Czechoslovakia; expected trade normalization improves export prospects
Shelley Galbraith
CZECHOSLOVAKIA Expected Trade Normalization Improves Export Prospects
Prospects for increased trade with Czechoslovakia are bright as the United States begins to normalize trade relations in recognition of the sweeping changes which are leading to political and economic pluralism in Czechoslovakia. Czechoslovakia continues to formulate a series of economic and political reforms designed to move toward a more democratic, free-market country. Prospects for sales and joint ventures are best in electronics, process controls and monitoring equipment, computers, machine tools, and light industries.
During the recent visit of Czechoslovak President Vaclav Havel to the United States, President Bush signed a one-year waiver of the Jackson-Vanik Amendment for Czechoslovakia, paving the way for that country to receive Most-Favored-Nation (MFN) tariff status from the United States following the signing of a trade agreement and approval by Congress. Negotiations on bilateral trade and investment agreements began in Prague on March 6, and the trade agreement, concluded April 5, was signed in Washington on April 12.
Czechoslovakia represents a market of more than $4 billion for Western goods. Traditional U.S. exports include hides and skins, fibers and fabrics, tobacco products, machinery, and measuring and laboratory instruments.
Traditional U.S. imports from Czechoslovakia include tractors, glassware, textiles, and footwear. Reciprocal MFN tariffs for U.S. and Czechoslovak goods are expected to increase trade and broaden the range of products exchanged between the two countries.
Unlike most other countries in the region, Czechoslovakia’s hard currency debt is growing slowly and remains low – around $7 billion in 1989. A relatively low level of indebtedness and hard currency surpluses have made Czechoslovakia an attractive market for Western traders and investors. Significant increases in borrowing from the West are not expected.
Last year marked the end of centralized planning in Czechoslovakia. The economy last year, according to highly critical government reports, experienced little growth, falling from 2.8 percent in 1988 to 1.7 percent in 1989. The Czechoslovak economy was plagued by excessive consumption of raw materials. energy, and labor, slow technological development, irrational prices, mis-allocation of resources, and insufficient consumer goods. Energy wastage and environmental problems are acute. Czechoslovakia consumes two to three times as much raw materials and energy as average developed countries and has the second highest emissions of sulphur dioxide per kilometer and the third highest emissions of nitrogen oxide.
Recognition of the major problems of the Czechoslovak economy has led to a planned restructuring of the domestic economy to allow for more intensive growth. Legislation enacted in 1989 includes the elimination of foreign trade and banking monopolies, increased autonomy for state-owned enterprises, and a liberalized foreign investment regime. New laws expected in 1990 will provide for private ownership, the establishment of joint stock and other forms of companies, further demonopolization of foreign trade, and a reduction in economic planning.
The government seeks to move Czechoslovakia towards a market economy while modernizing the existing industrial base. An important objective of this process will be a gradual streamlining of the country’s engineering and industrial production to foster specialization in areas where Czechoslovak industry can be competitive. There is also a desire to reorient the economy from unprofitable heavy industries such as steel, to cleaner high-technology industries.
To further promote trade and investment in Czechoslovakia the Department of Commerce plans to establish a Foreign Commercial Service office in Prague in late summer 1990. In addition, trade missions in several industries are being planned, including telecommunications, food processing and packaging equipment, and environmental and pollution controls. The Commerce Department also sponsors an exhibition at the Brno International Engineering Fair, to be held Sept. 12-19, 1990.
For additional information, call the Eastern Europe Business Information Center (EEBIC) on (202) 377-2645.
PHOTO : U.S. Trade Representative Carla A. Hills and Czechoslovak Foreign Trade Minister Andrej Barcak exhange copies of the trade agreement they signed April 12. With them are Michael Brownrigg, USTR, and, at right, Pavel Dvorak of the Ministry of Foreign Trade. The new accord is one of the steps needed to cut tariffs on Czechoslovak products sold in the U.S. Negotiations began in Prague March 6.
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