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Austria's chances in the market of the 90's.

Austria's chances in the market of the 90's

To a country the size of the U.S., a small nation like Austria (covering 32,376 square miles, about the size of South Carolina) with a population of just 7.5 million (roughly the same as New Jersey) may seem economically and politically unimportant. However, given the same per capita consumption of coffee as Austria, the U.S. would have to import 42-45 million 60 kg bags of green coffee and 75,000 to 80,000 metric tons of black tea, herb tea and fruit tea each year.

A look at Austria's foreign trade position shows that in 1989, we imported about $42.8 billion of merchandise and exported to the tune of about $35.8 billion. The resulting trade deficit of about seven billion dollars was made up in Austria's balance of payments by a surplus on services. This was the result above all of earnings from tourism, which is still an expanding sector in Austria, and technology transfers. The volume of Austria's trade comes to as much as $10,480 per person per year. Applying the same per capita figure to the U.S. would give a trade total of about $2,500 billion.

I do not want to take the statistical comparisons too far, though, because in many things small countries simply cannot be compared with big ones. Let me get back, then, to the essential facts. Austria's imports and exports in the entire agricultural sector, including foodstuffs, come to about five percent of the total. This low percentage is undoubtedly due in part to the high degree of self-sufficiency of the Austrian foodstuffs sector. Imports are only necessary to satisfy the Austrians' demand for luxury.

Austria (reference was first made to "Ostarrichi" in historical records in 996 AD) has so far experienced two periods of gigantic expansion. The first was under Charles V (reigned 1550-1558), "on whose empire the sun never set." The second was during the Austria-Hungarian monarchy (1848-1918), territorially the second largest European superpower of the period after Russia. Could Austria now be on the brink of a third and maybe even greater expansion?

Following the occupation by Nazi Germany in 1938 and the losing of World War II, Austria achieved an almost unbelievable economic recovery, aided by the Economic Recovery Program and a hard-working populace. Its wealth is now in no way less than that of such well-known countries as Switzerland and West Germany.

Having declared itself neutral from May 15, 1955, in a treaty with the victorious allies, Austria has since lived in peace with the rest of the world. It quickly discovered its role as kingpin between East and West - the neutral zone between western capitalism and eastern communism. It joined the United Nations in 1955, the Council of Europe in 1956 and EFTA in 1960. Since 1977 Austria has also enjoyed free trade with the European Community. The federal capital, Vienna, is not only the third UN city alongside New York and Geneva, but also the seat of several international organizations such as OPEC and the International Atomic Energy Agency.

Gorbachev's glasnost and perestroika have fundamentally changed the entire world picture. We are today witnessing the most far-reaching economic and political changes that have ever occurred.

What are the implications for Austria? For one thing, Austria's geographical position has changed. Having until recently been the last free country at the eastern edge of Western Europe, hugging the Iron Curtain, Austria is now at the genuine center of Europe following the sudden political upheavals east of its borders. Together with Switzerland, Austria used to constitue a politically neutral buffer zone between NATO and the Warsaw Pact. Austria's self-imposed neutrality, previously a barrier to full membership of the European Community, now has a new significance in a Europe in which the two opposing camps are disarming and working toward peaceful coexistence. And even more than that: working together to give 410 million East Europeans the standard of living of which they have been deprived for so long and at the same time ensuring for decades to come the growth opportunities on which the western economies are dependent if they are to maintain their efficiency.

It would therefore be quite unfair if Austria, a country that has done great service as a mediator between East and West, were suddenly "overtaken on the inside lane" in its efforts to gain membership of the European Community by former communist countries in an atmosphere of previously unimagined "Eastern Europe" euphoria. Austria's choice cannot be between East and West - its only option is integration into a United Europe comprising East and West within a single market of almost 750 million consumers.

Austria, which is a German-speaking country, must certainly make it clear to the European Community that it has no intention of being labeled the third German state and intends to find its partners in countries where English, French, Romance or Slav languages are spoken as well as everywhere else in Europe. Moreover, Austria will naturally continue to nurture its contacts with its present business partners and friends outside Europe.

The opening of the East was a great relief for hundreds of millions of people. Those in the East won greater personal freedom and individuality, giving them the chance to share in the opportunities offered by economic progress in the West. Those in the West benefit from the greater likelihood of a peaceful future and multi-nation international community.

Despite all the enthusiasm, though, there are still important problems that remain unsolved. Egonational chauvinism is not going to lead to a common European structure, but at best a Tower of Babel.

Europe's politicians would be well-advised to leave national borders as they are, to look for satisfactory solutions to the problems caused by the huge waves of refugees now crossing Europe, and to achieve lasting social peace within their own countries by rigorously refusing to grant special privileges to ethnic minorities. The faster those seeking asylum are assimilated into their new communities, the less friction will result. It is after all a sign not of weakness but of basic fidelity that the piper plays the tune for which he is paid.

Despite all the issues that have yet to be resolved, the western industrial nations have begun their eastward race, a new gold rush, to open up fresh markets in the East by entering into joint ventures and other forms of economic cooperation. A further attraction is that until the standard of living in the East has caught up with that of the West, Eastern Europe is a mine of cheap labor and low-priced production.

This business policy will benefit both East and West.

The opening of the Iron Curtain, the symbolic demolition of the Berlin Wall and the removal of the barbed wire entanglements and watchtowers have unleased a stream of tourists from the East.

For the immediate neighbors of the Eastern Bloc, such as Austria, this has led to a lasting increase in expenditure on consumption. Alongside the electronics sector (primarily home electronics), coffee and foodstuffs have had a major share in this growth.

Take for instance Austria's net coffee imports in the last 10 years. The annual growth in domestic coffee consumption averaged just 0.5 percent over this period. By comparison, net coffee imports went up 22.2 percent from 1988 to 1989, which, statistically speaking, would imply annual consumption of 10.7 kilograms of coffee per head of the Austrian population. However, this figure disregards the amount of coffee unofficially leaving Austria in the car trunks of tourists from the Eastern Bloc, artificially inflating Austrian per capita consumption. Austria's Kaffee-und Tee-Verband (The Coffee and Tea Federation) estimates that annually some 15 million kgs. of coffee are re-exported in this way. If this is the case, real domestic annual consumption per head of the Austrian population comes to 8.7 kgs. These coffee consumption figures also reflect Austria's successful tourist trade, which ended 1988 and 1989 with annual growth of 12.5 percent and 12.0 percent respectively.

That the tourists from the East are so interested in coffee is undoubtedly a reflection of the fact that coffee has been scarce in their countries for decades (not to mention its low quality) and is therefore a popular "means of payment" (so to speak, an illegal currency) on the black market. Despite the internationally much debated "non-member discount prices," retail coffee prices in the Eastern Bloc are usually so high that consumers have to pay an average of 10 percent of their monthly wage for one kilogram of roasted coffee. The equivalent figure in Austria is 0.6 percent or less.

Compared with the 7.5 million Austrians who buy an average of about 8.7 kgs per head of coffee each year, the population of Eastern Europe harbors enormous sales potential. To take just one example, the CSFR (Czech and Slovak Federal Republic) has about twice Austria's population but per capita coffee consumption of not even 20 percent of what an Austrian drinks. If we assume that Czechoslovakian consumers will come roughly into line with Austrian coffee drinking habits, this market alone has the potential for annual sales of 105 million kgs of green coffee more than at the moment.

The same applies to East Germany, Poland, Hungary and in particular the Soviet Union. Given free trade, the appropriate buying power and freely convertible currencies, the problem of coffee surpluses would thus be solved at one fell swoop. In fact one can go so far as to say that there are grounds not only for improving the quality of coffee cultivation but also for pressing for greater quantity, although at first sight that might still seem rather absurd at the moment.

Looking back at the history of coffee in Austria, consumption per head came to just 600 grams at the turn of the century. Sixty years later it had increased to 1.9 kilograms, and a growth continued to 3.8 kgs in 1970 and 6.9 kgs in 1980. We can expect real per capita consumption of about 10 kgs by the year 2000, giving a sevenfold increase in coffee consumption in a hundred years.

Total world coffee consumption has gone up considerably in the last two-and-a-half centuries, from about 600,000 bags in 1750 to four million bags in 1850 and about 32 million bags in 1950. Even before the East European market opened up, forecasters estimated that world coffee consumption would be about 120 million bags in 2000.

Unlike that of coffee, the consumption of tea will not increase as a result of the opening of the Eastern Bloc's borders. For years, Austria's annual per capita consumption of black tea has ranged between 140 and 160 grams. Austria's domestic tea consumption is calculated as the difference between tea imports and tea exports, which according to the country's foreign trade statistics, presently comes to about 1,100 metric tons (1989).

This source of data tells us nothing about the consumption of herb and fruit teas, so the Austrian Tea Board carried out a comprehensive survey to obtain the corresponding figures for these tea varieties. The results show that Austrians consume an average of about 190 grams of herb and fruit tea each year.

Tea consumption (including herb and fruit teas) worldwide is estimated at approximately 990 billion liters. Austria, a country above all of coffee and wine drinkers, only achieves about one fifth of the international mean.

The average Austrian household (2.7 people) consumes about 110 liters of tea beverages each year, that is 730 cups, which is the equivalent of 14 cups each week or two cups per day. This does not cost even one fifth of the price of a daily newspaper. As a guide, two liters of tea cost about the same in Austria as a daily newspaper, so the wholesome, refreshing and at the same time most varied of all drinks is also still the cheapest.

Each one of us has his own view of the changing face of world politics between East and West, but none of us is an omniscient prophet. We can merely hope that new developments will be for the better and take events as they come or, as the German phrase has it, "wait and see - and drink tea."

PHOTO : The average Austrian consumer imbibes 8.7 kg of coffee annually.

PHOTO : Dr. Heinz Vejpustek
COPYRIGHT 1990 Lockwood Trade Journal Co., Inc.
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Title Annotation:coffee trade
Author:Vejpustek, Heinz
Publication:Tea & Coffee Trade Journal
Date:Jun 1, 1990
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