By Anas Almasri
On Monday April 15th, Iceland became the first European nation to ink a Free Trade Agreement with China. The deal came following almost six years of negotiations between the two sides.
The agreement will remove tariffs on most traded goods and grant China a foothold in the Arctic as it aims to gain more influence in the northern territory by joining a new non-profit forum called the Arctic Circle, a venue to discuss the fate of the Far North.
China's trade with Iceland is relatively small when compared to trade volumes with major European economies. The North Atlantic country exported goods ostly fish and other marine products worth some $64 million to China last year, while about $358 million worth of goods went the other way mainly furniture, clothing and electronics.
Although Iceland's $14.4 billion GDP is small compared to the world's second largest economy at $7.3 trillion, the tiny country of 350,000 inhabitants does have expertise in geothermal energy; knowledge, experts say, China is trying to acquire.
Geothermal sources provide the volcanic island with a quarter of its energy needs, with the rest coming from hydropower. With this FTA, Iceland hopes to boost its trade relations with China by selling such expertise and diversifying away from marine products that account for 90 percent of its exports to China.
Another area of importance for the Chinese side is shipping. As the ice caps in the north recede, trading routes will open up. Reportedly, these new trade routes could save a third of the shipping time between Shanghai and Hamburg and also create a boom in resource extraction projects including oil & gas, diamonds and gold.
According to a study by University of California, the quickest way to get goods from Asia to the East Coast in the United States could very well be right through the North Pole by mid-century.
Iceland economy is still recovering from a major banking collapse in 2008, which forced its three biggest banks to default on nearly $85 billion of debt devastating its economy at the time. The country, however, has paid back more than half of the loans it received from the International Monitory Fund and Nordic countries ahead of schedule.
