Market Overview
This Country Commercial Guide (CCG) presents a comprehensive look at Austria’s commercial environment, including economic, political and market analysis; it is provided as a tool for U.S. companies intending to do business in Austria. The CCG is prepared annually at the U.S. Embassy in Vienna through the combined efforts of several United States Government agencies. It is a living document and its contents are updated during the year, as necessary and appropriate.
Austria, with a population of 8.3 million, is a dynamic EU member country offering export opportunities for U.S. companies of all sizes. For U.S. firms looking to expand in Southeast Europe, Austria offers some attractive features as an investment location, and recent Austrian governments have sought to increase that attractiveness through economic reforms and by highlighting Austria’s historical and economic ties to the surrounding region. At present, approximately 350 U.S. firms have subsidiaries, affiliates, franchisees, and licensees in Austria, of which about 150 have regional responsibilities for Central European, Eastern European, or Balkan countries. The EU also welcomed two new members in January 2007: Romania and Bulgaria, bringing the total EU Member Country count to 27.
According to the Austrian Central Statistical Office, overall Austrian imports grew by 9.6% in 2007. U.S. exports to Austria amounted to $5.1 billion, representing an 8.2% increase over 2006. U.S. exports to Austria were 3.3% of total imports to Austria, ranking number five among Austrian suppliers after Germany, Italy, China, and Switzerland. By comparison, U.S. imports from Austria in 2007 were reported to be $7.9 billion, down 5.6% from 2006, equal to 5.0% of total Austrian exports. The Austrian Government’s statistics should be compared to official U.S. Department of Commerce statistics for Merchandise trade between the United States and Austria. According to these figures, U.S. exports to Austria for 2007 were $3.2 billion, representing a 6.2% increase over 2006. According to the U.S. Government’s statistics, imports from Austria for 2007 were $10.7 billion, representing a 22.4% increase. For 2007 the U.S. ran a $7.5 billion trade deficit with Austria. The trend for 2008 using available figures through September showed a decrease in trade volume. The reasons for disparity between the U.S. and Austrian governments’ statistics are varied but are largely due to the methods of valuation used by customs authorities, the categories of products reflected, and considerations given to products that are transiting through Austria versus being consumed in Austria. In general the trend has been toward an increasing trade deficit with Austria.
Among Austrian export markets, the U.S. is number three, behind Germany and Italy. Principal U.S. exports to Austria are motor vehicle parts and accessories, aircraft, machinery, medical devices, pharmaceuticals, and computer equipment and parts. Principal Austrian exports to the U.S. include specialized industrial machinery, automobiles, pharmaceuticals, glassware, electric power machinery and some food products.
Given the worldwide economic crisis, the year 2009 will be the first recession year in Austria since 1981. Austria’s economy began to weaken in the second quarter of calendar year 2008 in reaction to the world downturn and is now in recession. The two leading Austrian economic research institutes downgraded their GDP growth estimates for 2008 to 1.8%. The economy is projected to contract by around 0.5% in 2009 due to shrinking exports and investments, despite modest growth in private consumption. For 2010, the institutes project a recovery with growth of 0.9% to 1.3% but warned of continued downside risks. Unemployment will rise to 3.9% to 4.1% in 2009. The budget deficit will spike from only 0.6% of the GDP in 2008 to about 2.8% in 2009 and most likely above 3% in 2010.
Despite these negative factors, it can be assumed that U.S. manufacturers will still keep up a good market position within the great majority of the Austrian industry sectors. Nevertheless, the U.S. automotive sector will have a significant decline on the Austrian market in 2009. Imports of automotive parts will experience a major reduction as Austria’s automotive assembly lines will run well below capacity in 2009.
Market Challenges
Basically, Austria is a good export market for U.S. companies, with no significant trade barriers. Qualified Austrian agents and distributors can be found for nearly every kind of product. Given the size of the country, Austria represents a desirable, affluent pilot market for U.S.-made products in Europe. Because of Austria’s geographic location and history, many Austrian agents and distributors, in addition to the Austrian market, sell regionally, covering several markets in Central and Eastern Europe and in the Balkan countries.
When establishing a business in Austria, U.S. companies may still encounter troublesome bureaucratic barriers. Some Austrian provinces have established one-stop-shops for investors, and they are competing with each other to eliminate red tape.
Most business activities in Austria are regulated and require that a separate application be made for a business license and for registration in the commercial register. Evidence of proficiency in running a business is required for most businesses. Usually a passing score on an examination or evidence of prior experience in the field is sufficient. For business activities that do not require proof of proficiency, the business license is granted automatically upon registration of the business.
Austria welcomes foreign direct investment that does not have a negative impact on the environment. The Government particularly welcomes those investments that create new jobs in high technology fields, promote capital-intensive industries, and have links to R&D activities, for which special tax incentives are available. The United States is the fourth largest foreign investor in Austria, after Germany, Italy, and the Netherlands, according to 2007 statistics. Many of the new U.S. investments in Austria are mergers and acquisitions (M&A) and not greenfield investments. Due to the M&A nature of U.S. investment, annual statistics show significant fluctuations in U.S. investment in Austria.
Market Opportunities
To overlook Austria would be to overlook one of the world’s most prosperous nations on a per capita basis. Doing business in and from Austria definitely has its advantages. The introduction below summarizes four advantages that will be particularly relevant in the future.
First, Austria is an international crossroads, bordering on eight European countries: Germany, Italy, Switzerland, Slovenia, Hungary, Slovakia, Czech Republic, and Liechtenstein. Four of Austria’s neighbors joined the EU in May 2004 (Czech Republic, Slovakia, Slovenia, and Hungary), transforming Austria geographically from a country on the eastern frontier of the EU to one occupying a more central position in the enlarged EU. The addition of two other Eastern European countries, Romania and Bulgaria, as new EU members at the beginning of 2007 strengthened Austria’s central position.
Austria is a member of the Schengen agreement and offers U.S. companies access to growing markets in the new EU frontier of Eastern and Southeastern Europe. Some ask whether Austria will continue to play a role as gateway to the East in attracting U.S. exports and investment, or whether U.S. firms will bypass Austria and go directly to the more growth-oriented and often more pro-business new EU members. The answer depends on many factors, and American firms are wise to assess all options. U.S. business continues to view Austria as a prime location and distribution hub. The country has financial and transportation links to the Eastern European and Balkan region, and its banks and service providers understand regional business practices. Partnerships with Austrian firms having a presence in regional markets may be an attractive option for some U.S. companies.
A second advantage for Austria is its well-diversified and relatively resilient economy. The Austrian government has sought to remain competitive by pursuing investment in high-potential industries such as telecommunications, non-agricultural biotechnology, medical and pharmaceutical research, and electronics. For U.S. companies in these industry sectors, Austria represents a good opportunity for export, joint ventures, and investment. Under pressure from the newest EU members, which offer lower corporate tax rates, Austria lowered its corporate tax rate in 2005 from 34% to 25%. This step reflected a commitment by the government to compete with its new EU neighbors.
A third plus for Austria is its membership in the EU and the Euro currency zone. The Euro has been the common currency for Austria since 2002. It has already facilitated trade and promoted economic stability for U.S. companies, helping them to manage pricing, balance accounts, and move products within Austria and throughout EU member countries. It should be noted that some U.S. firms have found Austria’s implementation of EU rules unnecessarily burdensome, bureaucratic and non-transparent, and have threatened to cut back on their investment in Austria as a result. Nevertheless, for U.S. exporters, the unified EU market and the still favorable exchange rate between the Euro and the dollar mean that U.S. goods should be able to compete on advantageous terms in the coming year.
A fourth advantage Austria offers is that the United States is its third largest trading partner and its largest trading partner outside of Europe. U.S. companies entering the market for the first time will benefit from the strong trading relationship already established between the two countries. Austria is a very attractive market demanding high product quality, excellent after sales service, and competitive prices. Although Austrian buyers may give preference to the supplier who is closest geographically and who speaks German, many U.S. products and services can compete well with those from Germany and other EU member countries.
Market Entry Strategy
The best strategy for an American exporter to Austria is usually to select one distributor or agent for the entire Austrian market. Some companies appoint distributors in Germany who cover all of German-speaking Europe, including Germany, Austria, and most of Switzerland. But this works best for U.S. exporters with a limited number of customers and end-users in Austria. In such cases, a distributor might be located in Munich instead of Vienna.
The U.S. Commercial Service in Vienna and its industry specialists are pleased to offer the well-established Gold Key Service, one of the most cost-effective methods of entering the Austrian market, as well as an array of other services tailored to the needs of U.S. companies exporting to Austria. For more details please see Chapter 10 of our "Country Commercial Guide for U.S. Companies: Doing Business in Austria".