Iceland WT/TPR/S/273 
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  IV. TRADE POLICIES BY SECTOR 
(1) AGRICULTURE  
(i) Features 
1. Agriculture and forestry represented about 1.2% of GDP in 2011, up from 1% in 2006.  In 
terms of employment, agriculture employed nearly 4,700 people in 2010;  while this represents only 
about 2.9% of employment, it is an increase compar ed to 2008, when it was 4,400.  Such an increase 
is unusual for a developed country and could be the result of the financial crises (Table IV.1).   
Table IV.1 
Overview of agriculture in Iceland, 2006-11 
 2006 2007 2008 2009 2010 2011 
Contribution to GDP (%) 1.0 1.1 1.2 1.2 1.2 1.2 
Number employed ..a ..a 4,400 4,300 4,700 4,800 
 (ISK million) 
Value of production 17,612 18,607 20,335 20,524 21,192 26,623 
of which       
Milk 5,419 5,925 7,457 9,106 9,230 9,618 
Beef and veal 1,228 1,351 1,536 1,605 2,228 1,987 
Sheep meat 2,688 2,820 3,340 3,322 3,613 4,509 
Pigmeat 1,635 1,802 1,972 1,798 1,749 2,188 
Poultry meat 1,717 2,051 2,184 2,244 2,251 2,650 
a Statistics for employment in ag riculture in 2006 and 2007 used a different met hodology and are not comparable with later year s. 
Source : Statistics Iceland.  Viewed  at:  http://www.statice.is/;  and the Icelandic authorities. 
2. Only about 1% of Iceland's land area of 103,022 km2 is suitable for cultivation;  about 25% is 
suitable for grazing, some of which can also be used to grow fodder crops.  In 2009, there were about 3,045 farms, practically a ll family owned and operated.
1  Livestock and livestock products are the 
main farms activities and most crops are grown for animal fodder, although some vegetable 
production takes place both outdoors (potatoes a nd cabbages) and under glass using geothermal 
sources for heating.  Most farms tend to be quite small with only 35 cows on the average dairy farm. 
3. In addition to the harsh climate and lack of suitable land, the scope for increasing productivity 
in Iceland is also limited to some extent by the narrow genetic base:  there is only one dairy breed, one 
sheep breed, and one horse breed.  These breeds have de veloped in isolation from the rest of the world 
and are vulnerable to transmittable diseases, making it  hard to safely introduce new genetic material.2 
4. Agriculture in Iceland is heavily subsidized with most support provided though market price 
support measures, principally through high tariffs that help to maintain high domestic prices relative 
to world prices and, therefore lead to a large tran sfer from consumers to agriculture producers.  The 
total value of support to agricultural producers was about ISK 14 billion in 2010, which is the equivalent of ISK 4.6 million per farm or ISK 2.9 million per person employed in agriculture. 
                                                      
1 Ministry of Fisheries and Agriculture online information.  Viewed at:  
http://eng.sjavarutvegsraduneyti.is/immigrants/icelandic_agriculture/ [July 2012]. 
2 Jóhannesson (2010). WT/TPR/S/273 Trade Policy Review 
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  (ii) Trade 
5. Iceland is a net importer of agriculture products.3  In 2011, exports were worth about 
US$81.5 million and imports about US$208 million.  The main exports are lamb and sheep meat, 
water, live horses, food preparations, and raw fur skins (mostly mink).  However, exports of some 
products vary considerably from one year to anothe r:  the value of sheep meat exports more than 
tripled from 2007 to 2010 and then fell back in 2011, while exports of fur skins fluctuated considerably during 2006-11 (Table IV.2). 
6. Imports of agriculture products were spread over a wide range of pr oducts, with bakers' 
wares, coffee, prepared foods, and chocolate headi ng the list, although the top ten imports make up 
less than half of total imports.  Total imports of agriculture products reflect  the economic situation, 
with strong growth up to 2008, followed by a sharp decline in 2009 (Table IV.3).  
Table IV.2 
Exports of agriculture products, 2006-11 
(US$ million and '000 tonnes) 
HS 02 Description  2006 2007 2008 2009 2010 2011 
0204 Meat of sheep or goats '000 tonnes 1.15  1.08  1.80  2.55  3.44  2.68  
 US$ million 5.01  5.32  9.74  11.37  17.37  17.14  
4301 Raw fur skins '000 tonnes 0.03  0.03  0.03  0.03  0.02  0.02  
 US$ million 8.62  9.63  12.28  7.57  5.29  10.48  
2201 Waters, unsweetened '000 tonnes 6.50  9.84  15.11  8.04  13.17  14.87  
 US$ million 3.51  5.51  8.29  4.58  7.52  8.29  
0101 Live horses, asses, 
mules, and hinnies '000 tonnes 0.44  0.45  0.69  0.50  0.43  0.37  
 US$ million 6.07  7.56  12.21  8.04  7.39  6.70  
4102 Raw skins of sheep or 
lambs '000 tonnes 2.22  0.94  1.04  2.72   2.56  1.67  
 US$ million 2.18  1.03  1.09  1.83  2.92  5.26  
2309 Preparations of kind 
used in animal feeding '000 tonnes 1.79  1.20  3.56  0.35  0.15  5.68  
 US$ million 2.21  2.01  5.01  1.17  0.69  4.67  
2106 Food preparations nes '000 tonnes 0.07  0.03  0.05  0.14  1.32  0.39  
 US$ million 1.02  0.86  1.51  2.23  5.30  3.70  
 Other US$ million 15.65  17.97  20.81  15.07  20.46  25.22  
 Total exports US$ million 44.27  49.90  70.95  51.86  66.95  81.47  
Source:  UN Comtrade. 
                                                      
3 In reviewing Iceland's agriculture trade, all tariff lines for fish and fisheries products were excluded 
because exports of these products are much  greater than exports of agriculture products.  For the purposes of this 
section of the Report, the definition of agriculture product used is that set out in Annex 1 of the Agreement on 
Agriculture, where fish and fish products are taken to include HS headings 020840, 03, 051191, 1504, 1603, 
1604, 1605, and 230120.  Fisheries are addressed in section (2) below.   Iceland WT/TPR/S/273 
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  Table IV.3 
Imports of agriculture products, 2006-11 
(US$ million and '000 tonnes) 
HS 02 Description  2006 2007 2008 2009 2010 2011 
1905 Bakers' wares 
 '000 tonnes 5.73  6.68  6.12  5.30  5.49  5.48  
 US$ million 21.22  27.55  27.35  20.37  20.50  22.71  
0901 Coffee '000 tonnes 2.22  2.37  2.20  2.44  2.29  2.15  
 US$ million 10.27  12.72  13.81  12.16  12.92  16.81  
1904 Prepared foods (cereals) '000 tonnes 2.54  2.63  2.56  2.58  2.48  2.60  
 US$ million 11.57  13.45  14.25  12.85  11.69  13.23  
1001 Wheat and  meslin '000 tonnes 32.98  36.30  34.90  38.13  36.46  36.14  
 US$ million 6.63  11.08  13.56  8.65  9.02  13.12  
1806 Chocolate '000 tonnes 1.91  1.90  1.80  1.55  1.57  1.57  
 US$ million 11.86  12.78  13.33  10.30  10.15  12.02  
1701 Sugar '000 tonnes 10.09  10.89  10.79  10.87  10.98  10.77  
 US$ million 5.50  6.26  7.50  7.77  7.52  10.35  
1901 Malt extract '000 tonnes 2.67  2.67  2.42  2.16  2.26  2.35  
 US$ million 7.87  8.35  8.50  6.62  6.48  7.63  
 Other US$ million 96.97  159.08  172.95  128.91  130.08  149.29  
 Total US$ million 171.90  251.26  271.27  207.62  208.34  245.16  
Source:  UN Comtrade. 
(iii) Agriculture policies 
7. The Ministry of Fisheries and Agriculture is re sponsible for agriculture policy, including trade 
policy.  The Ministry was created in January 20 08 when the separate Ministries of Fisheries and 
Agriculture were merged.4  On the same date, the Icelandic Food and Veterinary Authority 
(Matvælastofnun  - MAST) was established as an inspection and administrative body with 
responsibilities that include:  food safety;  plant a nd livestock quality and hea lth-related matters;  feed, 
seed, and fertilizer services;  administration of organic production;  and monitoring of animal 
welfare.5  In September 2012, the Ministry of Fisheries and Agriculture it is to be merged with the 
Ministry of Industry, Energy and Tourism to form the Ministry of Industries and Innovation (Chapter II(2)).  The Farmers' Association of Icel and represents farmers in discussions on agriculture 
policy and has been contracted by MAST to process direct payments to farmers. 
8. The legal basis for agriculture policy is: 
 Act No. 99/1993 on the Production, Pricing and Sa le of Agricultural Products, which sets out 
the policy framework, the legal basis for prod uction controls, provisions for slaughter and 
processing, pricing and support measures;  and 
 Act No. 70/1998 on Agriculture, which provides the legal basis for development projects, 
extension services, and livestock improvement. 
9. Under these Acts, there are a number of regulations  that apply to different sectors for specific 
periods, including: 
                                                      
4 Ministry of Fisheries and Agriculture online information.  Viewed at:  
http://eng.sjavarutvegsraduneyti.is/minis try/historical-overview/ [July 2012]. 
5 MAST online information.  Viewed at:  http://w ww2.mast.is/index.aspx?GroupId=1258 [July 2012]. WT/TPR/S/273 Trade Policy Review 
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   Regulation No. 4/2011 on horticultural production,  which has applied since 2002 and is to 
expire at the end of 2013; 
 Regulation No. 913/2010 on dairy production, wh ich has applied since 2004 and is to expire 
at the end of 2014;  and 
 Regulation No. 11/2008 on sheep production, which has applied since 2007 and is to expire at 
the end of 2015. 
(a) Trade policies 
10. Iceland has 1,793 tariff lines for agriculture pr oducts, at the eight-digit level (HS 2002).  
Although 1,000 of these lines are duty free, these relate to  products not produced in Iceland, or that do 
not compete directly with production in Iceland.  Fo r other agricultural products, the tariff structure is 
complicated:  most have compound tariffs with an ad valorem  component of 30% and a specific duty 
component that varies from ISK 5/kg to ISK 1,462/kg.  The average ad valorem  equivalent of these 
compound tariffs varies considerably, although it has not been possible to calculate ad valorem  
equivalents.  In addition, there are some tariff lines with simple ad valorem  tariffs (normally of 30% 
or 55%), some simple specific duties,  and some compound tariffs that have ad valorem  components 
not equal to 30%.  The tariff lines with the highest tariffs tend to cover meat and dairy products, and 
some vegetables (see Chapter III(iii)). 
11. Iceland reserved the right to apply the special agricultural safeguard on 645 tariff lines but has 
never used it.6 
12. Iceland notified the WTO Committee on Agriculture that it operates 87 tariff quotas covering 
a wide variety of products, some specified at the fo ur-digit HS level and some at the eight-digit level.  
The quotas are specified as either "minimum acce ss" quotas that relate to market-access opportunities 
created with the implementation of the results of the Uruguay, or "current access" quotas that 
represent market-access opportunities that existed before the results of the Uruguay Round were 
implemented.  The Committee on Agriculture was also notified that tariff quotas for products under 
66 four-digit HS headings were never opened becau se the applied MFN tariff has been less than or 
equal to the bound in-quota tariff. 
13. The levels of in-quota imports vary consider ably from one product to another and from one 
year to another.  For example, the quota for pig me at is 64 tonnes while in-quota imports have varied 
from zero in 2004 to 378 tonnes in 2008.  However, in most cases, average in-quota imports for the 
seven-year period ending 30 June 2010 exceeded the quota quantity and, for 29 tariff quotas, in-quota imports were more than three times the quota quan tity.  In some cases the high level of in-quota 
imports relative to the quota reflects the small si ze of the statutory quota, for example there are quotas 
for 900 kg of mushrooms, 1 tonne of palm oil, and 9.9 tonnes of pasta.
7 
14. Under its Uruguay Round Schedule, Iceland reserve d the right to provide export subsidies for 
1,797 tonnes of sheep meat up to a limit of SDR 9.3 million, and 3.16 million litres of milk up to a limit of SDR 2.6 million.  However, according to  the notifications made to the Committee on 
                                                      
6 WTO documents G/AG/N/ISL/27, 27 July 2009, G/AG/N/ISL/23, 29 July 2003, G/AG/N/ISL/21, 
30 October 2002, G/AG/N/ISL/18, 23 February 2001, G/AG/N/ISL/13, 26 January 1999, G/AG/N/ISL/7, 15 July 1997, and G/AG/N/ISL/3, 17 October 1996. 
7 WTO documents G/AG/N/ISL/30, 13 January 2011, G/AG/N/ISL/29, 30 July 2009, G/AG/N/ISL/25, 
22 November 2005. Iceland WT/TPR/S/273 
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  Agriculture, Iceland did not provide any e xport subsidies between 31 August 1998 and 
31 August 2008.8  However, under Regulation No. 535/2003 on Price Equalization for Exports of 
Goods made from Agricultural Raw Materials, th e Ministry for Fisheries and Agriculture may 
authorize the Customs Office to refund the exporter the difference between the cost of raw materials 
in the international and domestic markets.  In 2011, ISK 2.7 million (about US$23,274) was budgeted 
for the price compensation mechanism.9 
(b) Domestic support 
15. Under Regulation No. 913/2010 on dairy productio n, support is provided through production 
quotas, direct payments, and minimum producer pri ces.  The national production quota is set each 
year by the Minister of Fisheries and Agriculture  and is divided among producers based on historical 
production.  Production in excess of quotas is perm itted provided all such production is exported.  
Direct payments are based on the number of animal s (headage payments) and the size of a producer's 
quota (support entitlements).  Headage payments are provided for up to 100 cows, with full payment 
for each of the first 40 dairy cows then at a reducing rate for each additional cow.10  The average 
payment per cow in 2011 was ISK 22,000 (see Table IV.4 for total annual bu dgetary allocations.) 
16. A new mechanism for transferring milk pro duction quotas was adopted on 1 December 2011 
under Regulations Nos. 190/2011 and 430/2010.  A single market for quotas was established under the system:  bids to purchase, giving the quantity sought and the maximum price offered must be accompanied by bank guarantees;  and offers for sal e, with the quantity available and the minimum 
price may be submitted to MAST twice a year (by 25 March and 25 October).  A single clearing price 
equivalent to the intersection of the supply-demand cu rve is used;  bids at lower prices and offers at 
higher prices are rejected.   
17. The Agricultural Pricing Committee (made up of th e Farmers' Association, the dairies, trade 
union, and the Ministry) sets minimum prices for m ilk delivered to dairies by producers.  This 
minimum farm gate price applies throughout Icel and to milk produced within the production quota 
and is adjusted to take account of differences in  quality.  Minimum wholesale prices for several dairy 
products are also set by the Committee. 
18. Dairy producers are required to pay a price transfer levy (to reduce the price of some dairy 
products) and a price equalization levy (to level pr oduction costs among dairies) on delivery of milk 
to dairies.  In 2011, the total collected from these levies amounted to ISK 312 million and 
ISK 93 million respectively.
11 
19. In addition to direct payments and minimum pric es, dairy producers also benefit from indirect 
support for breeding, land cultivation,  and development programmes.  
20. Although suckler cows for some beef breeds ar e eligible for twice th e headage payment of 
dairy cows, the beef sector in Iceland is essentially a by-product of the dairy industry.12   
                                                      
8 WTO documents G/AG/N/ISL/28, 27 July 2009, G/AG/N/ISL/ 22/Rev.1, 26 August 2003, 
G/AG/N/ISL/17, 28 February 2001, G/AG/N/ISL/ 15, 2 September 1999, and G/AG/N/ISL/15/Corr.1, 
8 September 1999. 
9 European Commission (2011), Chapter 11 - Agriculture and Rural Development , p. 5. 
10 European Commission (2011), Chapter 11 - Agriculture and Rural Development , p. 7. 
11 European Commission (2011), Chapter 11 - Agriculture and Rural Development , p. 7. 
12 European Commission (2011), Chapter 11 - Agriculture and Rural Development , p. 7.   WT/TPR/S/273 Trade Policy Review 
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  21. Under Regulation No.11/2008, sheep production is  supported by direct payments that, unlike 
dairy production, are linked to historical rather than current production, along with aid for new entrants.  In addition, direct payments are ma de to producers through the quality payment scheme, 
provided they meet environmental, animal health , and animal welfare requirements.  A production 
control that provided higher farm-gate prices to pr oducers was abolished at the beginning of 2008.  
This programme obliged participating farmers to export whenever domestic production exceeded 
domestic consumption.
13  Consumer subsidies are also provided, at the wholesale level for purchasers 
of wool and to processors for marketing and storag e costs of sheep meat.  A levy collected at the 
wholesale level for marketing sheep meat amounted to ISK 13 million in 201014 (see Table IV.3 for 
total annual budgetary allocations). 
22. Under Regulation No. 4/2011, production of toma toes, cucumbers and sweet peppers is also 
supported by direct payments linked to producti on as well as through electricity subsidies and 
marketing and research programmes (see Table IV .3 for total annual budgetary allocations). 
(c) Support levels 
23. The most recent notification from Icela nd on domestic support to the WTO Committee on 
Agriculture was for the calendar years 2001, 2002, and 2003.15  However, supporting data for 
Iceland's application to accede to the EU provides information on budgetary support for agriculture in 
recent years (Table IV.3) and the OECD's annua l monitoring and evaluation report and supporting 
database covers the period 1986 to 2010 (Table IV.4 ).  While these sources are not in the same format 
as notifications to the WTO they do provide inform ation on the levels and trends in support.  
24. The OECD's main indicator of support to agri culture, the Producer Support Estimate (PSE), is 
"the annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, 
measured at the farm gate level, arising from po licy measures that support agriculture, regardless of 
their nature, objectives or impacts on farm producti on or income."  The Producer Single Commodity 
Transfer (producer SCT) is "the annual moneta ry value of gross transfers from consumers and 
taxpayers to agricultural producers, measured at the farm gate level, arisi ng from policy measures 
directly linked to the production of a single comm odity such that the producer must produce the 
designated commodity in order to receive the transfer."16 
Table IV.4 
Spending on support measures to  farmers in Iceland, 2008-11 
(ISK million) 
 2008 2009 2010 2011 
Dairy     
 Direct payments     
  Support entitlements 4, 366 4,589 4,681 4,915 
  Headage payments 538 542 553 581 
 Breeding and development work 127 136 139 146 
 Payments not linked to prices or production 141 61 161 169 
 Contributions to farmers' pension fund 198 209 115 0 
Table IV.4 (cont'd) 
                                                      
13 OECD (2009), p. 153. 
14 European Commission (2011), Chapter 11 - Agriculture and Rural Development , p. 8.  
15 WTO document G/AG/N/ISL/26, 16 December 2005. 
16 OECD (2010). Iceland WT/TPR/S/273 
 Page 61 
 
 
   2008 2009 2010 2011 
Sheep     
 Direct payments     
  Support entitlements 1, 901 2,080 2,122 2,228 
  Quality payment scheme  1,039 1,088 1,110 1,165 
  Special regional support 49 52 53 56 
 Wool utilization 348 364 371 390 
 Marketing and storage 363 340 347 364 
 Support to new entrants and development 95 97 99 104 
Horticulture     
 Direct payments 246 247 228 239 
 Electricity subsidies 179 153 203 213 
 Programmes for marketing, research, education 28 31 29 31 
Other     
 Development projects 90 90 52 .. 
 Extension services 351 381 359 302 
 Livestock breeding 100 107 110 86 
 Development projects 90 91 52 12 
 Agriculture Productivity Fund 160 159 148 15 
 Marketing projects 25 25 19 0 
.. Not available. 
Source:  Ministry of Foreign Affairs (2011), Iceland's application for membership  of the EU:  State Aid.  Viewed at: 
 http://esb.utn.is/media/ESB/samnings kaflar/11/State-Aid.PDF [January 2012]. 
25. According to the OECD, the PSE for Iceland dec lined in absolute terms from ISK 16.4 billion 
in 2006 to ISK 14.6 billion in 2010 and in relative terms from nearly 80% of total farm receipts in 1987 to 45% IN 2010.  However, although there has b een some reform of policy over the past few 
years, the main reason for the dec line is the rise in international prices and the corresponding decline 
in consumer transfers that result from higher dom estic prices relative to border prices.  Support 
remains very high by OECD standards where the PSE is 18% for the OECD as a whole. 
Table IV.5 
Total producer support estimate and single commodit y transfer values for selected commodities, 2004-10 
(ISK million) 
2004 2005 2006 2007 2008 2009 2010
Total agriculture    
Value of productiona ISK million 13,566 16,424 17,642 18,464 20,698 22,460 22,637
Producer Support Estimateb ISK million 13,628 15,965 16,390 14,721 15,606 15,428 14,609
 % of gross farm receipts 65.8 66.8 64.7 55. 3 51.6 48.0 44.8
Milk    
Value of production ISK million 5, 120 5,020 5,419 5,941 7, 245 8,891 8,663
Single Commodity Transferb ISK million 6,888 7,182 7,191 5,620 7,265 8,010 7,187
 % of gross farm receipts 75.4 78.2 74.2 53.2 59.2 56.9 51.2
Beef and veal         
Value of production ISK million 943 1,113 1,170 1,314 1, 514 1,677 1,879
Table IV.5 (cont'd)WT/TPR/S/273 Trade Policy Review 
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  2004 2005 2006 2007 2008 2009 2010
Single Commodity Transferb ISK million 384 569 622 618 264 108 107
 % of gross farm receipts 40.7 51.1 48.5 43.1 16.1 6.0 5.3
Sheep meat         
Value of production ISK million 1, 898 2,290 2,688 2,820 3, 340 3,322 3,497
Single Commodity Transferb ISK million 2,180 2,287 2,608 2,936 3,168 3,249 3,353
 % of gross farm receipts 52.9 49.4 50.9 55.1 48.1 48.8 48.4
Wool    
Value of production ISK million 296 251 355 157 92 92 92
Single Commodity Transferb ISK million 134 129 243 95 -2 -2 -2
 % of gross farm receipts 45.3 51.5 68.4 60.7 -2.4 -2.5 -2.4
Pig meat         
Value of production ISK million 1, 164 1,307 1,635 1,802 1, 972 1,766 1,774
Single Commodity Transferb ISK million 569 755 923 1,030 741 236 360
 % of gross farm receipts 48.8 57.8 56.4 57.1 37.6 13.4 20.3
Poultry meat          
Value of production ISK million 1, 235 1,630 1,716 2,051 2, 184 2,244 2,189
Single Commodity Transferb ISK million 1,107 1,522 1,446 1,683 1,568 1,538 1,496
 % of gross farm receipts 84.0 86.2 84.3 82.1 71.8 68.5 68.3
Eggs         
Value of production ISK million 600 696 752 742 742 752 752
Single Commodity Transferb ISK million 449 555 570 530 425 300 319
 % of gross farm receipts 74.8 79.7 75.8 71.4 57.3 39.9 42.5
a Value of production figures are from the OECD database a nd differ to those in Table IV.1, which were provided by the 
authorities. 
b Gross farm receipts include the receipts from subsidies paid to  producers as well as from sale s and, therefore, may be greate r than 
the value of production.  
Source : OECD statistical database s.  Viewed at:  http://www.oecd.org/c hile/producerandconsum ersupportestimates 
 database.htm [July 2012]. 
26. Despite the high level of support provided, agricultu re continues to decline relative to the rest 
of the economy, the number of farmers continues to fall, productivity is low by international 
standards, and imports are rising compared with domestic production.  Furthe rmore, policy continues 
to depend on market price support which, in most cases, is provided through high tariffs, resulting in 
large transfers from consumer to farmers.  Alt hough this has the advantage of not requiring any 
budgetary outlay from the Government, it is, according to the OECD, one of the least efficient and 
economically most expensive ways of supporting agriculture.17  However, the authorities stated that 
this does not take into account all the factors underl ying agriculture policy in Iceland, such as food 
security, sustainable developmen t, and rural development. 
                                                      
17 OECD (2002).  Iceland WT/TPR/S/273 
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  (2) FISHERIES  
(i) Features 
27. Fisheries remains a very important part of Iceland's economy, representing 40% of 
merchandise exports in 2011 (down from 75% in th e 1990s), and contributing about 9.7% to GDP 
(down from 14% in the 1990s).  Iceland has a larg e trade surplus in fisheries with exports of 
US$2,229 million in 2011 compared with imports of US$136 million.  Increasing capital investment and declining catches along with a more diversifie d economy have caused fisheries' share of total 
employment to fall steadily in recent years;  employment fell from 5.7% in fisheries and 6.1% in fish processing in 1990 to 3% in fisheries and 2.2% in fish processing in 2010. 
28. In 2010, Iceland had 1,625 fishing vessels w ith 152,401 gross tonnage (GT) plus 4 whaling 
vessels.  The gross tonnage of the fleet has been declining since peaking at 191,222 GT in 2004.  In 
recent years there has been an increase in the numbe r of small vessels (undecked and decked vessels 
of 10 GT or less) while the number of larger  vessels has continued to decline (Chart IV.1).
18 Although 
the smaller vessels outnumber the larger ones, the latter represent by far the greatest share of catch 
and capacity (Chart IV.2).   
05001,0001,5002,000
2002 2003 2004 2005 2006 2007 2008 2009 2010(Gross tonnes)Chart IV.1           
Icelandic fishing fleet by size category, 2002-10
Source: Statistics Iceland online database. Viewed at: http://www.statice.is/pages/ 916 [July 2012].Trawlers of more than 1,001 GT
Decked vessels 100-1,000 GT
UndeckedTrawlers 0-1,000 GT
Decked vessels 10-100 GTDecked vessels of more than 1,001 GT
Decked vessels 0-10 GT
 
29. Although the total catch volume has been falli ng for some time, the value of catch has 
increased considerably since 2005 as unit prices have in creased, even after inflation is taken into 
account (Chart IV.3).  
 
                                                      
18 Statistics Iceland online database.  Viewed a t:  http://www.statice.is/pages/916 [July 2012]. WT/TPR/S/273 Trade Policy Review 
Page 64 
  
  0500,0001,000,0001,500,0002,000,0002,500,000
2003 2004 2005 2006 2007 2008 2009 2010(Tonnes)Chart IV.2           
Total catch by vessel size category, 2003-10
Source: Statistics Iceland online database. Viewed at: http://www.statice.is/pages/ 916 [July 2012].Trawlers of more than 1,001 GT
Decked vessels 101-1,000 GT
UndeckedTrawlers 0-1,000 GT
Decked vessels 11-100 GTDecked vessels of more than 1,001 GT
Decked vessels 0-10 GT
 
010,00020,00030,00040,00050,00060,00070,00080,00090,000100,000
05001,0001,5002,0002,5003,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010000 tonnes
ISK million (constant 2000)Chart IV.3
Total Fisheries Catch, 2000-10
(Tonnes and constant 2000 ISK million)
Source: Statistics Iceland online database. Viewed at: http://www.statice.is/pages/916 [July 2012].(left-hand axis)
(right-hand axis)
 
 Iceland WT/TPR/S/273 
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  30. In terms of both value and quantity, cod is Iceland's most important catch as it made up over 
one third of the total catch value in 2010.  Othe r demersal species include haddock, redfish, and 
saithe.  Herring, blue whiting, mackerel and capelin  are the most important pelagic species.  Catches 
of different species vary from one year to anothe r depending on stocks.  For example, the catch of 
capelin was over 1 million tonnes in 2002 and 102, 000 tonnes in 2009 as a result of declining stocks 
(Table IV.6).  Most of the catch is taken in Icel and's fishing grounds but distant grounds are important 
for some species, particularly herring and blue whiting. 
Table IV.6 
Total catch and catch of main fish species, 2002-2010 
(ISK million and '000 tonnes) 
  2002 2003 2004 2005 2006 2007 2008 2009 2010 
Total catch ISK million 68,935  58,931 57, 689 55,399 58,189 58,378 64,158  66,444  72,908 
 '000 tonnes 2,133  1,980 1,728 1,669 1,323 1,396 1,283  1,130  1,063 
Cod ISK million 25,629  22,820 23,746 20, 329 21,078 21,521 20,858  21,320  24,439 
 '000 tonnes 213  206 227 212 199 174 151  189  179 
Haddock ISK million 6,363  5,136 6,501 7,244 8,723 10, 575 9,786  8,892  8,352 
 '000 tonnes 50  60 85 97 97 109 102  82  65 
Redfish ISK million 5,293  4,122 3, 156 4,459 4,995 4,226 5, 963  5,784  6,587 
 '000 tonnes 66  63 48 62 58 55 70  58  56 
Saithe ISK million 2,243  2,180 2,357 2,517 3,579 3,101 4, 194  4,514  4,649 
 '000 tonnes 42 52 63 68 75 64 70 61 54 
Greenland halibut ISK million 3,448  3, 559 3,308 2,476 2,295 1,543 2,671  4,127  3,663 
 '000 tonnes 19  20 15 13 12 10 12  16  13 
Norwegian spring- 
spawning herring ISK million 2,282  1,674 1,855 4,210 3,019 2,602 4,874  5,273  4,375 
 '000 tonnes 127  118 103 162 160 176 200  229  188 
Blue whiting ISK million 2,094  3,015 2,393 1,215 2,739 2,198 1,759  1,564  1,790 
 '000 tonnes 286  502 422 266 315 235 164  120  87 
Herring ISK million 1,581  1,538 2, 007 1,622 1,830 1,544 2, 969  2,104  1,600 
 '000 tonnes 97  132 122 103 132 144 171  102  67 
Capelin ISK million 7,681  4,272 3, 423 4,103 1,666 3,090 1,194  238  1,446 
 '000 tonnes 1,079  676 516 595 178 294 138  14  102 
Source Statistics Iceland.  View ed at:  http://www.statice.is /pages/916 [January 2012]. 
31. Compared with the catch industry, aquaculture is  small, with total production of about 5,100 
tonnes in 2008.  Cod and arctic char are the main species.19 
32. Fish processing remains important to Iceland's economy although employment in the sector 
has declined.  An increasing proportion of the catch  is being exported fresh or frozen on board and 
less is being reduced into oil and meal production.  In 2000, a major part of the pelagic catch was 
reduced to oil and fat and less than one fifth was frozen, in 2010 less than one third was reduced and 
over half was frozen (Chart IV.4). 
                                                      
19 FAO (2010).  WT/TPR/S/273 Trade Policy Review 
Page 66 
  
  33. Based on UN Comtrade data, Iceland's trade in fi sh products has fluctuated in recent years:  it 
increased steadily in value to over US$2 billion in  2007, fell to US$1.7 billion in 2009, and increased 
to US$2.2 billion in 2011.20  Imports of fish and fish products amounted to US$136 million in 2010, 
after falling to US$78 million in 2009.  However,  under the HS, SITC or BEC product classification 
systems available from UN Comtrade, data on trade in  fish products by species can be misleading, as 
some categories, such as HS 030420 (fish fillets, frozen) includes fillets from different species.  
Therefore, data from Statistics Iceland using the natio nal classification system have been used in this 
section of the review. 
0500,0001,000,0001,500,0002,000,0002,500,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Chart IV.4
Fish processing, 2000-10
Source :Statistics Iceland online database.  Viewed at:  http://www.statice.is/pages916 [July 2012].(Tonnes )
Other (including domestic consumption) Reduced Salted Fresh Frozen
 
34. For many years, Iceland's main fish export has been cod, (Table IV.7 ) although its importance 
relative to the total value of fish exports declined  from nearly 40% in 2005 to just over 30% in 2011.  
Over the past few years the expor ts of mackerel have increased from nothing to over US$200 million 
while exports of other species have fluctuated  depending on catch (which depends on the Total 
Allowable Catch (see below) and prices.  Alt hough the quantity exported has remained fairly 
constant, at about 650,000 tonnes si nce 2005, the value of exports has increased alongside fish prices.  
Furthermore, the structure of exports has change d with an increasing proportion of frozen fish and 
fish fillets and a declining portion as meal and oil (Chart IV.4). 
35. Iceland's main export markets for fish products  are other EEA countries, which take nearly 
three quarters of total exports of marine prod ucts;  the United Kingdom and Spain are the main 
destinations.  Outside the EEA, Russi a and Japan are the main markets. 
                                                      
20 For the purposes of this Review, fish products are defined as HS headings 020840, 03, 051191, 1504, 
1603, 1604, 1605, and 230120. Iceland WT/TPR/S/273 
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  36. Frozen shrimps accounted for over half of Iceland' s imports of fish and fish products in 2011, 
most of which is imported for processing and re-export.   The applied tariff on imports of all fish and 
fisheries products is zero, except for imports of m eat of whales and other cetaceans, which are subject 
to an applied tariff of 30% plus ISK 363/kg. 
Table IV.7 
Exports of fish products, 2005-11 
(US$ million and '000 tonnes) 
Description  2005 2006 2007 2008 2009 2010 2011 
Cod '000 tonnes 114 109 101 88 109 96 95 
US$ million 668 688 776  717 611 583 665 
Mackerel '000 tonnes 0 0 0 4 13 54 110 
US$ million 0 0 0 7 20 68 208 
Herring '000 tonnes 99 133 140 184 209 160 130 
US$ million 115 141 144  226 208 167 208 
Redfish '000 tonnes 44 45 44 47 45 42 38 
US$ million 126 144 128  141 129 133 167 
Capelin '000 tonnes 177 104 104 76 18 57 100 
US$ million 148 91 155  124 24 100 158 
Haddock '000 tonnes 44 42 48 53 42 31 23 
US$ million 187 192 259  239 164 154 139 
Saithe '000 tonnes 30 33 30 30 30 27 24 
US$ million 74 94 95  107 98 101 108 
Shrimp '000 tonnes 23 20 16 18 13 15 12 
US$ million 126 107 100  110 79 91 98 
Greenland halibut '000 tonnes 9 9 8 9 12 10 10 
US$ million 49 45 39  47 66 58 69 
Other demersal '000 tonnes 14 14 15 13 19 18 24 
US$ million 38 50 52  48 33 36 56 
Catfish '000 tonnes 7 7 8 8 8 7 6 
US$ million 25 28 30  45 42 40 43 
Lobster '000 tonnes 1 1 1 1 1 2 2 
US$ million 20 17 21  24 22 28 27 
Other US$ million 177 187  198 227 192  214 222 
Total US$ million 1,754 1,785 1,997 2,064 1,688 1,773 2,169 
Source:  Statistics Iceland  online database.  Viewed at:  http ://www.statice.is/pag es/916 [July 2012]. 
(ii) Policies 
37. The Ministry of Fisheries and Agriculture is r esponsible for fisheries policies, laws and their 
implementation.  (In September 2012, the Ministry of Fisheries and Agriculture it is to be merged 
with the Ministry of Industry, Energy and Tourism to form the Ministry of Industries and Innovation 
(see Chapter II(2)(i)).)  The main legislation rema ins the Fisheries Management Act of 1990, which 
established the legal basis for the annual establishm ent of a Total Allowable Catch (TAC) for each 
species and its allocation among holders of vessel quot as.  In August 2006, the Fisheries Management 
Act was consolidated to include all amendments up to that date and re-issued as Act No. 116/2006.21   
                                                      
21 The Fisheries Management Act No. 116 of 10 August 2006 (in English).  Viewed at:  
http://www.fisheries.is/management/fisheries-manag ement/the-fisheries-management-act/ [July 2012]. WT/TPR/S/273 Trade Policy Review 
Page 68 
  
  38. The Directorate of Fisheries, under the Ministry  of Fisheries and Agriculture, is responsible 
for implementing government policy, monitoring fishing activities and collecting data, and imposing 
penalties for illegal catches.  The Fisheries Associ ation of Iceland represents the fisheries and 
processing industries in policy discussions with the Mi nistry.  In 2007, along with the Ministry, the 
Marine Research Institute (MRI), and the Dire ctorate of Fisheries, it issued a Statement on 
Responsible Fisheries in Iceland that emphasized the importance of catch limits based on scientific 
grounds, the enforcement of these limits, and the importance of research.22 
39. TACs are established by the Ministry of Fish eries and Agriculture based on MRI assessments 
of the state of fish stocks, which are evaluate d by the relevant working groups and advisory 
committees of the International Council for the Expl oration of the Sea (ICES).  Under a Government 
decision, since 2005, the TAC for cod is based on a harvest control rule, with the target harvest 
equivalent to 25% of the estimated biomass;  the rule was revised to 20% with effect from fishing 
year 2007/08. 
40. Some fish stocks are managed by internati onal and/or bilateral agreements, under which 
Iceland receives a quota allocation:   
 the Northeast Atlantic Fisheries Commission (NEA FC) administers stocks in the international 
area in the Northeast Atlantic, and the catch by  Icelandic vessels is limited for blue whiting, 
Atlantic mackerel, Norwegian spring-sp awning herring, and oceanic redfish; 
 Icelandic ships are permitted to fish for cod within the EEZs of Norway and Russia in the 
Barents Sea, subject to a TAC; 
 the International Commission for the Conserva tion of Atlantic Tuna (ICCAT) allocates a 
fishing quota to Iceland for blue fin tuna for the East Atlantic and Mediterranean; and 
 the Northwest Atlantic Fisheries Organization ( NAFO) administers stocks in the international 
area of the Northwest Atlantic, and the catch by Icelandic vessels is limited for northern 
shrimp.23 
41. The TAC for each species that is subject to quota limits (both the TACs set by the Ministry of 
Agriculture and Fisheries for fisheries within  Iceland's EEZ, and those represented by quota 
allocations under the international and/or bilateral agreements) is divided among fishing vessels, each 
of which receives an individual transferrable quota (IT Q) based on its historical share of the catch.  
ITQs are "fairly freely transferable" but upper limit s are set for quota shares for the major fishable 
stocks that can be held by any single company or  group of companies linked by common ownership.  
Conversely, a vessel will lose its ITQ if it catches l ess than 50% of its total quota for two consecutive 
years.  A separate quota system is applie d to boats of less than 15 gross tonnes. 
42. In addition to the TAC and ITQ system, the Mini stry of Fisheries and Agriculture, the MRI, 
and the Directorate of Fisheries operate a numbe r of supporting measures including:  permanent 
closure of nursery areas;  closure of spawning areas for cod during the spawning period;  temporary closure of areas with excess juveniles;  a 12-mile exclusion limit for large trawlers;  and mesh-size limits and other equipment-related measures to reduce by-catch and catch of juveniles. 
                                                      
22 Ministry of Fisheries and Agriculture (2007).  
23 For the total allowable catches for all stocks subject to such limits (in English), see Ministry of 
Fisheries and Agriculture online information (in English).  Viewed at:  http://www.fisheries.is/ 
management/total-allowable-catch/ [July 2012]. Iceland WT/TPR/S/273 
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  43. Fishing companies have to pay a fishing fee b ased on the total value of catch landed in each 
year less allowances for salaries (fixed at 39.8% of the value of the catch), oil, and other running costs 
(index linked to the average cost in 2000).  The fee was 6% in 2004 and gradually increased to 9.5% 
in 2009.24  
44. Foreign ownership of fishing operations and primary fish processing (defined as salting, 
freezing, drying, and other processing to protect from decay, and the production of fish-oil or fish meal) is limited to no more than 25% direct and 49%  combined direct and indirect ownership.  In 
certain circumstances, direct foreign ownership of up to 33% may be permitted.
25 
45. Government support to the fisheries sector incl udes:  the Fisheries Project Fund created in 
200326 (this includes the assets of the Fisheries Deve lopment Fund, disbanded in October 2005);  the 
Research Fund to Increase the Value of Sea Produce;   grants to enhance scientific knowledge in 
marine aquaculture27;  and state aid to domestic fish-processing companies to support vocational 
training in the fishing industry.  According to one report, "Icelandic subsidies have been substantially 
lower than those of the other countries" and "[t]he Icelandic fisheries, although encouraged by Government policy, have largely had to stand financially on their own."
28   
46. Another report put the total value of governme nt financial transfers to marine capture 
fisheries in Iceland at US$47 million in 2007, of which US$13 million was classed as cost-reducing transfers and the rest was for general services (research and management/enforcement less fees).  The total value of government transfers in 2008 was the equivalent of 4% of the total landed value, 
compared with 20% of the total landed value for the OECD as a whole US$23,199 million.
29 
(3) ENERGY  
47. Iceland is unique in terms of its geography and its natural terrain, which, in-turn, gives it an 
unusual energy profile.  Approximately 85.4% of the primary energy supply comes from renewable 
sources (hydropower and geothermal), while the remainder comprises imported fossil fuels (refined 
oil) (Chart IV.5).  The fossil fuels are used  almost entirely for transport and fisheries. 
48. Three quarters of the electricity generated is u sed for the aluminium industry; other industries 
use a further 10%, while residential consumption is only 5%.  Hydro-power is responsible for 74% of 
electricity generation and the remainder is produ ced from geothermal sources.  Direct geothermal 
energy is also responsible for most of the space heating in Iceland. 
49. The electricity sector is dominated by companies owned by the State or by local governments.  
The National Power Company (Landsvirkjun), which is  owned by the State of Iceland, accounted for 
about 76% of the electricity generated in 2011.  The National Power Company is also the main 
stakeholder in IceGrid (Landsnet), which operates the transmission grid and is responsible for the 
delivery of electricity to the entire country through various state and regional distributers.  
 
                                                      
24 FAO (2010);  and Ministry of Fisheries and Agriculture online information.  Viewed at:  
http://www.fisheries.is/management [July 2012]. 
25 Central Bank of Iceland (2010), Box 3.1. 
26 Act No. 146/2003. 
27 WTO document G/SCM/N/123/ISL, 16 November 2005. 
28 Schrank (2003).  
29 OECD (2012b). WT/TPR/S/273 Trade Policy Review 
Page 70 
  
  Chart IV.5
Primary energy sources
Source: Iceland National Energy Authority online information.  Viewed at: http://www.nea.is.Hydro
19.1%Geothermal
66.3%Coal
1.7%Oil
13%
 
50. Iceland's energy market is open, and forei gn companies already operate in the market.  
Iceland has implemented the first and second electricity directives of the EU30, and the generation and 
distribution segments of the market are open to competition from companies in the EEA.31  Under the 
provisions of Electricity Act No. 65/2003, third-party access was allowed for transmission and distribution networks.  Power companies determine the price of electricity that they sell, while 
transmission and distribution fees are set by the in dustry regulator (National Energy Authority).
32  
Iceland also operates a policy of equalization of en ergy prices.  Under this policy, homes that are 
heated by oil and electricity (where no other mean s of heating are available) are subsidized by the 
State.  These subsidies amounted to ISK 1.1 billion in 2010.  
51. The legislation covering the energy sector in I celand is set out in Act No. 57/1998 on Survey 
and Utilization of Ground Resources, and Act No. 65/2003 on Electricity.  Both Acts are administered 
by the National Energy Authority.  Under these laws, investment and/or ownership of energy 
exploitation rights and the production and distri bution of energy are limited to EEA and EFTA 
residents.  Act No. 57/1998 stipulates that resources within the ground belong to the owner of the land.  However, a licence from the National Energy Au thority is required to survey or prospect on the 
land
33;  additionally a compensation agreem ent with the landowner is required. 
52. As per the provisions of the Electricity Act,  licences for the construction and operation of 
electric power plants are granted by the Mini ster of Industry, Energy and Tourism (from 
September 2012, the Ministry of Industries and Innovation).  The Act also stipulates that only one 
                                                      
30 Information provided by the authorities. 
31 One of the three largest electricity producers is majority owned by Magma Energy of Sweden 
(information provided by the authorities).  
32 Electricity prices in Iceland have declined in r eal terms since 2007 and ar e significantly lower than 
those in other Scandinavian countries. 
33 As of August 2008, the National Energy Authority may grant licences on behalf of the Minister of 
Industry, Energy and Tourism.  Iceland WT/TPR/S/273 
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  company may provide electricity transmission services in the country (IceGrid) and this company also 
has the exclusive right to construct new transmissi on infrastructure.  However, the National Energy 
Authority sets an upper limit on IceGrid's income, and IceGrid's profits are bound by an upper limit under the Act.  These measures indirectly control the tariff that IceGrid may charge.   
53. Under the provisions of the Electricity Act, transmission and distribution need to be separated 
from production and sales.  Furthermore, the Act allows consumers to choose their supplier.  
54. The authorities stated that, as part of its acce ssion process to the EU, Iceland had accepted the 
acquis  regarding energy and did not expect any difficulties in implementing it by accession.  
Furthermore, the authorities are in the process of pr eparing a comprehensive energy strategy for 2020 
that is to be released in 2012.  The salient features of the strategy are: 
 replacing fossil fuels with renewable energy; 
 following an environmentally protective and pr ecautionary approach in hydroelectric and 
geothermal energy production; 
 to support diversified industry with an emphasi s on ecologically beneficial high-tech industry; 
 sustainable utilization of all energy sources;  and 
 encouraging better energy utilization. 
(4) S
ERVICES  
(i) Financial sector 
(a) Banking 
Crisis and restructuring 
55. Iceland was one of the countries worst affected by the 2008 financial crisis;  nearly the entire 
banking system collapsed.  The Government had to intervene through emergency measures, which 
included, inter alia , capital controls and the establishment of three new commercial banks by the 
State, which took over the domestic operations of the three largest commercial banks, to prevent a 
complete meltdown of the system. 
56. Following its liberalization in 2003, the ba nking sector in Iceland, which comprises 
commercial banks and savings banks, pursued an aggressive growth strategy;  consequently, it grew 
exponentially, with assets rising from less than twice the level of GDP to a peak of nearly 11 times 
GDP in 2008.34  The growth was initially funded not thr ough deposit mobilization but much higher 
risk borrowing in international capital markets.  The se funds were used by the banks to make loans to, 
inter alia :  the banks owners and related parties, who in  turn invested in foreign firms and overseas 
real estate.35 
57. Credit rating agencies assigned high ratings to  the largest commercial banks in Iceland, 
enabling the banks to access global bond markets.  Th e banks relied to a large extent on short-term 
                                                      
34 OECD (2011);  and Ministry of Economic Affairs (2012). 
35 OECD (2011). WT/TPR/S/273 Trade Policy Review 
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  market funding, which created a significant refinanc ing need for the banks.  While global interest 
rates were low and international asset prices were rising, this was a profitable strategy and banks' 
returns on assets rose from 1.3% in 2003 to 2.6% in 2008.36  In 2008, nearly 60% of the banks' 
lending was to non-residents and 66% of deposits  were denominated in a foreign currency.37  
Furthermore, the aggressive pursuit of growth also raised questions about loan quality, as these were 
perceived to be made to the banks ' owners and related parties, through holding companies.  Indeed, in 
2008, loans to holding companies accounted for appr oximately one third of banks' loans to Icelandic 
firms.  
58. Rising interest rates in some countries and fa lling asset prices, along with an increase in non-
performing loans changed the risk perception of th e lenders to Iceland's banks.  As a result credit 
default swap (CDS)38 rates on Icelandic banks' debt increased many fold, which for all practical 
purposes meant that Icelandic banks were shut out of international bond markets.39  In order to meet 
their refinancing needs, the banks started to m obilize deposits, particularly in overseas markets, 
through online accounts by offering relatively high returns (over 6%, which were among the highest 
offered by online banks). 
59. However, the inflow of reta il deposits was not enough to cove r the outflows and the banks 
had to borrow from the Central Bank of Iceland and the European Central Bank, using claims on other 
Icelandic banks and fisheries companies as collateral.  
60. The collapse of Lehman Brothers in the Unite d States compounded the already acute liquidity 
position of Icelandic banks, with interbank markets c easing to function.  As a consequence Glitnir (an 
Icelandic Bank), which was to finance the repa yment of a maturing bond through the sale of a 
subsidiary, was facing default.  This had a ripple effect:  the value of Glitnir shares plummeted, 
exposing Landsbanki (Icelandic Bank) to large lo sses and failure as it had accepted large amounts of 
Glitnir shares as collateral for loans extended to th e owners of Glitnir Bank.  Credit rating agencies 
downgraded both Icelandic banks and the Republic of Iceland, resulting in increased margin calls and 
a run on the banks by depositors.  Furthermore, due to the large size of the banking system relative to 
the economy of Iceland, the authorities were una ble to issue blanket or even higher deposit 
guarantees.   
61. To prevent a complete collapse of the banking system, the Parliament of Iceland passed an 
"Emergency Act" on 6 October 2008 (Act No. 125/2008) under which: 
 the Minister of Finance on behalf of the Treasu ry may provide capital to an existing financial 
institution and/or takeover completely or partly an existing financial institution; 
 the Minister of Finance on behalf of the Treasury  is also authorized to inject capital into a 
savings bank.  Such a capital injection s hould not exceed 20% of the savings bank's own 
funds.  The implication being that the Treasury  is allowed by law to strengthen the capital 
ratio of savings banks; 
                                                      
36 IMF Country Reports , 12/89, 12/90, 12/91, 08/367, 08/368 and 09/306.  Viewed at:  
http://www.imf.org/ext ernal/country/ISL. 
37 Central Bank of Iceland (2009). 
38 A credit default swap (CDS) is a financial swap  agreement whereby the seller of the CDS will 
compensate the buyer in the event of a loan default.  The buyer of the CDS makes a series of payments (the 
CDS "fee" or "spread") to the seller and, in exchange, r eceives a payoff if the loan defaults.  Credit default swap 
pricing is used as a gauge of the riskiness of corporate and sovereign borrowers. 
39 For example CDS rates rose by over 800 basis points in 2008. Iceland WT/TPR/S/273 
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   the Financial Supervisory Authority (FME) ma y call a meeting of the shareholders or 
guarantee capital owners.  The FME is to preside over such meetings and has the right to take 
the floor and present proposals, which may in clude limiting the decision-making powers of 
the board of directors, dismissing the board of directors, taking over the assets, rights, and obligations of the financial entity, and selling or merging the financial entity.  Where the FME 
dismisses the board of directors, the FME may appoint a five-mem ber board, which would 
enjoy the same powers as the previous board; 
 the FME may restrict or prohibit the sale of a financial entity's capital and assets.  In such 
circumstances, the FME is permitted to take cu stody of the assets, and have them evaluated 
and sold as necessary for the payment of accrue d claims.  The FME is also authorized to 
nullify asset sales that took place up to one month before special action was taken;  and 
 depositor protection is enhanced.  Previously de posits in financial undertakings had the same 
priority as other unsecured claims for repa yment purposes during bankruptcy proceedings.  
Deposits now enjoy a higher priority as they are part  of an eight item list of claims that are to 
take priority during bankruptcy proceedings. 
62. The Government also announced a guarantee of domestic deposits to forestall a run on banks 
and to ensure that the intermediation function of  the banking system continued.  The guarantee was 
not a part of the legislation but only an announcement from relevant ministers. 
63. Under the powers conferred on it by the Emerge ncy Act, the FME took over the operations of 
three commercial banks (Landsbanki, Glitnir, and Kaupthing), which were placed in a moratorium 
under the control of the Resolutions Committee.  The domestic assets of these banks were discounted 
by 60% and transferred to the new banks that had been created by the Government (Table IV.8).  
Creditors of the taken-over banks were to be compensated up to the va lue of assets in excess of 
liabilities transferred to the new banks.   
Table IV.8 
Iceland new banks 
 Total equity State equity State holding Subordinated loans 
from the State Total state 
financing 
 ISK/billion % of total equity ISK/billion 
Landsbankinn 72 9 13 24 33 
Arion 65 3 5 25 28 
Islandsbanki 150 122 81 0 122 
Source : OECD Economic Surveys Iceland, June 2011. 
64. The new banks were capitalized in 2009, after ag reements were reached with the creditors of 
the old banks regarding compensation for the net asset s that had been transferred to the new banks.  
The creditors of Glitnir and Kaupthing accepted majo rity stakes in the newly formed Arionbanki and 
Islandsbanki respectively, while the creditors of  Landbanki accepted a minority equity stake in the 
new bank (Landsbankinn) and a ten-year bond wo rth ISK 260 billion issued by the new bank.40  
Additionally, the Government injected capital in to Landsbankinn so as to capitalize the bank to 
required levels, by virtue of which the Government acquired a majority stake in the bank (Table IV.8).  
The capital adequacy ratio was also revised significa ntly upward to 16% by the FME.  Currently all 
                                                      
40 The value of the bond could rise by ISK 90 billion if a review of the value of assets transferred 
reveals that they are worth more than their transfer value. WT/TPR/S/273 Trade Policy Review 
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  restructured banks are above this ratio (Table IV .9).  The much larger foreign operations of these 
banks went into receivership.  The Government of  Iceland agreed a reimbursement package with the 
United Kingdom and the Netherlands, whereby Icel and would repay 4% and 2% of GDP between 
2017-23 to resolve the dispute with the UK and Du tch creditors respectively.  However, this 
arrangement and a later one were  rejected in two referenda. 
Table IV.9 
Iceland financial sector, 2009-11 
Total assets 
 2009 2010 2011 2011 CAR 
 ISK/billion % of GDP ISK/billion % of GDP ISK/billion % of GDP % 
Commercial banks 2592 173 2804 182 2677 162 24 
Landsbankinn 1061 71 1081 70 1124 68 24 
Arion 757 51 813 53 823 50 22 
Islandsbanki 717 48 683 44 679 41 28 
MP bank 57 4 62 4 51 3 21 
        
Savings banks 143 10 135 9 59 4 13 
Non-banks 308 21 270 18 231 14 29 
Housing Finance Fund 795 53 836 54 859 52 2 
Source : IMF, Country Report 12/89. 
65. The savings banks were also severely affected by the crisis.  In April 2009, the authorities 
took control of five savings banks  and negotiated the restructuring of the others, resulting in the 
Government having a majority stake in six savings banks.  As of June 2011,  all savings banks had 
been restructured and met the required capital adequ acy ratio.  As a result of the restructuring, the 
number of savings banks operating in Iceland has been halved to ten. 
66. The Government also needed to inject funds to recapitalize the Housing Finance Fund, which 
has a 50% share approximately of the housing mo rtgage market in Iceland.  However, the 
restructuring of HFF has still not been completed. 
67. The continued functioning of the banking system  also required the restructuring of private 
sector debt.  In the run-up to the crisis, privat e-sector debt had reached over 450% of GDP (in 2008) 
and, as the crisis took hold, non-performing loans peaked at 45% of total loans.  The restructuring process has encompassed, voluntary out-of court settlements, increasing the coverage of debt 
distressed individuals, reducing the conflict of inte rest between creditors, and reducing asymmetry of 
information between debtors and creditors.  Furthe rmore, in December 2010, the authorities agreed a 
comprehensive set of measures with lenders as well as a restructuri ng offer to SMEs by mid-2011.  As 
a result, loans equivalent to approximately 12% of GDP have been written off for households and 
50% of GDP for corporations.  Consequently, NPLs  have nearly halved to 23% of total loans 
(Chart IV.6).  The Supreme Court ruling in February 2012
41, which deemed foreign currency loans 
illegal, is likely to cause delays in the restructuring process. 
                                                      
41 Islandsbanki online information.  Viewed  at http://www.islandsbanki.is/english/about-
islandsbanki/news/news-item/2012/02/15/Supreme-Court-ruling/. Iceland WT/TPR/S/273 
 Page 75 
 
 
  2008 2009 2010 201105101520253035404550Chart IV.6
Non-performing loans, 2008-2011
Source: IMF, Country Report 12/89 and OECD (2011), Economic Survey , June.(% of book value)
 
68. As a result of the restructuring, the number of banks (commercial and savings) declined from 
22 in 2008 to 14 in 2012, while the total assets of these banks declined from 1,000% of GDP to 
approximately 165% of GDP.  On the other ha nd bank profitability and capital adequacy have 
improved significantly.  Return on assets rose from -0.3% in 2009 to 3% in 2011, while capital 
adequacy ratios nearly doubled, to 24%.42 
69. The authorities took other measures to contain the impact of the crisis on the Icelandic 
economy.  In the immediate aftermath of the cr isis, questions about the banks' credit quality, 
appropriate exchange-rate level, and the oversupply of ISK in the market led to cessation of any 
activity on the foreign exchange market, which in turn impeded economic act ivity and international 
trade.  To get economic activity going again, the Ce ntral Bank issued foreign exchange regulations on 
10 October 2008, which stipulated that foreign exch ange could only be used to finance priority 
imports and not fund capital outflows.  On 15 Oct ober 2008, a temporary system of daily foreign- 
exchange auctions was set up, whereby the exchange  rate was determined by market conditions.  In 
November 2008, an amendment to the foreign exch ange law was enacted, under which movement of 
capital to and from Iceland without a licence fro m the Central Bank was banned, and Icelandic 
residents had to deposit any new foreign currency they  received with an Icelandic bank.  The domestic 
interbank foreign exchange market reopened in December 2008, since then the ISK has stabilized.  
However, capital controls remain in place. 
70. The authorities also negotiated a standby agreem ent with the IMF, which enabled Iceland to 
receive emergency funds to deal with the cris is, as well as access to funds from other sources 
(countries and institutions).  Howeve r, the terms of the agreement re quired Iceland to implement and 
achieve many quantitative criteria. 
                                                      
42 IMF, Country Report 12/89. WT/TPR/S/273 Trade Policy Review 
Page 76 
  
  Cost of restructuring 
71. The steps taken by the authorities to deal w ith the crises left shareholders and unsecured 
creditors  to absorb losses associated with  the failed banks.  For the three failed commercial banks, 
losses amounted to approximately €41 billion, of whic h the creditors are expected to recoup about 
€10 billion.43 
72. In order to recapitalize the new banks, the Govern ment injected funds equivalent to 22% of 
GDP, and in return gained assets and equity stakes resulting in a net outlay of 3.8% of GDP by the 
Government.  The cost of recapitalizi ng HFF was an additional 2.1% of GDP. 
73. Defaults on Central Bank loans to the failed banks, which were collateralized by claims on 
other Icelandic banks (which also failed) resulted in losses equivalent to 13% of GDP.  Furthermore, 
Central Bank loan guarantees amounting to approximately  1.5% of GDP were also called in.  Thus the 
total direct fiscal costs of the crisis amounted to about 20% of GDP.   
74. As part of the conditions of the IMF progra mme, the regulatory framework and supervisory 
practices in Iceland were to be assessed and recommendations made.44  The recommendations 
included:  strengthening the discreti onary powers of the FM E;  establishing a national credit agency at 
the FME;  making provisions on large exposures, connected lending, and related-party loans more 
stringent;  toughening the fit-and-proper requireme nts for owners;  and improving the cooperation 
between the FME and external auditors.45  These recommendations were adopted as a part of the 
amendment to the Act on Financial Undertakings a pproved in June 2010.  Additionally, a bill that 
would have revised the deposit insurance legislation in line with the European legislation went to 
parliament.  However, this bill has since been re vised and a new Act promulgated.  The Act amends 
the scheme to react to changes in the European scheme.  Financial institutions will pay into the fund 
in accordance with amounts deposited (general fee) and a risk indicator fee.  As noted in the travaux 
préparatoires46, the EU has not yet decided upon a final scheme regarding its deposit guarantee.  
Thus, according to the authorities, it is not the right time for Iceland to introduce its own comprehensive scheme, although it is  important to have cohesion.  
(ii) Telecommunications 
(a) Structure 
75. The share of the information and communicati ons sector in GDP declined from 5.5% in 2005 
to 4% in 2010, while total revenue increased  from ISK 29 billion to ISK 43 billion.  Annual 
investment in the sector declined from over ISK 8 b illion in 2008 to a little more than ISK 5 billion in 
2010.  The decline can be attributed to the overall decline in the economy brought about by the 
collapse of the financial system.  On the other ha nd, total telecommunication subscriptions continued 
to rise during the review period, due entirely to grow th of mobile subscriptions (Chart IV.7).  The 
telecommunications penetration rate rose fro m about 144% in 2006 to 163% in 2010. 
                                                      
43 OECD (2011). 
44 The retired Director General of the Finnish Fi nancial Supervisory Author ity Kaarlo Jannari was 
engaged to carry out the assessment. 
45 Jannari (2009).  
46 Information provided by the authorities. Iceland WT/TPR/S/273 
 Page 77 
 
 
  2006 2007 2008 2009 2010 20110100200300400500600Chart IV.7
Telephone subscriptions, 2006-2011
Source: Iceland Post and TelecomAdminstration online information.  Viewed at:  http://www.pfs.is.('000)
Fixed
Mobile
 
Fixed-line telephony 
 
76. The fixed-line segment has been in decline ove r the past few years.  Total subscribers 
declined from nearly 147,000 in 2006 to around 142, 500 in 2010, while total traffic declined from 
860,000 minutes to 618,000 minutes.  Fixed-line tele phony accounted for over 30% of total revenue 
in the electronic communications industry in 2 010, up from 23% in 2006, on account of internet 
television subscriptions.  Following the consolidati on and restructuring during the previous review 
period, there are currently four service providers in the fixed line segment:  Siminn, Vodafone, Tal, and Simafelagid.  The latter entered the market  in 2010.  Despite losing market share, Siminn 
continues to dominate, with 74% of the market followed by Vodafone, with nearly 17%.  Both 
providers are classified as having "significant market power" in certain service markets and hence 
may be subject to various obligations, imposed by  the Post and Telecom Administration (PTA) with 
respect to access to infrastructure, interconnec tion, and carrier selection and pre-selection. 
Mobile telephony 
 
77. The mobile communications market grew significantly during the review period:  total 
subscriptions rose from 284,000 in 2006 to over 341,0 00 in 2010.  Traffic also increased markedly 
from 450,000 minutes to nearly 750,000 minutes.  Grow th was driven by increased subscriptions and 
usage by the younger segment of the population.  In terms of revenue generate d, the mobile industry 
accounted for over 34% of total revenue in electr onic communications in 2010, making it the largest 
sub-sector.  In 2007, Nova started mobile voice ca ll operations, in 2008 Ta l and Sko merged, while 
Alterna commenced operations in 2010.  As a result  there are five companies operating in the mobile 
communications sector.  Despite losing market sh are since 2006, Siminn continues to be the main 
supplier with a 42% share in 2010.  Vodafone and Nova were the next largest with a 31% and 22% 
share of the market, respectively.  WT/TPR/S/273 Trade Policy Review 
Page 78 
  
  Internet 
78. In 2010, the internet sector accounted for near ly 17% of total revenue in the electronic 
communications sector.  Between 2006 and 2010, total internet subscribers rose from nearly 88,000 to 109,000.  Four companies operate in the market, wi th Siminn controlling over 50% of the market in 
2010;  its market share remained more or less consta nt during the review period.  Vodafone, the other 
major internet service provider, controlled over 30% of the market in 2010.  
(b) Regulations 
79. The main laws governing Iceland's tel ecommunications sector are Postal and 
Telecommunications Administration Act No. 69/2003 and Electronic Communications 
Act No. 81/2003.  The Postal and Telecom Administration (PTA) which is part of the Ministry of the 
Interior is responsible for administering the Acts and serves as the regulatory authority for the sector.  
80. The PTA is responsible for, inter alia , implementing the Electronic Communications Act and 
supervising electronic communications as provided for in the Act;  encouraging competition in postal 
and electronic communications services and preventing unfair business practices;  participating in developing the market for electronic communicati ons and information technology;  safeguarding 
public interest;  advising the authorities and mi nistries and ensuring that Iceland fulfils its 
international obligations as well as making recomme ndations, if necessary, for amendments to acts 
and regulations;  and participating in coopera tion resulting from international obligations. 
81. Under the Electronic Communications Act, na tural persons and legal entities established 
within the EEA and within WTO Member states ha ve a general authorization, and therefore do not 
need a licence, to start operations, unless specific fr equencies are involved.  All operators are required 
to register with the PTA.  An individual licence is  required for all frequencies except open spectrum.  
In most cases the procedure is simple and freque ncies are assigned by the PTA within six weeks of 
receipt of application. 
82. The Act also addresses transparency and non-discrimination;  rules on number portability, and 
on carrier selection and pre-selection;  and provisions  relating to competition within the sector.  The 
right to interconnection is established in Chapter VII of the Act, and the PTA is expected to "ensure 
access and interconnection and interoperability of services in a satisfactory and efficient manner" 
(Article 25) and may, inter alia , impose obligations with respec t to open and non-discriminatory 
access and price control.   
83. All users are entitled to universal service at th e same tariff rate throughout the country under 
the provisions of the Act.  The universal service obligation relates to basic telephony, data (128 Kb 
connection), and some other services.  To ensure  this obligation is met, the PTA may place 
obligations on electronic communications provide rs and set minimum quality requirements;  
according to the authorities, minimum quality require ments have been issued by the PTA.  The PTA 
also operates the equalization fund, which provides funding for universal service operations that are 
either unprofitable or run at a loss.   
84. Violations of the provisions of the Electronic Communications Act or the Act on the Post and 
Telecom Administration must be rectified within a month of their notification by the PTA.  If violations are not rectified, the PTA has authority to subject providers to daily fines, and to cancel the right to use numbers or the general authorization to op erate.  Serious or repeated violations may result 
in imprisonment.  Rulings by the PTA may be referred to the Rulings Committee for electronic Iceland WT/TPR/S/273 
 Page 79 
 
 
  communications and postal affairs, and to the cour ts.  However, according to the authorities there 
were no significant breaches during the review period.   
85. Recent amendments to the Electronic Communications Act have increased communications 
security and consumer protection;  implemented EU regulations on roaming on public mobile 
telephone networks;  and ensured smoother and quicker number portab ility.  The Act was amended in 
2007 with regard to the universal service fund (equali zation fund), which is financed by a fee levied 
on the turnover of all electronic communications pr oviders;  this fee was increased from 0.12% to 
0.65%.  The contribution was reduced to 0.1% in 2009 as the universal service provider did not use 
the available funds .  
(iii) Transport 
(a) Air transport 
86. The air transport sector in Iceland comprises passenger and cargo airlines, airports, and 
associated services.  The sector's contribution to  GDP was 6.6% in 2010 up from 5% in 2004. 
87. Between 2006-11, total passenger traffic wa s static, at around 3 million passengers.  
Passenger composition changed slightly over the peri od as international passenger traffic grew from 
2.1 million passengers to 2.2 million while domestic passenger traffic declined.  The decline was due 
to the financial crisis, which reduced the spendi ng power of the local population, and to improved 
road infrastructure.  Icelandic airlines became a more financially viable  choice for international 
travellers due to the financial crisis.   
88. Total cargo and mail also declined from approximately 65 tonnes in 2006 to about 40 tonnes 
in 2011.  Both international and domestic cargo declin ed as there was a shift from air freight to road 
and sea cargo transport, due to lower prices and increased efficiency.  
89. Currently, there are 16 foreign passenger transport ope rators in Iceland:  13 have an Icelandic 
Operation Licence and 7 operate scheduled air services.   Four international a nd nine domestic airports 
operate scheduled flights in Iceland.  All airports  (except Reykjavik airport) are owned and operated 
by Isavia, a wholly government-owned entity under the Ministry of the Interior.  In 2011, over 85% of 
international traffic was through Keflavik airport,  while Reykjavik airport accounted for nearly 50% 
of domestic traffic.  Ground handling is done by the airlines, under EU rules.  
90. Procedures and fees are the same for domestic and international airline companies.  However, 
the Government subsidizes scheduled  air transport to a number of dom estic destinations that have not 
proven economically viable.  Contracts  are awarded to airlines via an open tender.  In 2011, the 
subsidy was nearly ISK 215 million, up from ISK 137 million in 2006. 
91. Act No. 60/1998 on Aviation is the main legisla tion governing the air transport sector.  The 
Act is administered by the Ministry of the Interior through the Iceland Civil Aviation Authority.  According to the authorities, the Act mirrors Eur opean legislation, making Iceland compliant with 
European rules on licensing, access to the airline and ground handling, competition, slot allocation, 
airport charges, and aviation safety and security.  Fu rthermore, under the provisions of the Act, EEA WT/TPR/S/273 Trade Policy Review 
Page 80 
  
  operators are allowed to engage in  cabotage, while non-EEA operators  are only allowed to engage in 
cabotage if specified in a bilateral agreement.47  
92. In accordance with European ru les, Iceland operates under a "Single European Sky".  In 
addition, Iceland has bilateral aviation agreements  with Armenia, Azerbaijan, Bahrain, Barbados, 
Brazil, Canada, Chile, China, Columbia, Croatia , Denmark, Dominican Republic, Egypt, Finland, 
Germany, Ghana, Hong Kong, China, India, Indon esia, Jamaica, Jordan, Kuwait, Laos, Lebanon, 
Luxembourg, Macau, China, Malaysia, Mongolia, Netherlands, Norway, Oman, Paraguay, Qatar, 
Russian Federation, Rwanda, Saudi Arabia, Singapore,  South Africa, Spain, Sweden, Syria, Thailand, 
Turkey, Turkmenistan, United Kingdom, Viet Nam, a nd Zambia.  Iceland is also party to the EU-
USA Open Skies Agreement, which is the only ope n skies agreement that Iceland has in place.  
93. Under the provisions of Act No. 34/1991 on Foreign Investment in Companies, foreign 
ownership in Icelandic companies involved in air line operations may not exceed 49%.  This limitation 
does not apply to nationals of the EEA, who are treat ed as Icelandic nationals.  Additionally, no entity 
may be granted an operating licence unless it is effec tively controlled by EEA nationals.  There are no 
limitations on foreign partic ipation in auxiliary services. 
94. A major change during the review period was the division of the Icelandic Civil Aviation 
Administration into a new Icelandic Civil Aviation Administration (ICAA) and Isavia.  The new ICAA is responsible for regulation and aviation safety,  and thus for the issuance of licences for pilots, 
air traffic controllers, and air mechanics.  Th e ICAA also issues air worthiness certificates, air 
operator certificates, and certificates for air na vigation services and operations of aerodromes.  
Communications and interaction with internatio nal civil aviation organizations is also the 
responsibility of the ICAA. 
95. In addition to handling operati ons and developments of all airports in Iceland (except 
Reykjavik Airport), Isavia is responsible for air navigation services in the Icelandic control area. 
(b) Maritime transport 
96. On account of Iceland's geographical positi on and dependence on international trade, 
maritime transport remains very important for the country.  Indeed nearly all merchandise trade is 
conducted by sea.  Although 1,216 open boats and 1,050 decked vessels are registered in Iceland, only 
one tanker and one dry cargo ship are domestically flagged.   
97. The volume of goods transported by sea increased from nearly 5 million tonnes in 2003 to 
around 6 million tonnes in 2010;  a third were exports  and the rest imports.  The growth came about 
due to new aluminium smelters coming online. 
98. Currently, there are about 60 harbours in Icel and;  the number decreased during the review 
period due to mergers between small municipaliti es and the establishment of port associations.  
Harbours and coastal protection structures are owned and operated by the municipalities.   
99. Fifteen ports have appreciable cargo activities,  four of which can handle ships up to 40,000 
DWT.
48  The rest are essentially fishing ports but ar e able to receive larger merchant vessels for 
exports of fish-based products.  Good natural harbours are available for development in parts of the 
                                                      
47 As per the provisions of their bilateral agreements, operators from Greenland, Paraguay, and Chile 
are allowed to engage in cabotage. 
48 Iceland Export Directory online information.   Available at:  http://www.icelandexport.is. Iceland WT/TPR/S/273 
 Page 81 
 
 
  country earmarked for industrial development.  A ssociated Icelandic Ports, formed in 2004 through 
the merger of Reykjavík and adjacent ports (Akran es and Grundartangi), serve as the principal import 
and export points, and accounted for 47% of total cargo in Iceland in 2010. 
100. The main legislation governing the maritime sect or is the Icelandic Maritime Administration 
Act of 1996, administered by the Iceland Maritime Administration (IMA), under the Ministry of the 
Interior.  Under the provisions of the Act, all Ic elandic flagged vessels greater than six metres in 
length must be registered with the IMA, which ma intains a ships register.  A registration fee is 
charged based on the ship's tonnage.  Other respons ibilities of the IMA include:  port state control of 
foreign merchant vessels in Icelandic ports;  seamen's certification and crew issues;  implementation 
of the international Convention on Standards of  Training, Certification and Watchkeeping for 
Seafarers (STCW);  issuing  professional diving and pilots' certificates;  and maritime traffic services 
and security.  The IMA is also responsible for prep aring and publicizing the adoption of new maritime 
legislation.  It publishes marine-safety training materials and promotes training in other ways.  
Iceland's maritime legislation is fully aligned with  EU regulations on freedom to provide services, 
transfer of cargo and passenger ships between regist ers, action to safeguard free access to cargoes in 
ocean trades, and maritime cabotage.  With respect  to cabotage Iceland is the only WTO Member that 
has scheduled a binding commitment on cabotage. 
101. With respect to harbour administration, the IMA is responsible for coastal protection and 
harbour projects, research, and planning for the deve lopment of coastal protections and harbours.  The 
State is responsible for conducting basic research pertaining to  harbour projects as well as provision 
of financial support for new harbour projects.  The IMA develops a revolving four-year harbour 
development plan and submits it to Parliament for approval.  In recent years new development 
projects have been conducted in 20-30 harbours a year, for an average of ISK 300-500 million 
annually.  Most harbour projects are tendered out.  The IMA monitors the technical and financial 
aspects of state-sponsored projects and reports on them  annually to the Ministry and Parliament.  The 
IMA also monitors the construction of coastal prot ections.  The financing of these projects is through 
the Harbour Development Fund, which is run by the IMA and funded through the state budget and 
harbour fees.  
102. In January 2011, Iceland introduced a new port state control system in accordance with the 
EU directive on port state control.  Under the ne w system, called the New Inspection Regime (NIR),  
random checks have been abolished,  and inspections will be targeted according to a Ship Risk Profile 
so that "risky" ships are inspected frequently, wh ile "good" ships are inspected less frequently.  A 
ship's risk profile is determined according to, inter alia,  age, flag, type, and company.  
103. Iceland has ratified and incorporated into its laws and regulations, most of the conventions 
and instruments adopted by the International Maritim e Organisation (IMO), such as:  the International 
Convention for the Safety of Life at Sea (SOLAS );  International Convention on Standards of 
Training, Certification and Watch keeping for S eafarers (STCW);  International Convention on 
Standards of Training, Certifi cation and Watch keeping for Fish ing Vessel Personnel (STCW-F);  
Load Lines;  the Internationa l Convention for the Prevention of  Pollution from ships (MARPOL);  
Convention on the International Regulations for Preventing Collisions at Sea (COLREG);  
International Convention on Maritime Search and Rescue (SAR);  and Convention for the 
Suppression of Unlawful Acts against the Safety of Maritime Navigation (SUA).  WT/TPR/S/273 Trade Policy Review 
Page 82 
  
  (5) TOURISM  
104. The share of tourism in Iceland's GDP was 5.6% in 2009 and the sector employed 5.2% of the 
workforce.  Furthermore, between 2005-10 the sector  accounted for nearly 17% of Iceland's export 
receipts.  
105. However, due to the nature of the industry, wh ich is cyclical and income elastic, growth was 
variable during the review period.  Tourist arri vals, which had tapered off after 2008, increased 
significantly in 2011 to over 565,000 visitors (gro wth of over 16% over 2010) (Chart IV.8).  The 
recent growth can be attributed to a number of factor s:  Iceland is a more affordable destination due to 
the exchange rate depreciation;  better and more frequent flight connections;  and increased marketing 
(including inadvertently, through the eruption of Eyjafjallajökull in 2010 and Grímsvötn in 2011). 
2003 2004 2005 2006 2007 2008 2009 2010 20110100,000200,000300,000400,000500,000600,000Chart IV.8
Passenger traffic through Keflavik airport, 2003-2011
Source: Information provided by the authorities.(Number)
 
106. Under the Government's new growth plan, the authorities have identified tourism as a focus 
sector.  In this regard, a new public strategy for t ourism in Iceland was approved by parliament in 
2011.  Salient features of the new strategy are to:   
 maintain Iceland's unique nature with fo cused and strong emphasis on strengthening 
destinations; 
 improve the quality, professionalism, and e nvironmental consciousness of the tourism 
industry; 
 promote increased profitability, a nd respect for the industry;  and 
 extend the tourist season, decrease seasonal fluctu ation, and promote a better distribution of 
tourists around the country.  
 
107. With regard to the latter;  over 50% of tourists  visiting Iceland do so in the summer.  To avoid 
seasonal fluctuations the authorities are trying to promote Iceland as a year round destination by marketing unique natural phenomena such as northern lights and winter festivals.  Iceland WT/TPR/S/273 
 Page 83 
 
 
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