RESTRICTED GENERAL AGREEMENT C/RM/S/S4 15 November 1994 ON TARIFFS AND TRADE Limited Distribution (94-2426) COUNCIL TRADE POLICY REVIEW MECHANISM SWEDEN Report by the Secretariat In pursuance of the CONTRACTING PARTIES' Decision of 12 April 1989 concerning the Trade Policy Review Mechanism (BISD 36S/403), the Secretriat submits herewith its report on Sweden. The report is drawn up by the Secretariaton its own responsibility. It is based on the information available to the Secretariat and that provided by Sweden. As required by the Decision. in preparing its report the Secretariat has sought clarification from Sweden on its trade policies and practices. Document C/RM10/54 contains the report submitted by the Govemnment of Sweden. NOTE FOR ALL DELEGATIONS Until further notice. this document is subject to a press embargo. sweden C/RM/S/54I'e54 Page iii CONTENTS Page SUMMARY OBSERVATIONS i.xIX (1) The Econoinic Environment ix (2) Institutional Framework ix (3) Trade Policy Features and Trends x (i) Evolution since the initial review (ii) Type and incidence of trade policy instruments xi (iii) Secteral development patterns xii (4) Trade Policies and Foreign Trading Partners xiii 1. THE ECONOMIC AND TRADE ENVIRONMENT i (1) Major Features of the Swedish Economy (2) Recent Economic Developments 2 (3) Trade Performance 5 (i) Commodity patter of tade 7 (ii) Region.- pattern of trade 7 (4) Outlook 10 TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 12 (1) Overview of Developments since Sweden's last Trade Policy Review 12 (2) Trade Policy Objectives 12 (i) General trade policy objectives 12 (ii) The Uruguay Round 13 (3) Trade Agreements 15 (i) Relations with the European Union and EFTA partners 15 (ii) Central and eastern Europe. Turkey and Israel 19 (iii) Baltic States 19 (iv) Other countries 20 C/RM/S/54 Trade Policy Review Mechanism Page iv Page (4) Structure of Trade Policy Formulation 20 (i) Institutional structure 20 (ii) Independent review bodies 22 (5) General Trade Laws and Trade Legisiation 24 (6) The Generalized System of Preference (GSP) 26 111. FOREIGN DIRECT INVESTMENT AND TRADE 27 (1) Swedish Investment Abroad 28 (2) Foreign Direct Investment In Sweden 29 IV. TRADE POLICIES AND PRACTICES BY MEASURE 32 (1) Overview 32 (2) Measures Directly Affecting Imports 33 (i) Registration and notification requirements 33 (ii) Tariffs 33 (iii) Regional and bilateral trade 39 (iv) Customs valuation and clearance 40 (v) Variable import levies and similar measures 40 (vi) Levies and other charges 44 (vii) Import prohibitions 46 (viii) Import licensing 48 (ix) Import quotas 48 (x) Import surveillance 49 (xi) State trading 49 (xii) Import cartels 50 (xiii) Countertrade 51 (xiv) Standards and other technical requirements 51 (xv) Intellectual propertyrights 54 (xvi) Government procurement 55 (xvi;) Anti-dumping and countervailing duty actions 56 (xviii) Safeguards 57 (xix) Other matters 57 Sweden C/RM/S/54 page v Page (3) Measures Directly Affecting Exports 58 (i) Export prohibitions 58 (ii) Export controls 58 (iii) Export restraint arrangements 58 (iv) Export cartels 58 (v) Export promotion 59 (Vi) Export finance 60 (vii) Export insurance 61 (4) Measures Affecting Production and Trade 63 (i) Adjustment assistance 63 (ii) Research and development 64 (iii) Production subsidies, taxation concessions and other budgetary measures 66 (iv) Pricing and marketing arrangements in agriculture and fisheries 67 (v) Regional support 70 (vi) Other measures 73 V. TRADE POLICIES AND PRACTICES BY SECTOR 75 (1) Introduction 75 (2) Agriculture 75 (i) Crop production 79 (ii) Livestock 87 (3) Forestry 93 (4) Fisheries 94 (5) Mining (6) Manufacturing 97 (i) Food processing 97 (ii) Textiles and clothing 105 (iii) Leather products including footwear 109 (iv) Forestry, wood and paper products 109 (v) Pharmaceuticals 111 (vi) Petroleum 113 (viil Plastic products 113 (viii) Cement 113 (ix) Metals and metal products 114 (x) Machiney and equipment 116 (xi) Transport equipment 117 C/RM/S/54 Trade Policy Review Mechanism Page vi VI. TRADE DISPUTES AND CONSULTATIONS 122 (1) GATT Dispute Settlement 122 (i) Articles XXII and XXIII 122 (ii) Disputes under the Tokyo Round Agreements 122 (2) Other Consultations 123 REFERENCES 125 APPENDIX TABLES 127 Sweden C/RM/S/54 Page vii CHARTS Page I. THE ECONOMIC AND TRADE ENVIRONMENT 1.1 Exports and imports of Sweden by major product categories, 1993 8 1.2 Exports and imports of Sweden by country, 1993 9 Il. TRADE POLICY REGIME: OBJECTIVES AND FRAMEWORK 11.1 Organigramme of the Swedish Ministry of Industry and Commerce 21 11.2 Organization of the Swedish Competition Authority 23 III INVESTMENT POLICIES AND TRADE III. 1 Directinvestment flows from and into Sweden, 1985-93 29 IV. TRADE POLICIES AND PRACTICES BY MEASURE IV. 1 Swedish tariffs on agricultural products, before and after Uruguay Round reductions 38 IV.2 Swedish tariffs on manufactured products, before and afRer Uruguay Round reductions 38 V. TRADE POLICIES BY SECTOR V. 1 The Swedish grain surplus, 1989/90 to 1993/94 82 V.2 Swedish milk production, 1980-93 89 V.3 Swedish consumption of beverages, 1976-93 103 V.4 Swedish imports of clothing before and after deregulation, 1991/93 107 V.5 New passenger motor vehicles registered in Sweden, by country of origin, 1989 and 1993 120 C/RM/S154 Trade Policy Review Mechanism Page viii TABLES Page 1. THE ECONOMIC AND TRADE ENVIRONMENT 1.1 Major features of Sweden's economy, 1980-93 1.2 Sweden's recent economic performance, 1987-94 4 1.3 Sweden's intra-industry trade with the world, 1980-92 by GATT Tariff Study Categories 6 Il. TRADE POLICY REGIME: OBJECTIVES AND FRAMEWORK Il. 1 Free-trade agreements between EFTA countries and central and eastern European countries 19 IV. TRADE POLICIES AND PRACTICES BY MEASURE IV.1 Nominal rates for variable levies on Swedish imports of major agricultural commodities, 1990-93 42 IV.2 Revenue from indirect taxes in Sweden, 1989-93 45 IV.3 Export promotion in Swedcn, 1989/90 to 1992/93 60 IV.4 Swedish State aid to industries, 1989/90 to 1992/93 65 V. TRADE POLICIES BY SECTOR V.1 Swedish agricultural support, producer subsidy equivalents, 1989 to 1993 77 V.2 Effect of the Uruguay Round Agreement on Swedish border protection for selected agricultural products 78 V.3 Imports and exports in per cent of the Swedish market for selected foodstuffs, 1988 102 APPENDIX TABLES AI. 1 Principal exports of Sweden, 1985-93 129 AI.2 Principal imports of Sweden, 1985-93 130 AI.3 Total exports by region and country of destination, 1990-93 131 AI.4 Total imports by region and country of origin, 1990-93 132 AV. 1 Competition profiles in various sectors in. Sweden. 1991-94 133 AV.2 Production, imports, exports and tariffs applied in Sweden by ISIC category, 1993 135 Sweden C/RM/S/l54 Page ix SUMMARY OBSERVATIONS 1. Sweden's trade policy régime is 3. Sweden appears now to be emerging generally open and liberal. In certain areas from its worst recession since the 1930s very such as agriculture, textiles and clothing, much as a 'dual economy', with prospering Sweden has been in theforefrontamong OECD producers of tradeable goods and a current countries in taking measures towards accountsurplus whiledomesticorientedactivity deregulation and liberalization since 1990. is recovering moreslowly. In theyears to come, Thus, Sweden'sagriculturalreformprogramme, the Government will walk a fine line in adopted in 1990, aimed for deregulation of reconciling efforts to reduce record levels of domestic markets although, with a view to unemployment with measuresto control its high membershipofthe European Union, theprocess fiscal deficit and maintenance of a has slowed more recently. Sweden abolished non-inflationary monetary policy. MFA and similar restrictions on imports of textiles and clothing in 1991 and has also (2) Institutional Framework liberalized imports of footwear. Participating in the creation ofthe European EconomieArea 4. Parliament has ultimate responsibility (EEA), Sweden has become part of a market for tradepolicy under theSwedish Constitution. comprising more than 350 million people, The Trade Department, within the Ministry of allowing free circulation of labour, capital, Foreign Affairs, remains the centre ofpolicy services and goods covered by the Agreement. formulation, complemented by the National Board of Trade on a number ofspecific issues. (1) The Economic Environment No major changes have occurred in the tasks andfunctions ofthese two main administrative 2. At the time of Sweden's first Trade bodies responsiblefor tradepolicy issues since Policy Review in 1991, lhe economy showed thie initial review. signs ofoverheating. However, the slow-down in economicactivity in mostindustrial countries 5. Changes have, however, occurred with at the beginning of this decade hit Sweden respect to two autonomousagencies involvedin particularly hard; problems in tradeablegoods the implementation oftradepolicy. Following sectors spread to domestically oriented sectors a reorganization of institutions due to reforms and triggeredan abrupt endto the credit-driven in agriculture, theSwedishBoardofAgriculture expansion. Real GDP declined in 1991, 1992 has been the expert agency on agricutural and 1993. Nevertheless, conditions for policysince 1 July 1991. On thesamedate, the exporting and import-competng enterprises Swedish National Board for Technical brightened during 1992, as marked increases Development <NUTEK) wasformedthrough the in labourproductivity were combinedwith wage amalgamation of threeagencies, with a view to restraint. The sharpdepreciation oftheSwedish managing industrial and energy policies more krona after itsfloating in 1992 set the stagefor efficiently. The rôle ofthe Ainistry ofIndustry a significant revival in exporting industries in was broadened after the general elections in 1993 and 1994, when Swedish exportersappear September 1991; the tasks ofthe new Ministry to have recaptured market shares lost in the of Industry and Commerce include matters 1980s and gained further ground in overseas related to domestic trade and tourism, market markets. The rise in imports has been more and competition issues.