NorwayWT/TPR/S/XX
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WorldTrade
Organization / RESTRICTED
WT/TPR/S/205
17 September 2008
(08-4276)
Trade Policy Review Body
TRADE POLICY REVIEW
Report by the Secretariat
NORWAY
This report, prepared for the fifth Trade Policy Review of Norway, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Norway on its trade policies and practices.
Any technical questions arising from this report may be addressed to Ms.KatieWaters (tel. 022 739 5067), Mr. Alberto Bueno (tel. 022 739 6392), and Mr. Raymundo Valdés (tel. 022 739 5346).
Document WT/TPR/G/205 contains the policy statement submitted by Norway.

Note:This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Norway.

NorwayWT/TPR/S/205
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CONTENTS

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SUMMARY OBSERVATIONSvii

(1)Economic Environmentvii

(2)Trade Policy and Investment Frameworkvii

(3)Market Access for Goodsviii

(4)Other Measures Affecting Tradeix

(5)Sectoral Policiesix

I.Economic environment1

(1)Overview1

(2)Structure of the Economy, Output and Employment1

(3)Monetary and Exchange Rate Policies4

(4)Fiscal Policy6

(5)Balance of Payments7

(6)Trade and Investment Flows9

(i)Developments in merchandise trade9

(ii)Developments in trade in services9

(iii)Foreign direct investment10

(7)Outlook10

II.trade policy regime: framework and objectives12

(1)Overview12

(2)Trade Policy Formulation and Implementation12

(i)Institutional framework12

(ii)Trade policy formulation, implementation and objectives14

(3)Foreign Investment Regime14

(4)International Relations15

(i)World Trade Organization15

(ii)Preferential trade agreements17

(iii)Generalized System of Preferences (GSP)20

(iv)Aid for Trade21

III.trade policies and practices by measure24

(1)Overview24

(2)Measures Directly Affecting Imports24

(i)Procedures and documentation24

(ii)Customs valuation26

(iii)Rules of origin27

(iv)Tariffs28

(v)Other charges affecting imports31

(vi)Import licensing, controls and prohibitions32

(vii)Contingency measures33

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(viii)Technical regulations and standards35

(ix)Sanitary and phytosanitary measures37

(3)Measures Directly Affecting Exports40

(i)Procedures and charges41

(ii)Export prohibitions, restrictions and licensing41

(iii)Subsidies and fiscal concessions42

(iv)Export finance, insurance and guarantees43

(v)Export promotion and marketing assistance44

(4)Measures Affecting Production And Trade45

(i)Legal framework for businesses45

(ii)Competition policy and price controls48

(iii)Incentives50

(iv)State-trading, state owned enterprises and privatization56

(v)Government procurement58

(vi)Intellectual property rights61

IV.trade policies by sector66

(1)Overview66

(2)Agriculture66

(i)Features67

(ii)Border measures70

(iii)General support73

(iv)Policies by group of products76

(3)Forestry78

(4)Fishing and Aquaculture80

(i)Main features80

(ii)Institutional and legal framework81

(5)Energy83

(i)Overview83

(ii)Hydrocarbons84

(iii)Electricity86

(6)Manufacturing88

(7)Services89

(i)Main features89

(ii)Financial services90

(iii)Telecommunications94

(iv)Maritime transport96

(v)Professional services99

(vi)Air transport101

ANNEX IV.1Traffic coverage and main characteristicsin Norway's

air services agreements105

REFERENCES109

APPENDIX TABLES113

TABLES

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I.ECONOMIC ENVIRONMENT

I.1Basic economic indicators, 2004-082

I.2GDP growth measured by expenditure,2004-083

I.3Main monetary indicators, 2004-085

I.4Fiscal accounts of the non-financial General Government, fiscal years 2004-086

I.5Balance of payments, 2004-088

I.6Trade in services, 2004-0810

II.TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES

II.1Selected Notifications to the WTO, January 2004-June 200816

III.TRADE POLICIES AND PRACTICES BY MEASURE

III.1Structure of the tariff schedule, 2004 and 200829

III.2Summary analysis of the MFN tariff, 200829

III.3VAT rates, March 200832

III.4Import prohibitions and licensing requirements, 200833

III.5Other taxes and fees, 200839

III.6Export prohibitions and licensing requirements, 200841

III.7Export insurance and guarantee programmes administered by GIEK, 200844

III.8Principal business structures and selected requirements, 200846

III.9Industry-wide and selected sector-specific support programmes, 2005 and 200651

III.10Main state-owned enterprises in terms of equity, June 200857

III.11Overview of IPR protection provided by Norway's legislation, 200863

IV.TRADE POLICIES BY SECTOR

IV.1Production income, 2004-0567

IV.2Key indicators on selected domestically produced products, (average 2004-06)68

IV.3Main elements of agricultural agreements, 2004-0869

IV.4Tariff quotas and import volume71

IV.5Product-specific Aggregate Measurement of Support (AMS), 2002-0475

IV.6Measures exempt from the reduction commitment, 2002-0475

IV.7Export subsidies, 2002-0476

IV.8Assistance to the forestry subsector, 2004-0779

APPENDIX TABLES

I.ECONOMIC ENVIRONMENT

AI.1Merchandise exports by group of products, 2004-07115

AI.2Merchandise imports by group of products, 2004-07116

AI.3Merchandise exportsby trading partner, 2004-07117

AI.4Merchandise imports by trading partner, 2004-07118

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III.TRADE POLICIES AND PRACTICES BY MEASURE

AIII.1Tariffs under selected preferential agreements, 2008119

AIII.2Main excise duties, 2008125

IV.TRADE POLICIES BY SECTOR

AIV.1Norway's specific commitments under the GATS, 2008126

NorwayWT/TPR/S/205
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SUMMARY OBSERVATIONS

  1. Norway's standard of living is among the world's highest, and the domestic economy has performed strongly since its previous Trade Policy Review in 2004. Norway's enviable economic position is due in large part tothe profits accrued from oil and gas exports, a generally liberal import regime that facilitates the translation of these profits into consumer welfare gains, and sound macroeconomic policies. Market access for non-agricultural products is all but fully open; however, domestically produced agricultural goods remain heavily assisted, contributing significantly to high food prices. Taking steps to reduce such assistance would align agricultural policy with the market-based solutions pursued in other sectors, which have been key to Norway's prosperity.
  2. Norway has continued to undertake reforms during the period under review, often driven by its participation in the European Economic Area (EEA) Agreement. This participation has helped to add flexibility to the Norwegian economy and enhance market competition. However, it has also widened the gap between the treatment Norway grants to its EEA and other WTO partners. Closing this gap by applying reforms on an MFN basis, and securing them in the WTO, would help prevent trade and investment distortions. It would also help Norway prepare for a future when natural wealth may play a smaller role in its economy, and strengthen the multilateral trading system to whichNorway has demonstrated a long-standing commitment.

(1)Economic Environment

  1. The Norwegian economy experienced strong economic expansion during the period under review. Lower import prices, higher export prices for hydrocarbon products, and rising productivity have boosted domestic demand. As a result, Mainland GDP (domestic product excluding oil and gas activities) expanded at an average of 5.2% per yearover 2004-07. This has supported the continued rise in Norway's living standards, with per capita GDP at just over US$82,000 in 2007.
  2. Norway's service sector has continued to expand, accounting for some 66% of GDP in 2007. The economic weight of activities related to petroleum and natural gas extraction has decreased but these activities remain of great importance, accounting for 21% of GDP, 25% of public revenues, and 58% of merchandise exports in 2007. The composition and direction of Norway's merchandise trade did not change significantly over 2004-07. Exports are dominated by commodities, while close to 80% of Norway's imports consist of manufactured goods. Norway's main trading partners are the members of the European Communities (EC).
  3. Inflation has been kept in check, due in part to declining import prices, increasing domestic competition, and large inflows of foreign labour. Muted inflationary pressure has permitted the Central Bank to keep interest rates low, which in turn has supported economic expansion. Unemployment has fallen to very low levels (2.5%). Fiscal policy has been associated with large budget surpluses, which are being saved in a fund maintained abroad to smooth economic fluctuations. However, there are signs that real GDP growth has reached its potential, and that economic growth will slow down.

(2)Trade Policy and Investment Framework

  1. Norway grants at least MFN treatment to all its trading partners. No significant changes have been introduced to Norway's general legal framework since its last Review in 2004. Norway acknowledges that trade plays an important role in its economic prosperity, and considers that a well functioning and competitive domestic environment goes hand-in-hand with a binding and predictable open trade regime.
  2. Norway participates actively in the multilateral trading system. In the context of the Doha Development Agenda (DDA), Norway has presented several proposals individually and together with other Members. It has also submitted numerous notifications to the WTO, although a small number are lagging in areas such as agriculture, state trading, and import licensing. Norwayhas been involved in multilateral dispute settlement procedures in two cases as a respondent and in ten cases as a third party. It is an active participant in the WTO's work on aid for trade and a significant provider of assistance to developing countries; it has decided to increase its contribution to aid for trade in 2008, mostly through multilateral channels.
  3. Norway sees its membership in the EEA as an essential complement to the multilateral trading system. Norway's trade-related regulations are largely implemented within the context of its EEA membership. In the context of the European Free Trade Association (EFTA), Norway is part of an expanding network of free-trade agreements. This network includes FTAs with 16 trading partners; six were signed during the period under review.
  4. Norway's GSP scheme grants duty-free and quota-free access to all imports originating in LDCs; in 2008, changes were introduced to expand this treatment to 14 low income developing countries. For imports originating in other developing countries virtually all industrial goods enter duty free but agricultural products are subject to particular tariff reduction schemes.
  5. In general, Norway grants national treatment to foreign investors. It maintains restrictions on foreign investment in fisheries, audiovisual services, and maritime and air transport; with the exception of certain restrictions in the fisheries sector, these do not apply to investors from EEA members. The participation of domestic and all foreign investors is restricted by de jure State monopolies in certain postal and railway services, and in the retail sale of alcoholic beverages. Additionally, in practice, the participation of private investors is dampened by the significant shares the State holds in large companies in sectors including telecommunications, electricity, financial services, and petroleum and gas extraction.

(3)Market Access for Goods

  1. Norway has not made significant changes to customs procedures or documentation since 2004; new legislation to come into force in 2009 is not expected to introduce substantial changes. However, increased security measures are foreseen, reflecting developments in the EC.
  2. Norway's average applied MFN tariff is 6.7%. Applied tariffs on non-agricultural products are low, averaging 0.6%; 95% are duty free. In contrast, the average tariff on agricultural products (WTO definition) is 35.8%, and only 38% of tariff lines are duty free. Norway’s average bound rate is 28.9%; closing the gap between applied and bound rates would increase the predictability of Norway's trade regime. Norway's overall tariff is subject to negative escalation between unprocessed and semi-processed products mainly due to high protection of agricultural raw materials.
  3. Preferential margins under FTAs are relatively low, reflecting the limited concessions on agricultural products under those agreements, and the generally low MFN tariffs on other products. However, larger preferential margins are available under the GSP. Preferential rules of origin provide for various forms of cumulation and flexibilities.
  4. Norway considers that anti-dumping (AD) measures are often used for protectionist purposes, and distort trade and resource allocation in the importing Member. In consonance with these concerns, Norway has not taken any AD or countervailing measures during the review period. Neither has it taken any measures under the Agreement on Safeguards. The last contingency measure in force in Norway, an AD duty, was lifted in 1985. Anti-dumping and countervailing measures may not be used against imports from other EEA states, in areas covered by the EEA Agreement nor, under the EFTA Convention, against imports from fellow EFTA countries.
  5. Norway, as an EEA Member, adopts harmonized EC technical regulations and SPS measures (excluding on plants). Norway may negotiate adaptations to related EC rules, and may also adopt national technical regulations. Norway only notifies to the WTO SPS measures and technical regulations that are either purely national or differ substantially from those harmonized throughout the EEA. In assessing the risk of allowing GMOs, Norway takes into account social, ethical, and sustainable development principles. Norway levies a variety of fees for inspection services by the Norwegian Food Safety Authority.

(4)Other Measures Affecting Trade

  1. Exporters may benefit from tariff concessions for the inward processing of products intended for export, as well as drawback and customs warehousing schemes. Official support is extended to exporters through export financing and guarantee programmes. Export finance may involve subsidized interest rates and be subject to minimum-local-content requirements. Norway has a relatively large number of other incentive schemes, the use of which is subject to EEA disciplines on state aid. It is important to ensure that, by improving the competitive position of beneficiary companies,incentive schemes do not also distort markets.
  2. Norway has been applying a new Competition Act since 2004, which harmonized its legislation with EC rules and granted more power to the Norwegian Competition Authority. However, a study by the OECD suggests that competition could be enhanced in some sectors of the Norwegian economy, particularly in the food sector.
  3. Privatization has slowed down considerably since 2004. The State continues to participate in several economic activities, administering interests in 80, fully or partially owned, companies. The Government considers that state ownership ensures control over Norwegian natural resources, and that the State should be an active long-term owner of some "important" Norwegian companies.
  4. Norway is party to the Government Procurement Agreement. Its public procurement regime is open to all suppliers but the data available suggest that only a small portion of contracts is awarded to foreigners. Since Norway's last Review, a number of changes have been introduced to its intellectual property legislation. Norway allows the parallel importation of goods protected by intellectual property rights from EEA members but, in general, not from other countries.

(5)Sectoral Policies

  1. Norway offers a high level of assistance to the few agricultural goods that it produces, with support to agriculture estimated to be the second highest within the OECD (at 66% of the value of gross farm receipts). For those goods, imports normally only take place if domestic production cannot meet domestic demand. Norway administers tariff quotas for 24 tariff lines, most of which are allocated throughauctions; in a number of cases fill rates are low. Prices received by farmers over the period 2004-06 were over twice as high as those on the world market. Direct payments under the Blue Box are significant,and a few products benefit from export subsidies. Assistance to the agriculture sector is thus at significant variance with Norway's otherwise market-based policies and, largely as a result, Norwegian consumers pay particularly high prices for some agricultural products.
  2. Norway is the world's second largest exporter of seafood in terms of value. Foreign participation in wildlife catch activities is restricted, although not in the aquaculture and land processing sectors. Over the review period, Norway has implemented a series of market mechanisms to manage its fisheries, and continued to reduce subsidies.
  3. Norway is a significant producer and exporter of both crude petroleum and natural gas; production of crude seems to have peaked but natural gas production is on an upward trend. The State maintains strong participation in the sector, including through ownership of StatoilHydro, one of the world's largest offshore oil and gas companies. Since 2004, the Government has introduced new licensing and taxation arrangements to attract private investment. The electricity market is open to foreign investment but state-owned entities have significant involvement in the generation, transmission, and trading of electricity. Energy-intensive industrial processes are exempt from the electricity tax, while manufacturing, mining and quarrying are subject to a reduced tax rate.
  4. The manufacturing sector is relatively small and it is concentrated on industries associated with the production of equipment used in the extraction and processing of natural resources.
  5. In the services sector, Norway undertook extensive sector-specific commitments under the GATS. Important exceptions are postal services, audiovisual services, and health-related and social services. Norway ratified the Fourth Protocol on basic telecommunications and the Fifth Protocol on financial services. Norway's revised offer in the services negotiations, submitted in 2005, reflects its current legal framework.
  6. Norway does not apply restrictions on the establishment of foreign financial
    institutions but limits the cross-border supply of services by non-EEA banks and insurance companies. Authorization is needed when domestic or foreign investors increase their participation in a financial institution incorporated in Norway.
  7. Telecommunication companies do not require a licence to provide services unless they use the electromagnetic spectrum. A state-controlled operator has a dominant presence in most telecommunication markets. However, market competition has increased since 2004, prices for most services do not seem high and investment in the sector has been substantial.
  8. The majority of commercial seaports and airports are state-owned, but private operators, both national and foreign, may be granted permission to provide services. Maritime cabotage services can be provided by foreign operators, but only EEA providers are allowed to offer air transport services within Norway. Norwegian air carriers must be controlled by EEA investors. Most of Norway's international scheduled passenger traffic takes place within the EC Single Aviation Market, which establishes a very liberal regime for participating states.
  9. Regarding professional services, to provide legal, accounting or auditing services, professionals must in principle hold a Norwegian university degree or pass aptitude exams. EEA residents who hold a university degree from an EEA member are, in general, exempted from these requirements.