its export guarantee system more transparent by publishing conditions and eligible country lists.

7. Protection of U.S. Intellectual Property

Austria is a member of all principal multilateral intellectual property agreements and organizations, including the World Intellectual Property Organization (WIPO). Austrian laws are largely consistent with international standards. To implement EU directives on satellite broadcasting and copyright duration, Austria amended its copyright law in 1996. This amendment, which became effective April 1, 1996, introduced also a statutory license requirement for exhibiting films via video cassettes in hotel rooms and other lodging accommodations. The United States has urged the government to rescind this provision of the law, which is inconsistent with its international obligations. A levy on imports of home video cassettes and a compulsory license for cable transmission is required under Austrian copyright law. Of total revenues, 51 percent go to a special fund for social and cultural projects. Austrian copyright law requires that the owner of intellectual property prove the entire chain of rights up to the producer. In the case of films, this requirement has made prosecution of cases of video piracy almost impossible.

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 half 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 sector, 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-1995

Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1995—Continued [Millions of U.S. dollars]

11996 figures are all estimates based on monthly data available in October 1996. 2GDP at factor cost.

Source: U.S. Department of Commerce and U.S. Census Bureau; exports FAS, imports customs basis. 1994 and 1995 figures include trade with Luxembourg under the customs union. 1996 figures are estimates for Belgium only based on data available through November 1996.

1. General Policy Framework

Belgium possesses a highly developed market economy, the tenth largest among the OECD industrialized democracies. The service sector generates more than 70 percent of GDP, industry 25 percent and agriculture 2 percent. Belgium ranked as the ninth-largest trading country in the world in 1995, with exports and imports each equivalent to about 65 percent of GDP. Three-quarters of Belgium's trade is with other European Union (EU) members. Only 5 percent is with the United States. Belgium imports many basic or intermediate goods, adds value, and then exports final products. The country derives trade advantages from its central geographic location, and a highly skilled, multilingual and industrious workforce. Over the past 30 years, Belgium has enjoyed the second-highest average annual growth in productivity among OECD countries (after Japan).

Throughout the late 1970's and the 1980's, Belgium ran chronic budget deficits, leading to a rapid accumulation of public sector debt. By 1994, debt was equal to 137 percent of GDP. Because of the high Belgian savings rate, Belgium has largely financed its budget deficits from domestic savings. Foreign debt represents less than 10 percent of the total and Belgium is a net creditor on its external account.

Belgium's macroeconomic policy since 1992 has aimed at reducing the deficit to 3.0 percent of GDP and reversing the growth of the debt/GDP ratio in order to meet the criteria for participation in Economic and Monetary Union (EMU) set out in the EU's Maastricht Treaty. Since 1992, the Belgian Government has implemented budget austerity measures of more than $25 billion, or about 9.0 percent of GDP. Even though 75 percent of these measures were revenue increases rather than expenditure cuts, they had the advantage of being mostly structural in nature, as opposed to one-time measures. The deficit declined to 4.1 percent of GDP in 1995 and is estimated at 3.2 percent of GDP in 1996. The government's 1997 budget, presented in October 1996, provides for a 2.9 percent deficit and a reduction in the debt/GDP ratio to 127 percent. Belgium has no chance of reaching the Maastricht Treaty debt/GDP target of 60 percent, but expects to demonstrate sustained progress toward the target in order to qualify for early EMU membership.

Belgium's recession in 1993 was more severe than any EU member except Germany. The budget measures adopted by the government in 1992 and subsequent years have imposed a drag on the economy's recovery estimated at a reduction in GDP growth rates of between 0.2 and 0.5 percentage points. Unemployment remains high at nearly 10 percent of the workforce (by EU and OECD standardized definitions) due to the slow pace of the recovery, high labor costs (especially non-wage costs) and structural mismatches in skills and the geographic distribution of labor and employment opportunities. Only in the last few months has unemployment started to fall (down 1 percent on an annual basis) as a result of the recovery.

In 1993, Belgium completed its process of regionalization and became a Federal state consisting of the three regions of Brussels, Flanders and Wallonia. Each region was given substantial economic powers, including trade promotion, industrial development, research and environmental regulation.

2. Exchange Rate Policy

Belgian monetary policy basically shadows German interest rates closely in order to keep the Belgian franc (BF) close to its central parity with the German_mark (DM) within the European Monetary System's Exchange Rate Mechanism (ERM). The near collapse of the ERM in July 1993 placed enormous pressures on this "strong franc" policy as currency traders focussed on Belgium's high debt and budget imbalance. The National Bank of Belgium and government used high short-term interest rates, jawboning and currency market interventions to support the BF. Although the BF briefly slipped by about 7 percent against the central parity rate with the DM, it regained its parity by late 1993. Since then, the BF has remained within 2 percent of its DM parity. The result has been low inflation (even below Germany's level) and a much-reduced interest rate premium over German bonds. It has also meant an appreciation of the BF against the weaker European currencies. Belgian manufacturers have complained about the impact of the BF's appreciation on their competitiveness, particularly compared to weak-currency Europeans such as Spain and Italy.

3. Structural Policies

Belgium is a very open economy, as witnessed by its high levels of exports and imports relative to GDP (65 percent each). Belgium generally discourages protectionism. The Federal Government actively encourages foreign investment on a national treatment basis.

Tax policies: Belgium's tax structure was substantially revised in 1989. The top marginal rate on wage and salary income is 55 percent. Čorporations (including for

eign-owned corporations) pay a standard income tax rate of 39 percent. Small companies pay a rate ranging from 29 to 37 percent. Branches and foreign offices pay income tax at a rate of 43 percent, or at a lower rate in accordance with the provisions contained in a double taxation treaty. Under the present bilateral treaty between Belgium and the United States, that rate is 39 percent.

Despite the reforms of the past 5 years, the Belgian tax system is still characterized by relatively high marginal rates and a fairly narrow base resulting from numerous exemptions. While indirect taxes are lower than the EU average as a share of total government revenues, personal income taxation and social security contributions are particularly heavy. Total taxes as a percent of GDP are the fifth highest among OECD countries. Taxes on income from capital are by comparison quite low; since October 1995, the tax rate on interest income is 15 percent, and the tax rate on dividends is 25 percent for residents. There is no tax on capital gains.

Belgium has instituted special corporate tax regimes for coordination centers and business service centers (including call centers) in recent years in order to attract foreign investment. These tax regimes provide for a "cost-plus" definition of income for intragroup activities and have proven very attractive to U.S. firms.

Regulatory policies: The only areas where price controls are effectively in place concern energy, household leases and the price of pharmaceuticals. With the exception of the latter, none of these has any serious impact on U.S. business in Belgium. 4. Debt Management Policies

Belgium is a member of the G-10 group of leading financial nations, and participates actively in the IMF, the World Bank, the EBRD and the Paris Club. Belgium is also a significant foreign assistance donor nation. It closely follows development and debt issues, particularly with respect to Zaire (where official development aid flows are still frozen and aid money is mainly channelled through NGO's) and some other African nations.

Belgium is a net external creditor, the household sector's foreign assets exceeding the external debts of the public and corporate sectors. Only about 10 percent of the Belgian Government's overall debt is owed to foreign creditors. Moody's top Aal rating for the country's bond issues in foreign currency reflects Belgium's integrated position in the EU, its significant improvements in fiscal and external balances over the past few years, its economic union with the financial powerhouse Luxembourg, and the reduction of its foreign currency debt. The Belgian Government has no problems obtaining new loans on the local credit market. Because of the reform of monetary policy in 1991, as well as greater independence granted in 1993 to the National Bank of Belgium, direct financing in Belgian francs by the central bank has become impossible.

5. Significant Barriers to U.S. Exports

From the inception of the EU's single market, Belgium has implemented most, but not all, trade and investment rules necessary to harmonize with the rules of the other EU member countries. Thus, the potential for U.S. exporters to take advantage of the vastly expanded EU market through investments or sales in Belgium has grown significantly.

Some barriers to services and commodity trade still exist, however, including: -Telecommunications: The Federal Government is gradually opening up the previously monopolistic telecommunications sector. In September 1996, a second cellular operator started operations. In 1996, the government sold 49 percent of Belgacom, the public telephone operator, to a consortium of Ameritech, Tele Danmark and Singapore Telecom. American suppliers of equipment still complain that they face an unequal battle with established European suppliers. The United States has taken issue with the regulation of the directory services market, but a solution appears likely.

-Ecotaxes: The Belgian Government has adopted a series of ecotaxes, in order to redirect consumer buying patterns toward materials seen as environmentally less damaging. These taxes will raise costs for some U.S. exporters, since U.Š. companies selling into the Belgian market must adapt worldwide products to varying EU member state environmental standards.

-Retail service sector: Some U.S. retailers, including Toys“R” Us, have experienced considerable difficulties in obtaining permits for outlets in Belgium. Current legislation is designed to protect small shopkeepers, and its application is not transparent. Belgian retailers also suffer from the same restrictions, but their existing sites give them strong market share and power in local markets. -Public procurement: The EU has adopted several directives covering public procurement. Belgium's implementation of these directives has been slow and incomplete. Belgian public procurement is still characterized by poor public notifi

cation and procedural enforcement, requirements of offsets in military procurement, an unofficial "buy local" policy, and nontransparency throughout the procurement process. The government has implemented a new law on government procurement to bring Belgian legislation into conformity with European Union directives. The revision has incorporated some of the onerous provisions of EU legislation, while improving certain aspects of government procurement at the various governmental levels in Belgium. The new law can only be evaluated over time and its benefits will be heavily influenced by the way it is interpreted and implemented in Belgium. -Broadcasting and motion pictures: Belgium voted against the EU broadcasting directive (which requires a high percentage of European programs "where practical") because its provisions were not, in the country's view, strong enough to protect the fledgling film industry in Flanders. The Flemish (Dutch-speaking) region and the Francophone community of Belgium have local content broadcasting requirements for private television stations operating in those areas. The EU has taken the Walloon and Flemish communities to the European Court of Justice concerning these requirements. TNT has experienced considerable problems in arranging distribution of its signal on Belgian cable, while NBC and Viacom, via their majority interest in the TV4 channel, face similar problems with broadcasting authorities in Flanders.

6. Export Subsidies Policies

There are no direct export subsidies offered by the Belgian Government to industrial and commercial entities in the country, but the government (both at the Federal and the regional level) does conduct an active program of trade promotion, including subsidies for participation in foreign trade fairs and the compilation of market research reports. In addition, exporters are eligible for a reduction in social security contributions by employers and benefit from generous rules for cyclical layoffs. The latter programs come close to the definition of a subsidy in the case of a company engaged in exporting. All of these programs are offered to both domestic and foreign-owned exporters. The United States has recently raised with the Belgian Government and the EU Commission concerns over subsidies via an exchange rate program to Belgian firms producing components for Airbus.

7. Protection of U.S. Intellectual Property.

Belgium is party to the major intellectual property agreements, including the Paris, Berne and Universal Copyright Conventions, and the Patent Cooperation Treaty. Nevertheless, an estimated 20 percent of Belgium's video cassette and compact disc markets are composed of pirated products. For software, the share of pirated copies has dropped from 58 to 48 percent in 1 year, still representing a loss of $700 million to the industry.

Copyright: On June 30, 1994, the Belgian Senate gave its final approval to the revised Belgian copyright law. National treatment standards were introduced in the blank tape levy provisions of the new law, replacing reciprocity standards, which would have denied payments to U.S. firms. Problems regarding first fixation and non-assignability were also solved. The final law states that authors will receive national treatment, and allows for sufficient maneuverability in neighboring rights. The most recent estimate is that U.S. authors and producers will receive some $6 million annually from the proceeds of the blank tape levy in Belgium.

Patents: A Belgian patent can be obtained for a maximum period of twenty years and is issued only after the performance of a novelty examination.

Trademarks: The Benelux Convention on Trademarks established a joint process for the registration of trademarks for Belgium, Luxembourg and the Netherlands. Product trademarks are available from the Benelux Trademark Office in The Hague. This trademark protection is valid for 10 years, renewable for successive 10year periods. The Benelux Office of Designs and Models will grant registration of industrial designs for 50 years of protection. International deposit of industrial designs under the auspices of the World Intellectual Property Organization (WIPO) is also available.

8. Worker Rights

a. The Right of Association: Under the Belgian constitution, workers have the right to associate freely. This includes freedom to organize and join unions of their own choosing. The government does not hamper such activities, and Belgian workers in fact fully and freely exercise their right of association. About 60 percent of Belgian workers are members of labor unions. This number includes employed, unemployed and retired workers. Unions are independent of the government, but have important links with major political parties. As the government does not require unions to register, there are no prohibitions against antiunion actions before reg