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STILL TOO EARLY TO TELL EFFECTS OF CAR TAX, IMPORT SURCHARGE, MINISTRY OFFICIALS SAY

January trade deficit widens by another 7 bill. Sk

Despite the Slovak government's reinstating a car import duty and cancelling its 7.5 percent import surcharge, it's too early to tell how the two measures will impact the country's continually declining trade deficit, trade officials told The Slovak Spectator.
On January 1, Slovakia re-introduced an import tax on cars it had temporarily cancelled on makes up to 1,500 cubic centimeters. The no import duty led to a surge in cars being brought into the country, and was a major contributor to Slovakia's trade deficit that hit 64 billion Sk for 1996 (see story this page). On the same date, the government also cancelled the 7.5 percent import surcharge it levied on consumer products, in line with a long-standing request by the World Trade Organization (WTO).

Despite the Slovak government's reinstating a car import duty and cancelling its 7.5 percent import surcharge, it's too early to tell how the two measures will impact the country's continually declining trade deficit, trade officials told The Slovak Spectator.

On January 1, Slovakia re-introduced an import tax on cars it had temporarily cancelled on makes up to 1,500 cubic centimeters. The no import duty led to a surge in cars being brought into the country, and was a major contributor to Slovakia's trade deficit that hit 64 billion Sk for 1996 (see story this page).

On the same date, the government also cancelled the 7.5 percent import surcharge it levied on consumer products, in line with a long-standing request by the World Trade Organization (WTO).

Government officials held their breath to see how these two measures, one viewed as potentially positive and the other as potentially negative, would impact the country's sensitive trade balance. But even after receiving January's trade figures which put the deficit another 7 billion Sk in the red, government officials said it looked like the two measures had a minimal, if any, impact on the decrease.

According to Anna Joštiaková, head of the trade policy department at the Ministry of Economy, while car sales gained in January, it was not due to rising auto imports. "January car sales were mostly from domestic stocks," Joštiaková said, adding that car dealers filled their lots in December before the import duty was put back into place. Official statistics bear that out, showing December car imports to Slovakia amounting to 4.6 billion Sk, 1.6 times more than the monthly average for that year.

Likewise, the cancelled import surcharge hardly impacted the trade deficit in January, Joštiaková said, because it amounted to only 1.6 percent of the total volume of consumer goods imported into the country during 1996.

Sluggish exports to blame

Rather than car import duties and the zero import surcharge, stagnating exports should be blamed for the negative trade balance, according to Maria Kováčová, head of the economic policy department at the Ministry of Finance. She pointed out that Slovakia's exports increased only 0.5 percent in January, while imports during the same period grew 22.3 percent. "With an open economic system like ours, we should care much more about our export abilities," Kovacikova said.

Joštiaková agreed. "Our custom fees average 4.9 percent and are one of the lowest in Europe and among WTO countries," she said. "And yet we depend on imports, especially imports of energy sources. Our economic growth caused us to increase our energy consumption, but our economy has showed that it is not ready to balance the higher energy imports with an increase in export effeciency."

Ján Foltín, deputy minister of the economy, attributed January's import growth to imported energy, adding that the cold weather spurred more oil and gas imports. Also, Foltín added, the country imported nuclear fuel rods in January, something which it did not during the second half of 1996, despite the usual practice of importing the rods once every quarter.

Increase exports, limit imports

The Slovak government seeks to solve the problem both ways - improving exports and cutting down on imports. Several measures have either passed or are in the works to stimulate exports. "First of all, domestic businesses have no competitive tools to finance their export production," Kováčová said. "That's why the government prepared the bill [to create] Eximbank, thus creating possibilities [for Slovak companies] to get medium and long-term credits with interest rates comparable to abroad."

According to the economy ministry's Joštiaková, better use of the Foreign Trade Support Fund and more bilateral agreements aimed to liberalize trade will evantually help to improve exports.

But the president of the Association of Slovak Enterpreuners Miroslav Knitl, said the Fund "has, in a way, begun putting limits on foreign trade," especially the required 0.1 percent fees that all companies must pay to the fund from their total trade volume. "This punishes businessmen."

Foltín mentioned several regulations to limit imports that are expected to be on the government's agenda in the middle of March. He said "renewal of the import surcharge, increasing the prices of energy and fuel, and measures aimed to slow down the population's income are being considered."

Joštiaková also believes protection of the domestic market is important, such as the recently-approved anti-dumping law, which will come into effect on July 1, and a bill to prevent subsidized imports which the ministry is supposed to submit in April.

"I think we should do much more for sales of Slovak products," Joštiaková said. "We are preparing a mass-media project to inspire Slovak citizens to prefer Slovak products that are high-quality, low priced and thus support domestic production."

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