions for the work force add a further one-third or so to employers' wage bills. Like the situation in the EC countries, most goods and services for domestic consumption are subject to a value-added tax. The general rate was raised to an effective 25 percent of retail price in mid-1989. Beginning in 1992, lower rates will be applied to food, domestic transportation, and tourist-related services, and over time the Government intends to lower the general rate to bring it in closer harmony with levels in the EC. Trade in industrial products between Sweden and EC and EFTA countries are not subject to customs duty, nor is a significant proportion of Sweden's imports from developing countries. Import duties are among the lowest in the world, averaging less than percent ad valorem on finished goods and around 3 percent on semi-manufactures. Most raw materials are imported duty free. Until recently, two areas of the economy were particularly affected by government regulation: agriculture, and clothing and textiles. Sweden implemented a new food and agricultural policy in mid-1991 aimed at abolishing its complicated postwar system of regulating agricultural prices. Among other things, the new policy removed farm gate price guarantees. Instead, those prices are now determined by both domestic and export demand, though they continue to be supported by import levies. Funds for the subsidization of exports may no longer be raised collectively from producers, but production surpluses of grain and meat are, transitionally, still receiving government export subsidization. For 1992, there will be a grain surplus of around one million metric tons but less significant exportable amounts of other agricultural commodities. As to clothing and textiles, Sweden removed all barriers to trade in this area in mid-1991, with the expiry of the Multi-Fiber Arrangement. Support is being provided until mid-1992 to allow the domestic industry to adjust. SWEDEN There is very little regulation of exports apart from control of arms exports and a law governing the reexport of certain high technology products. The latter control was introduced in 1987 to stop Sweden being used as a transit point for the transfer of foreign high-technology equipment. The Government has substantially deregulated telecommunications in Sweden and restructured the industry to promote competition and encourage efficiency. 4. Debt Management Policies Sweden's external debt was incurred chiefly by central government in the aftermath of oil price hikes in the mid-1970s in order to buttress ailing industry. Shipbuilding, iron ore mining, and forestry, once Swedish industrial staples, received support over a ten-year period to retrench and restructure. Current debt policy is to incur no further debt of this kind, which in mid-year 1991 was the equivalent of around 5 percent of GDP. Management of the debt is posing no problems to the country and has no implications for the United States. 5. Significant Barriers to U.S. Exports and Investment To help ensure free Swedish access to foreign markets, Sweden has opened its own markets to imports and foreign investments, and campaigns vigorously for free trade in GATT and elsewhere. Import licenses are not required in Sweden, except for restricted items such as munitions, dangerous chemicals, etc. Sweden enjoys licensing benefits under Section 5(k) of the U.S. Export Administration Act. Sweden makes wide use of EC and international standards, labeling, and customs documents, in order to facilitate its own exports. Service exports to Sweden face some barriers. Swedish financial markets have been largely deregulated in recent years, and foreign banks, as of mid-1990, are now allowed to open branches in Sweden and purchase into Swedish banks. Until recently, a foreign insurer was only allowed to sell his insurance policies in Sweden by establishing a branch office (general agency). This requirement has been changed. As of January 1, 1990, an insurance broker is allowed to provide insurance from foreign insurance companies without a branch office in Sweden. As of August 1, 1990 a foreign insurance company, after authorization by the Finance Inspectorate, may market insurance policies in Sweden through a Swedish insurance company if the companies belong to the same group or have established an agreement to cooperate. Foreign investment is welcome in Sweden, though foreign ownership is not permitted or is restricted in air transportation, the merchant marine, and the manufacture of war materiel. In addition, a state-sanctioned monopoly protects health care. Both incoming and outgoing direct investment is screened by the Central Bank for statistical purposes. SWEDEN Sweden does not offer special tax or other inducements to attract foreign capital. Foreign-owned companies enjoy the same access as Swedish-owned enterprises to the country's credit market and government-sponsored incentives to business. Many of the Swedish corporations listed on the Stockholm Stock Exchange have a foreign ownership restriction clause in their articles of incorporation. Such clauses limit foreign ownership at any one time to a level corresponding to a percentage of the firm's share capital and of the voting strength of its shares (usually 40 percent of the share capital and 20 percent of the voting strength). Removal of or changes in such a clause can only be made at a general meeting of shareholders. The Government has no immediate plans to ban the use of foreign ownership restriction clauses. A general control which has hitherto applied to foreign purchases into Swedish firms is that a foreign legal entity or individual must obtain official sanction to acquire shares representing a holding of equity capital or voting power in a Swedish corporation in excess of 10 percent, or to raise an existing holding above thresholds of 20, 40, or 50 percent. Approval has usually been forthcoming as long as the move was not viewed as being detrimental to the public interest. This legislation and the requirement that foreign nationals and companies need official permission to acquire real estate for business purposes, including mining and forestry, is to be abolished in 1992. Government procurement is usually open to foreign suppliers, and the Swedish Government has no official policy of imposing countertrade requirements. 6. Export Subsidies Policies The Swedish Government provides basic export promotion support through its financing, jointly with Swedish industry, of the Swedish Trade Council. The Council works through Swedish embassies and trade offices in key markets, conducting a broad range of programs from preparation of promotional and technical literature to special exhibitions and seminars. The Swedish Government and Swedish industry also jointly finance the Swedish Export Credit Corporation (SEK), which grants medium- and long-term credits to finance exports of capital goods and large-scale service projects. Working with the Swedish Agency for Technical and Economic Cooperation (BITS), the SEK also provides mixed low-interest credits to LDC's with long maturity and grace periods. The Swedish Export Credit Guarantee Board (EKN) provides insurance against losses caused by default of a foreign debtor or buyer of Swedish exports. On average the guarantees cover 85 to 95 percent of the exporter's credit risk. Since mid-1991, government financial support for research and development, and for programs to assist regional development in economically weak areas has been the responsibility of a single agency, the National Board for SWEDEN Industrial and Technical Development (NUTEK). During 1990, before the formation of NUTEK, funds totaling SEK 5.3 billion ($900 million) were channeled in various supportive measures to these areas, corresponding to 2 percent of value added in the industrial sector. Sixty percent of the support went to research and development, export promotion, and programs to assist small businesses and economically weak regions. There are no tax or duty exemptions on imported inputs, no resource discounts to producers, nor is there a multiple exchange rate system in Sweden. Sweden is a signatory to the GATT Subsidies Code. 7. Protection of U.S. Intellectual Property Sweden is a member of the World Intellectual Property Organization and is a party to the Berne Copyright and Universal Copyright Conventions and to the Paris Convention for the Protection of Industrial Property, as well as to the Patent Cooperation Treaty. Sweden strongly protects intellectual property rights. The laws are adequate and clear, enforcement is good, and the courts are efficient and honest. Sweden supports efforts to strengthen international property rights, and often shares U.S. positions in international meetings on the subject. Workers have the right to associate freely and to strike. A large majority of the working population, including career military personnel and civilian government officials, belongs to trade unions. Unions conduct their activities with complete independence from the Government and political parties, although the Confederation of Labor Unions (LO), the largest federation has been allied for many years with the Social Democratic Party. b. The Right To Organize and Bargain Collectively Workers are free to organize and bargain collectively. Collective bargaining is carried out in the form of national framework agreements between central organizations of workers and employers, followed by industry and plant-level agreements on details. Swedish law fully protects workers from antiunion discrimination and provides sophisticated and effective mechanisms for resolving disputes and complaints. Disputes concerning violations of labor laws are in the vast majority of cases solved by informal discussions between the involved parties. Should a settlement not be possible, there is a labor court that tries cases of general interest for guidance and interpretation of the law, and its rulings in turn are followed by other courts. C. Prohibition of Forced or Compulsory Labor Forced or compulsory labor is prohibited by law and does |