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TITLE:  NORWAY ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE


                              NORWAY

                     Key Economic Indicators
      (Millions of Norwegian Krone unless otherwise stated)


                                  1991      1992      1993 /1
Income, Production
 and Employment

Real GDP (1991 prices)            686,683   709,316   718,537
Real GDP Growth (pct.)                1.6       3.3       1.3
GDP (at current prices)           686,683   701,650   754,800
By Sector (1991 prices):/2
  Agriculture & Fisheries          20,052    19,702    19,500
  Energy, Water & Shipping        149,300   162,446   167,200
  Manufacturing & Mining           94,293    96,004    96,100
  Construction                     24,705    24,471    24,570
  Rents                            33,811    33,968    34,050
  Financial Services               27,897    27,318    27,000
  Other Services                  224,715   229,432   232,117
  Government, Health
   and Education                  111,910   115,975   118,000
  Net Exports of
   Goods and Services              60,428    51,277    65,000
Real Per Capita GDP (91 BPS)      160,966   165,342   168,402
Labor Force (000's)                 2,130     2,131     2,134
Unemployment Rate (pct.)              5.5       5.9       6.1


Money & Prices
(annual percentage growth)

Money Supply (M2)                 10.60      7.30      5.00
Base Interest Rate /3             10.00     12.60      7.00
Personal Savings Rate (pct.)       2.6       5.0       5.4
Retail Inflation                   3.4       2.3       2.3
Wholesale Inflation                2.5       0.1      -0.1
Consumer Price Index               3.4       2.3       2.3
Exchange Rate  (NK/$)              6.48      6.21      7.00


Trade and Balance of Payments

Total Exports (FOB)               223,420   219,687   224,953
 Exports to U.S. /4                10,275    11,260    14,900
Total Imports (CIF)               170,305   166,387   172,067
 Imports from U.S. /4              12,857    13,821    13,000
Aid from U.S.                        0         0         0
Aid from other Countries             0         0         0
External Public Debt               25,953    55,335   92,223
Debt Service Payments (paid) /5     5,780     2,739    3,112
Gold and Foreign Exchange
Reserves                           80,411    84,496   110,000
Merchandise Trade Balance          53,115    53,300    52,886
 Balance with U.S. /4              -2,582    -2,561     1,900


Notes:

1/ Figures are estimates based on October 1993 data.
2/ Only available at constant 1991 prices
3/ Central Bank overnight lending rate; not annual percentage
growth
4/ Norwegian foreign trade statistics.  Exports exclude
Norwegian oil shipped to the U.S. from U.K. terminals
5/ Principal payments



1.  General Policy Framework

    Oil, gas, and hydroelectric energy dominate Norway's
resource base, with no major changes expected in the next two
decades.  On the Norwegian continental shelf, 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.

    Norway's population is relatively small.  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,
including agriculture, survive largely through generous
subsidies and protection from external competition.  These will
likely experience a painful period of adjustment in the years
ahead as the government adapts to the emerging EU single
market, regardless of its final decision on EU membership.

    Norway and the other EFTA countries have negotiated an
economic cooperation agreement with the EU under the framework
of the European Economic Area (EEA).  The Norwegian government
submitted an application for EU membership on November 25,
1992.  EU membership will be decided by a referendum, if
Norwegian demands (e.g., exemptions in the fisheries and oil
sectors) are met in membership negotiations.  Meanwhile,
opinion polls continue to suggest that Norwegians are deeply
divided over the issue.

    State intervention in the economy is significant.  The two
dominant industrial groups - Statoil and Norsk Hydro - are
state-controlled.  Moreover, restrictions remain on foreign
ownership of Norwegian industry, including financial
institutions.  Looking ahead to the 1990's, the EEA accord
requires that Norway grant national treatment to EEA member
states.  Policies vis-a-vis countries outside the EEA will
likely continue to be governed by reciprocity, and by bilateral
or multilateral agreement.

    The government's dependence on petroleum revenue has
increased substantially over the past decade.  On the
expenditure side, the most significant development has been a
rise in subsidies and social programs, financed by petroleum 
revenues.  In 1986 budgetary pressures increased because of
slumping oil prices, and the subsequent recession prompted
stimulatory fiscal policy.  Despite the rebound in world oil
prices, the budget deficit increased significantly between 1986
and 1992.

    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.

    Norway controls the growth of the money supply through
reserve requirements imposed on banks, open market operations,
and variations in the Central Bank overnight lending 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

    On December 10, 1992, Norway unpegged the krone from the
ECU and let the Norwegian currency float.  Since then, the
krone has depreciated over 10 percent vis-a-vis the dollar. 
Norway plans to return to a "fixed" exchange rate regime at a
future date.

    Norway strives to maintain a stable exchange rate.  Norway
is not a member of the European Monetary System but in 1990 the
Norwegian krone (NK) was pegged to the European Currency Unit
(ECU).  Prior to this move, the NK was pegged to a
trade-weighted basket of currencies in which the weight of the
U.S. dollar accounted for 11 percent.  The ECU peg broke the
direct link between the NK and the U.S. dollar.  Under the ECU
peg, Norwegian interest rates and inflation tended to move
toward EU levels.

    Norway dismantled most remaining foreign exchange controls
in 1990.  U.S. companies operating here have never reported
problems to the Embassy 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.  Some structural reforms have been implemented in
the past five 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 revised 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 bad loan portfolios
and overstaffing which will likely require further corrective
action.

    Over the past four years, limited income tax reform has
lowered personal income tax rates and broadened the tax base. 
Although modest progress has been made in reducing subsidies to
Norwegian industry, Norway's farm sector remains the most
subsidized in the OECD.  Norwegian subsidies and non-tariff
barriers (e.g., quotas) adversely affect U.S. farm 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 Government of Norway remains committed to an
ambitious structural reform program which may gradually improve
U.S. market access, but progress will be slow for political
reasons.


4.  Debt Management Policies

    Norway has embraced a cautious foreign debt policy to limit
the state's exposure in foreign markets.  At the end of 1992,
the external debt (foreign liabilities) of the government stood
at about US$ eight 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.

    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.  Following the floating of the Norwegian krone, foreign
capital inflows contributed to falling Norwegian interest rates.


5.  Significant Barriers to U.S. Exports

    Norway supports the principles of free trade and is quick
to condemn protectionist measures of other countries.  In
general, U.S. exporters experience few problems doing business
in Norway but some areas of tension exist.  While Norway is in
the process of reforming its agricultural support regime,
quantitative import restrictions and producer subsidies
adversely affect U.S. farm exports, as noted earlier.  Due to
the substantial Norwegian government ownership of major
Norwegian companies and government organization of business
groups, American companies that have a Norwegian subsidiary or
agent/distributor are able to operate in this market much more
effectively.

    In the area of public procurement, the U.S. has won a GATT
panel determination showing that Norway had acted in a manner
inconsistent with its GATT obligations in discriminating
against a U.S. company in the procurement of an electronic toll
ring system around the west coast town of Trondheim.  The U.S.
won a similar GATT case in 1990 involving a toll ring around
Oslo.

    The U.S. would like Norway to liberalize its procedures for
regulating telecommunications terminal equipment.  The
Norwegian Telecommunications Regulatory Authority (a separate
regulatory body under the auspices of the Ministry of
Transportation and Communications) has said it has improved the
speed and efficiency with which it approves telecommunications
devices used in Norway.  American companies without European
production facilities, however, report that it still takes up
to six months and significant fees to a Norwegian agent to
certify telecommunications equipment not used in large-scale
Norwegian government purchases.

    Norway is in the process of liberalizing its
telecommunications industry to make it compatible with EC
integration, and is actually much more open to purchasing
American telecommunications equipment and services than most
other European countries outside of the U.K.  Norwegian
government control of this field, however, is still maintained
by majority Norwegian ownership as detailed below.

    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's ongoing efforts to bring its laws into compliance with
EU 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 ownership in Norwegian corporations
cannot exceed to 33 percent of equity unless a concession is
granted.  Moreover, a single foreign investor cannot acquire
more than a 20 percent stake in a Norwegian corporation without
a concession.  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, although some heavily subsidized products
may be exported.  Dairy 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.


7.  Protection of U.S. Intellectual Property

    The impact of Norway's intellectual property rights (IPR)
practices on U.S. trade is negligible.  Norway is a signatory
of the main IPR 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 IPR 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 became available in
Norway in January 1992.  Previously, only process patent
protection was provided to pharmaceuticals.


8.  Worker Rights

    a.   Right of Association

    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.  Labor legislation and practice is uniform
throughout Norway.

    c.   Prohibition of Forced or Compulsory Labor

    Forced labor is prohibited by law and does not exist.

    d.   Minimum Age for Employment of Children

    Children are not permitted to work full time before age
15.  Minimum age rules are observed in practice.

    e.   Acceptable Conditions of Work

    Ordinary working hours do not exceed 37.5 hours per week,
and 25 working days of paid leave are 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.


         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                             3,251
Total Manufacturing                                     291
    Food & Kindred Products                     D
    Chemicals and Allied Products              11
    Metals, Primary & Fabricated                2
    Machinery, except Electrical               11
    Electric & Electronic Equipment             D
    Transportation Equipment                    0
    Other Manufacturing                        45
Wholesale Trade                                         171
Banking                                                  68
Finance and Insurance                                   123
Services                                                 16
Other Industries                                        126

TOTAL ALL INDUSTRIES                                  4,047


(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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