While the European Union is still holding trade consultations on anti-dumping and anti-subsidy investigations of Chinese solar panel enterprises, Iceland will become the first European country to sign a free trade agreement with China, according to Iceland Prime Minister Johanna Sigurdardottir, who kicked off her visit to Beijing on Friday.

Before embarking on her flight, Sigurdardottir told China Daily that she aims to sign the agreement to diversify trade and reduce her country's deficit. Her visit to the country is scheduled from Saturday to Thursday.

Sigurdardottir said she is "very much looking forward" to meeting President Xi Jinping and Premier Li Keqiang. "We have had excellent relations between Iceland and China for a long time," she said. "Our 40th anniversary of diplomatic relations was in 2011 and with the official visit to Iceland of the former premier Wen Jiabao, and my visit this year, the friendship and increasing trade relations are celebrated."

She also believes the agreement will lower the price of Chinese products in Iceland, calling it "a landmark agreement" for both countries. If Iceland signs the agreement, it will become the first country in Europe to sign an FTA with China, the world's second-largest economy.

FTA negotiations

The Chinese government has 14 FTA partners comprising 31 economies. There are six agreements still under negotiation with other economies, including Norway and Switzerland.

Switzerland and China just concluded their eighth round of FTA negotiations in Beijing last month. Denmark is also seeking FTA cooperation with China, as trade between the countries has surged in recent years, said Pia Olsen Dyhr, Denmark's minister for trade and investment.

"This is the first free trade agreement China has finalized with a European country, and for Iceland this is a very important agreement, with one of the largest economic powers in the world," Sigurdardottir said.

Iceland applied to become a member of the EU in 2009.

Over the past two years, trade disputes have increased significantly. Solar panel and telecom industries are the most prominent sectors.

"Chinese entrepreneurs want to invest in Europe, so it is very urgent for us to have investment negotiations to ensure the security of two-way investment. We have more areas for the two sides to invest in the future," Zhang Lirong, charge d'Affaires, for the Mission of the People's Republic of China to the European Union, said at a meeting held by the College of Europe in Belgium on Friday.

"We don't want to see the increasing trend of protectionism especially during a time when every country is facing difficulties in economic growth," Zhang said.

Sigurdardottir said the Iceland-China free trade agreement should create increased business opportunities and facilitate trade and cooperation between the two countries.

"With customs duties lowered or at zero, free trade should also lower prices to Icelandic consumers, on Chinese products, and increase competitiveness for Icelandic companies exporting or providing services to China," she said.

According to China's National Bureau of Statistics, bilateral trade between the two countries reached $152 million in 2011, with a 35 percent year-on-year growth.

"Although the trade deficit is large (between Iceland and China), we have seen a lot of increases in trade with China and exports of goods to China for the last decade," Sigurdardottir said.

Deficit reduction

"With the free trade agreement coming into force, I certainly hope that this will have a very positive effect on trade, reducing the deficit."

She said she will also have an opportunity to host a business seminar in Beijing, where future opportunities in trade relations will be discussed. A business delegation with representatives of more than 20 Icelandic companies is expected to attend. Many of these companies already have trade agreements and Memorandum of Understanding that they plan to sign during the visit, Sigurdardottir said.

The prime minister also wants to diversify trade with China in areas including tourism, geothermal utilization and Arctic research.

After the FTA is signed, Iceland will not change its investment policy toward China, she said.

China will play an important role in Iceland's recovery from the economic crisis, and the free trade agreement with China will certainly be important for Iceland's economic growth, debt reduction and job market, the prime minister said.

The total trade in goods of Iceland last year was 1.188 trillion ISK ($9.98 billion), while the total trade in services was 726 billion ISK.

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(China Daily 04/15/2013 page12)