WORLD TRADE
ORGANIZATIONG/SCM/N/48/ISL/Rev.1
26 February 2003
(03-1163)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Updating Notifications Pursuant to Article XVI:1 of
the GATT 1994 and Article 25 of the Agreement
on Subsidies and Countervailing Measures
ICELAND
Revision
The following communication, dated 21 January 2003, has been received from the Permanent
Mission of Iceland.
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TABLE OF CONTENTS
Page
I. THE AGRICULT URAL SECT OR....................................................................................2
1.1 Agricultural Agreements;  Payments to Milk Farms and Sheep Farms.........................2
II. SUPPORT FOR R&D AND TECH NOLOGICAL I NNOVATION ...............................4
2.1 Technology Fund............................................................................................................. .....4
2.2 Support for R&D in Marine Aquaculture.........................................................................5
III. SUPPORT TO SMALL AND ME DIUM-SIZED COMPANIES ....................................6
3.1 Job Creation Initiative..................................................................................................... ....6
IV. SUPPORT FOR EMPLOY MENT AND T RAINING......................................................7
4.1 Vocational Training Fund.  Support for Vocational Training ........................................74.2 Employment Opportunities fo r Women in Rural Areas..................................................7
4.3 Vocational Rehabilitation and Employment of Disabled Persons...................................8
4.4 Vocation Training in the Fishing Industry........................................................................9
V. REGIONAL SUPPORT ....................................................................................................10
5.1 Assistance to Development Projects .................................................................................10
5.2 Assistance to Local Economic Development....................................................................10G/SCM/N/48/ISL/Rev.1
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I. THE AGRICULTURAL SECTOR
A. NAME OF PROGRAMME
1.1 Agricultural Agreements;  Payments to Milk Farms and Sheep Farms
(Budget item no: 04-801 & 04-805)
B. RESPONSIBLE AUTHORITY
Ministry of Agriculture.
C. POLICY OBJECTIVE
Icelandic agricultural policy is implemented in pursuit of objectives which include increasing
efficiency in the agro-food sector, ensuring self-sufficiency for the country’s major commodityproduction; using domestic inputs to the extent possible; increasing efficiency in the agricultural food
sector; using export opportunities to the extent feasible; securing an equitable income for farmers; and
integrating environmental issues with the agricultural policy.
D. F
ORMS OF SUBSIDY
As part of the move toward a more transparent and efficient system of transfers, direct
payments based on support targets were introduced for registered farms producing sheepmeat and
milk in 1992 and 1993 respectively. As of the 1 996 Agricultural Agreement, however, production of
sheepmeat was no longer a prerequisite; farmers need to own 60 per cent live sheep for their
sheepmeat entitlements (i.e. formerly support targ ets).  Allocations for the Agricultural Agreements
are made under item no. 04-801 and 04-805 of the Budget (Ministry of Agriculture).
E. AMOUNT OF SUBSIDY
The amount of support measured by total costs budgeted for 1998 are listed in  tables 1 and 2
below.
Table 1  Budget item no. 04-801; Agricultural Agreements, Million ISK
Agricultural Productivity Fund 175,0
Market Regulation 317,4
Price Support (total direct payments) 4.465,8
Table 2  Budget item no. 04-805; Price Support, Million ISK
Subsidies, wool 243,2
F. RULES AND CONDITIONS
Implementation of the agricultural policy revolves around Agricultural Agreements
negotiated between the Government and the Farmer’s Union. Under Act No. 99/1993 on Production,
Pricing and Sales of Agricultural Products, the Minister of Agriculture is given the authority to
negotiate with the Farmer’s Union on behalf of the Government on the total support target for milkand total support target for sheepmeat entitlements for which the State will guarantee administered
prices.  As of September 1998, however, administered prices were abolished for sheepmeat.G/SCM/N/48/ISL/Rev.1
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Support is provided for milk farms and sheep farms.
1. Milk farmers
Milk producers receive direct payments from the Government on milk delivered to dairies.
The quantity must be within the allocated support targets.  The amount of monetary support is
equal for all producers in Iceland.
2. Sheep farmers
Sheep farmers receive direct payments from the Government which are based on support
targets for sheepmeat entitlements, for which they must own 60 per cent live sheep.
3. Sheep farmers - Wool
Wool scouring plants receive support from the Government and a regulated producer price for
wool is maintained above the world market price level.  The price of wool is thusadministered at both the producer and wholesale level.
4. Market regulation
Market regulation funds are used to pay for stockholding costs, marketing efforts and
withdrawal of sheepmeat entitlements.  Due to the relatively short slaughter season (on
average about six weeks in September and Oct ober) accumulation and holding of stocks of
sheepmeat between slaughter seasons is necessary as a safety measure to ensure supply.
Specific marketing efforts geared towards promotion of sheepmeat are included under this
heading along with costs associated with withdrawal of sheepmeat entitlements.
With reference to the above mentioned programmes, direct payments to dairy producers and
sheepmeat entitlements holders are granted directly to farmers.  The other two programmes are to be
considered as market regulation schemes.
G. DURATION
Current Agricultural Agreements will terminate in August 2005 (milk farmers) and in
December 2007 (sheep farmers).
H. LEGAL BASIS
Act No. 99/1993 on Production, Pricing and Sales of Agricultural Products. The State Budget.
I. TRADE EFFECTS
An assessment of the trade effects of the subsidies is not available. Below, in tables 3 and 4
there is, however, presented statistics on production, consumption and exports of the relevant
agricultural commodities.
Table 3  Quantity of milk received by dairies and calculated consumption by fat-content
of milk derived products (in 1000 of litres).
YearMilk, received
by dairies CreamYoghurt
products, etc. Butter CheesesSkimmed
Milk-powder, etc.
1998 105.716 16.369 3.052 25.860 22.526 1.369G/SCM/N/48/ISL/Rev.1
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Table 4  Quantity of sheep meat (in 1000 kg)
Year Production Export Consumption
1998 8.176 848 7.027
II. SUPPORT FOR R&D AND TECHNOLOGICAL INNOVATION
A. NAME OF PROGRAMME
2.1 Technology Fund
B. RESPONSIBLE AUTHORITY
Icelandic Research Council which is under the supervision of the Ministry of Culture and
Education.
C. POLICY OBJECTIVES
The objective of the Technology Fund is to facilitate innovation through supporting research
and technological development.
D. AMOUNT AND FORM OF SUBSIDY
The amount of subsidy and number of projects in 1998:
TF – shceme Million ISK No of projects
RTD projects - General project support 177,685 98
Transfer of knowledge 19,600 14
Preprojects 13,100 22
Travel grants for plan of bilateral or International
project RTD projects 430 2
210,812
Grants are awarded through three different schemes, general projects, transfer of knowledge
and cooperation projects.
General projects are RTD projects.  The fund contributes on average 30-40 per cent of the
total cost of the projects.  The participants pay the rest from industry and RTD institutions.
Transfers of knowledge projects are granted to companies lacking technical know-how but
planning to initiate RTD activities to increase th eir technological competence.  The grant is intended
to pay half the labour cost of one technician.
Cooperation projects are both preprojects to investigate and plan future RTD projects and
travel grants for companies and RTD institutions interested in European multinational projects.E. R
ULES AND CONDITIONS
Subsidies are granted only on the basis of project applications and all projects are cofinanced.
There is not formal upper limit for support, but the average support granted is around 30 per cent ofG/SCM/N/48/ISL/Rev.1
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total project expenses.  There are only matching grants and applicants finance the remaining costs by
own funding.  Support is granted to universities, public research institutes business enterprises and
individual scholars. All categories of applicants regardless of the branch of industry are eligible.
F. LEGAL BASIS
Act no. 61/1994 on the Icelandic Research Council, as amended by Act No. 44/1995.
G. TRADE EFFECTS
The support is granted to a variety of small projects and sectors, therefore it is difficult to
present statistical data permitting an assessment of trade effects.
H. DURATION
There is no time limit.
A. NAME OF PROGRAMME
2.2 Support for R&D in Marine Aquaculture
B. RESPONSIBLE AUTHORITY
Ministry of Fisheries.
C. POLICY OBJECTIVE
To enhance scientific knowledge in marine aquaculture.
D. FORM OF SUPPORT
Grants.
E. AMOUNT OF SUPPORT
1998
Million ISK 19,1
F. RULES AND CONDITIONS
Grants are awarded on the basis of applications evaluated by a special committee.
G. DURATION
There is no time limit, but each programme is decided on for a year at a time.
H. LEGAL BASIS
The Budget  item 05-190.G/SCM/N/48/ISL/Rev.1
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I. TRADE EFFECTS
There is no trade effect due to limited support.
III. SUPPORT TO SMALL AND MEDIUM-SIZED COMPANIES
A. NAME OF PROGRAMME
3.1 Job Creation Initiative
(Budget item 11-299-148)
B. RESPONSIBLE AUTHORITY
IceTec, under the auspices of the Ministry of Industry and Commerce.
C. POLICY OBJECTIVE
The objective is, to increase the knowledge and competence of entrepreneurs and small and
medium-sized enterprises such as in managing, financing, product development, marketing and
innovation.
D. FORM OF SUPPORT
Cost items incurred for consultants, product development, marketing and innovation are
eligible for grants.  Support shall in general not co ver more than 30 per cent of eligible expenses and
must not exceed 50 per cent.
E. AMOUNT OF SUPPORT
1998
Million ISK 65
F. RULES AND CONDITIONS
Firms and individuals having a registered domicile in Iceland can apply for a grant.
Individuals who apply for grants according to these rules must declare that they have not received a
grant from the Government amounting to more than ISK 8.4 million (100,000 ECU) last 3 years, the
grant applied for included.  In this context, spec ial grants for investment are not included.  Some
33 Million ISK of the amount is allocated to firms and individuals located in rural areas not enjoyingthe ongoing development of hydropower and related industrial development.
G. D
URATION
There is no time limit, but each programme is decided on for a year at a time.
H. LEGAL BASIS
The Budget.G/SCM/N/48/ISL/Rev.1
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I. TRADE EFFECTS
There are no trade effects of the support due to the general framework of the scheme and
limited support.
IV. SUPPORT FOR EMPLOYMENT AND TRAINING
A. NAME OF PROGRAMME
4.1 Vocational Training Fund.  Support for Vocational Training
B. RESPONSIBLE AUTHORITY
Ministry of Social Affairs, Directorate of Labour.
C. POLICY OBJECTIVE
The main purpose of this programme is to maintain and develop vocational skills, in most
cases for people already employed.
D. FORM OF SUBSIDY
Grants.
E. AMOUNT OF SUBSIDY
Actual total expenditure in 1998: ISK 63 million.
Through the programme 40 recipients have received 106 different vocational training courses.
Most of these recipients are non-profit or public organizations.
F. RULES AND CONDITIONS
Grants to organizations on application to the Vocational Training Fund mainly to make
curriculum or other teaching materials for the vocational training courses.
G. DURATION
The programme started in 1992.  Duration has not been specified.
H. LEGAL BASIS
Act No.19/1992 on Vocational Training, the Budget, item No.07-984.
A. NAME OF PROGRAMME
4.2 Employment Opportunities for Women in Rural Areas
B. RESPONSIBLE AUTHORITY
Ministry of Social Affairs, Directorate of Labour.G/SCM/N/48/ISL/Rev.1
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C. POLICY OBJECTIVE
The main purpose of this programme is to create new jobs among women.  Areas where high
unemployment is among women will especially be considered.
D. FORM OF SUBSIDY
Grants, up to 50 per cent of primary R&D costs,  innovation costs and cost of new products,
process and systems for industrial production.  Directorate of Labour pays the grants and controls
their disposition.
E. AMOUNT OF SUBSIDY
Actual total expenditure in 1998: ISK 16.1 million.
It is difficult to give exact information on how many jobs have been created or maintained, as
many of these new jobs are just part time jobs.
F. RULES AND CONDITIONS
Grants to women on application to the Directorate of Labour mainly to new product
developing and marketing.  The grant can also be given to companies, which have been established by
women.
G. DURATION
The programme started in 1990.  Duration has not been specified.
H. LEGAL BASIS
Governmental decision from 1990, the Budget item no.07-984.
A. NAME OF PROGRAMME
4.3 Vocational Rehabilitation and Employment of Disabled Persons
B. RESPONSIBLE AUTHORITY
Ministry of Social Affairs.
C. POLICY OBJECTIVE
The main purpose of this programme is to rehabilitate disabled persons.
D. FORM OF SUBSIDY
Gross wage subsidy to rehabilitation centers.
E. AMOUNT OF SUBSIDY
Actual total expenditure in 1998: ISK 129,5 million.G/SCM/N/48/ISL/Rev.1
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F. RULES AND CONDITIONS
The rehabilitation centers must have operating licence from the Ministry of Social Affairs to
apply to the Ministry for subsidies.  Mainly subsidies for salaries to disabled persons.
G. DURATION
The new programme started in 1992.  Duration has not been specified.
H. LEGAL BASIS
Act No.59/1992, Affairs of the Handicap Act and financed by the Budget item nos.  07.701,
07.702, 07.703, 07.706, 07.707, 07.708 and 07.711.
A. NAME OF PROGRAMME
4.4 Vocation Training in the Fishing Industry
(Budget item 05-190)
B. RESPONSIBLE AUTHORITY
Ministry of Fisheries.
C. POLICY OBJECTIVE
The aim of the programme is to promote the quality awareness and the quality of the working
life within the industry with the aim to create better products and make the workers more pleased.
D. FORM OF SUBSIDY
Subsidy is in the form of grants, based on administration costs of seminars and training
programmes concerning training, quality, working conditions etc.  The aid is paid to consultantcompanies concerned for general administration cost of the programme, such as salaries, travels,
materials etc.
E. A
MOUNT OF SUBSIDY
Actual total expenditure in 1998: ISK 11 million.
F. RULES AND CONDITIONS
The programme is available to all domestic fish processing companies.
G. DURATION
No time limit, the amounts are decided on in the Budget each year.
H. LEGAL BASIS
The Budget item no. 05-190.G/SCM/N/48/ISL/Rev.1
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I. TRADE EFFECTS
It is not possible to measure trade effects.
V. REGIONAL SUPPORT
A. NAME OF PROGRAMME
5.1 Assistance to Development Projects
B. RESPONSIBLE AUTHORITY
Institute of Regional Development.
C. POLICY OBJECTIVE
The objective of the programme is to assist the economic development of the nationally
assisted areas of Iceland.  The assisted projects are very small and cover mostly product development,
marketing, training and feasibility studies.
D. FORM OF SUBSIDY
Grants, up to around 40 per cent of project costs. The institute has legal provisions for other
types of support.
E. AMOUNT OF SUBSIDY
Actual total expenditure in 1998: ISK 88,9 million.
F. RULES AND CONDITIONS
The programme is available to individuals, private companies, local development companies
and municipalities.
G. DURATION
The programme has no time limit, the amount is decided on in the Budget each year.
H. LEGAL BASIS
Act no. 64/1985 on the Institute of Regional Development, the Budget, item no. 01-221.
A. NAME OF PROGRAMME
5.2 Assistance to Local Economic Development
B. RESPONSIBLE AUTHORITY
Institute of Regional Development.G/SCM/N/48/ISL/Rev.1
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C. POLICY OBJECTIVE
The objective of the programme is to assist local economic development companies in
providing counselling for small business in their area.
D. FORM OF SUBSIDY
Grants of up to 50 per cent of specified running costs of counselling operations.
E. AMOUNT OF SUBSIDY
Actual total expenditure in 1998: ISK 64,5 million.
F. RULES AND CONDITIONS
The programme covers special counselling services to tourism in addition to counselling and
general economic development.
G. DURATION
The programme has no time limit, the amounts are decided on in the Budget each year.
H. LEGAL BASIS
Act no. 64/1985 on the Institute of Regional Development, the Budget, item no. 01-221.
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