U.S. DEPARTMENT OF STATE
NORWAY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                              NORWAY
                                 
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                     1992      1993      1994 1/

Income, Production and Employment:

Real GDP (1991 prices)            109,542   112,074   117,229
Real GDP Growth (pct.)                3.4       2.3       4.6
GDP (at current prices)           113,197   103,478   109,300
By Sector:  (1991 prices) 2/
  Agriculture/Forestry/Fishing      3,066     3,113     3,439
  Energy/Shipping                  25,069    25,948    27,994
  Manufacturing/Mining             14,815    15,057    15,358
  Construction                      3,812     3,695     3,880
  Dwellings                         5,243     5,295     5,417
  Financial Services                4,216     4,233     4,403
  Other Services                   35,430    36,185    37,484
  Government/Health/Education      17,890    18,383    19,141
Net Exports of Goods and Services   8,233     7,024     6,629
Real Per Capita GDP ($, 1991 base) 25,535    25,961    26,986
Labor Force (000s)                  2,130     2,131     2,145
Unemployment Rate (pct.)              5.9       6.0       5.5

Money and Prices:

Money Supply (M2) (pct. ch.)          7.3       0.5       5.0
Base Interest Rate /3 (pct.)         12.6       6.8       7.0
Personal Savings Rate (pct.)          5.2       5.3       4.3
Producer Prices (pct. ch.)           -0.4      -1.0       1.6
Prices (pct. ch.)                     2.3       2.3       1.3
Exchange Rate (NOK/USD)              6.21      7.09      7.00

Balance of Payments and Trade:

Total Exports (FOB)                35,376    32,136    33,971
  Exports to U.S. 4/                1,782     1,901     2,243
Total Imports (CIF)                26,793    24,930    27,800
  Imports from U.S. 4/              2,225     1,889     2,286
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt                8,552     9,789    12,335
Debt Service Payments (paid) 5/       454       448       437
Gold and Foreign Exch. Reserves    13,606    21,813    20,000
Trade Balance                       8,583     7,206     6,171
  Balance with U.S. 4/               -443        12       -43


1/ 1994 Figures are all estimates based on monthly data in
October 1994.
2/ Only available at constant 1991 prices.
3/ Central Bank overnight lending rate; not annual pct. 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 has less than 5 million inhabitants.  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
international competition.  These will likely experience a
painful period of adjustment in the years ahead as the
government adapts to provisions of the Uruguay Round trade
agreement and to the emerging EU single market.

    Norway and the other EFTA countries have concluded a free
trade agreement with the EU - the European Economic Area (EEA)
Accord - which came into effect on January 1, 1994.  Norway
concluded an EU accession accord on March 16, 1994, but in a
referendum held on November 28, Norway rejected EU membership.

    State intervention in the economy is significant.  The two
dominant industrial groups--Statoil and Norsk Hydro--are state
controlled, and the state retains majority stakes in Norway's
top three commercial banks.  Moreover, restrictions remain on
foreign ownership of Norwegian industry, including financial
institutions.  However, the EEA accord requires Norway to put
in place new foreign investment legislation granting national
treatment to EEA member states by January 1, 1995 at the
latest.  Policies vis-a-vis countries outside the EEA will
likely continue to be governed by reciprocity and by bilateral
or multilateral agreement.

    On budgetary matters, the government's dependence on
petroleum revenue has increased substantially over the past
decade.  On the budget's 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 1993.  The budget deficit is
expected to narrow through 1994 and 1995 because of the impact
of economic growth and spending restraint.

    No general tax incentives exist to promote investment,
although tax credits and government grants are offered to
encourage investment in northern Norway.  Several specialized
state banks (e.g., the state agriculture and fisheries banks)
provide subsidized loans to industry.  Accelerated depreciation
allowances and subsidized power are also available to industry.

    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 overnight
lending rate.  Since the government strives to maintain a
stable exchange rate, its ability to use the money supply as an
independent policy instrument is weakened.


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 weakened over 10 percent vis-a-vis the U.S. dollar. 
Norway plans to return to a "fixed" exchange rate regime at a
future date yet to be decided.

    As noted, Norway strives to maintain a stable exchange
rate.  Norway is not a member of the European Monetary System,
but in 1990 the Norwegian krone (NOK) was pegged to the
European Currency Unit (ECU).  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 ECU
peg broke the direct link between the NOK 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 U.S. 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, although some structural reforms have been
implemented in the past five years.  Quantitative restrictions
on credit flows 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.  Further reform occurred when Norway
accepted the EU's banking directives as part of its membership
in the EEA.  The Norwegian banking industry continues to
struggle with bad loan portfolios and overstaffing, although
they have returned to profitability in 1994.

    Over the past five years, limited income tax reform has
lowered personal income tax rates but broadened the tax base. 
Although modest progress has been made in reducing subsidies to
Norwegian industry, Norway's farm sector remains the most 
heavily subsidized in the OECD.  Norwegian subsidies and
nontariff barriers (e.g., quotas; the Norwegian alcohol and
grain monopolies) adversely affect U.S. farm exports.

    Norway has taken some steps 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 GON remains committed to an ambitious structural
reform program which may gradually improve U.S. market access,
but progress will likely 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 1993,
the government's gross external debt (foreign liabilities)
stood at about $10 billion, but its external debt will likely
fall significantly through 1994 and 1995 because of reduced
government budget deficits.  Norway's total net foreign debt
(foreign liabilities less foreign assets), which was $6.5
billion in June 1994, is expected to evaporate in the 1994-96
period because of continuing balance of payments surpluses and
falling government budget 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 NOK, 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.  With
Norway's approval of the Uruguay Round trade agreement, these
agricultural restrictions will be tarrified and gradually
reduced.  Due to the substantial GON ownership of major
Norwegian companies and the GON organization of business
groups, American companies that have a Norwegian subsidiary or
agent/distributor are able to operate in this market much more
effectively.

    The U.S. has in the past won two GATT panel determinations
showing that Norway had acted in a manner inconsistent with its
GATT obligations in the area of public procurement when it
discriminated against U.S. companies in the procurement of
electronic toll ring systems around Oslo and Trondheim.  On
November 27, 1992, Norway adopted new public procurement
legislation which made rules more transparent.  Nonetheless,
the directives governing the so-called excluded sectors (e.g.,
energy; transportation and communication) raise competition
issues.  On July 1, 1994, Norway adopted new regulations for
public procurement of services in order to comply with the 
EEA accord.  According to these regulations, all services
procurements exceeding NOK 1.6 million (USD 235,000) are now
subject to international bidding and the granting of contracts
is to be based on nondiscriminatory criteria.

    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
GON purchases.

    The Government of Norway is in the process of liberalizing
its telecommunications industry, although the country is
already relatively open to purchasing U.S. telecommunications
equipment and services.  GON control of this field, however, is
still maintained by majority Norwegian ownership as noted above.

    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. 
U.S. financial firms can establish subsidiaries in Norway, but
cannot establish branches.

    Norway maintains reservations to the OECD Code of
Liberalization of Capital Movements with regard to inward
direct investment.  Foreign ownership in Norwegian corporations
remains restricted, and proposed acquisitions are reviewed on a
case-by-case basis.  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 Norwegian intellectual property (IPR)
practices on U.S. trade is negligible. Norway is a signatory of
the main IPR accords, including the Bern 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 became available in
Norway in January 1992.  Previously, only process patent
protection was provided to pharmaceuticals.


8.  Worker Rights

    a.  The 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--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                             3,136
Total Manufacturing                                     584
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                2
  Machinery, except Electrical               10
  Electric & Electronic Equipment            -2
  Transportation Equipment                    0
  Other Manufacturing                        53
Wholesale Trade                                         200
Banking                                                  85
Finance/Insurance/Real Estate                           141
Services                                                 29
Other Industries                                        179
TOTAL ALL INDUSTRIES                                  4,353    

(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
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