APPENDIX B BEST PROSPECT SECTORS FOR U.S. EXPORTERS TO ITALY (US$ millions, unless otherwise noted) A. Rank: 1 B. Name of Sector: AIRCRAFT & PARTS C. ITA Code: AIR 1993 1994 1995 D. Total Market Size 5,350 5,630 6,020 E. Total Local Production 5,550 5,910 6,320 F. Total Exports 2,050 2,180 2,300 G. Total Imports 1,850 1,900 2,000 H. Total Imports from U.S. 1,450 1,500 1,650 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: In 1993, the entire Italian aviation market experienced a year of contraction, as was the case in most other industry sectors. However moderate growth is expected through 1995 when large aviation companies such as the flag carrier Alitalia, and its wholly-owned subsidiary ATI, are expected to recover from their current heavy losses and give new impetus to purchases. As aviation production relies on high initial investment costs, Italian aviation manufacturers largely operate by collaborating with other foreign companies. In fact the majority of aircraft in service now are of foreign origin and are primarily of U.S. and France design. While European competition continues to increase, the Italian aviation sector is still maintaining strong ties with the U.S. industry and has high regard for U.S. products' sophistication, advanced technology and unique design. In 1993 U.S. manufacturers have been able to maintain their dominant position with approximately 78 percent import market share. A subsector of interest to U.S. manufacturers is the Airborne Avionics where U.S. leadership is unanimously recognized. A. Rank: 2 B. Name of Sector: INDUSTRIAL CHEMICALS C. ITA Code: ICH 1993 1994 1995 D. Total Market Size 48,800 51,000 53,500 E. Total Local Production 43,200 44,900 47,100 F. Total Exports 13,900 14,400 15,100 G. Total Imports 19,500 20,500 21,500 H. Total Imports from U.S. 925 1,000 1,100 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: Italy is a large producer and user of industrial chemicals. The biggest Italian chemical companies are State-owned. In the past, their development has been hampered by political involvement of Government parties. More recently, they suffered from massive judicial investigations into corruption. Italy produces mainly basic chemicals and imports specialty and industrial chemicals with high technological content. Many of the biggest European and American companies have subsidiaries and factories in Italy. It is expected that in the near future, both imports and exports will enjoy a consistent increase. American companies have a very high reputation in Italy as suppliers of high-quality specialty chemicals. A. Rank: 3 B. Name of Sector: AIRPORT & GROUND SUPPORT EQUIPMENT C. ITA Code: APG 1993 1994 1995 D. Total Market Size 2,250 2,400 2,600 E. Total Local Production 1,600 1,770 1,950 F. Total Exports 650 750 850 G. Total Imports 1,300 1,380 1,500 H. Total Imports from U.S. 530 600 680 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: The Italian market for airport and ground support equipment and services, including air traffic control (ATC) systems and ground avionics for air navigation assistance, is large and continuously growing, even though a slow-down was experienced in the last two years because of ongoing economic/financial problems, political instability and corruption and because of a country-wide business contraction. Italian manufacturers supply over 40 percent of domestic demand covering most of the needs for low technology ground support equipment and less sophisticated airport management systems. Therefore, the importance of imports of high technology products remain almost uninfluenced by the current dollar/lira ratio. The U.S. position in this market sector, and in particular in the Ground Avionics subsector, is fairly good and is expected to maintain its share through 1995/96, as U.S. technology leadership in advanced products and quality standards is highly regarded. A. Rank: 4 B. Name of Sector: Computer Services C. ITA Code: CSV 1993 1994 1995 D. Total Sales 4,400 4,690 5,000 E. Sales by local firms 3,202 3,405 3,630 F. Sales by local firms 136 145 160 G. Sales by foreign-owned firms 1,334 1,430 1,530 H. Sales by U.S.-owned firms 1,035 1,105 1,180 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: Computer services are expected to remain one of the driving forces in the Italian information technology market. In spite of the economic crisis, demand for complex solutions in vertical markets is growing, as customers require innovative technologies to remain competitive, while still controlling costs and optimizing existing resources. The most rapid market development is expected in the field of outsourcing services and facility management, but consulting, customization, and systems integration services are also forecast to register a considerable growth. The U.S. is the leader in this sector, and key factors for success for U.S. companies in Italy are proven knowledge of innovative technologies, availability of high quality solutions, vertical market experience, timely delivery, flexibility to meet the clients' needs, and eventually willingness to team up with experienced Italian partners. A. Rank: 5 B. Name of Sector: TELECOMMUNICATIONS EQUIPMENT C. ITA Code: TEL 1993 1994 1995 D. Total Market Size 7,970 8,350 8,750 E. Total Local Production 7,190 7,600 8,050 F. Total Exports 9230 1,000 1,150 G. Total Imports 1,700 1,750 1,850 H. Total Imports from U.S. 500 550 610 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: The Italian telecommunications sector is experiencing considerable development as the result of recent moves toward deregulation brought about by a political awareness of the strategic role of telecommunications in the European economic development and the progressive measures enacted by EU's TLC Commission to develop a common telecommunications policy. Growth in this market is continuing at a steady pace also in response to the recent choice of a second operator (Omnitel/Pronto Italia) to run a new cellular phone network and the founding of Telecom Italia that, by incorporating five major telephone service companies, will become the world's sixth largest telecommunications company. Italy will continue to represent an interesting market as substantial investments and expenditures are foreseen through 1995 and beyond. Consequently local manufacturing and imports should remain high and see additional growth. Competition from European manufacturers is increasing thereby partially eroding U.S. import market share for those products of low sophistication and general use. In view of the positive outlook on the local telecommunications marketplace and the enhancement of the country-wide networks, it is expected that specific interconnectivity products - such as Fiber Optics products - will largely benefit from this expansion. A. Rank: 6 B. Name of Sector: ELECTRONIC COMPONENTS C. ITA Code: ELC 1993 1994 1995 D. Total Market Size 3,200 3,490 3,800 E. Total Local Production 1,830 1,950 2,120 F. Total Exports 1,280 1,350 1,460 G. Total Imports 2,650 2,890 3,140 H. Total Imports from U.S. 330 365 410 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: The electronic components market is still experiencing a period of contraction due to the general recession that continued to hit the Italian economy through 1993. Nevertheless, the forecast for the future is positive due to the resumption of production in many factories related to this sector. Imports will continue to play a key role in the next few years. As in the past, limited Italian production will force Italy to continue to import large quantities of electronic components, mainly semiconductors, to meet the automotive, telecommunications, and automation industries' demand. The U.S. will remain Italy's number one supplier with approximately 13 percent of the import market share, with excellent market opportunities for EDP and defense industry products. A. Rank: 7 B. Name of Sector: PROCESS CONTROLS: INDUSTRIAL C. ITA Code: PCI 1993 1994 1995 D. Total Market Size 3,250 3,450 3,800 E. Total Local Production 2,060 2,250 2,480 F. Total Exports 525 630 695 G. Total Imports 1,715 1,830 2,010 H. Total Imports from U.S. 527 550 600 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: The Italian market for process controls is well developed and competitive, yet ready to accept products with innovative features. The local companies have excellent integration capabilities for systems and parts but are lacking on the manufacturing side. The main U.S. competitor is Germany, whose companies have a very large share in the Italian market. Although the growth in the next three years will be across the whole sector, as industrial investments should start again, the better export opportunities are in the supervision and control systems, and in process controls for the food industry subsectors. A. Rank: 8 B. Name of Sector: Franchising C. ITA Code: FRA 1993 1994 1995 D. Total Sales 8,400 10,320 11,460 E. Sales by Local Firms 7,800 9,540 10,600 F. Sales by Local Firms 1,350 1,420 1,590 G. Sales by Foreign-owned Firms 1,950 2,200 2,450 H. Sales by U.S.-owned firms 250 280 320 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: Franchising is expanding rapidly, and Italy is now second in Europe with 387 franchisors and 9000 franchisees with a total of 45,000 people employed. The local highly fragmented retail distribution system is gradually giving in to new, sophisticated and profitable franchising concepts. The most active segments are specialized trade, articles for the consumer and the service sector. A key factor to the successful introduction of a foreign franchising system is its adaptability to the Italian business and cultural patterns. The local business community's awareness of franchising is being improved by events such as the Franchising Exhibition held in Milan every year during the last week of February (Feb. 24-27, 1995) and by favorable publicity in the press. A. Rank: 9 B. Name of Sector: Computer Software C. ITA Code: CSF 1993 1994 1995 D. Total Market Size 3,102 3,380 3,690 E. Total Local Production 2,642 2,900 3,200 F. Total Exports 160 170 190 G. Total Imports 620 650 680 H. Total Imports from U.S. 410 450 480 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: The software market has slowed significantly after years of double-digit growth. This is the result of the reduction in information technology spending and is closely connected with a freeze in government contracts. There are also signs that the days of the generic software house have passed, with requests for increasing specialization becoming frequent. Intelligence systems continue to be sought, a field in which the U.S. maintains a strong lead. Despite the slowdown, American firms have continued to find a lucrative market for innovative software as was demonstrated by the highly successful Software Trade Mission to Rome in March 1994. Enactment of the EU software directive in December 1992 and increased enforcement against software piracy laid the ground for a dramatic increase in sales of U.S. packaged personal computer application software in 1993 (U.S. sales were up 330 percent in unit sales). A. Rank: 10 B. Name of Sector: Computers and Peripherals C. ITA Code: CPT 1993 1994 1995 D. Total Market Size 5,293 5,400 5,535 E. Total Local Production 5,586 5,700 5,840 F. Total Exports 3,583 3,690 3,780 G. Total Imports 3,290 3,390 3,475 H. Total Imports from U.S. 925 950 980 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: 1993 was a very bad year in the Italian market for computers and peripherals. Downpricing policies adopted by hardware manufacturers, together with the serious economic crisis, which led users to drastically reduce expenditures, resulted in a drop in sales value of 8 percent over the previous year. This sector, however, is expected to recover by the end of 1994 and to maintain its strategic role as one of the best prospect industries for U.S. imports. Deep changes in the companies' business organizations are strongly affecting the market structure. While mainframes and minis are expected to lose ground, good prospects exist for open systems and UNIX based systems, workstations, personal computers, mobile computing systems, CD-ROM and multimedia products. The U.S. enjoys a reputation for excellence in the sector, and American companies offering innovative, technologically advanced products should find good market opportunities. A. Rank: 11 B. Name of Sector: Laboratory Scientific Instruments C. ITA Code: LAB 1993 1994 1995 D. Total Market Size 1,040 1,110 1,190 E. Total Local Production 440 480 530 F. Total Exports 250 280 300 G. Total Imports 850 910 960 H. Total Imports from U.S. 310 330 355 I. Exchange Rates: 1 (one) U.S. dlr = lire 1,550 Comments: The laboratory scientific instruments sector is characterized by a predominance of imports, especially for the more advanced families of products. In fact, imports cover 80 percent of the domestic demand. There are relatively few important Italian manufacturers, therefore, with rare exceptions, Italian companies find it difficult to be competitive at an international level where the market is dominated by the U.S., German, French and Japanese manufacturers. The import market share of American products is particularity high (36 percent) and is expected to grow at a rate of approximately 7 percent through 1995. Prices tend to reflect the currency trend which at present reflects a strong dollar and a strong German mark. Even if high priced, the newest, the latest, the most sophisticated product, that which is tailored to the need of the buyer, has a better chance of finding a good customer in Italy. A. Rank: 12 B. Name of Sector: Insurance Services C. ITA Code: INS 1993 1994 1995 D. Total Sales 32,408 35,649 39,214 E. Sales by Local Firms 34,740 38,214 42,036 F. Sales by Local Firms 12,703 13,973 15,370 G. Sales by Foreign-owned Firms 10,371 11,408 12,548 H. Sales by U.S.-owned Firms 97 110 123 I. Exchange rate: 1 (one) U.S. dlr = lire 1,550 Comments: The National Insurance Institution (INPS) is facing ever- increasing costs and will probably encounter serious problems in guaranteeing an adequate pension to all citizens in the next century, or proper health care. More and more citizens are thus turning to private insurance, as indicated by the respective 21 percent and 15 percent increases in sales of life and health insurance policies during 1993. Foreign-owned insurance companies maintain an estimated market share of 32 percent. The handful of U.S. companies presently doing business in Italy have, however, managed to increase their performance currently reaching an estimated 0.30 percent of the market. A. Rank: 13 B. Name of Sector: Paper and Paperboard C. ITA Code: PAP 1993 1994 1995 D. Total Market Size 5,800 5,400 5,050 E. Total Local Production 6,100 5,700 5,500 F. Total Exports 2,550 2,600 2,650 G. Total Imports 2,250 2,300 2,200 H. Total Imports from U.S. 375 380 400 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: Italy's paper industry, mostly involved with the transformation and reconversion into finished products of the raw and waste materials, is forced to a large extent to import these materials from abroad. After three consecutive years of slow but steady decrease the sector in 1993 reported a positive trade balance with exports showing an increase of 18 percent and imports decreasing 2 percent. This result was created by the depreciation of the lira vis-a-vis the dollar. An increase in the use of waste paper in the productive process can also be noticed. Today waste paper use accounts for 50 percent of the total of raw materials utilized in the paper sector. Imports from the U.S. will remain unchanged as they fill particular niches of the paper market. A. Rank: 14 B. Name of Sector: Films/Videos C. ITA Code: FLM 1993 1994 1995 D. Total Market Size 1,280 1,310 1,340 E. Total Local Production 250 260 290 F. Total Exports 170 200 220 G. Total Imports 1,200 1,250 1,270 H. Total Imports from U.S. 950 960 970 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: U.S. products continue to dominate the Italian market and are estimated to account for 80 percent of total revenues. The recession affected both cinema goers and home cassette buying rentals: 80 million spectators attended movie theaters in 1993 (down 5 percent), and sales of home videos dropped by 13 with rentals down 9.13 percent. Official statistics do not reflect a much larger market. Estimates are that 40 percent of video recordings are copied illegally. An economic recovery, forecast for early 1995, coupled with increased sales of authentic products, augurs well for U.S. exporters in a very receptive market. Please note that the above figures do not include estimates of illegally copied materials. A. Rank: 15 B. Name of Sector: Electrical Power Systems C. ITA Code: ELP 1993 1994 1995 D. Total Market Size 5,670 5,500 5,700 E. Total Local Production 5,850 5,750 5,900 F. Total Exports 1,700 1,750 1,900 G. Total Imports 1,520 1,500 1,700 H. Total Imports from U.S. 280 250 300 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: Italy's economic slow-down and unforeseen difficulties in implementing the National Energy Plan, have significantly influenced the local market for energy related products, equipment and systems. Meanwhile, Italy's electric power demand continued to increase at constant growth rate favoring electric energy imports from other neighboring countries, such as France, Switzerland and Austria. It is expected that investments in new power plants and in refurbished existing ones, as well as engineering conversion to other primary fuels, will soon be resumed. Consequently, business prospects should increase and favor both local manufacturers and foreign suppliers. U.S. companies should concentrate their marketing efforts on highly sophisticated and innovative products and/or systems, and maintain and possibly improve their leadership in licensing and technical collaboration, as the majority of Italian- built electricity generating machinery is manufactured locally under U.S. licenses. A. Rank: 16 B. Name of Sector: Pollution Control Equipment and Services C. ITA Code: POL 1993 1994 1995 D. Total Market Size 3,870 3,810 4,010 E. Total Local Production 3,420 3,420 3,605 F. Total Exports 330 380 405 G. Total Imports 780 770 810 H. Total Imports from U.S. 350 348 370 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: The Italian pollution control market is a best prospect for U.S. sales in the medium term. After a few years of very dynamic growth, serious budgetary and political problems, legislative confusion, and an economic recession have hindered the full development of this industry. In 1994, these negative factors are expected to continue to affect the performance of the sector. However, the forecasted economic recovery at the end of 1994 and the new national 1994-1996 environmental plan, calling for investments of at least 6 billion dollars, should give momentum to this industry, allowing Italy to fully enforce EU legislation. The market is looking to foreign expertise for the supply of specialized know-how, equipment and instrumentation. Good business opportunities exist for experienced American firms providing highly innovative, safe, and efficient products, technologies, and services. The market for urban and industrial waste management products and services is expected to become one of the most important in this industry. A. Rank: 17 B. Name of Sector: Sporting Goods and Recreational Equipment C. ITA Code: SPT 1993 1994 1995 D. Total Market Size 5,000 5,250 5,600 E. Total Local Production 5,700 6,120 6,670 F. Total Exports 1,450 1,660 1,900 G. Total Imports 750 790 830 H. Total Imports from U.S. 120 126 133 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: During recent years, the general recession affecting the Italian economy reduced the amount of discretionary income for purchases such as sporting and recreational goods. Over the near term, due to the expected economy's slow turnaround and the growing interest in sports, the sporting and recreational goods market should register a modest but increasing growth. According to a recent survey, the most popular sports activities in Italy are gymnastics, soccer and tennis and they represent the most promising subsectors within the sporting goods market. American exporters have an edge over their competitors because of the good reputation enjoyed by U.S. products among Italian consumers. A. Rank: 18 B. Name of Sector: Printing and Graphic Arts Equipment C. ITA Code: PGA 1993 1994 1995 D. Total Market Size 920 970 1,010 E. Total Local Production 1,000 1,070 1,130 F. Total Exports 650 680 710 G. Total Imports 550 570 590 H. Total Imports from U.S. 40 45 50 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: In 1993, Italy's recession strongly affected the printing and graphic arts equipment sector. Total sales decreased by about 8 percent in real terms; imports decreased by about 6 percent, whereas exports increased by about 9 percent. The decrease in imports impacted nearly all the categories of products in different proportion, with the sole exception of the machines for the preparation of the molds, for which Italy is particularly dependent on foreign production. Good market opportunities exist for U.S.firms with proven knowledge of innovative technologies offering high level CTP technologies and machinery. A. Rank: 19 B. Name of Sector: Apparel C. ITA Code: APP 1993 1994 1995 D. Total Market Size 11,150 10,550 10,310 E. Total Local Production 14,785 15,080 15,680 F. Total Exports 6,145 7,070 7,980 G. Total Imports 2,510 2,535 2,610 H. Total Imports from U.S. 96 100 105 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: A severe economic recession has drastically depressed the Italian apparel market. Exports have grown 20 percent while local production has lost 5 percent. Imports have remained at 1 percent. However, the Italian clothing industry continues to be the largest in Europe and one of the largest in the world. The local apparel market is extremely sophisticated and quality, style and well-known brand names are key factors to success. Moreover, consumers favor natural fibers and accurate tailoring/manufacturing. The "all American", western and military looks are very popular. Market niches exist for U.S. made quality products. A. Rank: 20 B. Name of Sector: Medical Equipment C. ITA Code: MED 1993 1994 1995 D. Total Market Size 980 1,009 1,060 E. Total Local Production 565 584 623 F. Total Exports 175 180 188 G. Total Imports 590 605 625 H. Total Imports from U.S. 132 135 140 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: The National Health System guarantees free medical care to the entire population of Italy. The medical equipment sector has suffered from the recession which has affected the economy. The market in 1994 is expected to be flat as plans call for merging and closing hospitals, thus reducing the number of beds and cutting back on the enormous health care expenditures. Public hospitals account for 80 percent of all expenditures for medical products, while private clinics account for the remaining 20 percent. Italy depends heavily on imports from countries where R&D is more advanced. Diagnostic imaging equipment, radiotherapy equipment and electrosurgery equipment appear to have the best market potential. Demand is still good for foreign products with high technological content. A. Rank: 21 B. Name of Sector: Building Products C. ITA Code: BLD 1993 1994 1995 D. Total Market Size 26,600 26,800 28,800 E. Total Local Production 30,800 31,100 33,100 F. Total Exports 6,400 6,500 6,650 G. Total Imports 2,200 2,200 2,350 H. Total Imports from U.S. 80 80 85 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: Since 1992, the sector has suffered from the worst recession experienced by the Italian construction industry since World War II. In 1993, overall construction activity decreased by over 5 percent (in real terms) and a further drop is expected also in 1994. Spending decisions in public works have been hampered by the massive judicial investigations into corruption. Activity in the industrial, tertiary, and residential building was affected by the general economic recession, as well as by increased property taxation. The trend for building products is expected to reverse itself in 1995, following gradual recovery in the construction industry. This should be promoted by the expected recovery in the Italian economy and by new rules on public bidding coupled with higher public spending. Important subsectors are those of wooden and metal doors and windows which are estimated to reach, respectively, USD 2,100 and 2,300 million in 1995. A. Rank: 22 B. Name of Sector: Automotive Parts and Service Equipment C. ITA Code: APS 1993 1994 1995 D. Total Market Size 7,725 7,416 7,860 E. Total Local Production 10,457 10,513 11,143 F. Total Exports 5,589 5,868 6,220 G. Total Imports 2,857 2,771 2,937 H. Total Imports from U.S. 147 145 152 I. Exchange rate: 1 (one) U.S. dlr = lire 1,550 Comments: The above figures include statistics for original equipment (OE), components, accessories, service and repair equipment and supplies for the 28 million vehicles on the road. Sales of new motor vehicles dropped 20.4 percent in Italy during 1993, with a collapse of market demand in automotive parts/accessories, unexpected in its dimensions, and rumored to represent the worst crisis of the past fifty years. The demand is not expected to pick up until the very late months of 1994/beginning of 1995. The smaller increase in the growth of the vehicle fleet in the nineties, combined with the increase in the reliability of components, also points to a further slowdown in the growth of the aftermarket. However, optional components and all the wide range of passive and active safety accessories are fast becoming "must" factors in attracting customers. Increased interest is also being pursued for environmentally friendly vehicles. A. Rank: 23 B. Name of Sector: Air Conditioning and Refrigeration Equipment C. ITA Code: ACR 1993 1994 1995 D. Total Market Size 1,900 1,990 2,090 E. Total Local Production 1,970 2,070 2,170 F. Total Exports 420 440 460 G. Total Imports 350 360 380 H. Total Imports from U.S. 58 60 63 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: The worldwide recession has affected this sector over the past few years. Although the Italian market is showing an exceptionally fast rate of growth and is becoming more and more attractive to U.S. manufacturers, it is predictable that imports from the U.S. will remain stable or, at best, gain very little. U.S. companies' strategy should be to expand those niches (heavy industrial installations) in which they already hold a strong presence, or proceed, where possible, to the acquisition of local small manufacturers. A. Rank: 24 B. Name of Sector: Security and Safety Equipment C. ITA Code: SEC 1993 1994 1995 D. Total Market Size 1,420 1,540 1,670 E. Total Local Production 1,305 1,420 1,550 F. Total Exports 75 90 110 G. Total Imports 190 210 230 H. Total Imports from U.S. 47 48 50 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: Presently the Italian market for security and safety is growing at some 9 percent annually in spite of the general economic recession affecting most sectors in Italy. The high crime level is causing deep concern in Italy, stimulating demand for ad-hoc security means. As suppliers of advanced deterrent and surveillance security and safety equipment and systems, U.S. manufacturers are especially well poised to consolidate their market share, increase exports, including licensing, and broaden joint-venture opportunities. However, American manufacturers should consider that Italy already has a strong domestic security and safety industry with a reputation for high quality products, therefore market penetration is relatively difficult. A. Rank: 25 B. Name of Sector: Drugs and Pharmaceuticals C. ITA Code: DRG 1993 1994 1995 D. Total Market Size 14,753 14,350 14,400 E. Total Local Production 14,156 14,000 14,350 F. Total Exports 3,503 3,650 3,750 G. Total Imports 4,100 4,000 3,800 H. Total Imports from U.S. 421 410 422 I. Exchange Rate: 1 (one) U.S. dlr = lire 1,550 Comments: Italy introduced a health reform in 1993 to reduce and contain public spending on pharmaceuticals. Measures taken so far indicate a sharp fall in production and consumption of specialty drugs, formerly subsidized by the State, and a marked increase in OTCs, as consumers restrain the use of costlier preparations and turn to self-medication, and cheaper substitutes. A proposal to realign prices to the European average may further penalize the sector. Improvements are not likely to reach the pinnacles of the early 1990's. Foreign manufacturers dominate the market (30 percent of them are U.S. locally based companies). Once this period of adjustment is over, American firms and U.S. products are expected to improve on their already favorable position in this market, provided that they are able to supply innovative preparations. BEST PROSPECT SECTORS FOR U.S. AGRICULTURAL EXPORTERS TO ITALY A. Rank: N/A B. Name of Sector: Logs (2471000)(2472020) C. PS&D Code: IT9355A [1000 Metric Tons] 1992 1993 1994 D. Total Market Size 3561 3499 3600 (1000 Cubic Meters) E. Total Local Production 597 600 600 (1000 Cubic Meters) F. Total Exports 5.6 6.5 6.0 G. Total Imports 4045.8 3582.1 4000.0 H. Total Imports from U.S. 57.5 44.9 50.0 A. Rank: N/A B. Name of Sector: Processed Wood Products (2472010) (2482000) (2483020) (2483040) (6342010)(6343200)(6416120) C. PS&D Code: IT9355A [1000 Metric Tons] 1992 1993 1994 D. Total Market Size 11222 10757 11250 (1000 Cubic Meters) E. Total Local Production 4930 4900 4930 (1000 Cubic Meters) F. Total Exports 98.4 127.1 130.0 G. Total Imports 3816.1 3536.4 3800.0 H. Total Imports from U.S. 269.7 199.6 220.0 Comment: Although U.S. exports of forest products to Italy were affected adversely by the strong dollar during 1992 and 1993, the long term trend continues to be favorable. The market for Italian wood furniture is excellent due to the soft lira which has encouraged trade and as long as demand for finished products remains strong, demand for U.S. logs and semi finished products should remain firm. Exporters should continue their efforts to educate Italian end-users about the benefits of U.S. softwood and lumber applications. A. Rank: N/A B. Name of Sector: Oilseeds (2230000) C. PS&D Code: IT9406A [1000 Metric Tons] MY1992 MY1993 MY1994 D. Total Market Size 2873 2641 2706 E. Total Local Production 1343 854 1169 F. Total Exports 5 0 0 G. Total Imports 1505 1737 1537 H. Total Imports from U.S. 633 656 656 A. Rank: N/A B. Name of Sector: Oilmeals (0810000) C. PS&D Code: IT9406A [1000 Metric Tons] MY1992 MY1993 MY1994 D Total Market Size 3761 3715 3605 E. Total Local Production 1965 1837 1877 F. Total Exports 70 52 62 G. Total Imports 1866 1830 1790 H. Total Imports from U.S. 114 100 100 Comment: Implementation of the reformed Common Agricultural Policy for oilseeds is expected to result in a further decline in Italian soybean production during 1993/94, and a resulting increase in import requirements. U.S. suppliers should benefit from the increased demand despite strong price competition from Southern Hemisphere suppliers, primarily Argentina and Brazil. Oilseed meal imports are projected to remain steady. A. Rank: N/A B. Name of Sector: Grain and Feed (0410000) (0411000) (0440000) (0430000) (0452000) (0459200) (0422110) (0451000) C. PS&D Code: IT9411A [1000 Metric Tons] MY1992 MY1993 MY1994 D. Total Market Size 24682 25453 25028 E. Total Local Production 24297 22996 23491 F. Total Exports 7049 6495 5490 G. Total Imports 7114 6132 6712 H. Imports from U.S. 442 320 520 Comment: The perennial problem facing U.S. grain exports to Italy is the EU variable levy. In the case of wheat, this has resulted in France's virtual take-over of the bread wheat market. However, U.S. bread wheat (Dark Northern Spring and Hard Red Spring) has benefited from the improved quality standards. For durum wheat, imports from the United States in recent years have been limited to less than 50,000 tons of desert durum from Arizona and Southern California. However there has been a dynamic increase in total imports of wheat and rice derivatives. These products are particularly important for the Italian food processing sector for flour, pasta, bread, biscuits, and semolina production. The United States faces stiff competition from Canada and Europe, but the United States is the preferred exporter of quality grains. There is also an interest in pulses. U.S. competitors for pulses in the Italian market include Argentina and Turkey. Expanded interest in parboiled rice, brown rice and prepared rice mixes continues to offer some potential for U.S. exporters, although given the dominant position of local rice, the market for U.S. rice will likely remain limited. A. Rank: N/A B. Name of Sector: Nuts (0577400) (0577500) (0577901) (0577907) C. PS&D Code: IT9314A [1000 Metric Tons] MY1992 MY1993 MY1994 D. Total Market Size 135.9 137.0 137.0 E. Total Local Production 119.8 128.0 131.3 F. Total Exports 55.5 59.5 55.0 G. Total Imports 47.5 61.5 48.0 H. Total Imports from U.S. 14.5 7.6 7.8 Comment: The long-term decline in domestic production of walnuts and almonds is favoring imports from California. These nuts are increasing in popularity with consumers. A similar interest can be seen in dried fruit from the United States. Ad campaigns promoting raisins and prunes as healthy snack foods have been particularly successful. The superior quality of the U.S. product has resulted in strong demand for U.S. origin prunes. U.S. raisins also show potential for growth in the Italian market. A. Rank: N/A B. Name of Sector: Cattle and Swine (0013000) (0011000) C. PS&D Code: IT9452B* [head] 1992 1993 1994 D. Total Mkt Size/Slaughter 17326 17000 17000 E. Total Local Production 15175 15757 15616 F. Total Exports 16 14 16 G. Total Imports 3588 3100 3350 H. Total Imports from U.S. - - - * Does not include genetic material Comment: Italy is one of the largest U.S. markets for bovine semen. In 1993, U.S. exports of bovine semen were valued at 4.5 million USD. However, U.S. exports have been affected somewhat adversely by the Italian Holstein Friesian Association's (ANAFI) arbitrary qualitative restrictions on imports. Each year, ANAFI establishes a limit on the number of U.S. bulls eligible to provide semen to Italy. A. Rank: N/A B. Name of Sector: Hides/Skins (2111000) C. PS&D Code: IT9452B [Metric Tons] 1992 1993 1994 D. Total Market Size 435.0 435.0 435.0 E. Total Local Production 98.0 94.0 94.0 F. Total Exports 12.0 12.0 12.0 G. Total Imports 361.0 370.0 350.0 H. Imports from U.S. 8.0 8.0 8.0 Comment: Overall, Italy is the largest importer in the European Union of U.S. hides and skins. U.S. exports of finished and semi- finished leather products continue to benefit from strong Italian demand. The popularity of American-style shoes--such as Timberland and Top-Siders--which require a heavy side-leather, has in part sparked Italian demand for American leather