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News - Editor, 24 April 2013

China and Iceland Enter Into Free-Trade Deal



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During a recent state visit to Beijing by Iceland's Prime Minister Johanna Sigurdardottir, the two countries signed a free-trade deal which aims to eliminate most trade tariffs in the next few years. This is the first such agreement that China has signed with a European country and some analysts are of the opinion that it is part of China's strategy to reach out for allies as many of its historic trading partners are wary of China's increasing economic influence.

When comparing Iceland's 2011 G.D.P. of $14 billion with China's G.D.P. for the same period totaling $7.3 trillion, some may wonder what the benefit is to China of pursuing a free-trade deal with the small Nordic European country. While Iceland's exports, primarily of fish, to China totaled $61 million, it imported goods and services from the Asian giant to the value of $341 million, and is not in the position to offer significant new market growth. However, it has been noted that global warming and the resulting polar ice retreat is making the Arctic more accessible, and Iceland could help China in breaking into new markets there. This theory is supported by the fact that China has expressed interest in obtaining observer status with the Arctic Council – an intergovernmental forum that deals with issues and problems unique to Arctic governments and inhabitants. The Arctic Council's eight member countries are Canada, Finland, Iceland, Denmark, Norway, Russia, Sweden and the United States. Chairmanship of the Arctic Council changes every two years, with Canada set to assume this role at the council's meeting in May 2013, taking over from current chair Sweden.

Following talks between China's Premier Li Keqiang and Iceland's Prime Minister Johanna Sigurdardottir a joint statement was issued in which there was a call for bilateral cooperation on gender equality, human rights, labor issues, Arctic affairs, geothermal development, education, culture and tourism.

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