Trade at Austria

Austria

City hall Austria

 

Formal Name: Republic of Austria.
Short Form: Austria.
Term for Citizens: Austrian(s).
Capital: Vienna.

GEOGRAPHY

Austria in Map

 

Size: Approximately 83,859 square kilometers.
Topography: Most of country Alpine or sub-Alpine; heavily wooded mountains and hills cut by valleys of fast-flowing rivers. Plains around Vienna and Danube Valley in northeast only lowland areas and contain most of population. Danube, flowing east through northern provinces and Vienna, principal river. Of total area, 20 percent arable land, 29 percent pasture, 44 percent forest, and 7 percent barren.
Climate: Continental weather systems predominate; temperatures and rainfall vary with altitude. Temperate, cloudy, cold winters with frequent rain in lowlands and snow in mountains; cool summers with occasional showers. Humidity highest in wetter western regions, diminishing toward east.

ECONOMY

Gross National Product (GNP): US$174.8 billion in 1992 with 2 percent growth rate; US$22,110 per capita with 2.4 percent growth rate.
Agriculture and Forestry: Agriculture and forestry accounted for 2.8 percent of gross domestic product (GDP) and 7.4 percent of labor force in 1991. Principal crops: grains, fruit, potatoes, sugar beets, sawn wood, cattle, pigs, and poultry. About 80 to 90 percent self-sufficient in food.

Industries of Austria

Industry: Major sector with 36.3 percent of GDP and 36.9 percent of employment in 1991.
Services: Services accounted for 60.9 percent of GDP and 55.8 percent of employment in 1991. Largest growth sector; 10 percent growth in share of GDP and 14 percent growth in share of labor force since 1970.
Major Trading Partners: Most trade with European Union (EU). Germany largest single trading partner (in 1993 accounted for 38.9 percent of exports and 41.5 percent of imports), followed by Italy and Switzerland.
Imports: US$48.6 billion in 1993. Major imports: machinery and equipment, manufacturing products, chemical products, fuels and energy, and foodstuffs.
Exports: US$40.2 billion in 1993. Major exports: machinery and equipment, paper and paper products, transport equipment, metal manufactures, and textiles and clothing.
Balance of Payments: Current account deficit US$900 million in 1993. Persistent trade deficit. Per capita income from tourism strongest in world; helps balance deficit.
General Economic Conditions: Stable economy with generally good rates of growth; high living standards, comparable with other countries of Western Europe. In 1992 real GDP growth 1.6 percent, inflation 4.1 percent, and unemployment 5.9 percent; in 1993 real GDP growth -0.3 percent, inflation 3.6 percent, and unemployment 6.8 percent.
Currency and Exchange Rate: Schilling. In March 1994, exchange rate US$1 = S12.1.

FOREIGN ECONOMIC RELATIONS

Foreign Trade and the Balance of Payments

Like any small country, Austria depends heavily on foreign trade. Its central location in Europe reinforces that dependency and gives Austria a wide range of trading partners in both Eastern Europe and Western Europe. Austria also consistently seeks to avoid isolation and has joined international trading systems to ensure markets for its products and access to the goods it needs.

Foreign Trade Ties

As the economy has evolved and produced a more sophisticated range of products, foreign trade has become more important. Foreign trade made up about one-fourth of GDP in 1955, one-third by 1975, and two-fifths by 1990. Austria's export structure has also evolved. One-half the country's exports were once raw materials, foods, and semifinished goods, but by the early 1990s two-thirds of its exports were finished products. Imports have came to reflect this change and consist mostly of industrial and semifinished goods that require further processing and finishing. The largest category of exports in 1991 was machinery and equipment, accounting for almost one-third of all exports. Other major items included chemical products, paper and paper products, transportation equipment, metal manufactures, and textiles and clothing. The largest single import item was also machinery and equipment; other items were manufactured products, chemical products, fuels and energy, and petroleum.
Austria's main trading partners are in continental Europe, especially Germany, Italy, and Switzerland. Because of a heavy dependency on imports, Austria usually has a negative trade balance, which is compensated for by positive services and capital accounts. Income from tourism is especially important in reducing the negative trade balance. The trade balance deteriorated particularly during the 1970s because of increased oil prices, and Austria had to make special efforts during the 1980s to redress the balance.

Austria and European Integration

Given its dependence on international trade, Austria has always been interested in some form of customs union. Although it was recognized that there might be some competitive disadvantages in such associations, especially with countries that produced at more competitive prices, the Austrian government and Austrian manufacturers have always been even more afraid of being excluded. They feared that exclusion would prevent them from reaping any economies of scale and would ultimately consign them to an economic backwater.

2002-2007 study foreign exchange

The government, therefore, was anxious to join in some form of European economic association as several organizations were being shaped after World War II. It could not join the European Community (EC) as it was being formed, however, because of fear that this would violate the 1955 State Treaty prescription for neutrality. The member states of the EC called their organization the Common Market when they created it in 1958, but they made it clear from the beginning that it had a political as well as an economic purpose. Under those circumstances, Austria had to hold back as long as Europe was divided by the Cold War.
However, such considerations did not prevent Austria from joining the European Free Trade Association when it was formed in 1960. EFTA was a purely economic association, and its members included Finland, Sweden, and Switzerland, all neutral states that were not members of the North Atlantic Treaty Organization (NATO). Moreover, EFTA had no intention of becoming anything more than a trade association. EFTA was far from an ideal trading arena for Austria because most of its members were located on the periphery of Europe. EFTA countries came to account for less than 15 percent of Austria's trade, while 66 percent of its foreign trade was with the EC countries.
EFTA, however, did have a very important specific advantage from the Austrian standpoint because it did not require common tariffs. Thus, Austria could retain some control over the conditions under which its foreign trade operated, while expanding its close commercial links with a number of EC states (even as it remained formally outside the EC).
Austria attempted to obtain associate status in the EC despite the political barrier to full membership. As it became clear in the 1960s that some EFTA members, such as Britain, were beginning to edge toward EC membership, Austria began its own negotiations to obtain a special arrangement with the community. In 1972, after ten years of negotiations, Austria and the EC reached an agreement providing for a gradual lowering of tariffs to zero. Austria nonetheless remained outside the EC Common Agricultural Policy (CAP).
The Austrian government applied to join the EC in the summer of 1989, as the Soviet empire was crumbling and Moscow was no longer either disposed or able to use the neutrality restrictions of the State Treaty to bar Austria from membership. Like other EFTA states, Austrian officials agreed in 1991 to the formation of the European Economic Area (EEA) between EFTA and the EC as a preliminary step, but it also wanted to join the organization on its own.
Although Austria will probably not be able to join the European Union (EU)--as the EC came to be known in November 1993- -until 1995, by which time the Single Market should be well advanced, the government has taken steps to begin adapting the economy to EC standards. Along with adopting many EC laws and regulations through the EEA in 1991, the government has adopted a number of additional EC rules, including those governing the freedom of capital flows. These measures have been taken to ensure that the social partners and the economy as a whole would not be at a disadvantage when Austria becomes an EU member.

Structure of Employment in Austria

Under the terms of the agreement reached at the EC summit at Maastricht in December 1991, Austria's membership in the EU will also lead to membership in the new European Monetary Union (EMU) if Austria can meet the convergence requirements by 1997. These requirements include a number of features: an inflation rate within 2.5 percent of the three lowest in the EU; long-term interest rates within 2 percent of the three lowest rates; a government deficit below 3 percent of GDP; and a public-sector debt of less than 60 percent of GDP. As of 1993, Austria was able to meet these requirements, but there is no guarantee that that will be the case in 1997.
Austria tied the schilling to the deutsche mark in the 1960s, largely because the country could not function without a predictable exchange rate with its largest trading partner, West Germany. In part to reinforce that linkage, Austria joined the EMS and its ERM in 1979. This membership has meant that Austrian interest rates have matched those of the Bundesbank and, as a result, to all intents and purposes have been set in Frankfurt. Therefore, Austrian adherence to the EMU would be a logical extension of long-established policies, and Austrian currency would become whatever the EMU adopted, whether it is called the European Currency Unit (ECU) or the Euro-Mark as some have proposed.
The link to the deutsche mark has had a major advantage for Austria in that it has given the country a long period of low inflation and the kind of monetary stability that those who suffered through the terrible inflation of 1921-23 well appreciate. It is, however, also a disadvantage for Austria's international competitive position. Goods denominated in schillings, like goods denominated in deutsche marks, cannot count on any sales increases because of devaluation of the currency. In fact, the schilling has consistently increased in value since the end of the Bretton Woods fixed exchange-rate era in 1971. It has generally moved with the deutsche mark vis-à-vis the United States dollar.

Openings Toward the East

Austria had maintained close trade relations with various states of Central and Eastern Europe under the Council for Mutual Economic Assistance (Comecon) arrangements. Those arrangements collapsed at the end of the 1980s and, as of the early 1990s, had not yet been renegotiated. Because of the turmoil in several East European states, for example in the former Yugoslavia, precise trade arrangements will likely require some time to be negotiated.
Nonetheless, Austrian firms have proceeded actively to strengthen their position in Eastern Europe. Austrian firms soon were a major part of the thousands of joint venture agreements established with Hungary, the Czech Republic, and Slovakia. Austrian firms have also become involved in many joint ventures in the former Yugoslavia, but their fate remains uncertain as long as the region is unstable. Austrian firms have always been well placed in Slovenia and Croatia, both of which were once part of Austria-Hungary, and Austria resumed economic links with them as soon as they became independent in 1992.

GDP per capita

Austrian foreign investment, which has always remained closely in balance with foreign investment in Austria, although both had risen over the years, suddenly doubled to S11.4 billion in 1989 and rose to a new high of S18.3 billion in 1990. Much of the new investment was destined for Eastern Europe.
One of the hopes of the government is that many companies wanting to expand their operations in Eastern Europe will establish offices in Vienna. The city offers office space with modern facilities, often at modest prices. As of the early 1990s, a number of companies had set up operations there for these reasons.
In a broader sense, many of Austria's domestic and international policies will need to be adjusted to take into account developments taking place around Austria. Such concerns have been expressed before, by Austrians and by others, but may be more urgent in the future than in the past. The opening toward Eastern Europe and the creation of the EEA and the Single Market have changed the foundations on which Austria has functioned since the 1950s and will present new competitive challenges for production, marketing, and services.
As of late 1993, however, there were no indications that Austria had changed its patterns of behavior and operations, largely because they have been successful. The pressures that might provoke such a revision have not risen to the level where change is imperative. Moreover, if Austria needs to make changes to adjust to new pressures, many arguments could be made that some form of social partnership or social consensus mechanism may be more necessary than ever.

As is the case with many small countries, few studies of Austria exist in English, and the economy receives even less attention than other areas. Except for one collection of essays dating back to 1982, The Political Economy of Austria, edited by Sven W. Arndt, nothing comprehensive is available on the economy. Even books in other languages are rare, in part because most German-language books are highly technical. Instead, those who want to read about the Austrian economy must look for economic chapters in general texts about Austria, many of which are unsatisfactory.
However, a number of publications exist that contain relatively good information. The most useful are the annual publications of the Organisation for Economic Co-operation and Development that not only contain statistical information but also essays on various basic aspects of the economy. The quarterly and annual surveys published by the Economist Intelligence Unit, Country Report: Austria and Country Profile: Austria, also offer useful statistical information as well as summary analyses.
A number of German-language periodicals are published in Austria, including some published by major banks and some that are published by the Österreichisches Institut für Wirtschaftsforschung. These periodicals offer some useful up-to- date analyses as well as complete statistics. Thus, although the Austrian economy does not receive the kind of bibliographic attention that larger economies attract, basic information is available and reliable.