SECTION I. COMMERCIAL OVERVIEW A. Overview of Import Market Tariffs, taxes, industrial standards and pricing will all improve from the standpoint of the U.S. exporter as Austria becomes a member of the EU. As much as 50 percent of U.S. exports to Austria pass through an intermediate port. As a result, Austrian government import statistics, based on the country of origin, are substantially higher than U.S. export statistics based on the country of first destination. Many U.S. products imported by Austria are transformed there and sold to third countries as Austrian exports. B. Synopsis of Commercial Environment The commercial environment in Austria is positive. GDP growth is expected to continue through 1995. Inflation is expected to decline and unemployment is expected to rise slightly over the next two years. Austria continues to take measures to harmonize its laws and regulations with those of the EU. Austria is currently a member of the European Economic Area, a free trade zone created between the EU and most members of the European Free Trade Agreement. The EEA was established on January 1, 1994. Austria's June 12, 1994, referendum overwhelmingly endorsed membership in the EU. Austria is expected to become a member in January 1995. C. Host Country Business Attitudes Toward the U.S. Austrian regulations affecting the import of U.S. high-tech products are primarily technical. Although it is not a legal requirement, many end-users insist that operator's manuals and service instructions be in the German language. Products must conform to Austrian standards, which will be adapted to the EU-standards by the end of 1994 at the latest. For U.S. suppliers entering the market for the first time or selling to new customers, the usual practice is to require confirmed and irrevocable letters of credit. Most trade relationships between the United States and Austria, however, are well-established, and less stringent requirements, including both open account and extended terms, are often agreed upon once confidence is established. As Austria is a fully developed industrial nation, no special funding of U.S. export sales is available from U.S. governmental or multinational institutions. Austria's international credit rating gives it preferred status for trade, finance and investment guarantees. A bilateral arbitration agreement exists and can be included in contracts. D. Major Business Opportunities The Austrian market offers U.S. firms great business opportunities in all of the traditional high-tech industry sectors, including information technology, office automation, electro/ electronic medical apparatus, analytical and scientific instruments, aviation and avionics and electronic components and parts. The chemical, pharmaceutical and cosmetics industries are also good prospects. All major U.S. firms in the service/ tourism industry, including airlines, hotel chains, car rentals, travel agencies and fast-food chains, have considerable market shares and growth opportunities in the future. In the long term, leading U.S. manufacturers will have an excellent chance to win bidding contests for the following major projects: Major investments in military communications: The Austrian Army plans to invest in a VHF tactical radio system, including single channel radio access, radio access points and mobile subscriber terminals. The total investment is estimated at USD 636 million. Aviation: The Austrian Army plans to replace its SAAB fighter fleet with modern equipment in the next decade. The Austrian government will also need to invest in civil aviation. Austria's membership in the EU will spur the liberalization of flight connections in the future. The substantial increase in air traffic will stimulate investment to expand all of the major Austrian airports, including those in Salzburg and Innsbruck. Television & Broadcasting: Austria's membership in the EU will bring liberalization of TV and broadcasting laws. Private radio and TV stations will appear, meaning substantial infrastructure investment in the broadcasting/ transmission sector. It is possible that broadcasting stations, including the Austrian TV/ Broadcasting network (ORF), will invest in satellite broadcasting in the near future. E. Major Roadblocks to Doing Business The United States continues to enjoy good trade relations with Austria. There are no major economic, political or social barriers to doing business. F. Nature of Local and Third Country Competition Austrian manufacturers are increasingly turning to neighboring Central European countries to take advantage of low labor costs in their production. This will make Austrian products increasingly price competitive for domestic consumption and export. When Austria joins the EU, domestic consumer prices are expected to fall.