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A bilateral free trade agreement (FTA) between Iceland and China was signed on April 15 in Beijing by Ossur Skarpheoinsson, Minister for Foreign Affairs and External Trade of Iceland, and Gao Hucheng, China's Minister of Commerce, and witnessed by the Chinese Premier Li Keqiang and Iceland's Prime Minister Johanna Sigurdardottir.

The Iceland-China FTA is the first to be signed between China and a European country. In a joint statement, its purpose was said to be a further deepening of their mutually beneficial co-operation in the fields of trade (by abolishing tariffs) and investment.

The bilateral FTA is also said to be, in essence, similar to other FTAs that Iceland, as a member of the European Free Trade Association, has already concluded. It covers trade in goods and services, rules of origin, trade facilitation, intellectual property rights, competition and investment, and will enter into force when legal procedures of acceptance in both countries have been concluded.

With the entry into force of the FTA, tariffs on most goods between the two countries will be removed. For a small number of products, Chinese tariffs will be dismantled during a transition period of 5 or 10 years, but Chinese exports into Iceland will be duty-free as from the entry into force. Both China and Iceland exclude a limited number of products from tariff preferences – Iceland excludes, for example, dairy and meat products, while China will exclude certain paper products.

Iceland-China trade has been growing constantly over the years in spite of its small scale. Icelandic exports reached USD61.2m in 2012, up by 40.8% from 2011, and Icelandic imports from China reached USD340.8m, up from USD 287.7m in the previous year.

China is now Iceland's 4th biggest importing country and the biggest trading partner in Asia. However, even though Icelandic exports to China have been growing fast, China still only ranked as Iceland's 19th export market in 2012. Seafood has been the biggest growth factor of Icelandic exports to China, but the export variety and export value of other products such as electrical scales and ferrosilicon are also increasing.

China-Iceland FTA negotiations started in December 2006, but were aborted in 2009. In April 2012, the leaders of the two countries agreed to restart the talks, and, after a further two rounds, the final terms of the agreement were agreed in January this year.

The Icelandic Ministry for Foreign Affairs pointed to the agreement with China as an important milestone in Iceland's long-term policy to establish a comprehensive FTA network. Iceland has, so far, concluded 26 FTAs with a total of 35 partner countries outside the European Union.

Keqiang welcomed the FTA as a major event. It appears that the Icelandic agreement may have a particular importance to China to show how trade ties could be developed with the rest of Europe, but it could also be of use during the upcoming exploration of natural resources in the Arctic region.

• [Editor:editor]