Norway's Fifth Trade Policy Review - Reply Statement

Mr. Chairman, dear colleagues,

On behalf of the Norwegian delegation, I would like to express our sincere appreciation for the keen interest that so many Members have taken in our Trade Policy Review. Let me also thank Members for the many positive comments expressed during the meeting on Wednesday, touching on issues such as our open economy, economic performance and trade policies vis-à-vis developing countries. A special thanks to ambassador Teehankee for his thorough and interesting contribution as a discussant.

Let me also repeat my gratitude to the Secretariat for their efforts to produce a high quality report that has served its purpose as an excellent basis for our deliberations.

Mr. Chairman,

On Wednesday you underlined that the main purpose of the Trade Policy Review is to achieve greater transparency in and understanding of the trade policies and practices of Members. You also mentioned that the TPR should not serve as enforcement or to impose new commitments.

In this spirit, we have faithfully tried to respond as thoroughly as possible to the many questions and comments that have been raised. We have provided written answers to all written questions submitted before the TPR. Those answers which were not provided on Wednesday are available at the back of the room today.

Today, I will respond to those additional questions that were posed in the oral statements made by Members on Wednesday, as well as provide additional comments to some of the major issues that have been raised both in the Secretariat’s report, by the discussant and by Members.

I. ECONOMIC AND INSTITUTIONAL ENVIRONMENT

Let me start with issues related to the economic and institutional environment. Many of you have commented on Norway’s economic performance and macroeconomic policies. On Wednesday I highlighted some key issues related to the current state of our economy. I will not repeat them here, but rather respond to some of the points raised related to medium- and long-term challenges.

As regards oil resources, if they are handled well, the petroleum wealth should contribute to a permanent increase in the welfare and prosperity of citizens. In our view, a key feature in order to successfully handle the petroleum wealth is to separate spending of petroleum income from its accumulation. This approach necessarily involves a significant degree of saving in periods of high oil extraction or oil prices.

On this basis, a set of fiscal policy guidelines were endorsed by a large majority of the Norwegian Parliament in 2001:

• The petroleum revenues are to be gradually phased into the economy, approximately in step with the development in expected real return (4 percent per annum) from the Government Pension Fund – Global.
• Emphasis should be given to smoothing fluctuations in the economy in order to secure good capacity utilisation and low unemployment.

These guidelines facilitate a stable development in the Norwegian economy, both in the short and long run:

• They shelter the Fiscal Budget from the effects of volatility in petroleum prices.
• They facilitate the balanced phase-in of petroleum revenues over time.
• They enable budget policy to be used for purposes of stabilising production and employment.
• They contribute to predictability concerning the spending of petroleum revenues in the Norwegian economy.

Adhering to these guidelines has helped Norway avoiding many of the pitfalls associated with abundance of natural resources.

In addition, we acknowledge that the long-term gains in welfare and prosperity ultimately hinges on the underlying development in the non-oil economy and non-oil public finances. Reflecting this is the reform of the public pension system, which aims at curbing pension expenditures and stimulating labour supply. The pension reform passed the Parliament last year.

As in most OECD-countries, Norway still faces increasing pressures on public finances in the face of expected demographic changes – even when taking into account the pension reform and the room for increased spending of petroleum income in coming years according to the fiscal guidelines. As in most OECD-countries, this challenge will be an important part of the political agenda in Norway in the years ahead.

Mr. Chairman,
The role of the state was the focus of many questions on Wednesday, and in particular Government ownership in Norwegian businesses.
 
Where the State has ownership interests, it acts as an active, long-term owner, whose main aim is to contribute to the companies’ long-term value creation and industrial development. Decisions to buy or sell shares are taken on a case-by-case basis, and important decisions depend on parliamentary approval. Transparency and predictability increases confidence in state ownership. The Public is granted access to non-confidential information about the operation of State owned companies and the State’s ownership policies in order to ensure accountability.

The State and other shareholders choose a board of directors, which is responsible for managing the company. According to law, matters that require decisions by the owners must be raised at the general meeting and be decided upon. Companies in which the State has an ownership interest are managed in accordance with principles for good corporate governance. These companies shall be managed so as to ensure a market return on capital investment and sound industrial development over time. The State emphasizes that its investments are expected to be profitable. Target rates of return are set in order to monitor and evaluate company developments.
 
Let me reiterate that the State’s exercise of its ownership is based on generally accepted principles for corporate governance. In addition, the Government has organised the management of its ownership in such a way as to keep the role of owner separate from the roles of policy-maker, regulator and supervisor. The ultimate test of performance rests with the market. So far our experience suggests that the investor market acknowledges the practice of state ownership and easily accepts the Norwegian State as a co-owner. Privatisation is not, however, an issue for the present Norwegian Government.

Mr Chairman,
Let me now turn to another issue that has been addressed, pertaining to differences in treatment between EEA citizens and citizens from other Members regarding investments and the provision of services.

Norway has an open and transparent regime for investment and the provision of most services. However, there are some differences in treatment between EEA service providers and service providers from other countries. This is based on the fact that the EEA is an integration agreement based on the free flow of goods, services, capital and persons, and with very specific regulations for the different sectors. Differences in treatment are thus a reflection of the fact that the EEA provides for deeper integration between EEA countries.

While such differences in treatment exist, they do not necessarily represent any major impediments to economic actors. Companies originating in a non-EEA country may in most cases get access at the same level as companies from an EEA-country simply by establishing a subsidiary or having a local citizen act as their legal representative.

It should be noted that the level of integration within EEA actually provides obvious benefits for non-EEA companies: Once a company is established within the EEA, it will have access to all 30 countries of the European Economic Area on the same level as any other EEA-based company. The EEA is not an impediment for economic integration, but an important vehicle to promote cross-border trade and investment.

Mr. Chairman,
The integration of immigrants into Norwegian society was raised by the discussant. The Government fully acknowledges this challenge, and has implemented an Action Plan for the integration and social inclusion of the immigrant population. The purpose of the Action Plan is to promote a tolerant and multicultural society where rights, obligations and opportunities are the same for all, regardless of ethnic background, gender, religion, sexual orientation or degree of functioning. The government will combat discrimination, prejudice and racism in order to give everyone the same opportunities for social participation.

WTO participation.
Related to the issue of WTO participation, several Members, as well as the discussant, encouraged Norway to submit outstanding notifications. I can assure you that Norway takes the issue of timely notifications very seriously and regards this as an essential element in providing transparency about trade related measures. Our outstanding notifications, in particular in the area of agriculture, from the year 2005 and onwards are currently being prepared, and will be submitted when finalized. 

The issue of the difference between Norway’s bound and applied rates are noted in the Secretariat’s report, and were mentioned both by the discussant and several Members who urged Norway to close this gap in order to increase predictability. Such increased predictability is important not just in Norway, but in all Members, and will be a key result from the ongoing DDA negotiations.

The ambitious NAMA coefficient for developed countries outlined in the draft modalities text would bring our bound NAMA tariffs down to very low levels, and would result in a considerable reduction of the gap between bound and applied rates. It would also significantly lower both the bound and applied rates in the few areas where NAMA tariffs remain, most notably in areas of major interest to developing countries such as textiles and clothing.

As for agriculture, the cuts envisaged by the formula in the Chair’s text would cut over 90% of our agricultural tariff lines by an average of over 60%. Additional cuts for tropical and diversification products and products where tariff escalation exists would increase this figure even further. We look forward to continue working with other Members towards a timely conclusion of the DDA that will yield improved predictability both in the Norwegian and other markets.

Other international relations
Several Members commented on our changes in our GSP. Most of the attention has been directed towards the inclusion of 14 low income countries in our scheme for Duty Free and Quota Free market access. This means that 64 low-income countries are now given DFQF-MA into Norway for all their goods. 

Let me, however, point out that we have also implemented other changes in our GSP scheme. The preference margin for ordinary GSP countries has been increased by 20 percentage points within the WTO minimum access quotas for agricultural products, thus improving the preference margin for all developing countries outside the group of countries receiving DFQF-MA.

In addition, some adjustments were made in order to simplify the system. Efforts are also being undertaken to improve information about the system, in particular in least developed and low income countries, and to assist countries in meeting the requirements for GSP treatment. Finally, our Action Plan on Aid for Trade is also geared towards stimulating the use of the possibilities created by the GSP.

FTAs
We were pleased to note that several of our trading partners acknowledged the positive effects and increased trade resulting from our free trade agreements. We would like to commend both our existing free trade partners, and the countries which we are currently negotiating with, for their cooperation.

Free trade agreements are important also in order to develop trade with developing countries, and the majority of Norway’s free trade agreements are with developing countries. Through EFTA, Norway has free trade agreements with Chile, Croatia, Egypt, Israel, Jordan, Korea, Lebanon, Macedonia, Mexico, Morocco, The Palestinian Authority, SACU, Singapore, Tunisia and Turkey. Furthermore, negotiations have been concluded with Canada, Colombia and the Gulf Cooperation Council. Negotiations with Algeria and Peru are ongoing. Negotiations between EFTA and India were launched recently, and Norway and China started bilateral negotiations in September this year.

The discussant pointed to the bilateral agricultural agreements each of the EFTA states concludes in parallel with the FTAs. The reason for this is that the EFTA states do not have a common agricultural policy, and by negotiating bilateral agricultural agreements it is possible to give tailor-made concessions to the free trade partner without taking into account the sensitivities of all the EFTA States. As a consequence the concessions and the liberalisation are more extensive than it would otherwise have been.
 

II. TRADE POLICIES BY MEASURE

Turning to issues related to “Trade policies by measure”, let me first address an issue raised by the discussant on customs valuation. While taking note of the fact that 97 per cent of all declared values are accepted as the transaction value for purposes of customs valuation, the discussant asked whether customs valuation is related to the use of “average prices” and requested information on the situation vis-à-vis the remaining 3 per cent of cases where declared values are not accepted.

I would like to make it clear that customs valuation takes place on the basis of the declared transaction value, not any average values. As stated in the Report from the Secretariat, 97 per cent of all imports are declared by the importer as using the transaction value as the basis for the customs valuation. The remaining 3 per cent are mainly gifts, products returned for repair and samples of merchandise without any transaction involved. It is correct that the TVINN electronic declaration system uses a system of average transaction values, but the purpose of this system is not customs valuation, but rather to detect and select out declarations that may contain errors or that may require closer examination by customs officials.

SPS measures
In response to a question on notifications of SPS measures, Norway only notifies emergency measures and SPS measures that differ from what is covered by the EEA-Agreement. Since the last trade policy review in 2004 Norway has submitted 15 notifications to the WTO, five of which were emergency notifications. This demonstrates that the number of regulations which are purely national or differs substantially from the EEA-Agreement are limited.

TBT
A couple of TBT-related questions were raised. The first related to decaBDE. Norway would like to recall that the draft regulation to prohibit decaBDE was duly notified to the WTO (G/TBT/N/NOR/6). Norway informed member countries in the TBT committee about the rationale of the regulation of decaBDE, and provided background information to interested parties. After extensive public hearings and consultations, the regulation prohibiting decaBDE was adopted 9 December 2007 and entered into force 1st of April this year.

The second issue raised relates to a proposal to regulate 18 hazardous substances in consumer products. The proposal was submitted to a public hearing and has been notified to the WTO (G/TBT/N/NOR/17). The regulation did not enter into force on 1st of January 2008 as envisaged, and Norwegian authorities are currently examining the comments received in the public hearing and meeting with different stakeholders. In the upcoming meeting in the TBT committee 5-6 November, Norway will provide further information regarding the process and considerations regarding the proposed regulation on hazardous substances in consumer products.

GPA
The discussant commented that while Norway's government procurement is open and subject to the disciplines of the WTO's Government Procurement Agreement, it would seem that only a small portion of contracts are granted to foreign suppliers, and that the Secretariat Report noted that, in 2006, 96% of contracts bidded went to domestic suppliers.
 
Unfortunately, these figures are based on a report that suffers from a number of statistical errors, greatly underestimating the number and value of contracts awarded to foreign suppliers. It is unfortunately not possible to give a precise estimate of the percentage actually awarded to foreigners based on the current available data. Norway is currently taking steps to improve future reporting.

 

III. SECTORAL POLICIES

Agriculture
On sectoral policies, we have taken note of the many comments and concerns expressed related to our agricultural policies. We have already commented on this in our statement two days ago, and I think you are all well aware of our positions on this matter.

Let me in this context, however, recall that Norway is by no means a closed market for agricultural products. Outside domestically produced agricultural goods, Norwegian tariff protection is zero or only marginal. Norway is a net importer of agricultural products. The value of imported agricultural products far exceeds the value of agricultural production. Agricultural imports have increased by 37 per cent 2004 to 2007. In the same period, imports from developing countries increased by 50 per cent, and imports from LDCs increased by 70%.

Norway remains within its bound commitment levels for domestic support and export competition for all commodities. Furthermore, Norway is fully committed to the mandate of the Doha Development Agenda. Norway is prepared to undertake substantial reductions in support levels and tariff barriers as mandated by the Doha declaration. We urge all members to contribute to bringing about a swift and positive conclusion to the Doha Development Agenda.

Maritime sector
We have also noted concerns that Norway’s revised offer in the services negotiations related to maritime transportation may imply introduction of new restrictions and even indicate a “roll back”. 

Norway has made some revisions of a more technical nature in its revised offer, mainly to streamline the terminology and make the wording consistent for equal cases and content, but we do not consider this to alter the substance of existing commitments. Norway will be happy to engage with other members within the context of the services negotiations in order to explain and discuss the content of our – as well as other countries’ – revised offers.

One Member asked some very specific questions about our new tonnage tax system which was introduced on January 1st of this year. The main reason for the change of tax systems was to ensure a level playing field within the EEA for the shipping sector. This may not be the natural context to go through this system in great detail. This is why we have taken the liberty to provide some information in writing which has been submitted to the delegation who expressed interest in the matter. More copies of the same information are available to other interested members at the back of the room. 

Work permits
One last issue which has been touched upon by several Members is the issue of work permits. Work permits are required for most foreign citizens wishing to work in Norway. Generally, a person must have a concrete and current offer of employment for full-time work to get a permit. Wages and working conditions must not be of a lower standard than the applicable collective agreement, wage scale or normal standard for the location and profession. For more detailed information, reference is made to our response to a written question from China. In response to a specific question from one Member regarding applicants from low income countries, please note that there is no distinction made between applicants from low income and other countries.

I am looking forward to continue our deliberations and thank you all for your patience and attention.