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Czech: Prague's Protectionism Could Have A Regional Impact

By Jiri Kominek

Prague, 20 June 1997 (RFE/RL) - The Czech Republic hopes to reduce its growing trade deficit, following the introduction in April of a system requiring importers of consumer goods and foodstuffs to make a six-month, interest-free deposit equal to 20 percent of the value of the goods they want to import.

But Prague's new system of import deposits could have a regional impact by putting negative pressure on trade relations with neighboring countries, such as Hungary.

In the words of a trade official at the Czech Industry and Trade Ministry, Milan Vavra, Hungary's exports to the Czech Republic have risen sharply since Budapest adopted its own import surcharges two years ago. According to Vavra, these numbers should balance out now that the Czech Republic has introduced import deposits. But he notes, if the import deposits are maintained only to the end of 1997, then, they will not have much impact on current trends.

Prior to 1995, the Czech Republic enjoyed a $ 200 million trade surplus with Hungary. Then the Hungarian government introduced an import surcharge designed to protect the country's economy from encroaching imports.

With the import surcharge in place, the Hungarians succeeded in reducing their trade deficit with the Czech Republic down to $ 133 million in 1995, and, in 1996, this figure was reduced to about $ 100 million.

Although intitially set at eight percent, Hungary has since lowered the import surcharge to three percent of the total value of a given import, with the promise that the protectionist measure will be cancelled on July 1, 1997. It is estimated that, to date, the surcharge has netted Hungary some $ 1 billion dollars in revenue.

While the Czech Republic would like to maintain its import deposit, the legality of such a measure appears to be questionable, at least as far as the European Union (EU) is concerned. "The European Union has reservations about the import deposits and will decide in July on whether to recognize them or not," acccording to Petr Greger, attorney with the EU delegation in Prague. Greger says, the EU is trying to reach a compromise with the Czechs, since the concept of an import deposit is a relatively new one, with no one having introduced it in the past.

Hedvika Vankova, head of the Hungarian trade section at the Czech Industry and Trade Ministry, says that for now, Hungary is not greeting the Czech import deposits with open arms. In her words, there were protests when the Czech Industry and Trade Minister at the time, Vladimir Dlouhy, visited Budapest in April, after failing to grant the Hungarians exceptions to the deposit. She says "when Hungary adopted their import surcharges, they had the blessing of the World Trade Organization, so we had no choice but to accept it" .

Officials at the commercial section of the Hungarian embassy in Prague are cautious about commenting on the Czech import deposits, causing speculation that the Hungarian government has still to formulate an official response to the restrictive measure, based on the verdict passed by the EU in Brussels. Hungary is the Czech Republic's thirteenth-largest trading partner, accounting for just 1.3 percent of the country's foreign trade.

Among the goods which Hungary exports to the Czech Republic are steel, pharmaceuticals, and food products, including meats, and fruits and vegetables, which account for 25 percent of the total exports to their Czech trading partner.

The Czechs, for their part, export automobiles, steel, coal, coke, pulp and paper products, and glass.