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





                              SWEDEN

                     Key Economic Indicators
    (Billions of Swedish kronor (SEK) unless otherwise noted)


                                     1992      1993    1994 est.

Income, Production and Employment:

Real GDP (1985 prices)              943.7     971.9   1,001.5
GDP Growth (pct.)                    -1.7      -1.7      -2.8
GDP (at current prices )          1,438.2   1,436.5   1,431.7
GDP by Sector: (value added 1985 prices)
  Agriculture/Fishing                 4.8      13.9      14.9
  Forestry                           14.1      14.7      14.7
  Energy/Water                       25.4      25.2      25.2
  Mining/Manufacturing              194.3     188.5     190.4
  Construction                       57.0      52.6      48.4
  Bank/Insurance Services            41.8      41.7      39.8
  Other Services                    327.5     325.3     313.8
  Net Exports of Goods & Services    -3.5      -0.5      31.1
Real Per Capita GDP (SEK)         110,700   108,200   104,700
Labor Force (000s)                  4,516     4,429     4,305
Unemployment Rate (pct.)              2.9       5.3       8.0

Money and Prices:  (annual percentage growth)

Money Supply (M3)  1/               661.8     682.8     673.65
Base Interest Rate
  (3-month STIBOR)                   13.69     11.87      7.95
Personal Saving Rate (pct.)           3.4       8.1       9.9
Producer Prices                       4.5       1.0       2.2
Consumer Prices                       9.4       2.3       4.6
Exchange Rate (SEK/USD1.00)          6.05      5.81      7.75

Balance of Payments and Trade:

Total Exports (FOB)                 332.1     339.9     335.2
  Exports to U.S. 2/                 30.9      29.2      30.3
Total Imports (CIF)                 316.2     323.6     307.1
  Imports from U.S. 2/               25.9      28.0      30.2
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt 1/              59.0     243.5     359.2
Debt Service Payments 3/             22.1      17.5      55.4
Gold & Forex Reserves 1/             99.7     163.6     177.2
Balance on Current Account          -20.3     -29.0       0.0


1/ Year-end and 09/30/94.
2/ Annualized 1994 figure based on first half-year data.
3/ Interest and amortizations on central government external
funded debt.  For 1994, first half year.



1.  General Policy Framework

    Sweden is an advanced, industrialized country with a high
standard of living, extensive social services, a modern
distribution system, excellent internal and external
communications, and a skilled and educated work force.  The
Swedish economy has evolved from a centuries-old resource base
of ore, timber, and hydropower into an economy based
increasingly on high-technology goods and post-industrial
services.  A third of GDP is exported, and Sweden supports
liberal trading practices strongly.  Sweden formally applied
for membership in the European Union (EU) in 1991, completed
accession negotiations early in 1994, and became a member on
January 1, 1995.

    Instruments used to achieve economic policy goals are the
traditional monetary and fiscal ones, including an active labor
market retraining policy.  The Swedish Central Bank exercises
considerable autonomy in the realm of monetary policy, chiefly
by adjusting the overnight lending rate it charges commercial
banks in order to influence levels of liquidity in the
economy.  On the fiscal policy side, a determination to lower
tax rates, combined with the maintenance of expensive
government social programs, has led to a swelling of the
government budget deficit.  Some of this is financed by foreign
loans, but the bulk is covered by government bonds, treasury
notes, a national savings scheme, and so forth.

    During 1994 Sweden was slowly but clearly pulling out of
her worst and most protracted recession since the 1930s.  (GDP
declined by some six percent in the three-year period
1991-93.)  Unemployment in 1994 averaged 13 to 14 percent,
generally trending downward during the year.  (Swedish practice
is to quote two unemployment figures, open and disguised. 
"Disguised" unemployment, those in training and work programs,
accounts for six percent of the total unemployment.)  Interest
rates rose to very high levels in the wake of general unrest in
European financial markets, hastening bankruptcies and
hampering investment, and even after falling back have remained
at levels well above those of Germany.  This development helped
ease the ongoing financial crisis somewhat.  After defending
the krona's fixed exchange rate through several waves of
speculation in late 1992, Sweden floated the krona on
November 19, 1992.

    Though the export sector is strong, the domestic economy
remains weak.  Structural changes in recent years have prepared
the way for future economic growth.  This process was begun by
the former Social Democratic government, which: deregulated the
credit market; began deregulating agriculture; removed foreign
exchange controls; introduced a broad tax reform; won consensus
on nuclear power policy; abolished foreign investment barriers;
applied for EU membership; and pegged the krona to the European
Currency Unit.  The moderate-led coalition government that came
to power in 1991, while moving rapidly down the path of
European integration staked out by the Social Democrats, also
achieved some tax reduction, began the privatization of
government-owned corporations, stepped up investment in
infrastructure, and increased investment in education and
research.

    Budgetary constraints are governing the speed with and
extent to which some of the government's programs can be
implemented.  Until the economy picks up sufficient momentum,
the watchwords of both the former moderate-led coalition and
the new Social Democrat government are fiscal restraint and
continued public sector austerity.


2.  Exchange Rate Policies

    Between 1977 and 1991, the Swedish krona was pegged to a
trade-weighted basket of foreign currencies in which the U.S.
dollar was accorded double weight.  During that period there
were, nonetheless, two devaluations of the krona of 10 and 16
percent.  As a step on the road to eventual membership in the
EU, Sweden unhooked from the dollar-heavy basket and pegged the
krona unilaterally to the European Currency Unit (ECU) in
mid-1991.

    After defending the krona during turbulence on European
foreign exchange markets in late 1992, which for a brief period
sent overnight interest rates rocketing into three digits, the
government was eventually forced to float the krona.  The
currency has since depreciated by around 30 percent of its
value against the U.S. dollar, the Deutsche mark, and the pound
sterling, and by more than 50 percent against the yen.

    The stated monetary policy of the Central Bank is to see
that the depreciation of the krona does not result in an
increase in the underlying inflation rate (i.e., when the
effects of changes in indirect taxes and the depreciation are
excluded).  Inflation is to be held close to 2 percent
beginning after the direct effects of the float and various
indirect tax increases have worked through the system.

    Sweden applied a battery of foreign exchange controls until
the international deregulation process, particularly that
occurring in the EU, forced it to follow suit in the latter
half of the 1980s.  The only remaining restriction of this
legacy comprises routine Central Bank screening for statistical
purposes of both incoming and outgoing direct investment.


3.  Structural Policies

    The Swedish tax burden is the heaviest in the OECD,
equivalent to around 50 percent of GDP.  Current central
government expenditure during the severe recession ran at
almost 75 percent of GDP, versus an average for OECD Europe of
under 50 percent.  A broad tax reform in 1990-91 reduced the
marginal income tax rate on individuals to a maximum of around
50 percent.  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'
gross wage bills.  Swedish value-added tax is two-tiered, with
a general rate of 25 percent and a lower rate of 21 percent for
food, domestic transport, and many tourist-related services.

    Trade in industrial products between Sweden, the EU and
EFTA partners is 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 five percent ad valorem on finished goods
and around three percent on semi-manufactures.  (Swedish
tariffs, on average, will increase slightly due to EU
membership.)  Most raw materials are imported duty free.

    There is very little regulation of exports apart from
control of arms exports and a law governing the export and
re-export of certain high technology products.

    Sweden implemented a new food and agricultural policy in
mid-1991 aimed at deregulating its complicated postwar system
of agricultural price regulation.  EU membership, though, will
require Sweden to adhere to the EU's Common Agricultural Policy
and apply its regulations, in effect re-regulating the
agriculture production sector.


4.  Debt Management Policies

    Sweden's traditional external debt policy, dating back to
the mid-1980s, was to incur no net foreign borrowing by central
government for the purpose of financing budget deficits.  When
the policy was introduced, central government external debt
amounted to roughly one-quarter of the national debt.  However,
a heavy drain on foreign exchange reserves in conjunction with
the turbulence in European financial markets in the fall of
1992 ended the policy.  The Central Bank and National Debt
Office have since borrowed heavily in foreign currencies,
increasing the central government's external debt fivefold
virtually overnight to the equivalent of approaching one-third
of the national debt.  The new guidelines for central
government borrowing in foreign currencies state that the
lion's share of the national debt should continue to be in
Swedish kronor; that the borrowing should be predictable in the
short term yet flexible in the medium term; that the government
shall direct the extent of the borrowing; and that it shall
report each year on developments to the parliament.  Management
of the increased debt level so far poses no problems to the
country, but interest payments on the burgeoning national debt
as a whole are growing rapidly.


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 items such as munitions, hazardous substances,
certain agricultural commodities, fiberboard, ferro-alloys,
some semi-manufactures of iron and steel, etc.  Sweden enjoys
licensing benefits under Section 5(k) of the U.S. Export
Administration Act.  Sweden makes wide use of EU and
international standards, labeling, and customs documents, in
order to facilitate exports.

    Having adjusted its laws and regulations to EU practices in
preparation for EU membership, Sweden is now open to virtually
all foreign investment and allows 100-percent foreign ownership
except in areas of air and maritime transportation and the
manufacture of war material.  In recent years Sweden has done
away with laws governing foreign acquisitions of domestic firms
and has relinquished all controls over foreign purchases of
real estate for business purposes.  Any shares listed on the
Stockholm Stock Exchange may now be acquired by Swedes and
foreigners alike.  Corporate shares in Sweden can still have
differing voting strengths, however.

    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.

    Government procurement is usually open to foreign
suppliers, and the Swedish government has no official policy of
imposing countertrade requirements.  Sweden participates in all
relevant GATT codes on government procurement, standards, etc.

    Public procurement regulations have been harmonized with EU
directives in light of Swedish obligations under the EEA
Agreement.  The new regulations, which apply to central and
local government purchases in excess of ECU 400,000, now cover
procurement by entities in previously excluded sectors, i.e.,
the water, transport, energy, and telecom sectors.  Under the
EEA Agreement, Sweden must publish all government procurement
opportunities in the European Community Official Journal.


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 Swedish government and
Swedish industry also jointly finance the Swedish Export Credit
Corporation, 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, the Export Credit Corporation also
provides LDCs with concessionary trade financing.

    At year-end 1993, Swedish farmers were still receiving
government support for exports of surplus grain and meat
production, although these subsidies are being phased out.  The
government recently instituted new export subsidies for some
processed foods, among them hard cheeses.  As a member of the
EU, Sweden's agricultural support policies will have to be
adjusted to comply with the EU's Common Agricultural Policy,
including intervention buying, production quotas, and increased
export subsidies.

    In Sweden there are no tax or duty exemptions on imported
inputs; no resource discounts to producers; and no preferential
exchange rate schemes.  Sweden is a signatory to the GATT
Subsidies Code.


7.  Protection of U.S. Intellectual Property

    Sweden strongly protects intellectual property rights
having to do with patents, trademarks, copyrights, and new 
technologies.  The laws are adequate and clear, enforcement is
good, and the courts are efficient and honest.  Sweden supports
efforts to strengthen international protection of intellectual
property rights, often sharing U.S. positions on these
questions.  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.  As a signatory to the EEA Agreement,
Sweden has undertaken to adhere to a series of other
multilateral conventions dealing with intellectual property
rights.  Swedish intellectual property practices have no
adverse impact on U.S. trade.


8.  Worker Rights

    a.  Right of Association

    Swedish workers have the right to associate freely and to
strike.  Unions conduct their activities with complete
independence from the government and political parties,
although the Confederation of Labor Unions (LO), the largest
federation, has always been allied with the Social Democratic
Party.  Swedish trade unions are free to affiliate
internationally and are active in a broad range of
international trade union organizations.

    b.  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.  In 1993, after a two-year wage stabilization
agreement expired, a new national agreement with small wage
increases was signed for the manufacturing industry.  As
structured, the settlement represents a step toward the
decentralization of the wage formation process favored by
business.

    Swedish law fully protects workers from anti-union
discrimination and provides sophisticated and effective
mechanisms for resolving disputes and complaints.

    c.  Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited by law and does
not exist.

    d.  Minimum Age of Employment of Children

    Compulsory nine-year education ends at age 16, and full
employment is normally permitted at that age under supervision
of local municipal or community authorities.  In effect,
however, very few 16-or 17-year-old children are employed,
except in summer vacation jobs.   Those under age 18 may work
only during daytime and under a foreman's supervision. 
Violations are few, and enforcement--by police and public
prosecutors, with the assistance of the unions-- is considered
good.

    e.  Acceptable Conditions of Work

    There is no national minimum wage law.  Wages are set by
collective bargaining contracts, which typically have been
observed even at nonunion establishments.  There is substantial
assistance available from social welfare entitlements to
supplement those with low wages.

    The standard legal work week is 40 hours or less.  The
amount of permissible overtime is also regulated, as are rest
periods.  Since 1991, Sweden's vacation law guarantees all
employees a minimum of 5 weeks of paid annual leave, and many
labor contracts provide more.

    Occupational health and safety rules, set by the
governmental National Board of Occupational Health and Safety
in consultation with employer and union representatives, are
closely observed.  In companies with 50 or more employees,
trained safety stewards monitor observance of regulations
governing working conditions.  Safety stewards have the
authority to stop life-threatening activity immediately and to
call for a labor inspector.

    f.  Rights in Sectors with U.S. Investment

    The five worker-right conditions addressed above obtain in
all firms, Swedish or foreign, throughout all sectors of the
Swedish economy.



  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                                                 1
Total Manufacturing                                   1,166
  Food & Kindred Products                    17
  Chemicals and Allied Products              66
  Metals, Primary & Fabricated                5
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment           -10
  Transportation Equipment                  (1)
  Other Manufacturing                        95
Wholesale Trade                                         370
Banking                                                 (1)
Finance/Insurance/Real Estate                           167
Services                                                 70
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  1,802    

(1) Suppressed to avoid disclosing data of individual companies

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


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