Energy remains Norways predominant resource base, with no major changes expected in the next decade. Offshore the country has crude oil reserves sufficient to last over 20 years and enough natural gas to last nearly 100 years. On the mainland the availability of abundant hydropower supports energy intensive industries such as metals and fertilizers. In late 1991, Norway, with the other EFTA countries, reached agreement with the European Community to establish closer economic ties through the creation of a new European Economic Area (EEA). Although the European Court of Justice considers some of the elements of that agreement in violation of the Treaty of Rome, EFTA and EC negotiators are working to save the agreement. The EEA is scheduled to become effective on January 1, 1993. Participation in the EEA will require Norway to comply with a wide range of EC directives and regulations. The small size of the population limits Norway's human resource base; a highly centralized collective bargaining process and a restrictive immigration policy limit its flexibility in increasing industrial competitiveness. The petroleum sector and associated service industries will likely remain the engine of economic growth for the next several decades. Energy-intensive manufacturing industries will also remain prominent. Several inefficient sectors producing for the domestic market survive largely through generous subsidies. These will likely experience a painful period of adjustment in the years ahead as the Government adapts to the emerging EC single market, regardless of its final decision on EC membership. Norway and the other EFTA countries recently negotiated an economic cooperation agreement with the EC under the framework of the European Economic Area. There is increasing speculation in business and political circles that Norway will eventually join the flock of those countries submitting an application for EC membership. Norway is currently deeply divided over the issues. The Norwegian welfare state which redistributes a large share of the national income through taxes and subsidies. State intervention in the economy is significant. The two dominant industrial groups, Statoil and Norsk Hydro, remain state controlled. Moreover, restrictions are maintained on foreign ownership of Norwegian industry, including financial institutions. Looking ahead in the 1990's, it is realistic to expect some lessening of government intervention and control as Norway harmonizes its policies to be more in tune with the EC. a rise The government's dependence on petroleum revenue increased substantially over the past decade. On the expenditure side the most significant development was in subsidies and social programs, financed by petroleum revenues. In 1986 budgetary pressures increased because of slumping oil prices. The subsequent recession prompted stimulatory fiscal policy. Despite the rebound in world oil NORWAY prices, the budget deficit increased significantly between, 1986 and 1991. No general tax incentives exist to promote investment, although tax credits and government grants are offered to encourage investment in northern Norway. Accelerated depreciation allowances and subsidized power are available to industry. The Government of Norway will continue with its tax reform program in 1992, but the overall tax burden will remain roughly unchanged. The Government of Norway controls the growth of the money supply through reserve requirements imposed on banks, open market operations, and variations in the Central Bank discount rate. The Government strives to maintain a stable exchange rate, thereby limiting its ability to use the money supply as an independent policy instrument. 2. Exchange Rate Policy Norway is not a member of the European Monetary System but, effective October 22, 1990, the Norwegian Krone (NOK) was pegged to the European Currency Unit (ECU), the common currency unit of the EC. Prior to this move, the NOK was pegged to a trade-weighted basket of currencies in which the weight of the U.S. dollar accounted for 11 percent. The new foreign exchange rate system broke the direct link between the NOK and the U.S. dollar. The NOK is expected to fluctuate less against the major EC currencies and more against the dollar. Norwegian interest rates and inflation will tend to move toward EC levels under the new regime, and the scope of discretionary monetary policy will likely be reduced. Norway dismantled most remaining foreign exchange controls in 1990. U.S. companies operating here have never reported problems in remitting payments. 3. Structural Policies Norway remains highly dependent on its offshore oil and gas sector. Many parts of the mainland economy are protected and inefficient. Nevertheless, several significant reforms have been implemented in the past three years. Quantitative restrictions on credit flow from private financial institutions were abolished in 1987 and 1988 and, as noted above, most foreign exchange controls were dismantled in 1990. A new legal framework for the functioning of the financial system was adopted in 1988, strengthening competitive forces in the market and bringing capital adequacy ratios more in line with those abroad. Despite progress, the Norwegian banking industry continues to struggle with structural problems, bad loan portfolios and overstaffing, which will likely require further corrective action. Over the past three years, limited income tax reform has lowered personal income tax rates and broadened the tax base. Some progress has been made in reducing subsidies to Norwegian industry but there remains much room for further reform. NORWAY Norwegian agriculture remains heavily protected by subsidies and non-tariff barriers which adversely affect U.S. exports. Some steps have been taken to deregulate the service sector. However, large parts of the transportation and telecommunications markets remain subject to restrictive regulations, including statutory barriers to entry. Looking ahead, the Norwegian government remains committed to an ambitious structural reform program which may gradually improve U.S. market access. This program includes the lowering of subsidies to industry and agriculture, gradual liberalization of the import regime, and some privatization of Norway has embraced a cautious foreign debt policy to limit the state's exposure in foreign markets. The net external debt of the government stands presently at less than NOK 25 billion ($3.8 billion). The government's stated policy is that the domestic private sector should cover the bulk of financing requirements related to Norway's external deficits. In the past, this policy has contributed to high interest rates, and a rapid increase in short-term foreign private debt. Since 1990, the Government has allowed the private sector increased access to long-term foreign capital markets to facilitate improvements in the term-structure of its foreign debt. 5. Significant Barriers to U.S. Exports and Investments Norway supports the principles of free trade and is quick to condemn protectionism. In general, U.S. exporters experience few problems doing business in Norway. Nonetheless, some areas of tension exist. While Norway is in the process of reforming its agricultural support regime, quantitative import restrictions and producer subsidies continue to cover a wide range of agricultural products, including apples and pears. A GATT panel has been formed at the request of the United States which alleges that the Government of Norway has discriminated against a U.S. company in its procurement of a toll ring around the city of Trondheim, in Western Norway. The United States would like Norway to liberalize its procedures for regulating telecommunications terminal equipment. The Norwegian Telecommunications Regulatory Authority (a separate approval authority under the auspices of the Ministry of Transportation and Communications) has improved the speed and efficiency with which it approves telecommunications devices used in Norway. The Government of Norway is in the process of liberalizing its telecommunications industry to make it compatible with EC integration. Recent deregulation of financial markets appears to have eliminated many of the barriers facing U.S. financial institutions which seek to operate in the Norwegian market. NORWAY Norway's ongoing efforts to bring its laws into compliance with EC directives are being carried out on a non-discriminatory basis. This means that in many cases, U.S. financial institutions can look forward to continuing liberalization in the Norwegian market. Norway maintains reservations to the OECD Code of Liberalization of Capital Movements with regard to inward direct investment. Foreign investment in Norwegian corporations is limited to 33 percent of equity. The ownership of seagoing vessels and real estate is even more restricted. Norway can expect to gradually liberalize these regulations as it brings its national laws into compliance with the EEA. 6. Export Subsidy Policies As a general rule the Government of Norway does not subsidize exports, however some heavily subsidized products may be exported. Dairy and fishery products fall into this category. Indirectly, the Government supports the export of chemicals and metals by subsidizing the electricity costs of manufacturers. In addition, the Government provides funds to Norwegian companies for export promotion purposes. 1. Protection of U.S. Intellectual Property Norway is a signatory of the main intellectual property accords, including the Bern Copyright and Universal Copyright Conventions, the Paris Convention for the Protection of Industrial Property, and the Patent Cooperation Treaty. Norwegian officials believe that counterfeiting and piracy are the most important aspects of intellectual property rights protection. They complain of the unauthorized reproduction of furniture and appliance designs and the sale of the resultant goods in other countries, with no compensation to the Norwegian innovator. Product patents for pharmaceuticals will become available in Norway in January 1992. Only process patent protection is presently provided to pharmaceuticals. Workers have the right to associate freely and to strike. The Government can invoke compulsory arbitration under certain circumstances with the approval of Parliament. b. The Right to Organize and Bargain Collectively All workers, including government employees and the military have the right to organize and to bargain collectively. The right to organize is protected through the "Basic Agreement", negotiated between the National Union Organization (LO), Norway's largest trade union federation, NORWAY and the Employers' Union (NHO), is legally binding. Complaints of antiunion discrimination would be dealt with through the Labor Court. Collective bargaining is widespread, with most wage-earners covered by negotiated settlements, either directly or through understandings which extend the contract terms to workers outside of the main labor federation and the employer's bargaining group. c. Prohibition of Forced or Compulsory Labor Forced and compulsory labor is prohibited by law and does not exist. d. Minimum Age for Employment of Children children from the age of 13-18 may be employed part-time in light work which will not adversely affect their health, development, or schooling. Minimum age rules are observed in practice. e. Acceptable Conditions of Work Ordinary working hours are mandated by law and normally do not exceed 37.5 hours per week, with 25 working days of paid leave granted per year (31 for those over 60). There is no minimum wage in Norway, but wages normally fall within a national wage scale negotiated by labor, employers, and the Government. The Workers' Protection and Working Environment Act of 1977 assures all workers safe and physically acceptable working conditions. f. Rights in Sectors with U.S. Investment Norway has a tradition of protecting worker rights in all industries, and sectors where there is heavy U.S. investment are no exception. |