Return to: Index of "1994 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage



U.S. DEPARTMENT OF STATE
AUSTRIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                             AUSTRIA

                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)


                                   1992      1993        1994 1/

Income, Production and Employment:

Real GDP (1985 prices) 2/          78.8      78.6       80.6
Real GDP growth (pct.)              1.6      -0.3        2.5
GDP (at current prices)           185.2     181.4      195.4
By Sector:
  Agriculture                       4.5       4.1        4.4
  Energy/Water                      5.1       5.1        5.3
  Manufacturing/Mining             46.9      43.7       47.4
  Construction                     13.8      13.5       14.7
  Rents                             N/A       N/A        N/A
  Financial Services               32.7      33.9       36.6
  Other Services                   50.7      49.5       53.0
  Public Services                  24.9      25.2       27.0
Net Exports of Goods & Services   -73.3     -69.1      -73.5
Real Per Capita GDP
  (USD/1985 base) 2/              9,990     9,890     10,090
Labor Force (000s)                3,663     3,684      3,685
Unemployment Rate (pct.) 3/         3.6       4.3        4.3

Money and Prices:
(annual percentage growth unless otherwise noted)

Money Supply (M2)                   6.2       3.2        3.0
Secondary Bond Market Rate 4/      8.39      6.74       6.50
Personal Savings Rate 4/           11.2      11.5       12.0
Wholesale Inflation                -0.2      -0.4        1.0
Consumer Price Index                4.1       3.6        3.0
Exchange Rate (AS/USD) 5/         10.99     11.63      11.40

Balance of Payments and Trade:

Total Exports (FOB)                44.4      40.2       44.1
  Exports to U.S.                   1.2       1.3        1.4
Total Imports (CIF)                54.0      48.6       53.8
  Imports from U.S.                 2.1       2.1        2.3
Aid from U.S.                       N/A       N/A        N/A
Aid from Other Countries            N/A       N/A        N/A
External Public Debt 6/            15.7      18.3       21.5
Debt Service Payments               1.8       2.5        2.2
Gold and FOREX Reserves (year-end) 16.2      18.3        N/A
Trade Balance 7/                   -9.7      -8.4       -0.9
  Trade Balance with U.S. 7/       -0.9      -0.8      -10.0


N/A--Not available.

1/ Data as of October 1994 and economic forecasts.
2/ Converted at the 1985 exchange rate of AS 20.69=US$1.
3/ Unemployment rate according to OECD method.
4/ Average annual rates.
5/ There is only an official rate, no parallel rates.
6/ Figures reflect the federal government's external debt.
7/ 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 a high
standard of living.  Austria's economy 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.  Austria achieved a top economic and political
goal - full membership in the European Union (EU), which
occurred on January 1, 1995.  The Austrian Parliament ratified
the EU accession agreement by an overwhelming majority on
November 11, 1994.

    After eleven consecutive years of growth, the Austrian
economy experienced a mild recession in 1993, by contracting
0.3 percent in Austrian Schilling (AS) terms.  In 1994, Austria
has again entered a phase of swift recovery.  The budget
deficit has increased, however, from the planned three percent
of GDP to 4.7 percent in 1993 as a result of the weak economy
and spending increases, particularly for unemployment benefits
and a second year of maternity leave.  Austria financed its
1993 federal budget deficit of AS 117.1 billion (10 billion
dollars) primarily through Schilling and foreign currency
bonds.  The Austrian National Bank does not set money supply
targets, but uses interest rates, in particular the rediscount
rate and the rate for open market transactions, as its main
tool for maintaining the mark-schilling peg. 

    Formation of the European Union's single market and the
transformation occurring in Central Europe have posed
significant challenges for Austria, with the need for major
restructuring.  Austria's Grand Coalition Government of Social
Democrats and Conservatives undertook measures to make the
Austrian economy more liberal and open by introducing tax
reforms, privatizing some state firms, and liberalizing
cross-border capital movements.  Austria has significantly
increased trade and investment activities in Central Europe
since 1989, but has also faced stiffer competition from the
influx of low-priced Eastern products, and discrimination
resulting from the EU's free trade agreements with those
countries.  In July 1994, Austria's parliament approved the
Uruguay Round agreements.  Austria ratified the Uruguay Round
agreements in December and became a founding member of the
World Trade Organization on January 1, 1995.


2.  Exchange Rate Policy

    Because of the Federal Republic of Germany's importance as
a trading partner, the Austrian National Bank (ANB) maintains
its "hard schilling policy" by adjusting money supply and
interest rates to peg the schilling to the German Mark at an
exchange rate of AS 7 equals DM 1.  The schilling continued to
appreciate vis-a-vis many other European currencies in 1993, 
which meant that Austria's international competitiveness
deteriorated.  After a small recovery in 1993, the dollar
started to decline again vis-a-vis the schilling in late summer
1994.  Austria's foreign exchange regime is fully liberalized. 
Austrian capital markets were deregulated and liberalized by
the new Capital Market Law on Public Securities introduced in
1992.  U.S. issuers of bonds and securities are free to place
offerings in the Austrian capital market.  


3.  Structural Policies

    Austria's participation in the European Economic Area (EEA)
beginning in January 1994 and preparations for EU membership
have resulted in broad structural reform.  Most non-tariff
barriers to merchandise trade have been removed, financial and
other services have been liberalized, and cross-border capital
movements and market access for foreign bonds have been fully
liberalized.

    Following a preliminary set of tax reform measures in 1992
and 1993 geared at the environment and tax simplification, a
comprehensive tax reform became effective January 1, 1994. 
Main features of the reform were an increase of the general tax
credit for all taxpayers, the streamlining of tax procedures,
and the abolition of existing taxes such as capital tax and tax
on industry and trade.  To compensate for part of the revenue
shortfall, the corporate tax rate was raised from 30 to 34
percent. 

    Other laws and regulations have been amended to open up the
economy.  A more liberal Business Code became effective July 1,
1993, which reduced licensing requirements.  On November 1,
1993, Austria's new cartel law allowing for merger control
became effective.  The government enacted on July 1, 1994, a
new law requiring environmental impact assessments for many
projects in the waste, transportation, and energy sectors, and
for large industrial projects.  Austria's participation in the
EEA required Austria to implement its first federal procurement
law and to make its subsidy programs consistent with EU
regulations.  


4.  Debt Management Policies

    Austria's external debt management has no significant
impact on U.S. trade.  At the end of 1993, Austria's external
Federal Government debt amounted to AS 212.9 billion (18
billion dollars), or 19.2 percent of the Government's overall
debt.  In terms of GDP, Austria's public external debt amounted
to 10.1 percent in 1993 and is estimated to rise to 11 percent
in 1994.  Debt service for Austria's external federal debt
amounted to AS 29.2 billion (2.5 billion dollars) in 1993 and
was equal to 1.4 percent of GDP and 3.6 percent of total
exports of goods and services.    


5.  Significant Barriers to U.S. Exports

    Austria's tariff regime will change when it impliments the
EU common external tariff on January 1, 1995.  U.S. exporters
will face higher tariffs in many sectors including computers,
modems, fax machines, and other electronic equipment.

    In some sectors, competition is restricted, especially 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 product, red meats, poultry, grains (except
rice), fruits, vegetables, sugar, brown coal, and some
weapons.  

    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 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.  In the
first half of 1994, the import mechanism was changed, but the
import levy, which can reach as high as four dollars a
kilogram, remains in place.  The U.S. beef quota is likely to
be folded into the EU-wide HQB quota.  Due to the EU ban on
hormones, this would effectively curtail exports of U.S. beef
to Austria.  

    The Government of Austria generally welcomes foreign direct
investment.  One hundred percent foreign ownership is
permitted, and there are no restrictions on repatriation of
earnings, interest payments, and dividends.  However, investors
must sometimes deal with complicated administrative procedures
to obtain approval for new operations.  Environmental
regulations and land use plans that differ between provinces
complicate both domestic and foreign investment.  For example,
environmental and administrative approval of one recent large
U.S. investment took nearly two years.

    In July 1993, Austria implemented a highly restrictive
residency law aimed at curbing illegal immigration.  It applies
to all residents, except those from EU countries and
Switzerland, staying longer than six months.  Procedures are
complicated and lengthy, and it has made timely approval for
American business executives, their representatives, and their
families difficult.  

    Austria's 1993 Banking Act presents a number of obstacles
for market entry of U.S. banks.  Branches of non-EEA banks must
be licensed, while EEA banks may operate branches on the basis
of their home country licenses.  For bank branches or
subsidiaries from a non-EEA member country, the limits for
single large loan exposures and open foreign exchange positions
will shrink considerably, because the endowment capital from
their parent companies can no longer be included in the capital
base used for calculating these limits.  Other providers of
financial services, such as accountants, tax consultants, and
property consultants must specifically prove their
qualifications, such as university education or experience in
order to 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 EEA member countries benefit from more
liberal regulations with the enforcement of the EEA. 

    Imports of foodstuffs, plant pesticides, pharmaceuticals,
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 labeled in German. 
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.  

    Austrian government procurement is non-discriminatory and
complies with the General Agreement on Tariffs and Trade (GATT)
Agreement on Government Procurement.  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.  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.  With Austria's participation in the EEA, Austria
enacted its first federal procurement law, 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 EU
firms.      


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.  Preferential
financing is the main form of subsidy.  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.  As a result, 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
contributes to the AKB's borrowing costs.  The AKB's Export
Fund provides export financing programs for small and
medium-sized companies with annual export sales of up to AS 100
million.  Austria is a member of the GATT Subsidies Code.   


7.  Protection of U.S. Intellectual Property

    Austrian Laws are consistent with international standards,
and Austria is a member of all principal multilateral 
intellectual property organizations, including the World
Intellectual Property Organization.  Austria took an active
position on intellectual property during the Uruguay Round
negotiations.  To adopt to EU laws, as required by the EEA
agreement, Austria amended in March 1993 its copyright law to
provide for the protection of computer software.  The
Government also implemented in April 1994 the Protection of
Inventions Act and a law implementing protection certificates
for medicine patents in July 1994.

    A levy on imports of home video cassettes and a compulsory
license for cable transmission is required under Austrian
copyright law.  Fifty-one percent of total revenues go to a
special fund used for social and cultural projects.  A draft
law which was prepared by the Justice ministry to introduce
compulsory licensing of videocassettes to tourist and
educational institutions was postponed in September 1994. 
Austrian copyright law requires that the owner of intellectual
property must prove the entire chain of rights up to the
producer.  In the case of films, this has made prosecution of
cases for video piracy rare.  


8.  Worker Rights

    a.  The 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," in
which the leaders of Austria's labor, business, and
agricultural institutions give their concurrence to new
economic legislation and influence overall economic policy.

    b.  The Right to Organize and Bargain Collectively

    Austrian unions enjoy the right to organize and bargain
collectively.  The Austrian Trade Union Federation (OGB) is
exclusively responsible for collective bargaining.  All workers
except civil servants are required to be members of the
Austrian Chamber of Labor.  Leaders of the OGB and labor
chamber are democratically elected.  Workers are legally
entitled to elect one-third of the board of major companies. 

    c.  Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited by law.

    d.  Minimum Age of 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

    Labor laws tend to be consistently enforced in all sectors,
including the automotive sector, in which the majority of U.S.
capital is invested. 



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                               210
Total Manufacturing                                     578
  Food & Kindred Products                    15
  Chemicals and Allied Products              25
  Metals, Primary & Fabricated                2
  Machinery, except Electrical               54
  Electric & Electronic Equipment           (1)
  Transportation Equipment                  (1)
  Other Manufacturing                        60
Wholesale Trade                                         453
Banking                                                 (1)
Finance/Insurance/Real Estate                           110
Services                                                 12
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  1,384    

(1) Suppressed to avoid disclosing data of individual companies.
Source: U.S. Department of Commerce, Bureau of Economic
Analysis

(###)


To the top of this page