Iceland Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

EU member states are the main outlet for exports, roughly 2/3 of all Icelandic goods go there. Most Icelandic goods go to the Netherlands and Spain. Other important markets for Icelandic products are the USA, Great Britain, Germany, France and Norway. Almost half of all Icelandic imports came from EU countries in 2021. The countries with the largest share of Icelandic imports are Norway, the USA, Germany and China.

  • Allcountrylist: Overview of major industries in Iceland, including mining, construction, transportation, tourism, and foreign trade.
2017 2018 2019 2020 2021
Exports from the EU (million EUR) 2845.3 3,257.7 2,998.4 2,714.6 3263.9
Imports into the EU (million EUR) 2705.8 3 132.7 2,796.7 2,672.7 3430
Balance with the EU (million EUR) -139.5 -125.0 -201.7 -41.9 166.1

Source: European Commission

Trade relations with the Czech Republic

Since 2004, trade relations between the Czech Republic and Iceland have been regulated within the framework of the EEA Agreement. Measured by the turnover of trade, Iceland has a marginal position in Czech foreign trade. According to CZSO statistics, Iceland was the 73rd most important trade partner of the Czech Republic in terms of exports in 2021. However, from Iceland’s point of view, the Czech Republic was the 16th largest importer to the country in 2021, comparable to, for example, Australia and Japan.

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 1.5 1.1 0.9 0.9 1.3
Imports to the Czech Republic (billion CZK) 2 1.5 1.6 1.8 2.3
Balance with the Czech Republic (billion CZK) 0.5 0.4 0.8 0.9 1.0

Source: CZSO

Trade relations with countries outside the EU

The negative balance is mainly caused by the volumes of imports from China, Norway, the UK and the USA (the import items are very variable – mechanical devices, motor vehicles, textiles, food and fuel). The main export markets outside the EU are the UK and the USA, which Iceland supplies with fish products and aluminium.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 2502.5 2775.3 2984 2850.6 3916.5
Imports to countries outside the EU (million EUR) 1059 1249.8 1833.6 1802 2042.5
Balance with non-EU countries (million EUR) -1443.5 -1525.5 -1150.4 -1048.6 -1874

Source: EIU, Eurostat

Foreign direct investment

Iceland is a place where a developed economy meets low corporate income taxes, and at the same time a place that offers a wide range of interesting investment projects. The combination of these factors makes Iceland a promising location for foreign investors. The country has plenty of sustainable energy from hydro and geothermal sources as well as a skilled workforce. The investment environment in Iceland is therefore very friendly. In addition to low corporate income taxes, only 75% of income can be taxed for the first three years if certain conditions are met. As a member of the EEA Agreement, Iceland is part of the European internal market and is subject to European legislation, including duty-free access to the EU. Projects in the field of science and research, especially renewable energy and data centers, are now on the investment boom. In the area of ​​research, there are also promising projects that focus on the production of carbon fibers. Iceland has a strong high-tech industry, which, thanks to the already mentioned benefits, has the potential to be cheaper, more efficient and more environmentally friendly. Other important investment areas are greenhouses, aquaculture, tourism and real estate. Investments in Iceland most often come from Great Britain, the USA, Norway, Denmark, Germany and the Netherlands.

According to the available data of CzechInvest, no Czech companies are currently investing in Iceland.

FTAs and treaties

Treaties with the EU

Economic relations between Iceland and the EU are based on the EEA Agreement. As part of the obligations arising from Iceland’s activity in the EEA, a long-term problem has been the slow or incomplete transposition of new EU rules (in the form of amendments to the EEA Agreement) into national legislation. In the last few years, Iceland has managed to reduce the transposition deficit. Mutual trade relations between Iceland and the EU have long been complicated by disputes over the amount of quotas for mackerel fishing in the North Atlantic or the customs regime applied to imports of Icelandic fish products into EU countries. In May 2018, three agreements negotiated between Iceland and the EU entered into force, extending duty-free access to the Icelandic market for more than 95% of agricultural and food products originating in EU countries. In this context, there was also a significant increase in duty-free import quotas for selected types of meat, cheese and processed meat products. With effect from January 2020, exporters from EEA countries (including the Czech Republic) can import fresh meat and eggs to Iceland. In the case of poultry meat, the importer must provide a certificate of the absence of bacteria causing campylobacteriosis, and in the case of pork, beef or eggs, a certificate of non-contamination with salmonellosis. In November 2021, Iceland expressed interest in further adjusting the terms of mutual trade in agricultural products and in achieving fully duty-free access for Icelandic marine products to the EU market.

Contracts with the Czech Republic

Since 2004, trade relations between the Czech Republic and Iceland have been regulated within the EEA Agreement between the EU countries and the EFTA countries. The Czech Republic and Iceland also concluded a bilateral agreement on the avoidance of double taxation.

Developmental cooperation

The Czech Republic and Iceland do not provide each other with any development or technical assistance.

The Czech Republic receives funds from the EEA Funds, to which Iceland contributes a proportional part (around 3%). Within the 2014-2021 program period, priority target areas include innovation, research and education, energy security, climate change, social inclusion and projects strengthening Iceland’s bilateral relations with recipient countries. In the case of the Czech Republic, the main coordinator of EEA Funds is the Ministry of Finance, which administers most of the programs in cooperation with relevant departments and institutions. Funds within the current period will be available until 2024.

Prospective fields of study (MOP)

Iceland is a small, open economy, which is characterized by a combination of a free market approach with strong elements of the welfare state (the so-called Nordic model). It is among the countries with the highest GDP per person in the world and high labor productivity. Before the banking crisis of 2008-09, Iceland enjoyed a large influx of investment in the aluminum industry and hydropower. The dynamically developing financial industry had an important position within the national economy. After the financial crisis subsided, Iceland’s economy experienced a decade of strong growth, driven largely by the tourism industry and its associated air and sea transport. Within the structure of the national economy, even before the Covid-19 pandemic, the tourism industry ranked second only to public services in terms of the country’s GDP.

Energy industry

As a result of the development of electromobility, the ever-increasing energy intensity of the aluminum industry and newly built data centers, the demand for electricity in the country is increasing. At the same time, 100% of the electricity produced in Iceland comes from renewable sources, and the country wants to achieve carbon neutrality by 2040. Therefore, there is modernization and construction of new hydro and wind power plants and equipment for the production of geothermal energy, and the aging distribution network should also receive investment. Demand for key components such as transformers, turbines, generators, etc. can therefore be assumed.

Transport industry and infrastructure

As part of the post-pandemic recovery, the government plans to invest more in the development of road infrastructure, and for this purpose, partnerships between private and public sector entities (PPP) are being created, which are still not widespread in the country. In the capital region, the goal is to significantly increase the capacity of city bus transport. In 2022, the government plans to invest approximately CZK billion in the development of transport infrastructure. Opportunities are therefore offered in the broad area of ​​supply of building components and materials.

ICT

A relatively new phenomenon is the construction of data centers, which in Iceland use still affordable electricity from renewable sources and natural cooling to operate, taking into account the local climate. The average cost of operating a data center in Iceland is now half that of, for example, Germany or Britain. By 2025, investments in building data centers in the country should double. The sector offers opportunities not only in the construction, operation and maintenance of data centers, but also in the supply of hardware and software equipment.

Agricultural and food industry

Due to the adverse climatic conditions, which significantly limit the country’s food self-sufficiency, there is still a demand for high-quality and affordable food. Opportunities are also provided by the developing aquaculture – its production has quadrupled in the last 10 years in Iceland. This is a technologically demanding industry with a high degree of application of biotechnology, solid construction materials, feeding equipment or solutions for water purification.

Construction industry

The Icelandic government intends to support the local construction industry with several significant investments. The largest single project implemented in 2022 from the state budget speaks for everyone – a total of CZK billion is to be directed to the continuation of the construction of the new Landspítali hospital in 2022 alone. In addition, the expansion of housing construction in the area of ​​the capital is being prepared. The tourism industry, which is vital for Iceland, is on the rise again after the pandemic downturn, bringing with it the construction of accommodation facilities. Therefore, a wide range of building materials and components will find application.

Iceland Trade