<DOC>
[DOCID: f:63133.wais]



106th Congress                                                  S. Prt.
 2d Session              JOINT COMMITTEE PRINT                  106-45
_______________________________________________________________________

                                     

 
        COUNTRY REPORTS ON ECONOMIC POLICY AND TRADE PRACTICES

                               __________

                              R E P O R T

                            SUBMITTED TO THE

                     COMMITTEE ON FOREIGN RELATIONS

                          COMMITTEE ON FINANCE

                                 OF THE

                              U.S. SENATE

                                AND THE

                              COMMITTEE ON

                        INTERNATIONAL RELATIONS

                      COMMITTEE ON WAYS AND MEANS

                                 OF THE

                     U.S. HOUSE OF REPRESENTATIVES

                                 BY THE

                          DEPARTMENT OF STATE

       IN ACCORDANCE WITH SECTION 2202 OF THE OMNIBUS TRADE AND 
                      COMPETITIVENESS ACT OF 1988

                                     
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>





                      U.S. GOVERNMENT PRINTING OFFICE
63-133                        WASHINGTON : 2000




                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
CHUCK HAGEL, Nebraska                PAUL S. SARBANES, Maryland
GORDON H. SMITH, Oregon              CHRISTOPHER J. DODD, Connecticut
CRAIG THOMAS, Wyoming                JOHN F. KERRY, Massachusetts
ROD GRAMS, Minnesota                 RUSSELL D. FEINGOLD, Wisconsin
JOHN ASHCROFT, Missouri              PAUL D. WELLSTONE, Minnesota
BILL FRIST, Tennessee                BARBARA BOXER, California
SAM BROWNBACK, Kansas                ROBERT G. TORRICELLI, New Jersey
LINCOLN D. CHAFEE, Rhode Island
                   Stephen E. Biegun, Staff Director
                 Edwin K. Hall, Minority Staff Director
        
                              ----------                              


                          COMMITTEE ON FINANCE

                WILLIAM V. ROTH, Jr., Delaware, Chairman

CHARLES E. GRASSLEY, Iowa            DANIEL PATRICK MOYNIHAN, New York
ORRIN G. HATCH, Utah                 MAX BAUCUS, Montana
FRANK H. MURKOWSKI, Alaska           JOHN D. ROCKEFELLER IV, West 
DON NICKLES, Oklahoma                Virginia
PHIL GRAMM, Texas                    JOHN BREAUX, Louisiana
TRENT LOTT, Mississippi              KENT CONRAD, North Dakota
JAMES M. JEFFORDS, Vermont           BOB GRAHAM, Florida
CONNIE MACK, Florida                 RICHARD H. BRYAN, Nevada
FRED THOMPSON, Tennessee             J. ROBERT KERREY, Nebraska
PAUL COVERDELL, Georgia              CHARLES S. ROBB, Virginia

           Franklin G. Polk, Staff Director and Chief Counsel

        David Podoff, Minority Staff Director and Chief Counsel

                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman

WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                  Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVE CHABOT, Ohio                   EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
Carolina                             ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California        JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado

                    Richard J. Garon, Chief of Staff

          Kathleen Bertelsen Moazed, Democratic Chief of Staff

     Hillel Weinberg, Senior Professional Staff Member and Counsel

                   Kimberly Roberts, Staff Associate

                              ----------                              


                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 (iii)


                            C O N T E N T S

                              ----------                              
                                                                   Page

Foreword.........................................................   vii

Letter of Transmittal............................................    ix

Introduction.....................................................    xi

Text of Section 2202 of the Omnibus Trade and Competitiveness Act 
  of 1988........................................................  xiii

Notes on Preparation of the Reports..............................    xv

Some Frequently Used Acronyms....................................  xvii

                            COUNTRY REPORTS*

Africa:

    Ghana........................................................     1
    Nigeria......................................................     6
    South Africa.................................................    12

East Asia and the Pacific:

    Australia....................................................    17
    China, People's Republic of..................................    21
    Hong Kong*...................................................    28
    Indonesia....................................................    32
    Japan........................................................    38
    Korea, Republic of...........................................    44
    Malaysia.....................................................    50
    Philippines..................................................    57
    Singapore....................................................    63
    Taiwan*......................................................    69
    Thailand.....................................................    75

Europe:

    The European Union...........................................    81
    Austria......................................................    89
    Belgium......................................................    94
    Bulgaria.....................................................    99
    Czech Republic...............................................   105
    Denmark......................................................   110
    Finland......................................................   116
    France.......................................................   121
    Germany......................................................   125
    Greece.......................................................   129
    Hungary......................................................   135
    Ireland......................................................   139
    Italy........................................................   146
    The Netherlands..............................................   151
    Norway.......................................................   156
    Poland.......................................................   160
    Portugal.....................................................   165
    Romania......................................................   169
    Russia.......................................................   173
    Spain........................................................   180

                                  (v)

    Sweden.......................................................   186
    Switzerland..................................................   190
    Turkey.......................................................   193
    Ukraine......................................................   198
    United Kingdom...............................................   204

The Americas:

    Argentina....................................................   209
    Bahamas......................................................   214
    Bolivia......................................................   219
    Brazil.......................................................   224
    Canada.......................................................   230
    Chile........................................................   235
    Colombia.....................................................   241
    Costa Rica...................................................   248
    Dominican Republic...........................................   254
    Ecuador......................................................   260
    El Salvador..................................................   265
    Guatemala....................................................   270
    Haiti........................................................   274
    Honduras.....................................................   279
    Jamaica......................................................   285
    Mexico.......................................................   292
    Nicaragua....................................................   300
    Panama.......................................................   304
    Paraguay.....................................................   309
    Peru.........................................................   314
    Trinidad and Tobago..........................................   319
    Uruguay......................................................   324
    Venezuela....................................................   328

Near East and North Africa:

    Algeria......................................................   337
    Bahrain......................................................   341
    Egypt........................................................   345
    Israel.......................................................   352
    Jordan.......................................................   358
    Kuwait.......................................................   363
    Morocco......................................................   368
    Oman.........................................................   372
    Saudi Arabia.................................................   378
    Tunisia......................................................   383
    United Arab Emirates.........................................   388

South Asia:

    Bangladesh...................................................   395
    India........................................................   401
    Pakistan.....................................................   406

                               __________
*Reports also cover the following areas: Hong Kong and Taiwan.




                                FOREWORD

                              ----------                              

    The reports on individual country economic policy and trade 
practices contained herein were prepared by the Department of 
State in accordance with section 2202 of the Omnibus Trade and 
Competitiveness Act of 1988 (P.L. 100-418).
    Modeled on the State Department's annual reports on country 
human rights practices, the reports are intended to provide a 
single, comparative analysis of the economic policies and trade 
practices of countries with which the United States has 
significant economic or trade relationships. Because of the 
increasing importance of, and interest in, trade and economic 
issues, these reports are prepared to assist Members in 
considering legislation in the areas of trade and economic 
policy.

                                               Jesse Helms,
                          Chairman, Committee on Foreign Relations.

                                      William V. Roth, Jr.,
                                    Chairman, Committee on Finance.

                                        Benjamin A. Gilman,
                    Chairman, Committee on International Relations.

                                               Bill Archer,
                             Chairman, Committee on Ways and Means.

                                 (vii)

                                     




                         LETTER OF TRANSMITTAL

                              ----------                              

                                  U.S. Department of State,
                                     Washington, DC, March 6, 2000.
Hon. Jesse Helms,
Chairman, Committee on Foreign Relations.

Hon. William V. Roth, Jr.,
Chairman, Committee on Finance.

Hon. Albert Gore, Jr.,
President, U.S. Senate.

Hon. Dennis Hastert,
Speaker, House of Representatives.

Hon. Benjamin A. Gilman,
Chairman, Committee on International Relations.

Hon. Bill Archer,
Chairman, Committee on Ways and Means.

    Dear Sirs: Section 2202 of the Omnibus Trade and 
Competitiveness Act of 1988 requires the Department of State to 
provide to the appropriate Committees of Congress a detailed 
report regarding the economic policy and trade practices of 
countries with which the U.S. has significant economic or trade 
relationships. In this regard, I am pleased to provide the 
enclosed report.

            Sincerely,
                                            Barbara Larkin,
                          Assistant Secretary, Legislative Affairs.
Enclosure.

                                  (ix)

                                     


                              INTRODUCTION

                              ----------                              


         Country Reports on Economic Policy and Trade Practices

    The Department of State is submitting to the Congress its 
Country Reports on Economic Policy and Trade Practices in 
compliance with Section 2202 of the Omnibus Trade and 
Competitiveness Act of 1988. As the legislation requires, we 
have prepared detailed reports on the economic policy and trade 
practices of countries with which the United States has 
significant economic or trade relationships. This is the 
Department of State's 11th annual report. It now includes 
reports on 76 countries, customs territories and customs 
unions.
    Each report contains nine sections.

  <bullet> Key Economic Indicators: Each report begins with a 
        table showing data for key economic indicators in the 
        national income, monetary, and trade accounts.
  <bullet> General Policy Framework: This first narrative 
        section gives an overview of macroeconomic trends.
  <bullet> Exchange Rate Policies: The second section describes 
        exchange rate policies and their impact on the price 
        competitiveness of U.S. exports.
  <bullet> Structural Policies: The third section examines 
        structural policies, highlighting changes that may 
        affect U.S. exports to that country.
  <bullet> Debt Management Policies: The fourth section 
        describes debt management policies and their 
        implications for trade with the U.S.
  <bullet> Significant Barriers to U.S. Exports and Investment: 
        The fifth section examines significant barriers, formal 
        and informal, to U.S. exports and investment.
  <bullet> Export Subsidies Policies: The sixth section focuses 
        on government actions, policies, and practices that 
        support exports from that country, including exports by 
        small businesses.
  <bullet> Protection of U.S. Intellectual Property: The 
        seventh section discusses the country's laws and 
        practices with respect to protection of intellectual 
        property rights.
  <bullet> Worker Rights: The final section has three parts.

        --The first (subsections a through e) outlines the 
        country's laws and practices with respect to 
        internationally recognized worker rights.
        --The second (subsection f) highlights conditions of 
        worker rights in goods-producing sectors where U.S. 
        capital is invested.

                                  (xi)

        --Finally, a table cites the extent of such investment 
        by sector where information is available.

    The country reports are based on information supplied by 
U.S. Embassies, which is analyzed and reviewed by the 
Department of State in consultation with other U.S. Government 
agencies. The reports are intended to serve as general guides 
to economic conditions in specific countries. We have worked to 
standardize the reports, but there are unavoidable differences 
reflecting large variations in data availability. In some 
cases, access to reliable data is limited, particularly in 
countries making transitions to market economies. Nonetheless, 
each report incorporates the best information currently 
available.
                                       Ryan Samuel,
                        Acting Assistant Secretary of State
                                 for Economic and Business Affairs.


 TEXT OF SECTION 2202 OF THE OMNIBUS TRADE AND COMPETITIVENESS ACT OF 
                                  1988

                              ----------                              

    ``The Secretary of State shall, not later than January 31 
of each year, prepare and transmit to the Committee on 
[International Relations]* and the Committee on Ways and Means 
of the House of Representatives, to the Committee on Foreign 
Relations and the Committee on Finance of the Senate, and to 
other appropriate committees of the Congress, a detailed report 
regarding the economic policy and trade practices of each 
country with which the United States has an economic or trade 
relationship. The Secretary may direct the appropriate officers 
of the Department of State who are serving overseas, in 
consultation with appropriate officers or employees of other 
departments and agencies of the United States, including the 
Department of Agriculture and the Department of Commerce, to 
coordinate the preparation of such information in a country as 
is necessary to prepare the report under this section. The 
report shall identify and describe, with respect to each 
country:

    1. The macroeconomic policies of the country and their 
impact on the overall growth in demand for United States 
exports;
    2. The impact of macroeconomic and other policies on the 
exchange rate of the country and the resulting impact on price 
competitiveness of United States exports;
    3. Any change in structural policies [including tax 
incentives, regulation governing financial institutions, 
production standards, and patterns of industrial ownership] 
that may affect the country's growth rate and its demand for 
United States exports;
    4. The management of the country's external debt and its 
implications for trade with the United States;
    5. Acts, policies, and practices that constitute 
significant trade barriers to United States exports or foreign 
direct investment in that country by United States persons, as 
identified under section 181(a)(1) of the Trade Act of 1974 (19 
U.S.C. 2241(a)(1));
    6. Acts, policies, and practices that provide direct or 
indirect government support for exports from that country, 
including exports by small businesses;
    7. The extent to which the country's laws and enforcement 
of those laws afford adequate protection to United States 
intellectual property, including patents, trademarks, 
copyrights, and mask works; and



    *In 1995, the Committee on Foreign Affairs changed its name to the 
Committee on International Relations.

                                 (xiii)

                                     

    8. The country's laws, enforcement of those laws, and 
practices with respect to internationally recognized worker 
rights (as defined in section 502(a)(4) of the Trade Act of 
1974), the conditions of worker rights in any sector which 
produces goods in which United States capital is invested, and 
the extent of such investment.''


                  NOTES ON PREPARATION OF THE REPORTS

                              ----------                              

    Subsections ``a.'' through ``e.'' of the Worker Rights 
section (section 8) are abridged versions of section 6 in the 
Country Reports on Human Rights Practices for 1999, submitted 
to the Committees on International Relations of the House of 
Representatives and on Foreign Relations of the U.S. Senate in 
January 1999. For a comprehensive and authoritative discussion 
of worker rights in each country, please refer to that report.
    Subsection ``f.'' highlights conditions of worker rights in 
goods-producing sectors where U.S. capital is invested. A table 
cites the extent of such investment by sector where information 
is available. The Bureau of Economic Analysis of the U.S. 
Department of Commerce has supplied information on the U.S. 
direct investment position at the end of 1997 for all countries 
for which foreign direct investment has been reported to it. 
Readers should note that ``U.S. Direct Position Abroad'' is 
defined as ``the net book value of U.S. parent companies' 
equity in, and net outstanding loans to, their foreign 
affiliates'' (foreign business enterprises owned 10 percent or 
more by U.S. persons or companies). Where a figure is negative, 
the U.S. parent owes money to the affiliate. The table does not 
necessarily indicate total assets held in each country. In some 
instances, the narrative refers to investments for which 
figures may not appear in the table.

                                  (xv)

                                     


                     SOME FREQUENTLY USED ACRONYMS

                              ----------                              

ADB--Asian Development Bank
BIS--Bank for International Settlements
CACM--Central American Common Market
CARICOM--Caribbean Common Market
CAP--Common Agricultural Policy (of the EU)
CCC--Commodity Credit Corporation (Department of Agriculture)
EBRD--European Bank for Reconstruction and Development
EFTA--European Free Trade Association
EMS--European Monetary System (of the EU)
ERM--Exchange Rate Mechanism (of the EU)
ESAF--Enhanced Structural Adjustment Facility
EU--European Union
EXIMBANK--U.S. Export-Import Bank
FOREX--foreign exchange
FY--fiscal year
GATS--General Agreement on Trade in Services
GATT--General Agreement on Tariffs and Trade
GDP--gross domestic product
GNP--gross national product
GSP--Generalized System of Preferences
IBRD--International Bank for Reconstruction and Development 
            (World Bank)
IFIs--international financial institutions (IMF, World Bank and 
            regional development banks)
ILO--International Labor Organization (of the United Nations)
IMF--International Monetary Fund
IDB--Inter-American Development Bank
IPR--intellectual property rights
LIBOR--London Interbank Offer Rate
MFN--most favored nation
NAFTA--North American Free Trade Agreement
NGOs--non-government organizations
NIS--Newly Independent States (of the former Soviet Union)
OECD--Organization for Economic Cooperation and Development
OPIC--U.S. Overseas Private Investment Corporation
PTT--Post, Telegraph and Telephone
SAP--Structural Adjustment Program (of the IMF/World Bank)
SDR--Special Drawing Rights (of the IMF)
STF--Structural Transformation Facility
TRIPs--WTO Agreement on Trade-Related Aspects of Intellectual 
            Property Rights

                                 (xvii)

UR--Uruguay Round of trade negotiations in the GATT
USD--U.S. Dollar
VAT--value-added tax
WIPO--World Intellectual Property Organization
WTO--World Trade Organization
                                 AFRICA

                              ----------                              


                                 GHANA

                         Key Economic Indicators
          [Millions of U.S. Dollars unless otherwise indicated]
------------------------------------------------------------------------
                                              1997      1998    \1\ 1999
------------------------------------------------------------------------
Income, Production and Employment:
  Nominal GDP \2\.........................     6,884     7,630       N/A
  Real GDP Growth (pct) \3\...............       4.2       4.6       4.5
  GDP by Sector:
    Agriculture...........................     2,574     3,090       N/A
    Manufacturing.........................       640       656       N/A
    Services..............................     1,976     2,220       N/A
    Government............................       730       832       N/A
  Per Capita GDP (US$)....................       385       415       N/A
  Labor Force (000's).....................     8,240     8,480     8,734
  Unemployment Rate (pct).................        22        20        20

Money and Prices (annual percentage
 growth):
  Money Supply Growth (M2)................      40.8      17.6       3.9
  Consumer Price Inflation (end-of-period)      20.8      15.7      12.6
  Exchange Rate (Cedis/US$ annual average)     2,250     2,346     3,100
   Interbank (mid-rate)...................

Balance of Payments and Trade:
  Total Exports FOB \4\...................     1,491     1,830     1,880
    Exports to U.S. \4\...................       154       144       140
  Total Imports CIF \4\...................     2,128     2,213     2,253
    Imports from U.S. \4\.................       314       223       253
  Trade Balance \4\.......................      -637      -383      -373
    Balance with U.S......................      -160       -79      -113
  External Public Debt....................     5,651     5,922     5,750
  Fiscal Deficit/GDP (pct)................       2.6       2.3       N/A
  Current Account Deficit/GDP (pct).......       8.5       3.5       N/A
  Debt Service Payments/GDP (pct).........       8.6       8.4       N/A
  Gold and Foreign Exchange Reserves......       508       508       364
  Aid from U.S............................        52        58        60
  Aid from All Other Sources..............       N/A       N/A       N/A
------------------------------------------------------------------------
\1\ 1999 figures are all estimates based on most recent data available.
\2\ GDP at factor cost.
\3\ Percentage changes calculated in local currency.
\4\ Merchandise trade.
\5\ Data not available.

1. General Policy Framework
    Ghana operates in a free market environment under a popularly 
elected civilian government. In December, 1996, Ghana had its second 
experience in multiparty elections since the inauguration of the 4th 
Republic in January, 1993. President Jerry John Rawlings was reelected 
for a second four-year term which will expire in December of 2000.
    Rawlings headed a ``provisional'' regime from the end of 1981 until 
January, 1993, when democratic government under a written constitution 
was restored. Unlike the first parliament, the present has an 
opposition presence with 67 seats out of 200. An independent judiciary 
acts as the final arbiter of Ghanaian laws. The next presidential and 
parliamentary elections are scheduled for the year 2000.
    Since 1983 Ghana has pursued an economic reform agenda aimed 
generally at reducing government involvement in the economy and 
encouraging private sector development. Inflationary pressures as a 
result of government expenditure overruns prior to 1992 and 1996 
presidential and parliamentary elections have been contained to some 
extent. However, fiscal performance by government in the third quarter 
of 1999 is the basis for concern since government has resorted to heavy 
domestic borrowing to make up for shortfalls from mainly non-tax 
revenue, leading to rising domestic interest rates.
    The Bank of Ghana is currently pursuing a tight monetary policy in 
an attempt to absorb excess liquidity in order to sustain the downward 
trend in inflation. Inflation, measured at about 71 percent at the end 
of 1995, has consistently declined to 9.4 percent at the end of May, 
1999, the lowest for 20 years before rising to 12.6 percent in October 
of 1999. Following the steady fall in inflation, the Central Bank 
cautiously made reductions in the bank rate or rediscount rate from 45 
percent in 1995, to 27 percent in April, 1999. Lending rates, which 
fell accordingly, have started rising as the Bank intensifies its open 
market operation to keep money supply within target. Increases in 
domestic prices of petroleum products to make up for corresponding 
increases in world crude oil prices, and the rapid depreciation of the 
local currency against major foreign currencies, are exerting intense 
inflationary pressures.
    The government's economic program has focused on the development of 
Ghana's private sector, which historically has been weak. Privatization 
of state-owned enterprises continues, with about two-thirds of 300 
enterprises sold to private owners. Despite the energy crisis in 1998, 
Ghana achieved real economic growth of 4.6 percent as against 4.2 
percent recorded in 1997. Growth in 1999 is expected to be lower than 
the government projection of 5.5 percent due to the effect of terms of 
trade shocks in 1999 arising from a decline in world prices of cocoa 
and gold and increases in oil prices. Agriculture (which still accounts 
for about 41 percent of GDP and employs about 60 percent of the work 
force) and manufacturing have recorded much slower growth. Other 
reforms adopted under the government's structural adjustment program 
include the elimination of exchange rate controls and the lifting of 
virtually all restrictions on imports. The establishment of an 
Interbank Foreign Exchange Market has greatly expanded access to 
foreign exchange. The elimination of virtually all local production 
subsidies is further indication of the government's intention to move 
toward a market orientation for the economy.
2. Exchange Rate Policy
    The foreign exchange value of the Ghanaian cedi is established 
independently through the use of Interbank Market and Foreign Exchange 
bureaus, and currency conversion is easily obtained. The foreign 
exchange auction procedure was abandoned in 1992. Ghana fully accedes 
to Article IV of the IMF convention on free current account 
convertibility and transfer. Through the Bank of Ghana's intervention, 
the cedi depreciated by about 13 percent in 1998 as compared to an 
annual average of about 25 percent during 1993 to 1997. Depletion of 
the Bank's foreign exchange reserves in 1999, mainly as a result of 
higher oil import bills and shortfall in external program assistance, 
has resulted in a sharp depreciation of the cedi and a shortage of 
major foreign exchange. In general, the exchange rate regime in Ghana 
does not have any particular impact on the competitiveness of U.S. 
exports. This may change, however, if the euro continues its fall in 
relation to the dollar.
3. Structural Policies
    Ghana progressively reduced import quotas and surcharges as part of 
its structural adjustment program. Tariff structures are being adjusted 
in harmony with the ECOWAS Trade Liberalization Program. With the 
elimination of import licensing in 1989, importers are now merely 
required to sign a declaration that they will comply with Ghanaian tax 
and other laws. Imported goods currently enjoy generally unfettered 
access to the Ghanaian market.
    The government professes strong support for the principle of free 
trade. However, it is also committed to the development of competitive 
domestic industries with exporting capabilities. The government is 
expected to continue to support domestic private enterprise with 
various financial incentives. Ghanaian manufacturers seek stronger 
protective measures and complain that Ghana's tariff structure places 
local producers at a competitive disadvantage relative to imports from 
countries enjoying greater production and marketing economies of scale. 
High local production costs frequently boost the price of locally 
manufactured items above the landed cost of goods imported from Asia 
and elsewhere. Reductions in tariffs have increased competition for 
local producers and manufacturers while reducing the cost of imported 
raw materials.
    The government successfully reintroduced value-added tax (VAT) in 
December, 1998, at a ten-percent rate. Government has proposed an 
increase to 12.5 percent to make up for anticipated revenue shortfalls 
in 2000. Additionally, government is expected to broaden the tax base 
and enhance compliance. All these, although significant, are not enough 
to reduce net domestic borrowings in order to ease pressure on 
inflation and domestic interest rates. In 1998, government's domestic 
interest payments were about 30 percent of its domestic revenue, more 
than the local budget for both health and education.
    Despite successful structural reform in other parts of the economy, 
one disappointment in Ghana's recent efforts has been that of its 
divestiture program. The Divestiture Implementation Committee (DIC) 
published an action plan in April 1999 detailing an agenda for the 
divestiture of several major enterprises and outlined specific annual 
targets for receipts. Since then, the actual implementation has 
included only two divestitures, that of the State Transport factory and 
that of GHACEM, a cement factory, totaling US$31.5 million.
4. Debt Management Policies
    Ghana's total outstanding external debt, including obligations to 
the IMF, totaled approximately USD 5.7 billion at the end of the second 
quarter of 1999. Outstanding obligations to the IMF under medium-term 
facilities stood at USD 305 million at the end of the same period. At 
that time, outstanding long-term debt was about USD 5 billion (about 88 
percent of total debt), of which USD 1.5 billion and USD 3.5 billion 
were owed to bilateral and multilateral institutions, respectively. The 
size of external debt as a proportion of GDP continues to decrease from 
its 1994 level of 97 percent to 79 percent of GDP in 1998. Ghana's debt 
service ratio in 1998 was 31 percent. In 1991 Ghana cleared all 
external debt arrears. Ghana is a heavily indebted poor country (HIPC) 
but has not asked to be the beneficiary of debt relief or rescheduling 
in recent times. To better manage its debt portfolio, since August, 
1997, government has applied a moratorium on public and public 
guaranteed non-concessional borrowings.
    Persistent balance of payments deficits have resulted in a 
continuing increase in foreign indebtedness. Swings in commodity 
prices, especially gold and cocoa, have a dramatic impact on Ghana's 
export revenues. In 1999, Ghana suffered from external shocks not only 
from the falling prices of these commodities but also the increase in 
the world price of crude oil. These are estimated to cumulatively 
affect the balance of payments by about 370 million dollars in 1999. 
This deficit is reflected in reduction in imports, lower GDP, and 
exchange rate adjustments. The government is expected to sustain its 
present level of external program assistance and increase receipts from 
the divestiture of state-owned enterprises to moderate the volatility 
of the cedi.
5. Significant Barriers to U.S. Exports
    Import licenses: Ghana eliminated its import licensing system in 
1989 but retains a ban on the importation of a narrow range of products 
that do not affect U.S. exports. Ghana is a member of the WTO.
    Services Barriers: The Ghanaian investment code prohibits foreign 
participation in the following sectors: small-scale wholesale and 
retail sales, taxi and car rental services with fleets of fewer than 
ten vehicles, lotteries, and barber and beauty shops. Current insurance 
law requires at least 40 percent Ghanaian ownership of insurance firms 
in Ghana.
    Standards, Testing, Labeling, and Certification: Ghana has 
promulgated its own standards for food and drugs. The Ghana Standards 
Board, the national testing authority, subscribes to accepted 
international practices for the testing of imports for purity and 
efficacy. Under Ghanaian law, imports must bear markings identifying in 
English the type of product being imported, the country of origin, the 
ingredients or components, and the expiration date, if any. Non-
complying goods are subject to government seizure. Several highly 
publicized seizures of goods (pharmaceuticals and food items) with 
expired shelf-life dates are occasionally carried out. The thrust of 
this law is to regulate imported food and drugs; however, by its terms 
the law applies to non-consumable imports as well. Locally manufactured 
goods are subject to comparable testing, labeling, and certification 
requirements. Four pre-shipment inspection firms contracted by 
government also perform testing and price verification for some 
selected imports that are above USD 5,000.
    Investment Barriers: The investment code guarantees repatriation of 
dividends, loan repayments, licensing fees and repatriation of capital. 
It also provides guarantees against expropriation or forced sale and 
sets forth dispute arbitration processes. Foreign investors are not 
subject to differential treatment on taxes, access to foreign exchange 
and credit, or importation of goods and equipment. Separate legislation 
covers investments in mining and petroleum and applies equally to 
foreign and Ghanaian investors. The investment code no longer requires 
project approval from the Ghana Investment Promotion Center (GIPC). The 
U.S. Embassy reports growing problems related to government violations 
of private sector landowning rights and property rights.
    Government Procurement Practices: Government purchases of equipment 
and supplies are usually handled by the Ghana Supply Commission (the 
official purchasing agency) through international bidding and, at 
times, through direct negotiations. Former government import monopolies 
have been abolished. However, parastatal entities continue to import 
some commodities. The parastatals no longer receive government 
subsidies to finance imports.
6. Export Subsidies Policies
    The Government of Ghana does not directly subsidize exports. 
Exporters are entitled to a 100 percent refund for duty paid on 
imported inputs used in the processing of exported goods. Bonded 
warehouses have been established which allow importers to avoid duties 
on imported inputs used to produce merchandise for export. Firms 
involved in exports enjoy some fiscal incentives such as tax holidays 
and preferential tax/duty treatment on imported capital equipment. 
Firms under the export processing zones all benefit from the same 
incentives.
7. Protection of U.S. Intellectual Property
    After independence in 1957, Ghana instituted separate legislation 
for copyright (1961) and trademark (1965) protection based on British 
law. Subsequently, the government passed modified copyright and patent 
legislation in 1985 and 1992, respectively. Prior to 1992 the patent 
laws of the United Kingdom applied in Ghana. Ghana is a member of the 
Universal Copyright Convention, the World Intellectual Property 
Organization, and the English-Speaking African Regional Intellectual 
Property Organization, and is also a signatory to the WTO Agreement on 
TRIPs. IPR holders have access to local courts for redress of 
grievances. Few infringement cases have been filed in Ghana in recent 
years. Ghana has not been identified as a priority country in 
connection with either the ``Special 301'' Watch List or Priority Watch 
List.
    Patents (Product and Process): Patent registration in Ghana 
presents no serious problems for foreign rights holders. Registration 
fees vary according to the nature of the patent, but local and foreign 
applicants pay the same rate.
    Trademarks: Ghana has not yet become a popular location for 
imitation designer apparel and watches. In cases where trademarks have 
been misappropriated, the price and quality disparity would be apparent 
to all but the most unsuspecting buyer.
    Copyrights: Enforcement of foreign copyrights may be pursued in the 
Ghanaian courts, but few such cases have actually been filed in recent 
years. The bootlegging of computer software is an example of copyright 
infringement taking place locally. There is no data available to 
quantify the commercial impact of this practice. Pirating of videotapes 
is another local practice that affects U.S. exports, but the evidence 
suggests that this is not being done on a large scale. There is no 
evidence of a significant export market for Ghanaian-pirated books, 
cassettes, or videotapes.
    In summary, infringement of intellectual property rights has not 
had a significant impact on U.S. exports to Ghana. Pirated computer 
software may become a more significant problem in the future, however, 
as computer use grows.
8. Worker Rights
    a. The Right of Association: Trade unions are governed by the 
Industrial Relations Act (IRA) of 1958, as amended in 1965 and 1972. 
Organized labor is represented by the Trades Union Congress (TUC), 
which was established in 1958. The IRA confers power on government to 
refuse to register a trade union, but the current government or the 
previous military regime has not exercised this right. No union leaders 
have been detained in recent years, nor has the right of workers to 
freely associate otherwise been circumscribed.
    b. The Right to Organize and Bargain Collectively: The IRA provides 
a framework for collective bargaining and protection against anti-union 
discrimination. Law prohibits civil servants from joining or organizing 
a trade union. However, in December, 1992, the government enacted 
legislation which allows each branch of the civil service to establish 
a negotiating committee to engage in collective bargaining for wages 
and benefits in the same fashion as trade unions in the private sector. 
While the right to strike is recognized in law and in practice, the 
government has on occasion taken strong action to end strikes, 
especially in cases involving vital government interests or public 
order. The IRA provides a mechanism for conciliation and arbitration 
before unions can resort to industrial actions or strikes. Over the 
past four years there have been several industrial actions involving 
salary increase demands, conditions of service, and severance awards. 
1999 saw a number of short-lived ``wild cat'' strikes by doctors and 
industrial workers.
    c. Prohibition of Forced or Compulsory Labor: Ghanaian law 
prohibits forced labor and it is not known to be practiced. The 
International Labor Organization (ILO) continues to urge the government 
to revise legislation that permits imprisonment with an obligation to 
perform labor for offenses that are not countenanced under ILO 
Convention 105, ratified by Ghana in 1958.
    d. Minimum Age of Employment of Children: Labor legislation in 
Ghana sets a minimum employment age of 15 and prohibits night work and 
certain types of hazardous labor for those under 18. The violation of 
child labor laws is common and young children of school age can often 
be found during the day performing menial tasks in the agricultural 
sector or in the markets. Observance of minimum age laws is eroded by 
local custom and economic circumstances that compel children to become 
wage earners at an early age. Inspectors from the Ministry of Labor and 
Social Welfare are responsible for enforcement of child labor laws. 
Employers who violate laws prohibiting heavy labor and night work by 
children are occasionally prosecuted.
    e. Acceptable Conditions of Work: In 1991 a Tripartite Commission 
composed of representatives from government, organized labor, and 
employers established minimum standards for wages and working 
conditions. The daily minimum wage combines wages with customary 
benefits such as a transportation allowance. The current daily minimum 
wage is Cedis 2,900, about 85 cents at the present rate of exchange. 
This sum does not permit a single wage earner to support a family and 
frequently results in multiple wage earners and other family-based 
commercial activity. A much-vaunted, government-commissioned study on 
reform of the civil service (including a serious revision of grades and 
salary levels) was implemented in June, 1999. By law the maximum 
workweek is 45 hours, but collective bargaining has established a 40-
hour week for most unionized workers.
    f. Rights in Sectors with U.S. Investment: U.S. investment in Ghana 
is concentrated in the primary and fabricated metals sectors (gold 
mining and aluminum smelting), food and related products (tuna canning 
and beverage bottling), petroleum marketing, and telecommunications. 
Labor conditions in these sectors do not differ significantly from the 
norm, save that wage scales in the metals and mining sectors are 
substantially higher than elsewhere in the Ghanaian economy. U.S. firms 
have a good record of compliance with Ghanaian labor laws.

 Extent of U.S. Investment in Selected Industries--U.S. Direct Investment Position Abroad on an Historical Cost
                                                   Basis--1998
                                           [Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
            Category                                                     Amount
----------------------------------------------------------------------------------------------------------------
Petroleum......................  ..............  -1
Total Manufacturing............  ..............  (\1\)
  Food & Kindred Products......  0               ...............................................................
  Chemicals & Allied Products..  0               ...............................................................
  Primary & Fabricated Metals..  (\1\)           ...............................................................
  Industrial Machinery and       0               ...............................................................
   Equipment.
  Electric & Electronic          0               ...............................................................
   Equipment.
  Transportation Equipment.....  0               ...............................................................
  Other Manufacturing..........  0               ...............................................................
Wholesale Trade................  ..............  0
Banking........................  ..............  0
Finance/Insurance/Real Estate..  ..............  0
Services.......................  ..............  0
Other Industries...............  ..............  0
TOTAL ALL INDUSTRIES...........  ..............  (\1\)
----------------------------------------------------------------------------------------------------------------
\1\ Suppressed to avoid disclosing data of individual companies.

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


                                 ______
                                 

                                NIGERIA


                         Key Economic Indicators
          [Billions of U.S. Dollars unless otherwise indicated]
------------------------------------------------------------------------
                                              1997      1998    \1\ 1999
------------------------------------------------------------------------
Income, Production, and Employment:
  Nominal GDP \2\.........................      50.1      52.0       N/A
  Real GDP Growth (pct) \3\...............       3.2       2.4       N/A
  GDP by Sector (pct):
    Agriculture...........................      31.5      32.3       N/A
    Manufacturing.........................       6.3       6.1       N/A
    Services..............................       9.7       9.6       N/A
  Per Capita GDP (US$)....................       250       250       240
  Labor Force (millions)..................      43.0      40.0       N/A
  Unemployment Rate (pct).................       2.6       3.9       N/A

Money and Prices (annual percentage
 growth):
  Money Supply Growth (M2)................      15.0      15.6       N/A
  Consumer Price Inflation................       8.5      10.0       8.0
  Exchange Rate (Naira/US$ annual average)
    Official..............................        22        82        95
    Parallel..............................        55        85       101

Balance of Payments and Trade:
  Total Exports FOB \4\...................      15.2       9.0       N/A
    Exports to U.S. \5\...................       6.3       4.2       N/A
  Total Imports FOB.......................      10.3       9.9       N/A
    Imports from U.S. \5\.................       0.8       0.8       N/A
  Trade Balance...........................       4.9      -2.0       N/A
    Trade Balance with U.S. \5\...........       5.5       3.4       N/A
  Current Account Deficit/GDP (pct).......       1.2      -3.5       N/A
  External Public Debt....................      27.1      28.7       N/A
  Debt Service Payments/GDP (pct).........       1.8       1.4       N/A
  Fiscal Deficit/GDP (pct)................       0.2       4.7       N/A
  Gold and Foreign Exchange Reserves......       7.6       7.1       N/A
  Aid from U.S. (US$ millions)............       N/A       N/A       N/A
  Aid from All Other Sources..............       N/A       N/A       N/A
------------------------------------------------------------------------
\1\ 1999 figures, except exchange rates, are all estimates based on
  available monthly data in November.
\2\ GDP at factor cost. Conversion to U.S. dollars done with official
  exchange rate of 82 naira to the dollar for 1998/99.
\3\ Percentage changes calculated in local currency.
\4\ Merchandise trade.
\5\ Source: U.S. Department of Commerce and U.S. Census Bureau; exports
  FAS, imports customs basis; 1999 figures are estimates based on data
  available through November 1999.

1. General Policy Framework
    Nigeria is Africa's most populous nation and the United States' 
fifth largest oil supplier. It offers investors a low-cost labor pool, 
abundant natural resources, and one of the largest domestic markets in 
sub-Saharan Africa. On the other hand, inadequate infrastructure, 
corruption, and inconsistent regulations mean that considerable time, 
money and managerial effort are needed for a firm to begin operation 
and earn profits in Nigeria. Nigeria's basic infrastructure is 
extensive but inadequate for a population of over 100 million. Roads 
and bridges are crumbling, telephone service is erratic, and there are 
recurring shortages of water and electricity. Social unrest in some 
areas, widespread unemployment, a stagnant economy depressed by over-
reliance on oil, the lack of effective due process, and serious fraud 
and violent crime problems complicate business in Nigeria.
    After a period of moderate fiscal austerity in the late 1980s, the 
Nigerian government ran budget deficits of up to 12 percent of GDP 
beginning in 1990. The deficit decreased to seven percent in 1994 and, 
by postponing government spending (including for debt service), in 1995 
shrank to negligible proportions. In 1996, the budget had a surplus of 
1.6 percent of GDP. For the majority of 1997, the budget ran a reported 
surplus. The deficit reduction and ensuing surplus came about primarily 
through austerity--e.g., foregoing government projects and 
infrastructure maintenance--as well as stronger-than-expected oil 
revenue. Recommendations by international financial institutions 
include reducing large government fuel price subsidies (the official 
price of gasoline is currently about 20 cents per liter), shelving a 
number of government projects which are of doubtful economic value, and 
reducing leakage from government income due to corruption.
    In previous years, monetary policy had been driven by the need to 
accommodate the government's budget deficit and a desire to reduce the 
inflationary impact of the budget deficit on the economy. Deficits at 
the federal level had been financed primarily by borrowing from the 
Central Bank of Nigeria (CBN), which held 85.1 percent of the 
government's domestic debt at the end of 1997. Since the Central Bank 
monetizes much of the deficit, budgetary shortfalls have a direct 
impact on the money supply and on price levels, which had risen rapidly 
for several years but have since slowed. In 1996, the government also 
began releasing money from an extra-budgetary account called the 
Petroleum Trust Fund (PTF) for infrastructure and other projects. 
President Obasanjo has scrapped the fund and constituted a winding up 
committee to look into the activities of the PTF.
    In 1999, Nigeria has continued the policy of ``guided 
deregulation'' and privatization instituted in the 1995 budget. The 
former head of state, General Sani Abacha, had abandoned the 1986 
structural adjustment program reforms and instituted tight government 
control over key economic variables. In response to the economic 
downturn caused by those measures, Abacha's 1995 budget abandoned the 
tightly regulated economic policies enacted in 1994. Under the new 
policy, the Nigerian government reopened the Autonomous Foreign 
Exchange Market (AFEM), loosened controls on foreign investment and 
reduced tariffs and bans on some imports. The 1999 budget continued the 
trend of fiscal austerity and the slow deregulation of the economy. On 
the demise of General Abacha, General Abdulsalami Abubakar, also 
reiterated the government's intention to privatize major parastatals, 
including telecommunications and electricity (NITEL and NEPA 
respectively.) The 1998 budget promised privatization with 40 percent 
equity for the government, 20 percent equity for Nigerian citizens, and 
unrestricted sale of the remaining 40 percent. Invitations to invest 
were to be made to specific investors with relevant expertise. The 1998 
budget also targeted the reorganization of the electricity generating 
parastatal (NEPA.) In 1999, the government repealed and amended eleven 
decrees that inhibited competition or conferred monopoly powers on 
public enterprises in the petroleum, telecommunications, power and 
mineral sectors. However, the promised privatization exercise has not 
occurred and its present prospects are unclear. The Obasanjo government 
has declared its conditional support for eventual privatization and 
promised a transparent privatization program after evaluating and 
rehabilitating the parastatals' assets.
    In November 1999, the Obasanjo government released a Year 2000 
budget of 500 billion Naira (USD 5 billion). The budget was predicated 
on an oil price of $18 per barrel as against the $16.5 used in the 1999 
budget. The education sector got the highest allocation of 40.3 billion 
Naira. Next in allocation is the Defense Ministry with an allocation of 
34.1 billion Naira. Nigeria's external debt servicing is retained at 
$1.5 billion and external debt stood at $28.54 billion as at September 
30, 1999. External debt arrears currently stand at $18.86 billion, 
while the debt service commitment for the year 2000 is expected to be 
$1.98 billion.
2. Exchange Rate Policy
    In 1999, the autonomous foreign exchange market (AFEM) was fully 
deregulated. Dual exchange rates were scrapped and only AFEM rate 
prevails. Companies can now hold domiciliary accounts in private banks, 
with unfettered use of the funds. Foreign investors may bring capital 
into the country without Finance Ministry approval, and may service 
foreign loans and remit dividends. Bureau de change offices are 
functioning and transactions in the bureau de change offices have been 
increased to $10,000 per transaction. In addition, oil companies are 
allowed to sell foreign exchange directly to interested banks and 
private organizations. The Central Bank has continued to intervene at 
the weekly AFEM.
3. Structural Policies
    As stated in the December 1986 circular ``Industrial Policy of 
Nigeria,'' the Nigerian government maintains a system of incentives to 
foster the development of particular industries, to encourage firms to 
locate in economically disadvantaged areas, to promote research and 
development in Nigeria, and to favor the use of domestic labor and raw 
materials. The Industrial Development (Income Tax Relief) Act of 1971 
provides incentives to ``pioneer'' industries deemed beneficial to 
Nigeria's economic development. Companies given ``pioneer'' status may 
enjoy a non-renewable tax holiday of five years, or seven years if the 
pioneer industry is located in an economically disadvantaged area.
    In 1995, Nigeria promulgated the Nigerian Investment Promotion 
Commission Decree to replace the Enterprises Promotion Act. This decree 
liberalized the foreign investment regime, allowing 100 percent foreign 
ownership of firms outside the petroleum sector. Investment in the 
petroleum sector is still limited to the existing joint venture 
agreement or production-sharing contracts with the Nigerian government, 
though there has been discussion of the Nigerian government selling off 
some small parts of its joint venture equity. A foreign enterprise may 
now buy shares of any Nigerian firm except those on the ``negative 
list'': production of firearms, ammunition and narcotics, military and 
paramilitary apparel. The Investment Promotion Decree provides for the 
creation of an Investment Promotion Commission that will register 
companies for foreigners after incorporation under the Companies and 
Allied Matters Decree of 1990. The decree also abolishes the expatriate 
quota system (except in the oil sector) and prohibits any 
nationalization or expropriation of a foreign enterprise by the 
Nigerian government except for such cases determined to be in the 
national interest.
    Nigeria has partially implemented the 1995 money laundering decree, 
which introduced bank reporting procedures designed to inhibit this 
practice. There is also a decree against advance-fee fraud (called 419 
fraud after the relevant section of the Nigerian criminal code.) 
However, as of 1999, there has been only limited success in reducing 
financial fraud despite improving law enforcement actions against fraud 
perpetrators. The broad scope of business fraud has brought 
international notoriety to Nigeria and constitutes a serious 
disincentive to exporters.
4. Debt Management Policies
    Nigeria's foreign debt ballooned from $13 billion in 1981 to $24 
billion in 1986, when sharply lower oil revenues and continued high 
import levels escalated balance of payments deficits. Debt service 
obligations including payment of arrears, are projected to be over $8 
billion annually for the next several years. However, according to the 
1998 Central Bank of Nigeria's Annual Report, Nigeria's total external 
debt stock at the end of 1998 amounted to $28.774 billion, compared 
with $27.09 in 1997. The exact debt figure with multilateral financial 
institutions is still in dispute. The 1999 budget allowed only $2 
billion for foreign debt payments, thus ensuring continued build-up of 
arrears.
    In January 1992, in an effort to reduce its external debt, the 
Nigerian government concluded an agreement with the London club that 
gave commercial banks a menu of options from which to choose in 
reducing Nigeria's commercial debt. The menu included debt buy backs 
(currently at 45 cents to the dollar), new money bonds, and 
collateralized par bonds. As a result of the agreement, Nigeria was 
able to reduce its external debt by $3.9 billion since 1992, but the 
accumulation of arrears on other debt (especially Paris Club debt), 
which currently represent 70 percent of total debt stock, has kept 
external debt levels high.
    From 1986 to early 1992, on the basis of a comprehensive structural 
adjustment program, Nigeria reached three standby agreements with the 
IMF. The last one lapsed in 1992. Discussions with the IMF since then 
have shown some progress, as evidenced by the 1996 decapping of 
interest rates and removal of the mandatory sectoral credit allocations 
for banks. In 1999 Nigeria and the IMF resolved most issues standing in 
the way of a new standby arrangement. Nigeria's inadequate servicing of 
Paris Club debt remains a principal obstacle.
    Nigeria's most recent rescheduling agreement with the Paris Club 
expired at the same time as its standby agreement with the IMF, and 
debt repayment obligations on Paris Club debt have continued to grow. 
(Nigeria has kept up to date on its multilateral and London Club debt.) 
In 1992 Nigeria made payments of $2.7 billion against interest and 
principal payment obligations of $5 billion. However, faced with 
similar obligations in the following years, external debt service 
payments were only budgeted at $1.6 billion for 1993, $1.8 billion for 
1994, and $2 billion yearly from 1995 to 1998. In 1997, actual debt 
service payments were $503.5 million (or 25.2 percent) lower than the 
$2 billion budgeted. Although discussions with the IMF and World Bank 
continued on a medium term economic program, and Nigeria is making some 
progress at meeting their criteria, no new rescheduling agreement will 
be reached until an IMF program is in place.
5. Significant Barriers to U.S. Exports
    Nigeria abolished all export licensing requirements and cut its 
list of banned imports in 1986. However, as of November 1999, the 
importation of approximately 13 items is still banned. These bans were 
initially implemented to restore Nigeria's agricultural sector and to 
conserve foreign exchange. Although widespread smuggling compromises 
the bans, reduced availability of grains has raised prices for both 
banned commodities and locally produced substitutes. The government 
discontinued fertilizer subsidies for farmers in 1997, but reintroduced 
them in 1999. Widespread fertilizer shortages persist.
    In 1995, Nigeria announced a new tariff structure for the next five 
years. Revisions aimed to narrow the range of custom duties, increase 
rate coverage in line with WTO provisions, and decrease import 
prohibitions. In the 1999 budget, Nigeria's 1998 revised higher tariffs 
were reduced, but excise duties eliminated in 1998 were restored for 
certain goods. Excise duties of 40 percent were restored for 
cigarettes, cigars, tobacco, and spirits. Other commodity duty rates 
are: rice, 50 percent; day-old chicks and parent stock, 5 percent; 
sparkling wines, wine coolers, and champagne, 100 percent; fruits and 
fruit juices, reduced from 75 to 55 percent; jute, 10 percent; cotton, 
60 percent; fertilizers, 5 percent; textile fabrics 65 percent; and 
garments, 75 percent. For 1999, the 25 percent import duty rebate that 
was granted importers in late 1997 was abolished. Poultry and eggs, 
beer and stout, barley and malt, and mineral and similar waters, 
removed from the prohibited import list in 1998, never qualified for 
the rebate. However, duty rates for live, chilled or frozen poultry and 
eggs were slashed from 150 to 55 percent to reduce smuggling for these 
products and the consequent loss of significant duty revenue.
    Other import restrictions apply to aircraft and ocean-going 
vessels. A government authorized inspection agent must inspect all 
imported aircraft and ocean-going vessels. In addition, performance 
bonds and offshore guarantees must be arranged before either down 
payments or the Ministry of Finance authorizes subsequent payments.
    In 1996, to reduce congestion and corruption in Nigerian ports and 
following a reported shortfall in customs receipts, the Nigerian 
government changed the procedures by which goods enter or leave the 
country. All unaccompanied imports and exports regardless of value 
require pre-shipment inspection (PSI). Imports must be accompanied by 
an import duty report (IDR). The Nigerian government will confiscate 
goods arriving without an IDR. The PSI was abandoned temporarily in 
early 1999 in favor of destination inspection, but the new scheme was 
fraught with problems and was soon shelved for the PSI again. In 
addition, all goods are assessed a one-percent surcharge to cover the 
cost of inspection. The Obasanjo Administration has made some progress 
on its pledge to practice open and competitive contracting. Anti-
corruption is an energetic and central plank of the new government's 
policy. Foreign companies incorporated in Nigeria receive national 
treatment. Currently, tenders are published in newspapers for 
prospective contractors. Approximately five percent of all government 
procurement contracts are awarded to U.S. companies.
6. Export Subsidy Policies
    In 1976, the government established the Nigerian Export Promotion 
Council (NEPC) to promote non-oil exports from Nigeria. The Council 
administers incentive programs, including a duty drawback program, the 
export development fund, tax relief and capital assets depreciation 
allowances, and a foreign currency retention program. The duty drawback 
or manufacturing in-bond program is designed to allow the duty free 
importation of raw materials to produce goods for export, contingent on 
the issuance of a bank guarantee. The performance bond is discharged 
upon evidence of exportation and repatriation of foreign exchange. 
Though meant to promote industry and exportation, these schemes have 
been burdened by inefficient administration, confusion, and corruption, 
causing great difficulty and, in some cases, losses to those 
manufacturers and exporters who opted to use them.
    The NEPC also administers the export expansion grant program, a 
fund that provides grants to exporters of manufactured and semi-
manufactured products. Grants are awarded on the basis of the value of 
goods exported, and the only requirement for participation is that the 
export proceeds be repatriated to Nigeria. Though the grant amounts are 
small, ranging from two to five percent of total export value, they may 
constitute subsidies as defined by the WTO and raise questions about 
compliance with WTO obligations. In the 1999 budget, the government 
announced that the incentive schemes will be replaced by a non-cash 
incentive scheme termed ``negotiable duty credit certificate'' (NDCS), 
under which exporters' claims are credited against future imports. This 
measure will save the government from making annual budgetary 
allocations to the scheme and is in conformity with the WTO.
7. Protection of U.S. Intellectual Property
    Nigeria is a signatory to the Universal Copyright Convention and 
the Berne Convention. In 1993, Nigeria became a member of the World 
Intellectual Property Organization (WIPO), thereby becoming party to 
most of the major international agreements on intellectual property 
rights. Cases involving infringement of non-Nigerian copyrights have 
been successfully prosecuted in Nigeria, but enforcement of existing 
laws remains weak, particularly in the patent and trademark areas. 
Recently, Nigeria's active participation in international conventions 
has yielded positive results. Law enforcement agents occasionally carry 
out raids on suspected sites for production and sale of pirated tapes, 
videos, computer software and books. Piracy is widespread, but 
prosecution under the copyright law is slow. However, since the TRIPS 
(Trade Related Intellectual Property Rights) agreement was signed under 
the Uruguay round in 1993, the Nigerian Copyright Council has 
intensified efforts to combat piracy by organizing workshops for law 
enforcement agents on copyright issues.
    The Patents and Design Decree of 1970 governs the registration of 
patents, and the Standards Organization of Nigeria is responsible for 
issuing patents, trademarks, and copyrights. Once conferred, a patent 
conveys an exclusive right to make, import, sell, or use the products 
or apply the process. The Trademarks Act of 1965 governs the 
registration of trademarks. A trademark conveys the exclusive right to 
use the registered mark for a particular good or class of goods.
    The Copyright Decree of 1988, based on WIPO standards and U.S. 
copyright law, criminalizes counterfeiting, exporting, importing, 
reproducing, exhibiting, performing, or selling any work without the 
permission of the copyright owner. Progress on enforcing the 1988 law 
is slow. The expense and time necessary to pursue a copyright 
infringement case discourage prosecution of such cases.
    Few companies have sought trademark or patent protection in Nigeria 
because it is generally perceived as ineffective. Losses from piracy 
are substantial, although the exact cost is difficult to estimate. Most 
recordings sold in Nigeria are pirated, and the video industry is based 
on the sale and rental of pirated tapes. Satellite signal piracy is 
also common. Violation of patents on pharmaceuticals is a problem.
8. Worker Rights
    a. The Right of Association: Nigerian workers may join unions with 
the exception of members of the armed forces, police force, or 
government employees of the following departments and services: 
customs, immigration, prisons, currency printing and minting, central 
bank and telecommunications. A worker engaged in an essential service 
is required under penalty of law to provide his employer 15 days' 
advance notice of his intention to cease work. Essential service 
workers include federal and state civilian employees in the armed 
services, and public employees engaged in banking, telecommunications, 
postal services, transportation and ports, public health, fire 
prevention, and the utilities sector. Employees working in an export 
processing zone may not join a union for a period of ten years from the 
start-up of the enterprise.
    Under the law, a worker under a collective bargaining agreement may 
not participate in a strike unless his representative has complied with 
the requirements of the Trade Disputes Act, which include provisions 
for mandatory mediation and for referring the labor dispute to the 
government. The Act allows the government in its discretion to refer 
the matter to a labor conciliator, arbitration panel, board of inquiry, 
or the National Industrial Court. The Act also forbids any employer 
from granting a general wage increase to its workers without prior 
government approval. In practice, however, the Act does not appear to 
be effectively enforced as strikes, including in the public sector, are 
widespread, and private sector wage increases are not submitted to the 
government for prior approval.
    Nigeria has signed and ratified the International Labor 
Organization's (ILO) convention on freedom of association, but Nigerian 
law authorizes only a single central labor body, the Nigeria Labor 
Congress (NLC). Nigerian labor law controls the admission of a union to 
the NLC, and requires any union to be formally registered before 
commencing operations. Registration is authorized only where the 
Registrar of Trade Unions determines that it is expedient in that no 
other existing union is sufficiently representative of the interests of 
those workers seeking to be registered.
    b. The Right to Organize and Bargain Collectively: Nigerian labor 
laws permit the right to organize and bargain collectively. Collective 
bargaining is common in many sectors of the economy. Nigerian law 
protects workers from retaliation by employers (i.e. lockouts) for 
labor activity through an independent arm of the judiciary, the 
Nigerian Industrial Court. Trade unionists have complained, however, 
that the judicial system's slow handling of labor cases constitutes a 
denial of redress. The government retains broad authority over labor 
matters, and often intervenes in disputes it feels challenge its key 
political or economic objectives. However, the era of government 
appointed ``sole administrators'' of unions is now over, and the labor 
movement is increasingly active and vocal on issues seen to attest the 
plight of the common worker, such as deregulation, privatization, and 
the government's failure to advance its poverty alleviation program.
    c. Prohibition of Forced or Compulsory Labor: Section 34 of the 
1999 Constitution, and the 1974 Labor Decree, prohibit forced labor. 
Nigeria has also ratified the ILO convention prohibiting forced labor. 
However, there are occasional reports of instances of forced labor, 
typically involving domestic servants. The government has limited 
resources to detect and prevent violations of the forced labor 
prohibition.
    d. Minimum Age for Employment of Children: Nigeria's 1974 labor 
decree prohibits employment of children under 15 years of age in 
commerce and industry and restricts other child labor to home-based 
agricultural or domestic work. The law further stipulates that no 
person under the age of 16 may be employed for more than eight hours 
per day. The decree allows the apprenticeship of youths under specific 
conditions. Primary education is compulsory in Nigeria, though rarely 
enforced. Actual enrollment is declining due to the continuing 
deterioration of public schools. Increasing poverty and the need to 
supplement meager family incomes have forced also many children into 
the employment market, which is unable to absorb their labor due to 
high levels of unemployment. The use children as beggars, hawkers, or 
elsewhere in the informal sector is widespread in urban areas.
    e. Acceptable Conditions of Work: Nigeria's 1974 labor decree 
established a 40-hour workweek, prescribed 2 to 4 weeks of annual 
leave, set a minimum wage, and stipulated that workers are to be paid 
extra for hours worked over the legal limit. The decree states that 
workers who work on Sundays and legal holidays must be paid a full 
day's pay in addition to their normal wages. There is no law 
prohibiting excessive compulsory overtime. In 1998, the federal 
government raised for all federal employees the minimum monthly wage 
(salary and allowances) to N5, 280.00 (USD 60) from N450 (USD 5.00). 
The government later reversed the decision and reduced the minimum wage 
to N3,500.00 (USD 35) for federal workers and N3000.00 (USD 30) for 
state workers. However, many states are unable, or unwilling to pay the 
new minimum wage. Widespread reports of empty state treasuries 
inherited by the new civilian government threaten their ability to pay 
the new salary. Despite this, the Obasanjo government is considering 
plans to further increase the minimum wage. The 1974 decree contains 
general health and safety provisions. Employers must compensate injured 
workers and dependent survivors of those killed in industrial accidents 
but enforcement of these laws by the ministry of labor is largely 
ineffective.
    f. Rights in Sectors with U.S. Investment: Worker rights in 
petroleum, chemicals and related products, primary and fabricated 
metals, machinery, electric and electronic equipment, transportation 
equipment, and other manufacturing sectors are not significantly 
different from those in other major sectors of the economy.

 Extent of U.S. Investment in Selected Industries--U.S. Direct Investment Position Abroad on an Historical Cost
                                                   Basis--1998
                                           [Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
            Category                                                     Amount
----------------------------------------------------------------------------------------------------------------
Petroleum......................  ..............  1,696
Total Manufacturing............  ..............  56
  Food & Kindred Products......  (\1\)           ...............................................................
  Chemicals & Allied Products..  20              ...............................................................
  Primary & Fabricated Metals..  -1              ...............................................................
  Industrial Machinery and       0               ...............................................................
   Equipment.
  Electric & Electronic          0               ...............................................................
   Equipment.
  Transportation Equipment.....  (\1\)           ...............................................................
  Other Manufacturing..........  0               ...............................................................
Wholesale Trade................  ..............  1
Banking........................  ..............  (\1\)
Finance/Insurance/Real Estate..  ..............  (\1\)
Services.......................  ..............  0
Other Industries...............  ..............  4
TOTAL ALL INDUSTRIES...........  ..............  1,925
----------------------------------------------------------------------------------------------------------------
\1\ Suppressed to avoid disclosing data of individual companies.

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


                                 ______
                                 

                              SOUTH AFRICA


                         Key Economic Indicators
          [Billions of U.S. Dollars unless otherwise indicated]
------------------------------------------------------------------------
                                         1997        1998     1999 (est)
------------------------------------------------------------------------
Income, Production and Employment:
 \1\
  Nominal GDP (at nominal prices)...       147.9       134.5       146.0
  Real GDP Growth (pct).............         2.5         0.5         0.9
  GDP by Sector:
    Agriculture.....................         5.2         4.3         4.6
    Mining and Quarrying............         8.9         7.7         8.3
    Manufacturing...................        27.5        23.0        25.1
    Wholesale/Retail Trade..........        18.5        15.7        17.1
    Financial Services..............        20.6        18.5        20.1
    Government......................        17.6        15.0        16.3
  Per Capita GDP (US$)..............       2,987                     N/A
  Labor Force (millions)............         9.8    10 (est)         N/A
  Unemployment Rate (pct)...........        22.9  23.0 (est)         N/A

Money and Prices (annual percentage
 growth):
  Money Supply Growth (M2)..........        18.7        13.6          10
  Consumer Price Index..............         8.6         6.9         5.5
  Exchange Rate (Rand/US$ annual
 average) \1\
  Unified...........................         4.6         5.5         6.2

Balance of Payments and Trade:
  Total Exports FOB \2\.............        25.6        24.6        23.4
    Exports to U.S. \3\.............         2.5         3.0         3.0
  Total Imports CIF \2\.............        28.9        27.4        23.1
    Imports from U.S. \3\...........         3.0         3.6         2.4
  Trade Balance \2\.................        -3.3        -2.5         0.3
    Trade Balance with U.S. \3\.....        -0.5        -0.6         0.6
  External Public Debt \4\..........         3.3         2.7         N/A
  Fiscal Deficit/GDP (pct)..........         4.2         5.5         N/A
  Current Account Deficit/GDP (pct).         1.5        -1.6        -0.5
  Debt Service Payments/GDP (pct)...         6.1         6.7         N/A
  Gold and Foreign Exchange Reserves         3.7         7.6         6.5
  Aid from U.S. (US$ millions) \5\..       110.5        71.3        53.4
  Aid from Other Countries \6\......         N/A         N/A         N/A
------------------------------------------------------------------------
\1\ The following exchange rates were used in the calculations: $1:R4.61
  for 1997, $1:R5.80 for 1998, and an estimated $1:R6.15.
\2\ All South African trade statistics include export and import data
  for the five members of the Southern African Customs Union (Botswana,
  Lesotho, Namibia, South Africa, and Swaziland) up to December 1997.
\3\ Source: U.S. Department of Commerce and U.S. Census Bureau; exports
  FAS, imports customs basis.
\4\ From IMF Yearbook, September 1999.
\5\ The figures represent aid from USAID only.
\6\ SA has received substantial aid from all over the world. However,
  there is no comprehensive audit of the total aid given to SA to date.

1. General Policy Framework
    South Africa is a middle-income developing country with well-
developed financial, legal, communications, energy, and transport 
sectors, a stock exchange which ranks among the 20 largest in the 
world, and a modern infrastructure supporting an efficient distribution 
of goods to major urban centers throughout the region. More than five 
years since the historic election of President Nelson Mandela in the 
country's first multi-racial elections, South Africa remains the 
largest economy in Africa, and is very important to U.S. trade and 
investment.
    Decades of apartheid-era policies resulted in the inefficient use 
of human resources, under-investment in human capital, labor 
rigidities, large budgetary outlays for duplicative layers of 
government and facilities, extensive governmental interference in the 
economy, and a lack of foreign investment and imported goods resulting 
from international sanctions. In the lead up to the 1994 elections, the 
South African economy started enjoying a period of recovery after more 
than four years of negative real GDP growth from 1988-1992. The economy 
has posted real GDP growth rates of 2.5 percent in 1994, 3.1 percent in 
1995, 4.2 percent in 1996 and 2.5 percent in 1997. The 1998 growth rate 
however came in at 0.5 percent largely due to the financial turmoil 
which hit almost all emerging markets. Some recovery is expected in 
1999 with many predicting a real GDP growth rate of 0.9 percent.
    South Africa faces daunting developmental problems resulting from 
apartheid-era policies. The government's objectives today are growth, 
jobs, black economic empowerment, promotion of small, medium, and micro 
enterprises, and the extension of telecommunications, transportation, 
and other infrastructure links to under-served rural and urban areas .
    The government demonstrated its commitment to open markets, 
privatization, and a favorable investment climate with the release of 
its macroeconomic strategy, GEAR, in June 1996. This strategy includes 
expansion of infrastructure, restructuring of state assets, 
conservative fiscal and monetary targets and continued reduction of 
tariffs to promote greater competition and industrial revitalization. 
These efforts, together with South Africa's implementation of its World 
Trade Organization (WTO) obligations, show that South Africa is moving 
steadily towards free market principles.
    Over the last decade, quantitative credit controls and 
administrative control of deposit and lending rates have largely 
disappeared. The South African Reserve Bank (SARB) now operates in much 
the same way as western central banks, influencing interest rates and 
controlling liquidity through its rates on funds provided to private 
sector banks, and to a lesser degree through the placement of 
government paper. In the past five years, restrictive monetary policy, 
through the maintenance of relatively high central bank lending rates, 
has curbed domestic spending on imports and reduced inflation to its 
lowest rates in twenty years.
    The government primarily finances its debt through the issuance of 
government bonds. To a lesser extent, the government has opted to 
finance some short-term debt obligations through the sale of foreign 
exchange and gold reserves. As a corollary to its restrictive financial 
policies, the government has not opted to finance deficit spending 
through loans from commercial banks.
2. Exchange Rate Policy
    Under South African exchange regulations, the SARB has substantial 
control over foreign currency. Exchange controls are administered by 
the SARB's Exchange Control Department and through commercial banks 
that have been authorized to deal in foreign exchange. All 
international commercial transactions must be accounted for through 
these ``authorized foreign exchange dealers.'' In addition, the SARB is 
a marketing agent for gold, which accounts for roughly 18 percent of 
export earnings. This provides the SARB wide latitude for determining 
short-term exchange rates. Monetary authorities normally allow the rand 
to adjust in an attempt to stabilize external accounts.
    While the SARB recognized that the low level of hard currency 
reserves necessitated continued inflow of long-term capital, the 
government of national unity eliminated the previous dual exchange rate 
and established a unified exchange rate on March 20, 1995. Nonetheless, 
South Africa still maintains several capital controls to prevent large 
capital outflows. The government is more likely to approve foreign 
exchange purchases for investment abroad if the foreign partner of the 
South African party conducts an asset swap, whereby an equivalent 
amount of foreign exchange is invested in South Africa by the foreign 
partner. Although domestic as well as foreign business concerns have 
lobbied hard for the lifting of the asset swap requirement, it is 
unlikely that the government will do so until foreign reserve levels 
approach the three-month coverage level. While foreign reserves are 
currently at about $6.5 billion, the SARB maintains a large Net Open 
Forward Position of $15.6 billion as of the end of September 1999.
3. Structural Policies
    Prices are generally market-determined with the exception of some 
petroleum products, electricity, transport services and certain 
agricultural goods. Purchases by government agencies and major private 
buyers are by competitive tender for projects or supply contracts. 
Bidders must pre-qualify, with some preferences allowed for local 
content.
    The main sources of government revenue in South Africa are income 
taxes and the Value-Added Tax (VAT). The VAT rate is 14 percent.
    The government has undertaken some measures in the past two years 
to ease the tax burden on foreign and domestic investors. It has 
steadily reduced the corporate primary income tax rate from 40 percent 
in 1994 to 30 percent in 1999. In addition, the Secondary Tax on 
Corporate Dividends was halved to 12.5 percent in March 1996.
4. Debt Management Policies
    At the end of 1998, the SARB reported that total foreign (public 
and private) debt amounted to approximately $38.8 billion. The ratio of 
total foreign debt to GDP has remained steady at around 26 to 30 
percent over the past three years, while interest payments as a 
percentage of total export earnings have remained at levels ranging 
from 7.3 percent in 1995 to 8.4 percent in 1998.
    South Africa is a member of the World Bank and International 
Monetary Fund (IMF) and continues Article IV consultations with the 
latter on a regular basis. In December 1993, after 27 years of economic 
isolation, South Africa obtained an $850 million IMF facility, which 
replenished South Africa's strained foreign exchange reserves and 
normalized its international financial relations. South Africa is also 
obtaining a modest World Bank loan, and is in discussions regarding 
other small grants or loans as well as greater use of World Bank 
advisory and training assistance to help with its ambitious development 
objectives.
5. Aid
    There is no comprehensive audit of the total aid given to SA to 
date. Besides the aid of $53.4 from USAID noted in the front table, the 
U.S. also provides military aid estimated at $1.65 million for FY 1998/
99.
6. Significant Barriers to U.S. Exports
    Under the terms of the Import and Export Control Act of 1963, South 
Africa's Minister of Trade and Industry may act in the national 
interest to prohibit, ration, or otherwise regulate imports. In recent 
years, the list of restricted goods requiring import permits has been 
reduced, but still includes such goods as certain foodstuffs, clothing, 
fabrics, wood and paper products, refined petroleum products and 
chemicals.
    The government remains committed to the simplification and eventual 
reduction of tariffs within the WTO framework, and maintains active 
discussions with that body and its major trading partners.
    The government is attempting to centralize and standardize the 
buying procedures of national, provincial, local, and state-owned 
corporate entities. Purchases are by competitive tender for project, 
supply and other contracts. As part of the government's policy to 
encourage local industry, a price preference schedule, based on the 
percent of local content in relation to the tendered price is employed 
to compare tenders. To claim preference for local content, tenders must 
enclose with their bid a certificate showing classification of supplies 
offered in terms of local content.
    An additional preference may be claimed if a product bears the mark 
of the South African Bureau of Standards. On tenders of less than R2 
million ($350,000), the government awards preference points to 
enterprises and companies operating in South Africa that demonstrate 
significant ownership or employment of previously disadvantaged 
individuals.
    Since late 1996, the Industrial Participation Program (IPP) has 
mandated a countertrade/offset package for all state and parastatal 
purchases of goods, services, and lease contracts in excess of $10 
million. Under the program, all bidders on government and parastatal 
contracts who exceed the imported content threshold must also submit an 
industrial participation package worth 30 percent of the imported 
content value. The bidder then has 7 years to discharge the industrial 
participation obligation. Non-performance of the contract is subject to 
a penalty of 5 percent of the outstanding industrial participation 
obligation.
7. Export Subsidies Policies
    The Export Marketing Assistance Scheme (EMA) offers financial 
assistance for the development of new export markets, through financing 
for trade missions and market research. The new Export Finance 
Guarantee Scheme for small exporters promotes small and medium 
exporters through credit guarantees with participating financial 
organizations. Provisions of the Income Tax Act also permit accelerated 
write-offs of certain buildings and machinery associated with 
beneficiation processes carried on for export, and deductions for the 
use of an export agent outside South Africa.
8. Protection of U.S. Intellectual Property
    Patents may be registered under the Patents Act of 1978 and are 
granted for 20 years. Trademarks can be registered under the Trademarks 
Act of 1973, and are granted for ten years with a possible renewal of 
an additional ten years. New designs may be registered under the 
Designs Act of 1967, which grants copyrights for five years. Literary, 
musical and artistic works, cinematographic films and sound recordings 
are eligible for copyrights under the Copyright Act of 1978. This act 
is based on the provisions of the Berne Convention as modified in Paris 
in 1971 and was amended in 1992 to include computer software. The 
government passed two IPR-related bills in parliament at the end of 
1997: the Counterfeit Goods Bill and the Intellectual Property Laws 
Amendment Bill, bringing South Africa's laws largely into conformity 
with its international trade obligations under the Trade Related 
Intellectual Property Agreement of the WTO. The Patents, Trademarks, 
Designs, and Copyrights Registrar of the Department of Trade and 
Industry administers these acts.
    South Africa is a member of the Paris Union and acceded to the 
Stockholm Text of the Paris Convention for the Protection of Industrial 
Property. South Africa is also a member of the World Intellectual 
Property Organization.
    Although South Africa's intellectual property laws and practices 
are generally in conformity with those of the industrialized nations, 
firms do experience some problems. The trademarks of a number of U.S. 
companies were misappropriated under the former government, when local 
firms took advantage of inadequate protection for famous marks. In 
April 1995, the U.S. Trade Representative placed South Africa on the 
``Special 301'' Watch List in an attempt to resolve these cases. South 
Africa was removed from the list in 1996 due to progress on several 
fronts. In May 1998, however, South Africa was placed back on the Watch 
List, in part because of a lack of adequate protection of undisclosed 
data and a law, passed in December 1997, which appeared to empower the 
Minister of Health to abrogate patent rights for pharmaceuticals. After 
extensive consultations, the US and South African governments reached 
an understanding on this Act in September 1999. USTR removed South 
Africa from the Watch List in December 1999.
    Software piracy occurs frequently in South Africa. The Business 
Software Alliance (BSA) estimates that as much as 50 percent of South 
Africa's business software is pirated, resulting in a loss of over 
$74.9 million to computer companies. Piracy in the video and sound 
industry is also an issue of concern, with a sound piracy rate of 40 
percent and a video piracy rate of 16 percent. Total annual losses due 
to audiovisual piracy in South Africa during 1998 are estimated to be 
$24.0 million.
9. Worker Rights
    a. The Right of Association: Freedom of association is guaranteed 
by the constitution and given statutory effect by the Labor Relations 
Act (LRA). All workers in the private sector and most in the public are 
entitled to join a union. Moreover, no employee can be fired or 
prejudiced because of membership in or advocacy of a trade union. 
Unions in South Africa have an approximate membership of 3.4 million or 
35 percent of the economically active population. The right to strike 
is guaranteed in the constitution, and is given statutory effect by the 
LRA. The International Labor Organization (ILO) readmitted South Africa 
in 1994. There is no government restriction against union affiliation 
with regional or international labor organizations.
    b. The Right to Organize and Bargain Collectively: South African 
law defines and protects the rights to organize and bargain 
collectively. The government does not interfere with union organizing 
and generally has not interfered in the collective bargaining process. 
The new LRA statutorily entrenches ``organizational rights,'' such as 
trade union access to work sites, deductions for trade union 
subscriptions, and leave for trade union officials.
    c. Prohibition of Forced or Compulsory Labor: Forced labor is 
illegal under the constitution, and is not practiced.
    d.Minimum Age for Employment of Children: Employment of minors 
under age 15 is prohibited by South African law. The LRA, however, 
grants the Minister of Welfare discretionary powers to permit 
employment of children under carefully described conditions in certain 
types of work, such as in the agricultural sector. Child labor is also 
used in the informal economy.
    e. Acceptable Conditions of Work: There is no legally mandated 
national minimum wage in South Africa. Instead, the LRA provides a 
mechanism for negotiations between labor and management to set minimum 
wage standards industry by industry. In those sectors of the economy 
not sufficiently organized to engage in the collective bargaining 
processes which establish minimum wages, the Basic Conditions of 
Employment Act, which went into effect in December 1998, gives the 
Minister of Labor authority to set wages, including for the first time 
wages for farm or domestic workers. Occupational health and safety 
issues remain a top priority of trade unions, especially in the mining 
and heavy manufacturing industries which are still considered hazardous 
by international standards.
    f. Worker Rights in Sectors with U.S. Investment: The worker rights 
conditions described above do not differ from those found in sectors 
with U.S. capital investment.

 Extent of U.S. Investment in Selected Industries--U.S. Direct Investment Position Abroad on an Historical Cost
                                                   Basis--1998
                                           [Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
            Category                                                     Amount
----------------------------------------------------------------------------------------------------------------
Petroleum......................  ..............  (\1\)
Total Manufacturing............  ..............  864
  Food & Kindred Products......  139             ...............................................................
  Chemicals & Allied Products..  193             ...............................................................
  Primary & Fabricated Metals..  (\1\)           ...............................................................
  Industrial Machinery and       37              ...............................................................
   Equipment.
  Electric & Electronic          112             ...............................................................
   Equipment.
  Transportation Equipment.....  (\1\)           ...............................................................
  Other Manufacturing..........  293             ...............................................................
Wholesale Trade................  ..............  145
Banking........................  ..............  (\1\)
Finance/Insurance/Real Estate..  ..............  247
Services.......................  ..............  162
Other Industries...............  ..............  (\1\)
TOTAL ALL INDUSTRIES...........  ..............  2,363
----------------------------------------------------------------------------------------------------------------
\1\ Suppressed to avoid disclosing data of individual companies.

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

                       EAST ASIA AND THE PACIFIC

                              ----------                              


                               AUSTRALIA

                         Key Economic Indicators
        [Billions of U.S. Dollars unless otherwise indicated] \1\
------------------------------------------------------------------------
                                              1997      1998    \2\ 1999
------------------------------------------------------------------------
Income, Production and Employment:
  Nominal GDP \3\.........................     405.2     364.0     390.7
  Real GDP Growth (pct)...................       5.2       4.6       3.0
  GDP by Sector: \4\
    Agriculture...........................      12.0      10.5      10.7
    Manufacturing.........................      96.3      85.0      88.9
    Services..............................     274.7     247.8     269.2
    Government............................      16.7      14.2      14.6
  Per Capita GDP (US$)....................    22,500    19,700    20,500
  Labor Force (000's).....................     9,220     9,345     9,461
  Unemployment Rate (pct).................       8.5       8.0       7.3

Money and Prices (annual percentage
 growth):
  Money Supply (M3).......................       6.3       7.6       8.8
  Consumer Price Inflation................      -0.2       1.6       2.5
  Exchange Rate (Aust$/US$ annual average)
    Official..............................       N/A       N/A       N/A
    Parallel..............................      1.36      1.59      1.56

Balance of Payments and Trade:
  Total Exports FOB.......................      62.5      55.9      60.4
    Exports to U.S........................       4.6       5.3       7.0
  Total Imports CIF.......................      61.5      60.9      64.3
    Imports from U.S......................      13.4      13.6      14.8
  Trade Balance...........................       1.0      -4.9      -3.8
    Balance with U.S......................      -8.7      -8.3      -7.7
  External Public Debt....................      44.2      33.7      25.7
  Fiscal Deficit/GDP (pct)................      -0.2      -0.5      -0.8
  Current Account Deficit/GDP (pct).......       3.1       4.8       5.5
  Debt Service Payments/GDP...............       2.2       1.8       1.8
  Gold and Foreign Exchange Reserves......      17.2      15.5      15.9
  Aid from U.S............................         0         0         0
  Aid from Other Countries................         0         0         0
------------------------------------------------------------------------
\1\ Exchange rate fluctuations must be considered when analyzing data.
  Percentage changes calculated in Australian Dollars.
\2\ 1999 figures are estimates based on available monthly data in
  November.
\3\ Income measure of GDP.
\4\ Production measure of GDP. ``Manufacturing'' includes manufacturing,
  mining, utilities, and construction.

1. General Policy Framework
    Australia's developed market economy is dominated by its services 
sector (65 percent of GDP), yet it is the agricultural and mining 
sectors (7 percent of GDP combined) that account for the bulk (58 
percent) of Australia's goods and services exports. Australia's 
comparative advantage in primary products is a reflection of the 
natural wealth of the Australian continent and its small domestic 
market: 19 million people occupy a continent the size of the contiguous 
United States. The relative size of the manufacturing sector has been 
declining for several decades, and now accounts for just under 12 
percent of GDP.
    The Asian economic downturn has yet to have a significant impact on 
economic growth, despite forcing many exporters to target alternative 
markets. With inflation well under control (Australia recorded annual 
price deflation for the first time in 35 years in 1997), the task for 
economic policy makers is to lower the unemployment rate, which remains 
stubbornly mired in the 8.0 percent range.
    The Liberal/National coalition government continued its program of 
fiscal consolidation in its budget for the 1999-2000 fiscal year, 
announcing a budget surplus of $3 billion.
2. Exchange Rate Policies
    Australian Dollar exchange rates are determined by international 
currency markets. There is no official policy to defend any particular 
exchange rate level, although the Reserve Bank of Australia (RBA) does 
operate in currency markets. The RBA is active in what it describes as 
``smoothing and testing'' foreign exchange rates, in order to provide a 
generally stable environment for fundamental economic adjustment 
policies.
    Australia does not have any major foreign exchange controls beyond 
requiring RBA approval if more than A$5,000 in cash is to be taken out 
of Australia at any one time, or A$50,000 in any form in one year. The 
purpose of this regulation is to prevent tax evasion and money 
laundering; authorization is usually automatic.
3. Structural Policies
    The government is continuing a program of economic reform, begun in 
the 1980s, that includes the reduction of import protection and 
microeconomic reform. Initially broad in scope, the program now focuses 
on industry-by-industry changes and reform of the labor market. The 
government is also continuing with the privatization of public assets. 
Federal Government ownership in telecommunications carrier Telstra has 
been reduced (via two public floats) to 51%.
    The General Tariff Reduction Program, begun in March 1991, has 
reached its conclusion, with most existing tariffs now at 5 percent. 
However, the passenger motor vehicles and textiles, clothing and 
footwear industries are still protected by high tariffs (17.5 and 17-28 
percent respectively). These tariffs are scheduled to decline to 15 and 
25 percent respectively by 2000 (where they will remain, pending 
further review, until 2005).
    The Liberal/National coalition government recently passed 
legislation altering the structure of Australia's income and sales tax 
system, and currently has before parliament legislation reforming the 
business taxation system.
4. Debt Management Policies
    Australia's net foreign debt has averaged between 30 and 45 percent 
of GDP for the past decade, and in mid-1998 totaled $145 billion (39 
percent of GDP). Australia's net external public debt is $28 billion, 
or 7 percent of GDP. The public sector accounts for 19 percent of 
Australia's external debt; the remainder is the responsibility of the 
private sector. The Federal Government is using its privatization 
receipts and budget surpluses to further reduce its debt obligations. 
The net debt-service ratio (the ratio of net income payable to export 
earnings) has remained at or below 10 pct since 1997, down from 21 
percent in 1990.
5. Significant Barriers to U.S. Exports
    Australia is a signatory to the WTO, but is not a member of the 
plurilateral WTO Agreement on Government Procurement.
    Services Barriers: The Australian services market is generally 
open, and many U.S. financial services, legal and travel firms are 
established there. The banking sector was liberalized in 1992, allowing 
foreign banks to be licensed as either branches or subsidiaries. 
Broadcast licensing rules were also liberalized in 1992, allowing up to 
20 percent of the time used for paid advertisements to be filled with 
foreign-sourced material (far greater than the percentage of non-
Australian messages actually broadcast).
    Local content regulations also require that 55 percent of a 
commercial television station's weekly broadcasts between the hours of 
6:00 a.m. and midnight must be dedicated to Australian-produced 
programs (The U.S. regrets that this requirement was recently increased 
from 50 percent). Regulations governing Australia's pay-TV industry 
require that channels carrying drama must devote 10 pct of program 
expenditure to new Australian-produced content (though they are not 
required to actually screen the programs produced).
    Standards: Australia became a signatory to the GATT Technical 
Barriers to Trade Agreement in 1992. However, Australia still maintains 
restrictive standards requirements and design rules for automobile 
parts, electronic and medical equipment, and some machine parts and 
equipment. Currently, all Australian standards are being rewritten to 
harmonize them where possible to international standards, with the 
objective of fulfilling all obligations of the GATT Technical Barriers 
to Trade Agreement.
    Labeling: Federal law requires that the country of origin be 
clearly indicated on the front label of some types of products sold in 
Australia. Various other federal and state labeling requirements are 
being reconsidered in light of compliance with GATT obligations, 
utility and effect on trade. The Federal and State Health Ministries, 
working with the Government of New Zealand, are currently reviewing 
proposals to label products containing genetically modified organisms 
and have agreed to consider issues of consumer information, health, 
implementation costs of a labeling regime, and potential impact on 
Australian exports.
    Commodity Boards: Several national and state commodity boards 
control the marketing and export of certain Australian agricultural 
products. Activities for these marketing authorities are financed by 
the producers, but some boards enjoy export monopoly powers conferred 
by the federal or state government. While some of the boards' domestic 
activities have been deregulated, the export of wheat and rice remains 
under the exclusive control of commodity boards. The government has 
indicated that the Australian wheat board (which strictly regulates 
wheat marketing abroad) may have its export monopoly reviewed during 
2000, though the terms of the review have yet to be announced. The 
export of barley from certain states likewise remains strictly 
regulated.
    Sanitary and Phytosanitary Restrictions: Australia's geographic 
isolation has allowed it to remain relatively free of exotic diseases. 
Australia imposes extremely stringent animal and plant quarantine 
restrictions. The WTO SPS agreement requires, among other things, that 
Australia's restrictions undergo a risk assessment to ensure that any 
restrictions are science-based, rather than disguised non-tariff 
barriers. Concerns remain with Australia's restrictions on chicken 
(fresh, cooked and frozen), pork, California table grapes, Florida 
citrus, stone fruit, apples, Pacific North-West cherries, timber and 
corn.
    Investment: The government requires notification of (but normally 
raises no objections to) investment proposals by foreign interests 
above certain notification thresholds, including: acquisitions of 
substantial interests in existing Australian businesses with assets of 
A$5 million or more (A$3 million for rural properties); new businesses 
involving an investment of A$10 million or more; portfolio investments 
in the media sector of 5 percent or more; all non-portfolio investments 
irrespective of size; takeovers of Australian companies valued at 
either A$20 million or more, or for more than 50 percent of the target 
company's total assets; and direct investment of foreign governments 
irrespective of size. Investment proposals for entities involving more 
than A$50 million in total assets are approved unless found contrary to 
the national interest. Special regulations apply to investments in the 
banking sector, the media sector, urban real estate and civil aviation.
    Divestment cannot be forced without due process of law. There is no 
record of forced divestment outside that stemming from investments or 
mergers that tend to create market dominance, contravene laws on equity 
participation, or result from unfulfilled contractual obligations.
    Government Procurement: Since 1991, foreign information technology 
companies with annual sales to the Australian Government of A$10-40 
million (US$6-24 million) have been required to enter into Fixed Term 
Arrangements (FTAs), and those with sales greater than A$40 million 
into Partnerships for Development (PFDs). Under an FTA, a foreign 
company commits to undertake local industrial development activities 
worth 15 percent of its projected amount of government sales over a 
four year period. Under a PFD, a foreign firm agrees to invest 5 
percent of its annual local turnover on research and development in 
Australia; export goods and services worth 50 percent of imports (for 
hardware companies) or 20 percent of turnover (for software companies); 
and achieve 70 percent local content across all exports within the 
seven year life of the PFD.
    Recent changes to Australian Government procurement policies have 
seen a significant decentralization of purchasing procedures, with the 
introduction of Endorsed Supplier Arrangements (ESA). Companies wishing 
to supply information technology (IT) products and major office 
machines to the Australian government must gain endorsement under the 
ESA. The industry development component of the new ESA requires 
evidence of product development, investment in capital equipment, 
skills development and service support, and sourcing services and 
product components, parts and/or input locally. In addition, applicants 
must demonstrate performance in either exports, research and 
development, development of strategic relationships with Australian or 
New Zealand suppliers/customers, or participation in a recognized 
industry development program.
    The Australian Government maintains its commitment to source at 
least 10 percent of its purchases from Australian small to medium size 
enterprises. The government will continue to require tenderers to 
include industry development objectives in tender documents, with model 
guidelines to be developed in consultation with industry.
    Motor Vehicles: The import of used vehicles manufactured after 1973 
for personal use is banned, except where the car was purchased and used 
overseas by the buyer for a minimum of three months. Commercial 
importers must apply for a ``compliance plate'' costing A$20,000 for 
each make of car imported. Left hand drive cars must be converted to 
right hand drive (only by licensed garages) before they may be driven 
in Australia.
6. Export Subsidies Policies
    Australia is a member of the WTO Agreement on Subsidies and 
Countervailing Measures.
    The coalition government has severely curtailed assistance schemes 
to Australian industry as part of its fiscal consolidation program. 
Under the Export Market Development Grants Scheme, the government gives 
grants to qualifying firms of up to A$200,000 to assist in offsetting 
marketing costs incurred when establishing new export markets. There 
are also schemes available for drawbacks of tariffs and sales and 
excise taxes paid on the imported components of exported products. Such 
schemes are available in the passenger motor vehicle and the textiles, 
clothing and footwear industries. Grants schemes and tariff concessions 
have also been subject to expenditure reductions. The Research and 
Development Tax Concession (available to firms undertaking eligible 
R&D) was reduced from 150 percent to 125 percent. The only remaining 
bounty (production subsidy) assists shipbuilders, and is due to expire 
on December 31, 2000.
    The Pharmaceutical Industry Investment Program is designed to 
compensate manufacturers of pharmaceutical products for the effects of 
the federal government's intervention (through the national health 
system) in the market for consumer pharmaceuticals. Under the scheme, 
approved producers receive higher prices for selected products in 
return for commitments to undertake domestic drug research and 
development.
7. Protection of U.S. Intellectual Property
    Australia is a member of the World Intellectual Property 
Organization (WIPO), and most multilateral IPR agreements, including: 
the Paris Convention for the Protection of Industrial Property; the 
Berne Convention for the Protection of Literary and Artistic Works; the 
Universal Copyright Convention; the Geneva Phonogram Convention; the 
Rome Convention for the Protection of Performers, Producers of 
Phonograms, and Broadcasting Organizations; and the Patent Cooperation 
Treaty. Australia has yet to take action on the new WIPO Copyright 
treaties. USTR has placed Australia on the ``Special 301'' Watch List 
because of limitations in its protection of test data and parallel 
imports, among other concerns.
    Patents: Patents are available for inventions in all fields of 
technology (except for human beings and biological processes relating 
to artificial human reproduction). They are protected by the Patents 
Act (1990), which offers coverage for 20 years subject to renewal. 
Trade secrets are protected by common law, such as by contract. Design 
features can be protected from imitation by registration under the 
Designs Act for up to 16 years (upon application).
    Test Data: In 1999, the government passed legislation providing 
five years of protection of test data for the evaluation of a new 
active constituent for agricultural and veterinary chemical product. No 
protection is provided for data submitted in regard to new uses and 
formulations.
    Trademarks and Copyrights: Australia provides TRIPs compatible 
protection for both registered and unregistered well known trademarks 
under the Trademark Act of 1995. The term of registration is ten years. 
Copyrights are protected under the Copyright Act of 1968 for a term of 
the life of the author plus 50 years. Computer programs can receive 
copyright protection. The Australian Copyright Act provides protection 
regarding public performances in hotels and clubs. In recent years, the 
government has passed legislation removing parallel import protection 
for sound recordings and for goods whose protection was based on the 
copyright of packaging and labeling, and allowing the decompilation of 
computer software.
    New Technologies: Infringement of new technologies does not appear 
to be a significant problem.
8. Worker Rights
    a. The Right of Association: Workers in Australia fully enjoy and 
practice the rights to associate, to organize and to bargain 
collectively. In general, industrial disputes are resolved either 
through direct employer-union negotiations or under the auspices of the 
various state and federal industrial relations commissions. Australia 
has ratified most major international labor organization conventions 
regarding worker rights.
    b. The Right to Organize and Bargain Collectively: Approximately 32 
percent of the Australian workforce belongs to unions. The industrial 
relations system operates through independent federal and state 
tribunals; unions are currently fully integrated into that process. 
Legislation reducing the powers of unions to represent employees and of 
the Industrial Relations Commission to arbitrate settlements was passed 
by Federal Parliament in November 1996. Further changes in industrial 
relations are under consideration in draft legislation currently before 
Parliament.
    c. Prohibition of Forced or Compulsory Labor: Compulsory and forced 
labor are prohibited by conventions which Australia has ratified, and 
are not practiced in Australia.
    d. Minimum Age for Employment of Children: The minimum age for the 
employment of children varies in Australia according to industry 
apprenticeship programs, but the enforced requirement in every state 
that children attend school until age 15 or 16 maintains an effective 
floor on the age at which children may be employed full time.
    e. Acceptable Conditions of Work: There is no legislatively-
determined minimum wage. An administratively-determined minimum wage 
exists, but is now largely outmoded, although some minimum wage clauses 
still remain in several federal awards and some state awards. Instead, 
various minimum wages in individual industries are specified in 
industry ``awards'' approved by state or federal tribunals. Workers in 
Australian industries generally enjoy hours, conditions, wages and 
health and safety standards that are among the best and highest in the 
world.
    f. Rights in Sectors with U.S. Investment: Most of Australia's 
industrial sectors enjoy some U.S. investment. Worker rights in all 
sectors are essentially identical in law and practice and do not 
differentiate between domestic and foreign ownership.

 Extent of U.S. Investment in Selected Industries--U.S. Direct Investment Position Abroad on an Historical Cost
                                                   Basis--1998
                                           [Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
            Category                                                     Amount
----------------------------------------------------------------------------------------------------------------
Petroleum......................  ..............  4,344
Total Manufacturing............  ..............  6,387
  Food & Kindred Products......  662             ...............................................................
  Chemicals & Allied Products..  2,749           ...............................................................
  Primary & Fabricated Metals..  359             ...............................................................
  Industrial Machinery and       586             ...............................................................
   Equipment.
  Electric & Electronic          173             ...............................................................
   Equipment.
  Transportation Equipment.....  581             ...............................................................
  Other Manufacturing..........  1,278           ...............................................................
Wholesale Trade................  ..............  2,057
Banking........................  ..............  2,595
Finance/Insurance/Real Estate..  ..............  8,347
Services.......................  ..............  2,198
Other Industries...............  ..............  7,748
TOTAL ALL INDUSTRIES...........  ..............  33,676

----------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Commerce, Bureau of Economic Analysis.


                                 ______
                                 

                       PEOPLE'S REPUBLIC OF CHINA


                         Key Economic Indicators
          [Billions of U.S. Dollars unless otherwise indicated]
------------------------------------------------------------------------
                                              1997      1998    \1\ 1999
------------------------------------------------------------------------
Income, Production and Employment:
  Nominal GDP.............................     903.1     960.8   1,016.8
  Real GDP Growth (pct) \2\...............       8.8       7.8       6.9
  GDP by Sector: \3\
    Agriculture...........................     168.7     172.7     176.1
    Manufacturing.........................     444.1     472.8     510.7
    Services..............................     267.9     291.0     304.3
    Government............................      22.3      24.3      25.7
  Per Capita GDP (US$)....................     734.2     772.0     797.0
  Labor Force (millions)..................     697.0     705.0     713.0
  Unemployment Rate (pct) \4\.............       3.1       3.1       3.1

Money and Prices (annual percentage
 growth):
  Money Supply (M2).......................      19.6      14.8      15.3
  Consumer Price Inflation................       2.8      -0.8      -1.4
  Exchange Rate (RMB/US$ annual average)..       8.3       8.3       8.3

Balance of Payments and Trade:
  Total Exports FOB \5\...................     182.7     183.7     198.4
    Exports to U.S........................      62.5      71.2      81.9
  Total Imports CIF \5\...................     142.4     140.2     156.0
    Imports from U.S. FAS.................      12.8      14.3      15.0
  Trade Balance...........................      40.3      43.5      42.4
    Balance with U.S......................      49.7      56.9      66.9
  External Public Debt....................     131.0     146.0     149.0
  Fiscal Deficit/GDP (pct)................       1.5       3.5       3.2
  Current Account Surplus/GDP (pct).......       4.5       3.1       0.0
  Debt Service Payments/Exports (pct).....       7.3      10.9       9.0
  Payments/GDP (pct)......................       1.5       2.4       2.4
  Gold and Foreign Exchange Reserves......     139.9     145.0     152.0
  Aid from United States..................         0         0         0
  Aid from All Other Sources..............       0.4       0.6       0.6
------------------------------------------------------------------------
\1\ Estimated from third quarter and end October 1999 data.
\2\ Official growth rate published by State Statistical Bureau based on
  constant renminbi (RMB) prices using 1978 weights. All other income
  and production figures are converted into dollars at the exchange
  rate. Economic experts continue to debate the accuracy of these
  figures, with some arguing that real growth may be half or less the
  official rate.
\3\ Production and net exports are calculated using different accounting
  methods and do not tally to total GDP. Agriculture includes forestry
  and fishing; manufacturing includes mining.
\4\ ``Official'' urban unemployment rate; agricultural laborers are
  assumed to be totally employed in China's official labor data. Many
  economists believe the real rate is much higher.
\5\ U.S. Department of Commerce (U.S.-China bilateral trade data for
  U.S. trade; PRC Customs (Chinese global trade data and 1999
  estimates.)

Sources: State Statistical Bureau Yearbook, People's Bank of China
  quarterly Statistical Bulletin, U.S. Department of Commerce Trade
  Data, Embassy estimates.

1. General Policy Framework
    China's official GDP growth rate was 7.4 percent for the first 
three quarters of 1999, continuing the gradual slowdown from the 
double-digit economic growth of the early 1990s. Consumer spending 
languished despite a special two-year infrastructure spending program 
and a separate social welfare and civil service spending increase in 
mid-1999. State-Owned Enterprise (SOE) reform may have slowed, 
particularly in terms of shifting employment from the over-invested 
state-owned manufacturing sector to the underdeveloped services sector. 
Price deflation has persisted in 1999, with the retail price index down 
2.6 percent in October from a year earlier (up from a low of -3.5 
percent in the second quarter of 1999.) New bank lending grew more 
slowly in 1999, perhaps reflecting increased prudence on the part of 
the dominant state-owned banks, whose poor financial condition was a 
major concern.
    Export growth was the one bright spot in the overall economic 
picture. Exports grew 2.1 percent in the third quarter after 
consecutive declines through the end of June. China has maintained 
competitiveness in many of its major export products, although there 
are signs of weakness in textiles and steel. Chinese imports increased 
by 15.8 percent in the first three quarters, as China implemented an 
anti-smuggling campaign announced in late 1998 and official statistics 
captured former gray market imports. Real import levels are widely 
believed to have remained stable, and may have actually declined in 
some sectors. Inflows of foreign direct investment slumped by about ten 
percent, year on year, through the end of July. New commitments dropped 
even more substantially, by 20.5 percent through the end of July.
    Since late 1998, the Chinese government has employed a deficit-
financed fiscal stimulus program to encourage the expansion of the 
domestic economy. The stimulus program financed efforts to broaden the 
social safety net for retired and laid off workers, salary and pension 
increases for government workers, and infrastructure expenditures. In 
addition, the government experimented with policies to curb falling 
prices, stimulate household consumption, and promote exports and 
investment. While the program has had limited impact on economic 
expansion so far, the National People's Congress agreed in August of 
1999 to have the central government issue an additional RMB 60 billion 
in treasury bonds to underwrite more projects.
    As part of its effort to increase the profit making capability of 
state-owned enterprises, the Chinese government has experimented with 
administrative measures to counter falling prices for SOE products. The 
Government announced in mid-1999 that it would prosecute enterprises 
selling at below cost and limit approvals to build additional capacity 
in a range of over-saturated industries. Firms in industries in which 
competition has led to excessive price cuts have also been encouraged 
to limit production. An anti-smuggling campaign, begun in the fall of 
1998, has shut down black and gray market competition for domestically-
produced products such as televisions and home entertainment systems.
    China is committed to reforming its financial system in order to 
allocate the large amount of savings in the economy more efficiently. 
The failure of the Guangdong Trust and Investment Corporation (GITIC) 
in late 1998 prompted the Chinese government to rein in the operations 
of more than 200 other trust and investment companies and toughen the 
supervision of domestic bank