EC acts over car subsidies

THE EUROPEAN Commission yesterday threatened to impose import duties on state-subsidised cars imported into the EC through Austria.

The Austrian government has until the end of the month to stay the EC's hand by reducing the level of subsidies it offered Chrysler as an inducement to establish a plant in Graz.

The factory - which received 33 per cent of its start-up costs in grants and subsidies from the Austrian government - makes the Voyager people-carrier.

In its first year of operation the plant produced 14,000 vehicles, which is expected to rise to 50,000 by 1994.

The Austrian government has already offered to reduce its investment to 'below 20 per cent'. But the commission regards the offer as too late and too vague.

A 1972 trade agreement allows the EC to impose tariffs against products imported from European Free Trade Agreement countries if they can be shown to be destined for the EC market. At the start of next year the seven Efta member countries will adopt a new and closer economic relationship with the EC as members of the new European Economic Area.

The EC is keen to clear the matter up before the new relationship begins to take legal effect and complicate existing negotiations.

The Austrian government is understood to be working on the premise that the EC has previously allowed state aid of 20 per cent - such as in the case of the Ford-VW plant in Portugal.