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

                             DENMARK

                     Key Economic Indicators
     (Millions of Danish kroner (DKK) unless otherwise noted)


                                  1991      1992      1993 1/
Income, Production,
 and Employment

Real GDP (1985 prices) /2         581,720   588,721   590,000
Real GDP growth (pct.)              1.1       1.2       0.2
GDP at current prices /2          717,110   745,741   754,500
By sector:
  Agriculture                      29,050    26,393    30,000
  Energy, Water, Heat              12,957    14,327    15,000
  Manufacturing                   134,795   141,850   140,000
  Construction                     40,694    41,834    41,000
  Raw Materials, Mining             7,040     6,377     7,000
  Rents                            72,217    74,404    75,000
  Financial Services               21,336    21,542    21,500
  Other Services                  262,720   273,464   275,000
  Government Services             158,994   166,360   170,000
  Overlap Corrections             -22,693   -22,810   -20,000
Net Exports of
 Goods and Services                52,991    65,551    61,000
Real Per Capita GDP /2
 (DKK, 1985 prices)               112,861   113,842   113,700
Labor Force (000's)                 2,903     2,910     2,915
Unemployment Rate                    10.6      11.4      12.5


Money and Prices
(annual percentage growth)

Money Supply (M2) /3                  4.3       1.8       1.3
Base Interest Rate (pct.)            11.4      11.6      11.0
Personal Saving Rate (pct.)           5.1       4.9       6.0
Consumer Price Index                  2.4       2.1       1.2
Wholesale Inflation                   1.0      -1.1      -0.8
Exchange Rate ($ per DKK)           0.1563   0.1657    0.1550


Balance of Payments and Trade

Total Exports (FOB) /4            229,765   239,912   231,500
  Exports to U.S. /5               10,576    11,584    10,300
Total Imports (CIF) /4            206.798   203,536   192,000
  Imports from U.S. /5             13,045    11,473     9,000
Aid from U.S.                     n/a       n/a       n/a
Aid from other countries          n/a       n/a       n/a
External Debt                     264,000   241,000   213,000
External Debt Service
  Net Interest Payments            35,634    34,517    30,100
Gold and FOREX Reserves            44,563    44,964    60,000
Trade Balance /4                   22,967    36,376    39,500
  Balance with U.S. /5             -2,469       111     1,300


Notes:

1/  1993 figures are all estimates, generally based on six to
    eight-month data available as of October 1993.
2/  GDP at factor cost.
3/  M2 figures are not available.  The money stock figure
    includes the private nonbank sector's share of monetary
    base plus short term (up to two years) bank deposits.
4/  Merchandise trade, excludes EU agricultural export
    subsidies.
5/  1992 and 1993 figures include Puerto Rico.  Effective
    January 1993, Danish trade statistics omit U.S. products
    imported into Denmark via other EU countries. 
    Transshipped products formerly accounted for about
    one-third of Danish imports from the United States.



1.  General Policy Framework

    Denmark is a small, highly industrialized "value-added"
country with a long tradition of foreign trade, free capital
movements, political stability, an efficient and well-educated
labor force, and a modern infrastructure effectively linking
Denmark to the rest of Europe.  Denmark's natural resources are
concentrated in oil and gas fields in the North Sea, which are
increasingly meeting Denmark's energy needs.  They supplied
two-thirds of Denmark's energy consumption in 1992.  Because
Denmark remains dependent on imported raw materials,
semi-manufactures and coal, ensuring adequate supplies has
always been a major goal of Danish trade and industry
policies.  Denmark's active liberal trade policy in the EU,
OECD, and GATT often coincides with U.S. interests.  Danish
trade with EU and EFTA countries accounts for more than
three-quarters of total trade.  The United States, Denmark's
largest non-European trading partner, supplied close to six
percent of total Danish imports in 1992, including almost
one-third of coal imports, and more than 90 percent of aircraft
imports.

    Denmark's economy is now strong and well positioned to
benefit from the EU single market which began January 1, 1993. 
Danish voters reversed their earlier rejection of the
far-reaching "European Union" (the Maastricht
Treaty) in a nationwide referendum on May 18, 1993, thus
reinforcing Denmark's commitment to continued EU cooperation
and integration.

    The turnaround of the Danish economy since the late 1980's
resulted from the former minority center-right coalition
government's economic policies which in general have been
continued by the Social Democratic Party-led majority coalition
government which took power in January 1993.  Tight fiscal
policies, minimum increases in public expenditures and monetary
and exchange rate policies similar to Germany's were major
contributing factors in the turnaround.  Nevertheless, a few
important problems such as high unemployment and increasing
public sector budget deficits remain.

    Danish fiscal policy meets the conditions of the EU
economic and monetary union (EMU).  For example, Denmark 
complies with the prohibition against monetization of its
central government deficits.  Deficits are financed through the
sale of government bonds and treasury bills at market terms. 
Despite broad political agreement on putting a lid on the
public sector's size and costs, reduced tax revenues, increased
unemployment benefit and other transfer income costs, and the
introduction of recession response measures have led to growing
budget deficits.  The central government budget deficit
projection for 1993, initially DKK 33.9 Billion, has been
increased to DKK 54.5 Billion, or more than six percent of
gross domestic product (GDP).  The budget deficit for 1994, now
projected at DKK 55.6 Billion, is likely to increase
substantially.  Nevertheless, in order to combat unemployment,
the government is easing its fiscal policy through public
investments and new job creation measures.  An income tax
reform passed in 1993 will reduce marginal income tax rates
beginning in 1994, with the revenue loss being offset in part
by a new five percent labor contribution tax on gross incomes,
and new environmental taxes.

    Recently introduced foreign investment incentives include
the establishment in 1992 of preferential "business zones" in
high unemployment areas (as of October 1993 without any notable
effect) and lenient income taxation of high-paid foreigners
working in Denmark.  Since 1989, the government has spent about
DKK 65 million on promoting direct investment in Denmark by
U.S. and Japanese high-tech companies, but so far this effort
has borne limited fruit.

     The Danish fixed exchange rate policy (see section 2), 
pursued since the early 1980s, requires a monetary policy which
gives high priority to price stability.  This together with
fully liberalized capital movements has meant limited room for
pursuing independent interest rate and liquidity policies. 
Danish interest rates are linked closely to those of Germany. 
In order to tighten management of money-market rates (without
adjusting official interest rates), in April 1992 the Danish
Central Bank, which holds monetary policy authority, introduced
a new liquidity management system via weekly issuances of
two-week deposit certificates and by providing liquidity to
commercial banks via re-purchases of both treasury bills and
deposit certificates.  Low inflation together with monetary and
the exchange rate policies have produced high real interest
rates, which helped maintain a strong krone during the ERM
crisis in July.  On the other hand, high real interest rates
impede investment.


2.  Exchange Rate Policy

    Denmark is a member of the European Monetary System (EMS)
and its exchange rate mechanism (ERM).  It supports the
objectives of the EMU, but has the right not to participate in
its third phase (establishment of a single EU currency and
relinquishment of national sovereignty over monetary policy). 
Since 1982, the government has successfully resisted solving
Denmark's economic problems through exchange rate adjustments
and it continues this policy.  In August 1993, the
trade-weighted value of the krone was almost two percent lower
than in August 1992, due mostly to the volatile developments in
the ERM in July 1993, when the ERM fluctuation bands were 
widened to plus or minus 15 percent.  In comparison, the value
of the krone in March 1993 was up more than eight percent due
to the devaluations in 1992 of the British pound and the
Swedish krone.  Intervention by the Danish Central Bank (and
German Bundesbank) protected the krone's position in the ERM,
but drained foreign exchange reserves which in turn required
new large government borrowing abroad.  As foreign exchange
markets stabilize, Denmark expects return flows of foreign
exchange reserves and repayment of foreign debt.

     The value of the krone against the U.S. dollar in August
1993 was almost 20 percent lower than in August 1992.  Although
by October the krone had strengthened by some four percent,
deterioration in U.S. price competitiveness is likely to have a
negative impact on U.S. exports to Denmark.


3.  Structural policies

    Danish pricing policies are based on free market
principles.  Entities with the ability to fix prices because of
their dominance in the market are regulated by a competition
council.

    In spite of the tax reform passed in 1993, Danes generally
concede that the tax system needs further overhaul to improve
incentives for work and investment, and to reduce the
"underground" economy, which today may equal as much as 10
percent of GDP.  However, beginning in 1994, the government is
reducing high Danish marginal income tax rates in order to
bring the Danish income tax system closer to those of other EU
countries, which are structurally different from that of
Denmark.  Uniquely among EU countries, Danish employers pay
virtually no non-wage compensation.  Most of employers' costs
of sick leave and unemployment insurance are paid by the
government.  Employees pay their part of unemployment insurance
out of wages.  Another major concern is the high Danish
value-added tax (VAT), which, at 25 percent, is the highest in
the EU.  However, as VAT revenues constitute more than
one-quarter of the central government's total revenues, a
reduction would have severe budgetary consequences.  The
government therefore has no plans to reduce the VAT, but hopes
that EU VAT rates, particularly those of Germany, will
gradually approach the Danish rate.

    Despite success in resolving most of Denmark's former
structural imbalances, a number of problems remain, most
notably high unemployment.  Despite high unemployment, labor
mobility, both geographically and sectorally, remains low in
Denmark.  This is in part due to lenient requirements to
qualify for unemployment benefits and structural rigidity which
prevents crossing craft lines.  At present, about two-thirds of
the cost of unemployment benefits is paid from general
revenues.  The former government would have liked to see
extensive labor market reform, including transferring a major
part of the financing of the unemployment insurance system to
employers and employees.  However, the present government's
efforts concentrate on new job-creation measures, including
advancing public investment projects, some of which may be open
to foreign, including U.S., competition.

4.  Debt Management Policies

    Since 1963, recurring, large balance of payments (BOP)
deficits produced a foreign debt which in 1988 peaked at DKK
293 billion, or 40 percent of GDP.  However, since 1990, the
BOP has moved into surplus and is projected to reach DKK 28
billion in 1993.  Consequently, foreign debt is expected to
fall to about 24 percent of GDP by the end of 1993.  Despite
BOP surpluses, net interest payments on the debt continue to be
a burden, accounting for some seven percent of total export
earnings.  Standard and Poor's and Moody's Investors services
rate Denmark AA and Aal, respectively, reflecting the strong
economy and the large BOP surplus.  Denmark's public sector is
a net external debtor, while the private sector, including
banks, is a net creditor.  At the end of 1992, the public
sector's net foreign debt, including foreign exchange reserves,
was the equivalent of DKK 292 billion, of which
krone-denominated government bonds accounted for about
two-thirds.

    The volatility of the dollar during the 1980s triggered a
Danish government decision in early 1988 to reduce the dollar's
share of the central government's debt denominated in foreign
currencies.  In 1984, more than 50 percent of this debt was
denominated in dollars; in 1992 the ratio had dropped to
one-third.  The dollar debt was mostly shifted into debt
denominated in German marks, Swiss francs, and European
Currency Units (ECU).

    Danish development assistance is large by international
standards, accounting for one percent of gross national product
(GNP), or about DKK 9.0 billion.  It is almost equally
distributed between bilateral and multilateral assistance. 
Bilateral assistance is concentrated in about 14 countries with
a per capita GNP of less than $1,705 (1992).  Denmark also
supports the new democracies in East and Central Europe and in
1994 will spend about DKK 2.1 Billion for assistance (0.25
percent of GNP).  Finally, Denmark plans to spend in 1994 DKK
4.1 billion for new multinational environmental and disaster
programs, including "pre-asylum" refugee costs in Denmark.
Denmark actively participates in the IMF, the EBRD, the World
Bank, and the Paris Club.


5.  Significant Barriers to U.S. Exports

    Heavily dependent on foreign trade, Denmark maintains few
restrictions on imports of goods and services and on
investment.  Denmark adheres to all GATT codes and, as a member
of the EU, also to all EU legislation which impacts on trade
and investment.  There are no special Danish import
restrictions or licenses which pose problems for U.S. industrial
products exporters.  Agricultural goods must compete with
domestic production, protected under the EU's common
agricultural policy.  Denmark also has stringent phytosanitary
requirements.

    With the implementation of the EU single market on January
1, 1993, most industrial standards, testing, labelling and
other requirements are being harmonized within the EU.  With
respect to services, the Danish credit card act has, since
1987, prevented credit card companies from operating in Denmark
on international terms.  This legislation prohibits credit card
companies from charging vendors for costs related to the use of
cards held by Danes.  As a consequence, American Express
stopped issuing credit cards to Danes for use in Denmark. 
However, other credit card companies continued operations under
the new requirements.

    Denmark, like most other countries, requires an exam or
experience in local law in order to practice law.  In addition,
investment in stockbroker companies requires that the managing
director has at least three years of experience in securities
trade.  However, experience in a U.S. stock exchange will
probably not alone meet this requirement.

    Denmark provides national, and in most instances
nondiscriminatory, treatment to all foreign investment. 
Ownership restrictions are only applied in a few sectors: 
hydrocarbon exploration (which in general requires limited
government participation on a carried interest basis); arms
production (a maximum of 40 percent of equity and 20 percent of
voting rights may be held by foreigners); aircraft
(third-country citizens or airlines may not directly own or
exercise control over aircraft registered in Denmark); and,
ships registered in the Danish International Ships Register (a
Danish legal entity or physical person must own a significant
share and exercise a significant control (20-25 percent) over
such ships).

    Denmark, as a general rule, applies a reciprocity test to
foreign direct investment in the financial sector, which,
however, has not been an obstacle to U.S. investment.  When
established, an entity receives national treatment.  The Danish
telecommunications network remains a government-controlled
monopoly, but is open to minority portfolio investment.  A
second private cellular mobile telephone network (general
system mobile-GSM) with the U.S. Bellsouth participating,
competes with the government-controlled network.

    Denmark's government procurement practices meet the
requirements of the GATT Government Procurement Code and EU
public procurement legislation.  Denmark implemented the EU
"Utilities Directive" January 1, 1993, but indications are that
the voluntary "50-percent EU-origin requirement" will be
interpreted liberally by the Danish government.  Countertrade,
or rather offset trade, is used by the Danish government only
in connection with military purchases which are not covered by
the GATT code.  Denmark has no "buy Danish" laws.

    There is no record of U.S. companies complaining about
burdensome customs procedures.  Denmark has an effective and
modern customs administration which has reduced processing time
to a minimum.


6.  Export Subsidies Policies 

    EU agricultural export restitutions (subsidies) in 1992 of
DKK 5.4 billion were equivalent to about one-third of the value
of Danish agricultural exports to non-EU destinations. 
Government support for agricultural export-promotion programs
is insignificant.  Denmark has no direct subsidies for its   
nonagricultural exports except for shipbuilding.  There are no
special programs to subsidize exports by small companies.

Indirectly, however, Denmark has programs to assist export
promotion, research and development, regional development, and
a limited number of preferential financing schemes aimed, inter
alia, at increasing exports.  In 1989, Denmark restructured its
development assistance and abolished the distinction between
untied and tied bilateral assistance.  However, the principle
of using 50 percent of all bilateral assistance for purchases
from Danish companies was maintained.  All these programs,
however, apply equally to foreign companies producing in and
exporting from Denmark.

    A 1992 EU survey shows that Denmark has one of the lowest
rates of state aids to industry (about two percent of GDP)
among EU countries.  Shipbuilding support, where Danish
subsidization is within the ceiling set in the EU shipbuilding
directive (nine percent of the contract value), accounts for
almost one-third of total Danish state aids to industry. 
Denmark is an ally of the United States in the efforts to phase
out shipbuilding subsidies internationally.


7.  Protection of U.S. Intellectual Property

    Denmark is a party to, and effectively enforces, a large
number of international conventions and treaties concerning
protection of intellectual property rights, and therefore
Denmark offers adequate protection of those rights.

    Patents:  Denmark is a member of the World Intellectual
Property Organization (WIPO).  It adheres to the Paris
Convention for the Protection of Industrial Property, the
Patent Cooperation Treaty (PCT), the Strasbourg convention, and
the Budapest convention.  Denmark has also ratified the
European Patent Convention and the EU Patent Convention.

    Trademarks:  Denmark is a party to the 1957 Nice
Arrangement and to the Arrangement's 1967 revision.  A new
Danish Trademark Act entered into force January 1, 1992 which
also implements the EU Trademark Directive harmonizing EU
member countries' trademark legislation.  Denmark strongly
supports efforts to establish an EU-wide trademark system.  In
addition, Denmark has legislation implementing EU regulations
for the protection of the topography of semiconductor products
which also extends protection to legal U.S. persons.

    Copyrights:  Denmark is a party to the 1886 Bern Convention
and its subsequent revisions, the 1952 Universal Copyright
Conventions and its 1971 revision, the 1961 International
Convention for the Protection of Performers, etc., and the 1971
Convention for the Producers of Phonograms, etc.  There is
little piracy in Denmark of records or videocassettes. 
However, software piracy in Denmark is estimated at about DKK
700 million annually.  It is now on the decline due to sharply
reduced prices, improved protection of programs, and efforts to
combat such piracy by the international software company-owned
Business Software Alliance.  Piracy of other items, including
books, appears very limited.  There are no indications that
pirated products are being imported to or exported from
Denmark.  One possible copyright problem involves the 
imposition on January 1, 1993 of a Danish levy on blank audio
and video tapes for home use.  A large share of revenues from
the levy will be passed on to Danish artists and artists from
countries having a comparable levy.  Since the United States
does not impose a comparable levy, U.S. artists, who probably
account for two-thirds of works being copied by Danish homes,
would not benefit from the levy.

    The embassy has no record of other complaints by U.S.
organizations, exporters or subsidiaries in Denmark
regarding infringement of intellectual property rights
or unfair Danish practices in this field.  Thus the impact on
U.S. trade appears nominal.  Denmark is neither named on the
Special 301 Watch List nor on the Priority Watch List.  Nor is
it identified as a priority foreign country.


8.  Worker Rights

    a.  Right of Association:

    Workers in Denmark have the right to associate freely, and
all (except those in essential services and civil servants)
have the right to strike.  Approximately 80 percent of Danish
wage earners belong to unions.  Trade unions operate free of
government interference.  They are an essential factor in
political life and represent their members effectively.  In
1992, 62,800 workdays were lost due to labor conflicts (down
from 101,000 in 1991).  Greenland and the Faroe Islands have
the same respect for worker rights, including full freedom of
association, as Denmark.

    b.   Right to Organize and Bargain Collectively

    Workers and employers acknowledge each other's right to
organize.  Collective bargaining is widespread.  Salaries,
benefits, and working conditions are agreed in bienniel
negotiations between the various employers' associations and
their union counterparts.  If negotiations fail, a national
conciliation board is tasked with mediating.  Its proposal is
voted on by both management and labor.  If the proposal is
turned down, the government may force a legislated solution
(usually based upon the mediator's proposal).  In case of a
disagreement during the life of a contract, the issue may be
referred to the labor court.  The decisions of the court are
binding.  The labor contracts which result from collective
bargaining, as a general rule, are also used by the nonunion
sector.

    Labor relations in non-EU parts of the Danish Realm (i.e.
the Faroe Islands and Greenland (a beneficiary of the U.S.
Generalized System of Preferences), are generally conducted in
the same manner as in Denmark proper.

    c.   Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited and does not exist
in the Danish Realm.

    d.   Minimum age for employment of children

    The minimum age for full-time employment is 15 years.  The
law prescribes limitations on the employment of those between
15 and 18 years of age, and it is enforced by the Labor
Inspection Service, an autonomous arm of the Ministry of Labor.

    e.   Acceptable Conditions of Work

    There is no legally mandated workweek nor national minimum
wage.  However, the workweek set by labor contracts is 37
hours.  The lowest hourly wage in any national labor agreement
is sufficient to provide a worker with a decent standard of
living.  Danish law provides for five weeks of paid vacation. 
Danish law also prescribes conditions of work, including safety
and health; duties of employers, supervisors, and employees;
work performance; rest periods and days off; medical
examinations; and maternity leave.  The Labor Inspection
Service ensures compliance with work place legislation.

    Similar conditions of work are found in Greenland and the
Faroe Islands, except that their workweek is 40 hours. 
Unemployment benefits in Greenland are either contained in
Labor Contract Agreements or come from the general social
security system.  A general unemployment insurance system in
the Faroe islands was established in August 1992, replacing
former unemployment compensation covered by the social security
system.  As in Denmark, sick pay and maternity pay fall under
the social security system.

    f.  Rights in Sectors with U.S. Investment

    Worker rights in those goods-producing sectors in which
U.S. capital is invested do not differ from the conditions in
those other sectors where no U.S. investment is found.


         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                                315
    Food & Kindred Products              137
    Chemicals and Allied Products          D
    Metals, Primary & Fabricated          50
    Machinery, except Electrical           D
    Electric & Electronic Equipment       21
    Transportation Equipment               *
    Other Manufacturing                   85
Wholesale Trade                                    503
Banking                                              D
Finance and Insurance                              351
Services                                           116
Other Industries                                    13

TOTAL ALL INDUSTRIES                             1,707


(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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