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TITLE:  AUSTRIA ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE

                             AUSTRIA

                     Key Economic Indicators
  (Billions of Austrian schillings (AS) unless otherwise noted)


                                  1991      1992      1993 /1
Income, Production,
 and Employment

Real GDP (1985 prices)            1,615.6   1,639.8   1,628.3
Real GDP Growth (pct.)              3.0       1.5      -0.7
GDP (at current prices)           1,914.8   2,028.6   2,098.0
By Sector:
  Agriculture                        53.0      50.1      54.0
  Energy and Water                   52.3      55.6      58.1
  Manufacturing/Mining              502.3     525.9     526.0
  Construction                      140.3     153.6     161.4
  Rents                             n/a       n/a       n/a
  Financial Services                321.5     350.4     370.0
  Other Services                    511.7     546.4     568.2
  Public Services                   269.2     286.8     292.5
  Net Exports of
   Goods and Services              -789.7    -805.6    -814.1
Real Per Capita GDP 
 (in AS, 1985 prices)             206,460   207,990   205,000
Labor Force (000's)                 3,601     3,661     3,688
Unemployment Rate (pct.)            5.8       5.9       7.0


Money and Prices
(annual percentage growth)

Money supply (M2)                   8.2      -3.6      -2.0
Secondary Bond Market Rate /2       8.69      8.39      6.85
Personal Savings Rate /2           13.2      11.2      10.0
Wholesale inflation                 0.8      -0.2      -0.5
Consumer price index                3.3       4.1       3.7
Exchange rate 
 (AS/US$)                          11.68     10.99     11.60


Trade and Balance of Payments

Total exports (FOB) /4              479.0     487.6     459.4
Exports to U.S.                      13.5      12.9      15.4
Total Imports (CIF) /4              591.9     593.9     567.4
Imports from U.S.                    23.4      23.4      26.0
Aid from U.S.                       n/a       n/a       n/a
Aid from Other Countries            n/a       n/a       n/a
External Public Debt /3             148.5     172.1     188.0
Debt Service Payments                12.5      19.8      29.6
Gold and FOREX Res. (year-end)      148.3     178.3     n/a
Trade Balance /4                   -112.9    -106.3    -108.0
Balance with U.S. /4                 -9.9     -10.5     -10.6


Notes:

1/  Data as of October 1993 and economic forecasts.
2/  Actual, average annual rates, not changes in them.
3/  Figures reflect the federal government's external debt.
4/  Merchandise trade only.



1.  General Policy Framework

    Austria, a member of the European Free Trade Association
(EFTA) and the OECD, has a highly developed economy, with
services, including the important tourism sector, contributing
64 percent to total gross domestic product (GDP).  Austria is
highly integrated into the international economy, with exports
of goods and services amounting to almost 40 percent of GDP. 
The state-owned sector has traditionally played a significant
role in the economy, but it has declined steadily in recent
years.

    Formation of the European Union's single market and
liberalization in Central and Eastern Europe pose new
challenges for Austria, and the economy is expected to continue
to undergo major restructuring.  Following eleven consecutive
years of growth, Austria was hit by a recession in 1993 as a
result of the weak international economy, particularly in
Germany, its major trading partner.  Austria's real GDP is
expected to decline by about one percent in 1993.  The
recession has delayed progress in the government's goal of
reducing the budget deficit to 2.5 percent of GDP by 1994.  In
1992, the deficit was 3.3 percent of GDP.

    Austria's Grand Coalition Government of Social Democrats
and Conservatives has taken measures to make the Austrian
economy more liberal and open by introducing a major tax
reform, privatizing state-owned firms, and liberalizing
cross-border capital movements.  To gain access to the European
Union's (EU) internal market, Austria applied to join the EU in
July 1989, and negotiations began on February 1, 1993.  Austria
will participate in the European Economic Area (EEA), a free
trade zone agreement between EU and EFTA, which Austria
ratified on September 22, 1992.  The Government prepared
extensive new legislation in 1992 and 1993 to prepare Austrian
industry and business for the EEA and ultimately the EU.

    Austria has significantly increased trade and investment
activities in the Central and Eastern Europe (CEE) since 1989,
but has also faced stiffer competition from the influx of
low-priced Eastern products, and discrimination as a result of
the EU's free trade agreements with the CEE countries.  Because
of geographical proximity and longstanding ties, Austria has
been an important gateway for Western companies active in the
region.

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


2.  Exchange Rate Policy

    The Austrian National Bank (ANB) maintains a "hard
schilling policy," adjusting money supply and interest rates to
maintain the schilling/German mark exchange rate at AS 7.04 to
DM 1.  In 1992, the schilling appreciated against most other
European currencies.  In 1992/93, the ANB followed the German
Bundesbank's lead, but also cut interest rates further to
stimulate the weakening economy.  The value of the U.S. dollar
has dropped considerably vis-a-vis the schilling since 1990,
but recovered slightly in 1993.

    Since November 1991, Austria's foreign exchange regime is
fully liberalized.  On January 1, 1992, Austria introduced a
Capital Market Law on Public Securities which deregulated and
liberalized capital markets.  U.S. issuers of bonds and
securities are free to place offerings in the Austrian capital
market.


3.  Structural Policies

    The prospect of EU integration has sparked economic reform
measures during the past two years.  By participating in the
EEA, Austria will adopt about 60 percent of the EU's rules.  In
1993, the Austrian Government published its first federal
procurement law, and new legislation on cartels, competition,
and business law.  The Austrian Government has also taken steps
to make its subsidy programs consistent with EU regulations. 
The "Social Partnership", the system whereby the leaders of
Austria's labor, business, and agricultural institutions
maintain an ongoing dialogue and give their concurrence to new
economic legislation, is an important feature of the economy.

    A comprehensive tax reform will become effective January 1,
1994.  Aside from modernizing the Austrian tax system, it will
reduce personal income taxes and encourage investment and
equity capital formation.  The corporate tax will rise to a
uniform 34 percent; the abolition of the capital tax, however,
will significantly reduce the total tax burden for corporations.

    A more liberal Business Code became effective July 1, 1993
which makes obtaining licenses in several business categories
easier.  A new Cartel Law implements regulations for merger
control.  The Austrian government has also passed legislation
requiring environmental impact assessments for many new
projects that enters into force in mid-1994.


4.  Debt Management Policies

    At the end of 1992, Austria's external federal government
debt amounted to AS 172.1 billion or 17.4 percent of the
Government's overall debt.  Foreign debt was divided between
bonds (92.4 percent) and credits and loans (7.6 percent). 
Austria's foreign debt is denominated as follows: 40 percent in
Swiss francs, 30 percent in German marks, 27 percent in
Japanese yen, and 3 percent in Dutch guilders.

    Austria's public external debt amounted to 8.5 percent of
GDP in 1992 and is expected to rise to 9.0 percent in 1993.  
Debt service on this debt amounted to AS 19.8 billion in 1992
and was thus equal to 1.0 percent of GDP and 2.5 percent of
total goods and services exports.  The 1993 external federal
debt service of about AS 29.6 billion is equivalent to 1.4
percent of GDP and 3.6 percent of total exports.  Republic of
Austria bonds are rated AAA.  Austria is an active member of
the IMF, World Bank, and Paris Club, and follows debt issues
closely, particularly in relation to Eastern Europe and Russia.


5.  Significant Barriers to U.S. Exports

    Overall tariff levels in Austria are higher than in other
OECD countries.  If Austria becomes a full member of the EU,
Austria will reduce overall custom duties vis-a-vis the United
States, in particular for industrial products with a high
degree of processing.  Still, there exist administrative and
technical barriers such as import declarations, quotas, and
licensing, testing, and labelling requirements.

    In some sectors competition is restricted, in particular 
in agriculture.  High tariffs combined with complicated
licensing and quota systems limit agricultural imports. 
Discretionary licenses are required for imports of some food
products, including dairy products, red meats, poultry, grains
(except rice), fruits, vegetables, sugar, brown coal, and some
weapons.  The Austrian Government imposed quotas on cement
imports in 1991 and on fertilizers in April 1993 to control the
influx of low-priced products from Central and Eastern European
countries.

    Trade of cheese and beef between the U.S. and Austria is
conducted under two bilateral agreements.  The first, dating
from 1980, gives the U.S. a 600-ton quota for U.S. high quality
beef (HQB) in Austria, and the U.S. granted Austria a duty free
quota of 7,850 tons for cheese.  The second accord, negotiated
in 1992 under GATT Article XXVIII as a result of trade
concessions withdrawn by Austria on oilseeds products, provides
for an additional HQB quota of 400 tons for the U.S.  In 1992,
Austrian imports of HQB into Austria totalled $12.5 million and
Austrian exports of cheese to the U.S. were $13 million.  In
the fall of 1993, the U.S. requested consultations, claiming
that Austria was in violation of the agreements because of
changes in the import mechanism, failure to release the full
quota in a timely manner, and substantial increases in levies.

    Foreign firms offering banking, insurance, and legal
services are required to obtain business licenses, as are
Austrian firms.  The new Banking Act, which goes into effect on
January 1, 1994, limits Ministry of Finance discretion and
requires that bank licenses be issued if basic requirements are
met.  Insurance companies wishing to operate in Austria must
establish a branch office and have at least two managers
resident in Austria.  Other providers of financial services,
such as accountants, tax consultants, and property consultants
require specific proof of their qualifications, such as
university education or number of years of practice.  Other
service companies also require a business license, one of the
preconditions of which is legal residence.  As a result, U.S.
service companies often must form a joint venture with an
Austrian firm.  U.S. companies holding investments in several
countries participating in the EEA might benefit from more
liberal regulations with the entry into force of the EEA.

    Imports of foodstuffs, plant pesticides, pharmaceutical
specialities, or electrical equipment are permitted only if the
products pass standards set by the Austrian Testing Institute
or a government agency.  Due to the sometimes broad and diverse
testing procedures for pharmaceuticals, responses may take as
long as three or four years.  The Austrian Consumer Protection
Law and the Law Against Unfair Competition require that textile
products, apparel, household chemicals, soaps, toiletries, and
cosmetic preparations must be marked and labelled in German.  A
regulation implemented in September 1992 requiring that all
imported tropical forest products be identified and labelled
was lifted in March 1993.  All telecommunications equipment,
including customer premises equipment, private networks, cable
TV networks and value-added services, is subject to approval by
the Austrian Post and Telegraph Administration (PTT).  The
Austrian approval policy for customer premises equipment tends
to be liberal.

    The Austrian government generally welcomes all foreign
direct investment, but particularly investment which creates
new jobs in high-technology sectors, improves productivity, or
restructures and strengthens traditional industries.  One
hundred percent foreign ownership is permitted.  Repatriation
of earnings, interest payments, and dividends is not
restricted.  However, investors must sometimes deal with
complicated administrative procedures to obtain approval for
new operations.  It is also complicated for foreigners to
purchase real estate, due to the different environmental
regulations and land utilization plans of individual
provinces.  For example, environmental and administrative
approval of one recent large U.S. investment took nearly two
years.

    Austria ratified and implemented the Multilateral Trade
Negotiations Agreement on Government Procurement.  Provincial
and municipal governments are not, however, required to comply
with the rules.  Austria does not have restrictive
"buy-national" legislation and the principle of the best bidder
is usually maintained.  Bid times are sufficiently long to
allow foreign firms to submit bids.  Federal agencies publish
public tender notices in English and German.

    Austria published its first federal procurement law in
mid-1993 in preparation for participation in the EEA, adapting
the EU's Single Market legislation on procurement.  The
Austrian Government did not, however, implement Article 29 of
the EU Utilities Directive which mandates price preferences for
EC firms.  U.S. subsidiaries based in EEA countries will now be
able to bid for Austrian procurement contracts which before
were open only to Austrian companies.  The GATT Government
Procurement Code will continue to apply for U.S.-based
suppliers.  In the military sector, the Austrian Government
often requests offset arrangements; in early 1993, it concluded
such an agreement with the French Government for the purchase
of Mistral missiles.


6.  Export Subsidies Policies

    The Government provides export promotion loans and
guarantees within the framework of the OECD Export Credit
Arrangement and the GATT Subsidies Code.  In mid-1991, the
Austrian Kontrollbank (AKB), Austria's export financing agency,
revised its guarantee policy to set rates according to country
risk rather than fixed rates.  In the past year, the extension
of guarantees has become more restrictive.  The government
assumes guarantees for credit transactions of the AKB if the
proceeds of such transaction are used for financing exports and
contribute to the AKB's borrowing costs.  The Export Fund
provides export financing programs for small and medium-sized
companies with annual export sales of up to AS 100 million.


7.  Protection of U.S. Intellectual Property

    Laws are consistent with international standards.  Austria
is a member of the World Intellectual Property Organization as
well as of the Bern Convention for the Protection of Literary
and Artistic Works, the Paris Convention for the Protection of
Industrial Property, the Universal Copyright Convention, the
Patent Cooperation Treaty, the Geneva Phonograms Convention,
and the Brussels Satellite Convention.  It has also signed the
Budapest Treaty on International Recognition of the Deposit of
Microorganisms for the Purpose of Patent Procedure.

    Austria has a patent law, a trademark law, a law protecting
industrial designs and models, and since 1989, a law protecting
the pattern design of semiconductors.  Austria's new copyright
law of March 1993 provides for the protection of computer
software.  Austria is a member of the Paris Union International
Convention for the Protection of Industrial Property, and
patents on inventions are valid up to 18 years after
application.  Austria is also a member of the Madrid Trademark
Agreement.  Trademarks are protected for renewable ten-year
periods.  Protection for industrial designs and models has been
extended to 15 years.

    A levy on imports of home video cassettes and a compulsory
license for cable transmission is required under Austrian
copyright law.  The resulting revenues are collected and
distributed by marketing companies with 51 percent of the total
going to a special fund used for social and cultural projects. 
In 1993, the government was reviewing a proposal to require
compulsory licensing of videocassettes to tourist and
educational institutions.  There are no estimates of losses to
U.S. firms caused by intellectual property infringements in
Austria but they are believed to be negligible.


8.  Worker Rights

    a.  Right of Association

    Workers in Austria have the constitutional right to
associate freely and the de facto right to strike.  Guarantees
in the Austrian Constitution governing freedom of association
cover the rights of workers to join unions and engage in union
activities.  Labor participates in the "social partnership,"
and has a significant influence on economic policy.

    b.  Right to Organize and Bargain Collectively

    Austrian unions enjoy the right to organize and bargain
collectively.  The Austrian Trade Union Federation (ATUF) is
exclusively responsible for collective bargaining.  All workers
except civil servants are members of the Austrian Chambers of
Labor which do research, prepare legislative proposals, and
provide legal services.  ATUF and labor chamber leaderships are
democratically elected.  Workers are legally entitled to elect
one-third of the board of major companies.  Employers in
enterprises with more than five employees are legally obligated
to prove that job dismissals are not motivated by antiunion
discrimination.

    c.  Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited by law.

    d.  Minimum Age for Employment of Children

    The minimum legal working age is 15.  The law is
effectively enforced by the Labor Inspectorate of the Ministry
for Social Affairs.

    e.  Acceptable Conditions of Work

    There is no legally-mandated minimum wage in Austria. 
Instead, minimum wage scales are set in annual collective
bargaining agreements between employers and employee
organizations.  Workers whose incomes fall below the poverty
line are eligible for social welfare benefits.  Over 50 percent
of the workforce works a maximum of either 38 or 38.5 hours per
week, a result of collective bargaining agreements.  The Labor
Inspectorate ensures the effective protection of workers by
requiring companies to meet Austria's extensive occupational
health and safety standards.

    f.  Rights in Sectors with U.S. Investment

    Since labor laws practices are uniform throughout Austria,
worker rights in the sectors in which U.S. capital is invested
do not differ from those in other sectors of the economy.



        Extent of U.S. Investment in Selected Industries

             U.S. Direct Investment Position Abroad
               on an Historical Cost Basis - 1992
                   (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                                 D
Total Manufacturing                                     622
     Food & Kindred Products                   14
     Chemicals and Allied Products             19
     Metals, Primary & Fabricated               2
     Machinery, except Electrical              53
     Electric & Electronic Equipment          211
     Transportation Equipment                   D
     Other Manufacturing                        D
Wholesale Trade                                         422
Banking                                                  42
Finance and Insurance                                     *
Services                                                  D
Other Industries                                          *

TOTAL ALL INDUSTRIES                                  1,365

(D)-Suppressed to avoid disclosing data of individual companies
(*)-Less than $500,000

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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