Environmental Impacts of a Free Trade Agreement between China and Norway

Report 2011/33

Haakon Vennemo

Environmental Impacts of a Free Trade Agreement between China and Norway

Category	Reports
Sub-Categories	Development Cooperation
Year	2011
Report Number	33
Author(s)	Haakon Vennemo
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Environmental Impacts of a Free Trade Agreement 
between China and Norway	 	
Ole Kristian Fauchald and Haakon Vennemo	 	
 
Vista Analysis 	Report 2011/33 	 	
FNI Report 1/2012	 	
 
2 January 2012	 	
Report 
33
/2011
 from Vista Analysis AS

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	1 	
 
Document Details	 	 	
Vista Analysis AS	 	Report number 2011/33	 	 	
Title 	 	Environmental impacts of a Free Trade Agreement 
between China and Norway 	 	
 	
ISBN	 	978	-82	-8126	-047	-4 	 	
Author	 	Ole Kristian Fauchald and Haakon Vennemo	 	 	
Finished date	 	January 2, 2012	 	 	
Project Manager	 	Haakon Vennemo	 	 	
Quality Control	 	NA	 	 	
Client	 	Ministry of 	the 	Environment	, Norway	 	 	
Access	 	Public 	 	 	
Published 	 	Pdf	 	 	
Key words	 	Environment, free trade agreement, China, Norway

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	2 	
 
Acknowledgements	 	
This report 	has 	been	 written by Ole Kristian Fauchald of the Fridtjof Nansen Institute, and Haakon 	
Vennemo of Vista Analysis. Through the drafting process the authors have had close dialogue with a 
team at Beijing Normal University 	headed by	 Hu Tao and Mao Xianqiang. We t	hank them for fruitful 	
discussions and constructive comments. Ginni Wiik and Eirik Grytli 	have 	provided excellent research 	
assistance. We would also like to thank participants at the 	public 	hearing on environmental impacts 	
of the Sino	‒Norwegian Free Trade Agreement held in March, 2011, and the 	workshop on the same 	
topic held in June 2011. In particular we thank Friends of the Earth, ForUM and the Norwegian Trade 
Campaign for thoughtful written comments. Finally	, our 	thanks go to the Mi	nistry of 	the 	Environment 	
for organizing the project, and to Beate Berglund Ekeberg, Helene Hoggen and Solveig Crompton for 
helpful comments to earlier drafts.

Environmental implications of a Sino	-Norwegian FTA	 	
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Contents	 	
 
Acknowledgements	 ................................	................................	................................	................................	........	 2 	
Executive summary	 ................................	................................	................................	................................	........	 5 	
1. Introduction	 ................................	................................	................................	................................	...............	 11	 	
2. Main 	content of this assessment	 ................................	................................	................................	........	 12	 	
3. Baseline scenario	 ................................	................................	................................	................................	.....	 12	 	
3.1 Recent trends in trade and investment	 ................................	................................	...................	 13	 	
3.2 Baseline scenario for trade in goods	 ................................	................................	.........................	 17	 	
3.3 Baseline scenario for trade in services	 ................................	................................	....................	 22	 	
3.4 Bas	eline scenario for investment	 ................................	................................	...............................	 26	 	
4. Screening	 ................................	................................	................................	................................	.....................	 27	 	
4.1 Trade in goods	 ................................	................................	................................	................................	... 27	 	
4.2 Trade in services	 ................................	................................	................................	...............................	 28	 	
4.3 Investment	 ................................	................................	................................	................................	..........	 30	 	
5. Free trade scenario	 ................................	................................	................................	................................	. 30	 	
5.1 Trade in goods	 ................................	................................	................................	................................	... 30	 	
5.2 Trade in services	 ................................	................................	................................	...............................	 36	 	
5.3 Investment	 ................................	................................	................................	................................	.........	 39	 	
5.4 Measures to avoid negative environmental consequences	 ................................	.............	 41	 	
6. Green trade scenario	 ................................	................................	................................	..............................	 43	 	
6.1 Introduction	 ................................	................................	................................	................................	........	 43	 	
6.2 General measures	 ................................	................................	................................	.............................	 44	 	
6.3 Defining environmental goods and services	 ................................	................................	..........	 44	 	
6.4 The envi	ronmental priorities of China and Norway	 ................................	...........................	 47	 	
6.5 Trade in goods	 ................................	................................	................................	................................	... 48

Environmental implications of a Sino	-Norwegian FTA	 	
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6.6 Trade in services	 ................................	................................	................................	...............................	 51	 	
6.7 Investment	 ................................	................................	................................	................................	..........	 56	 	
7. Scoping	 ................................	................................	................................	................................	.........................	 58	 	
7.1 Introduction	 ................................	................................	................................	................................	........	 58	 	
7.2 Free trade scenario	 ................................	................................	................................	..........................	 58	 	
7.3 Green trade scenario	 ................................	................................	................................	.......................	 60	 	
8. Environmental impacts of the free trade scenario	 ................................	................................	.....	 61	 	
8.1 The ‘pollution haven’ and ‘race to the bottom’ hypotheses	 ................................	.............	 61	 	
8.2 Case study 1 	– Export of fish from Norway to China	 ................................	..........................	 63	 	
8.3 Case study 2 	– Export of clothing from China to Norway	 ................................	.................	 74	 	
8.4 Case study 3 	– Services associated with mining	 ................................	................................	... 79	 	
8.5 Mode 4 of supply of services	 ................................	................................	................................	........	 82	 	
8.6 National treatment of investment	 ................................	................................	..............................	 85	 	
9. Environmental impact	s of a green trade scenario	 ................................	................................	......	 90	 	
9.1 Integration of general clauses on the environment	 ................................	............................	 90	 	
9.2 Fast track for environmental goods and	 services	 ................................	..............................	101	 	
9.3 Export controls of goods	 ................................	................................	................................	..............	106	 	
9.4 Intellectual property rights (IPR)	 ................................	................................	............................	109	 	
9.5 Case study 4 	– Clean energy	 ................................	................................	................................	.......	113	 	
9.6 Case study 5 	– Carbon capture and storage (CCS)	 ................................	.............................	114	 	
Tables, figures	 and boxes	 ................................	................................	................................	........................	116	 	
References	 ................................	................................	................................	................................	.....................	117

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Executive summary	 	
Environmental impact assessment of a free trade agreement between China and Norway	 	
China and Norway have a 	long history of negotiating commerce. One early example is the Treaty of 	
Peace, Friendship and Commerce, signed in Canton (Guangzhou) in 1847. The 	two 	countries are 	
currently negotiating a free trade agreement (FTA). 	This	 will be Norway’s first agreement c	onducted 	
independently of EFTA since 1992	, and	 could 	also 	become China’s first agreement with a mainland 	
European country. 	 	
In recent years it has become common to conduct environmental assessments 	(EAs) 	of free trade 	
agreements. Examples involving China i	nclude New Zealand’s National =nterest Analysis of the 	
China	‒New Zealand FTA (2008), the analysis of a potential FTA between China, Japan and Korea (Liu 	
et al.	, 2010) and the analysis of a potential partnership and cooperation agreement between China 	
and the EU (EU, 2008). The U	SA	, Canada and other countries regula	rly conduct environmental 	
assessments of free trade agreements. Depending on their timing and official status the assessments 
inform negotiators about pitfalls and opportunities, with the potential of influencing negotiation 
outcomes; or they anal	yse impac	ts of an FTA after the fact, providing impetus for national policy 	
debates on follow up measures and safeguards. Given the limited number of 	its 	FTAs	 with	 other 	
countries	, Norway has not developed a	 tradition 	of conducting EAs of such agreements. This repo	rt 	
therefore marks a first for Norway. It is written during a pause in negotiations and may therefore 	be 	
of use during	 the next phase. The perspective and approach of the report may also 	prove 	of value for 	
future Norwegian trade agreements. 	 	
A distinguishi	ng feature of this report is that economic, regulatory and policy analyses are integrated 	
throughout the assessment. 	The FTA is meant to have an economic impact 	– on trade and 	
investment,	 on	 production and consumption. This economic impact is likely to hav	e environmental 	
consequences. An FTA may also delineate the borders between trade policy and environmental 
policy, with further consequences for the environment. Initial consequences may motivate changes 
in domestic environmental policy, 	leading	 to a secon	d round of consequences for the environment, 	
and so on. In short	, an FTA is likely to have consequences for the environment through 	various	 	
channels	. S	ome are economic in nature and some	 regulatory. 	 	
Important elements of the analysis 	have been	 worked out 	in collaboration between the Norwegian 	
authors and a team from Beijing Normal University 	consisting of	 experts in analy	sing environmental 	
consequences of free trade agreements. The assessment is built on publicly available information. 	It 	
follows the metho	dology outlined in Fauchald and Vennemo (2011). 	One element of the project has 	
been to communicate with the public and officials. 	We 	established a project website 	(fni.no/Norway	-	
China	-FTA/index.htm	), received some written comments from 	non	-governmental org	anizations 	
(fni.no/Norway	-China	-FTA/participation.htm	) organized a public hearing on March 4 2011 	
(fni.no/Norway	-China	-FTA/hearing.htm	), and have had several meetings with public officials, 	
primarily from the Ministry of the Environment.	 	
Free trade and gre	en trade scenarios describe the outcome of trade negotiations	 	
This assessment examines consequences 	under	 two scenarios for 	the 	outcome of the trade 	
negotiations.	 The 	free 	trade 	scenario	 assumes that tariffs and non	-tariff barriers are reduced and 	
eventual	ly eliminated, taking cues for the details from previous Norwegian and Chinese trade 	
agreements as well as 	from 	the 	feasibility study conducted by China and Norway at the initiation of 	
trade negotiations. From a Norwegian perspective	, the Chinese trade agr	eements with Chile and 	
Peru, two important fishery nations, provide interesting precedents. 	As to	 intellectual property 	
rights	, this	 scenario builds on the obligations of the TRIPS agreement	, without including	 all the 	
additional provisions found in EFTA’s 	FTAs. For most services of interest (in particular mining, energy 	
production and distribution, research and development services, environmental services)	, the 	
scenario assumes that both Norway and China 	will 	undertake commitments to allow 	greater

Environmental implications of a Sino	-Norwegian FTA	 	
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commercia	l presence of enterprises (mode 3 of supply), as well as increased availability of cross	-	
border supply (mode 1) and supply through 	the 	presence of natural persons (mode 4). The free trade 	
scenario also allows the 	national treatment (	NT	) obligation to be ap	plied to 	the 	establishment of an 	
investment, and investors to bring disputes to international arbitration. Public procurement is not 
part of th	is scenario	, and m	easures to avoid negative environmental consequences of trade are 	
limited to general exceptions	. 	
The 	green 	trade 	scenario	 includes similar provisions as the 	free 	trade 	scenario, but complements 	
them by adding measures to enhance 	the 	positive impacts 	of trade and to	 safeguard against negative 	
impacts. Measures aimed at enhancing positive impacts are 	directed at environmental goods and 	
services. There are several lists of environmental goods, including a list of 153 goods that has gained 
some prominence. The scenario does not explicitly endorse any list, but considers that goods that 
promote the indoor	 rural environment 	(primarily an issue for	 China) 	and goods that promote the 	
global environment should be properly included. In a paper authored by the Chinese team (Hu Tao, 
2011) a list of 227 goods is suggested. We assume that the 	green 	trade 	scenario wi	ll eliminate import 	
tariffs on environmental goods 	entering	 China. Most tariffs into Norway 	have already been	 	
eliminated. With respect to non	-tariff barriers on environmental goods	, the green trade scenario 	
covers a 	‘fast	-track	’ for importing environmental	 goods, and export controls for environmentally 	
harmful goods (primarily an issue for China). In addition, the scenario considers intellectual property 
rights in light of efforts to balance the need for improved environmental technologies (	assuming that 	
intellectual property rights will promote such technologies	) with the need to disseminate such 	
technologies. 	Relevant suggestions	 can also be found in some of China’s FTAs,	 e.g., th	ose	 with Peru 	
and Costa Rica. 	Further, t	he 	green 	trade 	scenario assumes that 	China and Norway 	will 	undertake not 	
to apply countervailing duties and anti	-dumping measures on environmental goods and services. 	
Such	 duties and measures remain available if they can be justified on environmental grounds. Th	is 	
scenario considers that furt	her liberalization of trade in environmental services may be both to the 	
benefit and to the disadvantage of the environment	. It is	 not limited to environmental services as 	
defined in the Norwegian and Chinese WTO schedules. Regarding investment, the scenar	io considers 	
linking the environmental performance of investors to the FTA, based on the OECD Guidelines for 
Multinational Investments.	 	
The scenarios are compared to a 	baseline scenario 	characterised by WTO	-commitments and existing 	
bilateral trade and inve	stment agreements between China and Norway. Since the green trade 	
scenario takes off from the free trade scenario it is also possible to compare the green trade and free 
trade scenarios.	 	
Based on processes of screening and scoping in light of input from co	nsultations with public 	
authorities, 	non	-governmental organizations	 and the team of Chinese researchers, we have selected 	
five ‘case studies’ and five ‘regulatory studies’ for assessment. The case studies focus on effects of 
the FTA on trade and investment	 between Norway and China, and the resulting environmental 	
consequences. The regulatory studies focus on effects of the FTA 	for	 environmental rules and policy.	 	
Environmental consequences of the 	free 	trade 	scenario	 	
According to t	he ‘pollution haven’ hypothe	sis	, liberalization of trade 	leads	 to environmental 	
deterioration in developing countries. Despite fairly extensive research	, this	 hypothesis has failed to 	
generate much empirical support	. We find that increased competition between Norwegian and 	
Chinese bu	sinesses can lead to a ‘regulatory chill’ in some specific contexts, in particular related to 	
CO	2 emissions	 ‒ a fact to bear in mind when assessing the outcome of our analysis of 	the 	
environmental consequences of the free trade scenario. 	 	
Salmon farming:	 The FTAs between China and Chile and China and Peru contain provisions that 	
eliminate tariffs from an initial level of about 10	% to zero over a few years. By comparison	, the 	
current tariff on Norwegian salmon is about 10	%. Norway currently has a cap on sal	mon production 	
from farming	: if it is not lifted	, the impact of an FTA will of course be negligible. Assuming that the

Environmental implications of a Sino	-Norwegian FTA	 	
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cap is lifted	, our	 analysis finds that exports of salmon 	will 	increase. Based on available studies, our 	
best estimate is that the 	free 	trade 	scenario 	is likely to	 have 	the following consequences:	 	
 	300 additional farmed salmon reaching waterways	 	
 	1.4 million additional fish 	lice	 	
 	11	 000 tons additional fish catch, of which 122 tons overexploited blue whiting	 	
 	48	 000 tons additional CO	2 emissions	 	
The 	apparent precision	 of the	se figure	s does not reflect true accuracy. These are estimates produced 	
by traditional life	-cycle methodology	, including an implicit assumption that marginal and future 	
production technology is equal to current, average techno	logy. 	 	
Readers unfamiliar with the problems of fish farming may find it difficult to 	assess 	the 	figure	s. As a 	
percentage of the size of current problems they are low	, mainly because	 China is a rather small 	
export market for Norwegian salmon 	at present	, and	 there are limitations as to	 how much bigger 	the 	
market 	can be expected t	o become as a result of 	10%	 lower prices. 	Assuming	, not unrealistically, that 	
a greater market share for Norwegian salmon will mean a smaller market share for, e.g., Scottish or 
Chile	an salmon	, the global environmental impacts will be smaller than the national impacts for 	
Norway.	 	
Services associated with mining:	 There is 	growing	 interest in Norw	ay’s	 mineral resources. Norwegian 	
municipalities have set aside 2313 localities that may be 	used for mining activities (NGU and DM, 	
2011). China is a leading country in the mining and minerals industries, and has significant world 
market shares in a broad range of mineral products. Chinese enterprises are carrying out mining 
activities through mo	de 4 of supply (physical presence of Chinese miners) elsewhere in the world. 	On 	
the basis of	 these considerations	, as well as increases in other modes of supply	, we foresee that 	
Norwegian commitments in the mining sector are likely to have some negative re	gulatory and 	
environmental impacts, see 	Table 1.1. 	 	
Table 1.1	 	Impacts of mode 1 	– 4 commitments for Norwegian mining	 	
Mode of 
supply	 	
Primary (economic / trade) 
consequence	 	
Regulatory consequences	 	Environmental 
consequences	 	
Mode 1	 	
Cross	-border 	
supply	 	
Incre	ased outsourcing of 	
analytical and surveillance 
related activities to China. 
Limitations on the activities 
of 	the 	national institution for 	
knowledge on bedrock, 
mineral resources, surficial 
deposits and groundwater	 	
(NGU	) due to the prohibition 	
against comp	etition with 	
private service suppliers.	 	
Increased difficulty 	in regulating 	
and controlling the quality of the 
service.	 	
Increased risk of harmful 
emissions from accidents 
and ordinary operation.	 	
Mode 2	 	
Consumption 
abroad	 	
No significant effects.	 	 	 	
Mode 3	 	
Commercial 
presence	 	
Some increase in Chinese 
investments relative to 
investment from other 
countries. Chinese investors 
may have a preference for 	
Chinese investors 	might	 challenge 	
environmental requirements 	on 	
the basis of investment protection 
rules included in the FTA or under 
the current BIT between China 	
Increase in foreign 
investment may lead to 
increased political 
pressure to exploit 
mineral resources that

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	8 	
exporting raw materials in 
short supply to China.	 	
and Norway, e.g. non	-	
discrimination in light of the 
potential need to strengthen 
environmental policy measures as 
the industry develops and 
environmental	 impacts 	
accumulate (see also section 8.6 
below).	 	
otherwise 	might 	have 	
been left unexploited due 
to environmental 
concerns.	 	
Mode 4	 	
Presence of 
natura	l 	
persons	 	
Chinese enterprises will 
increase the use of Chinese 
workers on mining sites in 
Norway. This is particularly 
relevant due to the current 
lack of skilled work force in 
Norway.	 	
While Norwegian legislation will 
apply to Chinese workers in 
Norway, si	gnificant compliance 	
and enforcement issues are likely 
to arise.	 	
Increased risk of harmful 
emissions from accidents 
and ordinary operation	s. 	
 
In particular, we emphasize the challenges that such commitments may have for compliance and 
enforcement of Norwe	gian rules and standards. Possible mitigating measures 	include	 the following:	 	
 	The Norwegian schedule could list reservations under mode 1 and mode 4 of supply relating 
to national treatment, to ensure future possibilities of establishing quality control wi	th 	
Chinese service suppliers or Chinese services.	 	
 	The FTA could include arrangements to 	promote	 cooperation among Chinese and Norwegian 	
authorities and industries in the mining and environmental sectors.	 	
 	Measures could be taken to strengthen the capabiliti	es of relevant Norwegian monitoring 	
and enforcement authorities.	 	
Mode 4 of supply of services:	 The free trade scenario assumes that Norway will undertake some 	
commitments regarding mode 4 of supply. In 2006 Norway participated in a collective request to 
allow the presence of persons, in particular managers of contractual service suppliers, and 
independent professionals. Nevertheless, it is not unlikely that Norway will maintain major 
reservations.	 	
In our view,	 the primary consequences of Norwegian commitmen	ts are that Chinese enterprises, 	
including enterprises where Chinese investors own large share	s, will significantly expand their use of 	
Chinese professional	s in Norway	. Norwegian enterprises as well as foreign	-owned enterprises 	will 	
probably	 do the same. 	The 	likely 	result will be to lower the cost of services where Chinese personnel 	
are used. One example 	with environmental 	relevance is 	the 	construction of wind power and mini	-	
hydro facilities, see below. 	While lower cost of renewable energy is positive for 	the environment, 	
compliance and enforcement problems may arise, especially 	given 	the language barrier. Depending 	
on the character of the activity in question, compliance and enforcement problems 	may bring	 	
increased risk of harmful environmental effects fro	m ordinary activit	ies	 or from accidents that may 	
occur as a result of the	se activit	ies	. 	
National treatment of investment:	 The national treatment 	(NT) 	provision is likely to cover all 	
regulatory and economic measures that may affect an investment during its	 life	-cycle. Trends in case 	
law indicate that investors face a 	heavy	 burden of proof when invoking 	such	 provisions, and that 	
claims are increasingly based on the fair and equitable treatment provisions rather than the 	NT	 	
provisions. We find that there is a	 low but slightly 	above	-average (compared to BITs and other FTAs), 	
and increasing probability that an investor will invoke the 	NT	 provision under a Sino	‒Norwegian FTA.

Environmental implications of a Sino	-Norwegian FTA	 	
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Future clarification of the 	NT	 obligation is likely to establish a fair balance between 	the interests of 	
investors and states, as seen from the perspective of investment tribunals. Adding an explanatory 
footnote to the 	NT	 provision could 	allow states to justify measures that otherwise would be regarded 	
as unlawful under the provision. Such a 	footnote would increase the emphasis on the motivation of 	
public authorities, and allow a broad range of arguments and materials to be brought forward during 
dispute settlement. This 	in turn 	could significantly increase the cost of proceedings.	 	
 
Environmen	tal consequences of the 	green 	trade 	scenario	 	
Several 	recent 	cases 	have demonstrated the	 potential tensions between trade and 	the 	environment. 	 	
 	China’s policies in support of wind electricity and	, recently, photovoltaic (solar) electricity 	
have been critici	zed for constituting unfair trade practice and brought to the WTO.	 	
 	EU’s policy 	of charg	ing	 airplanes taking off from Europe	an	 airports for the carbon they emit 	
has been criticized by US and Chinese airlines	, and l	awsuits are pending at the European 	
Court o	f Justice. 	 	
 	China’s policy 	of limiting	 the export and production of rare earths on environmental grounds 	
ha	s been criticized by the main importing countries and brought to the WTO.	 	
These cases are described in boxes in the main text of the report. In such 	cases, it is the 	principle	 of 	
the 	green 	trade 	scenario that legitimate environmental interests shall prevail over trade interests. 	 	
Integration of environmental provisions: 	The report considers the inclusion of environmental 	
provisions in the preamble and 	the main text of the FTA, and distinguishes between provisions on the 	
purpose and principles of the FTA, on the rights and obligations of states, and on institutional and 
procedural issues. P	reambular language, including statements on the 	relationship betw	een the FTA 	
and existing environmental agreements, is unlikely to have effects in the short term	 (first five years)	, 	
but 	may well prove	 relevant 	to the interpretation and application of the FTA in the medium and long 	
term. The report finds that there is so	me scope for extending and specifying the general exceptions, 	
but that such extension is likely to have limited effects in practice. 	We	 conclude that the most 	
effective approach to ensuring appropriate regulation of the relationship between the FTA and MEA	s 	
would be to adopt a provision 	setting out	 precise rules regarding the relationship between the FTA 	
and a limited number of MEAs. Some recent FTAs contain provisions recommending or prohibiting 
the lowering of environmental standards in order to attract i	nvestment or gain competitiveness. 	In 	
our view,	 such 	provisions	, combined with 	a high	-level consultation mechanism	, could 	prove 	
important	 in the rare cases where Norway 	or China lower their environmental standards 	in order 	to 	
gain competitiveness.	 	
Fast tr	ack for environmental goods and services: 	The 	green 	trade 	scenario seeks to stimulate trade 	
in environmental goods and services and is tolerant towards trade barriers on environmentally 
harmful goods and services. Norway has a zero import tariff on most in	dustrial goods	, and an 	
initiative to exempt specific environmental goods from tariff is unlikely to make much difference. 
Chinese tariffs on most environmental goods are 5	‒10	%. Non	-tariff barriers are in some cases the 	
most important barriers to the innova	tion and manufacture of environmental goods. The report 	
considers that the following measures can be taken to ‘fast track’ the import and export of 
environmental goods: eliminate tariffs on environmental goods (in practice relevant only 	as regards	 	
China); 	implement measures to secure increased trade facilitation; simplify access to export credit 	
and other forms of lawful and generally accepted forms of support to stimulate export; undertake 
not to impose countervailing and anti	-dumping duties on environment	al goods; and ensure that 	
communications and consultations regarding import and export of environmental goods are given 
high priority in relevant institutions established under the FTA. The report recommends that 
environmental services be redefined for th	e purpose of ‘fast tracking’, and that 	such 	‘fast tracking’ 	
should 	focus on commitments for modes 1 and 4 of supply.

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Export control of goods: 	This issue is controversial at the time of writing, 	because	 in the case China 	– 	
Measures Related to the Exportatio	n of Various Raw Materials (WT/DS394/R)	 a panel has recently 	
issued a report, which has been appealed. The main thrust of the panel’s finding is that the measures 
taken by China are unlawful under the WTO Agreement. Against this background, 	this	 report 	
dis	cusses the possibilities of increasing the flexibility and predictability for a state resorting to export 	
controls for environmental purposes. The options recommended are 	including 	an interpretative note 	
to the relevant general exception explaining the int	entions of the parties as to its application to 	
export controls; and an annex to the FTA in which the parties may list 	general	 and/or 	specific	 	
exceptions.	 	
Intellectual property rights:	 The 	present 	report finds that there is room for a clearer emphasis on 	
environmental issues in the context of intellectual property rights than 	at present	 under the TRIPS 	
Agreement. It also observes that China and Norway seem to have similar positions on the 
relationship between intellectual property rights and biodiversity an	d recommends that this issue be 	
explored further in the negotiations.	 	
Clean energy and CCS: 	In 2010 China invested 30	% more in new renewable energy than the second	-	
ranking	 country	, Germany	, and 60	% more than the third	-ranking	 country	, the 	USA. China has th	e 	
highest capacity in the world of hydro, mini	-hydro and wind, and is increasing its capacity in solar 	
photovoltaics very rapidly. Norway has perhaps the largest hydro	-capacity in the world 	in relation	 to 	
its size and significant competence in hydro	-techno	logies. Norway has 	considerable	 potential for 	
onshore wind	: the potential for further expansion remains large in China as well. Both countries have 	
notable	 un	tapped	 potential for offshore wind	 energy production	. 	
The promotion of clean energy and CCS 	will 	challenge a trade agreement at many different levels. 	
Here we note	: technology transfer and 	intellectual property rights	; in order to bring down 	the 	costs 	
of environmental services, 	greater	 openness concerning mode 4 of supply would be helpful; 	
facilitated	 trade in goods that are important components of environmental services; and measures to 	
ensure that public procurement is based on merit.	 	
Apart from 	public 	procurement, which we 	have not considered	, the other options are 	evaluated	 in 	
the 	green 	trade 	scena	rio. Lowering the Chinese import tariff on environmental goods is probably the 	
simplest to achieve. As noted, some liberalization of mode 4 of supply of services is included in 	both 	
the 	free 	trade 	and 	the g	reen 	trade 	scenarios, and may promote cl	ean	-en	ergy	 technologies. Progress 	
with respect to 	intellectual property rights	 would also benefit the interchange and promotion of 	
clean	-en	ergy technologies.

Environmental implications of a Sino	-Norwegian FTA	 	
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1. Introduction	 	
The People’s Republic of China (China) and Norway signed a Memorandum of Understanding 	(MoU) 	
on 18 September 2008 to undertake negotiations of a Free Trade Agreement (FTA) between the two 
countries. According to the MoU, 	 	
The Free Trade Agreement will aim at promoting trade in goods and trade in services, while 
facilitating investment flows 	between the People’s Republic of China and the Kingdom of 	
Norway, contributing to sustainable economic growth as well as enhancing the cooperation 
between their enterprises, thus improving the welfare and living standard of their people.	 	
The Norway	–China F	ree Trade Agreement 	– Joint Feasibility Study (hereafter the Feasibility Study) 	
presents these 	general conclusion	s on the expected outcomes of the negotiations:	 	
A possible FTA between China and Norway would be expected to eliminate tariffs on 
substantiall	y all the trade between the two countries and addressing non	-tariff measures, 	
while taking into account sensitivities on both sides. … Further liberalisation of trade in 
services between the two countries should be aimed at creating mutual beneficial and t	ailor 	
made solutions for China and Norway.	 In relation to investment, the future FTA between 	
China and Norway would result in greater transparency of regulations and laws that affect 
both direct and portfolio foreign investments, more liberalised regimes 	which will facilitate 	
investments in each country, and a more stable policy framework for investors.	 (Feasibility 	
Study, 	Ministry of Trade and Industry 2008: 5)	 	
China is Norway’s second largest trading partner outside the EU.	 The 	envisaged 	FTA between Chin	a 	
and Norway will be one of several agreements 	relevant t	o commerce between the two countries.	1 It 	
may encompass or replace in whole or in part some earlier agreements. 	 	
This is the first bilateral FTA 	to be 	negotiated by Norway on a bilateral basis since 	1992	, as m	ost such 	
agreements are negotiated through EFTA. No environmental assessments (EAs) have been c	onducted 	
as regards	 bilateral FTAs in EFTA. Nor ha	ve	 EAs been conducted on an independent basis, e.g., by 	
academic institutions. 	 	
China has negotiated	 various	 bilateral FTAs in recent years	,2 and these	 have to some extent been 	
subjected to EAs. Its FTA with New Zealand was initiated by a Joint Study Report (2004) which 
anal	ysed potential impacts of future negotiations in different dimensions, including 	environmental 	
impacts. The final FTA was made subject to a National Interest Analysis by New Zealand (2008) that 
includes a brief assessment of environmental effects. A possible Partnership and Cooperation 
Agreement between China and the EU has been the su	bject of an extensive ‘sustainability impact 	
assessment’ (S=A) emphasizing environmental features (EU, 2008) and a team of researchers from 
Beijing Normal University and other institutions have carried out an EA of a possible FTA between 
China, Korea and J	apan (Liu 	et al.	, 2010). 	 	
EAs of free trade agreements are quite common in some other countries, most prominently the U	SA	3 	
and Canada.	4 The EU has carried SIAs of 	several	 FTAs and other economic cooperation agreements.	5 	
In recent years, some developing cou	ntries, in particular 	Latin	 American, have started to undertake 	
 	 	 	1 A list of relevant bilateral agreements between Norway and China is set out in the Methodolo	gy Report.	 	2 See 	http://fta.mofcom.gov.cn/english/index.shtml	. 	3 See 	http://www.ustr.gov/trade	-topics/environmen	t/environmental	-reviews	. 	4 See 	http://www.international.gc.ca/enviro/assessment	-evaluation/trade	-	
commercial.aspx?menu_id=21&menu=R	. 	5 See	 http://ec.europa.eu/trade/analysis/sustainability	-impact	-assessments/	.

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	12	 	
EAs of their FTAs.	6 	
Nomenclature is not settled in this area. The term 	‘environmental assessment	’ (EA) is used as 	
shorthand for this analysis	, in line with	 Canadian us	age	. The content of the a	nalysis and process also 	
fits with the term SEA (for Strategic Environmental Assessment (or Analysis)), or EIA (environmental 
impact assessment). 	 	
This EA follows the modalities and methodology outlined in Methodology Report (Fauchald and 
Vennemo, 2011). I	t is based on publicly available information about the FTA	 negotiations between 	
China and Norway.	 	
2. Main content of this assessment	 	
This assessment is built around a baseline scenario (chapter 3), a free trade scenario (chapter 5) and 
a green trade scenar	io (chapter 6). The baseline scenario assumes that no FTA between China and 	
Norway is agreed	, and analyses the patterns of trade and investment given this assumption. The free 	
trade scenario assumes that an FTA is agreed, lowering trade and investment barr	iers with 	a view to	 	
facilitating trade and investment between the two countries. The green trade scenario assumes that 
particular attention is paid to facilitating sustainable, green trade and investment	; further, that, t	o 	
this end,	 some barriers are lower	ed to facilitate environmentally beneficial trade and investment, 	
and some environmental safeguards and policies are strengthened. 	 	
The difference between the baseline scenario on the one hand and the free trade and green trade 
scenarios on the other defin	es the economic and regulatory impacts of the FTA. However, in practice 	
any analysis of an FTA will have to focus on impacts that are likely to be 	important from political, 	
social, economic or environmental perspectives	. This assessment conducts a screenin	g based on the 	
Methodology Report (chapter 4) and scoping (chapter 7) of impacts for their environmental 
implications	, and concludes this process by identifying a limited number of sectors and issues 	for 	
further analysis	. 	
The sectoral studies	 are referred	 to as	 case studies	 here	. There are three case studies in the free 	
trade scenario (fish, clothing, services associated with mining) and a further two in the green trade 
scenario (clean energy and carbon capture & storage). In addition	, the free trade scena	rio analyses 	
the 	impacts of mode 4 supply of services, and national treatment of investment. The green trade 	
scenario analyses 	the 	impacts of integrating general clauses on the environment, of fast	-track	ing	 for 	
environmental goods and services, of export c	ontrols for environmental purposes, and of intellectual 	
property rights. 	 	
 	
3. Baseline scenario	 	
In accordance with good practice	 in EAs (see Methodology Report) we develop a baseline scenario 	
that provides a yardstick for evaluating impacts of the free tr	ade and green trade scenarios. One 	
main question is how 	to deal with the 	still	-ongoing negotiations in the WTO. For Norway, the major 	
implications of 	a conclusion of the Doha Round are likely to be reduction of tariffs and subsidies in 	
the agricultural sec	tor as well as extension of commitments in the services sector. For China, w	ith its	 	
broader range of trade restrictions, conclusion of the Doha Round might have more significant 
 	 	 	6 OECD 2007:67	‒68 ‘The United States, in particular, has encouraged its trade partners to conduct	 assessments. 	
Morocco, Jordan, Chile, and Singapore for example have conducted assessments in connection with RTAs 
negotiated with the United States, but these reports are generally not publicly available. … In addition, some 
countries have conducted asses	sment studies with financial and technical support from the United Nations 	
Environment Programme (UNEP).’ UNEP has sponsored country studies covering more than 20 countries.

Environmental implications of a Sino	-Norwegian FTA	 	
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effects, e.g. for tariffs and market access for goods, commitments regarding s	ervice sectors, and 	
investment	-related issues (through service commitments). Given the high level of uncertainty 	
regarding the results of the Doha Round, as well as 	our	 limited access to information about countries’ 	
positions in the negotiations, in partic	ular those of China, we 	decided against basing	 the baseline 	
scenario on a potential conclusion of the Doha Round. 	As c	onclusion of the Doha Round would 	
presumably facilitate trade and investment between Norway and China, thus reduc	ing 	the relative 	
effects 	of a	 Sino	‒Norwegian	 FTA	, our choice of baseline scenario is more likely than not to involve an 	
over	-estimation of the potential effects of 	such 	an FTA. 	 	
The baseline is defined by the existing legal commitments of the negotiating partners	: in the context 	
of these negotiations	, the commitments 	undertaken by	 Norway and China in the WTO as well as 	
bilateral agreements in force between the parties. 	We have adjusted t	his starting point 	on the basis 	
of relevant unilateral decisions of the negotiating parties to l	iberalize, in particular 	regarding 	the 	
application of lower tariffs than those set out in the WTO Schedule of Concessions.	 	
 	
3.1 Recent trends in trade and investment	 	
To introduce the baseline scenario we review recent trends and the present situation with 	respect to 	
trade and investment volumes between China and Norway. 	 	
Trade in goods	 	
For trade in goods, both imports from China and exports to China are increasing, 	with	 imports 	
increasing the most	 (see Figure 3.1	). Note that these figures 	given there 	do not	 include, e.g. 	
Norwegian petroleum exported to Amsterdam 	or elsewhere, and later imported to China from there. 	
This is the case for other 	Figures and 	Tables in this section as well.	 	
Figure 3.	1 	Trends in Norwegian imports from 	China and exports to China	, NOK billion	 
 	
Note: Trade in goods	, in c	urrent NOK. Source	: Statistics Norway. Chinese statistics may give a different answer. In 2006, for 	
example, Norwegian statistics record	ed a trade volume with China of 	USD 	5.4 billion whe	reas China record	ed USD 	2.95 	
billion. See Feasibility Study	.

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	14	 	
Clothing is the main 	import	 item to Norway from China, followed by office machines including PCs 	
and telecommunications equipment. In 2010	, five groups (2	-digit HS) accounted for two	-thirds of 	all 	
imports	 (see Figure 3.2	). 	
 
 
Figure 3.	2 	Main import items to Norway from China	, NOK billion	 	
 	
Note: Unit billion NOK. Year 2010. Source	: Statistics Norway.	 	
 
‘Fish and marine products	’ are	 the main 	export	 item from Norway t	o China, followed by metals, and 	
industrial machines. In 2010	, five groups (2	-digit HS) accounted for 	60%	 of all exports	 (see Figure 3.3	).

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	15	 	
Figure 3.	3 	Main export categories from Norway to China	 	
 	
Note: Unit billion NOK. Year	 2010. Source Statistics Norway.	 	
 
In general	, trade between the two countries 	seems	 associated with comparative advantage	s. Norway 	
exports fish and metals to China	; China exports clothes, PCs etc. to Norway	, and t	he two countries 	
acknowledge the role of co	mparative advantage	s in the trade negotiations	. Let us	 cite from the 	
summary published by China following the sixth round of 	Sino	‒Norwegian	 FTA talks (emphasis 	
added): 	 
China's Machinery and Electronic Products took up nearly 50% of the export to Norway 
including vessels, electronic appliance, computers, communication and mechanical 
equipment; and the products like chemical fertiliz	ers, fish products, and petrochemical 	
products took up a large proportion of China's import from Norway, 	which obviously 	
embodied the mutual complementarity of commodity structure of the bilateral trade	. 	
Additionally, the cooperation of both countries in t	he fields of seamen labor services, 	
information & communication, pharmaceuticals, is also becoming closer and closer.	7 	
 	
The policy environment for trade in goods	 	
The development in goods trade is correlated with trends in the policy environment for trade.	 Tariffs 	
and non	-tariff barriers are sometimes considered jointly in the form of tariff	-equivalent 	effective 	
rates of protection. 	Fæhn (2002) 	explains this theory, and	 estimates effective rates of protection for 	
the Norwegian economy in 1989, 1991 and 1994	. This was prior to Norway’s WTO accession, in 	
which import quotas were turned into tariff equivalents. For instance, in 1994 tariffs on agricultural 
goods were zero and domestic production was protected by quotas. Hence these estimates do not 
say anything	 about	 the tariff equivalents of 	today’s	 non	-tariff barriers. The pattern of protection 	
 	 	 	7 http://fta.mofcom.gov.cn/enarticle/ennorway/ennorwaynews/200912/1948_1.html

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	16	 	
registered by Fæhn is similar to that 	noted by the	 WTO (2010): extensive protection of agricultural 	
goods and almost free trade otherwise. 	 	
The World Bank	’s Ease of 	Doing 	Business surveys indicate that neither China nor Norway currently 	
ha	s particularly cumbersome export and import procedures.	8 However, while Norw	ay’s	 procedures 	
seem to be 	among	 the least cumbersome in the world, th	ose of China	 are about the global avera	ge. 	
For instance, Norw	egian	 procedures require seven days of document preparation and handling, and 	
$729 for a standardized cargo of goods to be imported to Norway	, whereas i	n China the same 	
procedure requires 24 days and $545. The global average is 26 day	s. 	
The policy environment for China’s trade is heavily influenced by the country’s 	joining the	 WTO in 	
2001. WTO accession led to the easing and eventual lifting of the tariff	-rate	-equivalent export quotas 	
on Chinese textiles and clothing, which 	has been sh	own to have	 had a 	major	 impact (	see 	e.g., 	
Vennemo et al., 2008). Above we noted that clothing is China’s main export category to Norway 
today. On the import side	, WTO accession led to the gradual lifting of industrial and agricultural 	
quotas and tariffs	, thereby	 open	ing	 up for 	more	 imports to China.	 	
The Chinese	 policy environment for trade in goods is also likely to be influenced by cases brought 	
against China in the WTO. Of particular interest to this study, China has been subject to two 
complaints concern	ing environmental measures. The first is China 	— Measures Related to the 	
Exportation of Various Raw Materials (DS398, 395, 394), in which China, 	inter alia,	 invokes 	
environmental reasons to justify export duties and quotas on bauxite, coke, fluorspar, magn	esium, 	
manganese, silicon metal and zinc. The panel rejected the Chinese arguments	,9 but this	 decision was 	
appealed by China on 	31 	August 2011. The second case is China 	— Measures 	Concerning 	Wind 	Power 	
Equipment (DS419), in which the	 USA has claimed	 that C	hinese measures providing grants, funds, or 	
awards to enterprises manufacturing wind power equipment are in violation of article 3 of the SCM 
Agreement. So far, this case 	has been	 subject to consultations only	, in which	 Japan and the EU have 	
joined 	in. In 	addition to these two cases formally brought to the dispute settlement mechanism, the 	
EU, 	USA	 and Japan 	have given consideration to 	bringing a case 	to the WTO 	concerning Chinese 	
policies regarding ‘rare earth	s’.10 	
Trade in services 	 	
Data from the UN sho	w that Norway’s exports of services to China are 0.1	% of Norway’s total exports 	
of services (see Table 3.1). The amounts involved are small, and exports or services to China make up 
around 220 million NOK, less than each of the five main items of goods exporte	d to China. 	 	
Table 3.1	 	Export of services from Norway to the world, and to China. 	USD b	illion	 	
World	 	38	.6 	
China	 	0.038	 	
Source: www.unstats.un.org	 	
 
The m	ain	 categories of services sold from Norway to China are ‘other business services’	, and t	he 	
most impor	tant subcategory under this heading is ‘miscellaneous business, professional and 	
technical services’. =n general, maritime services are important for Norwegian trade	, but e	xports of 	
such	 services to China are probably registered elsewhere in the statistics	. 	
 	 	 	8 http://www.doingbusiness.org	 	9 WT/DS394/R.	 	10 See 	http://ic	tsd.org/i/news/bridgesweekly/114203/	.

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	17	 	
Imports of services to Norway from China make up 0.2	% of all Norwegian imports of services (Table 	
3.2). ‘Other business services’ make up most Norwegian imports from China. 	 	
Table 3.2	 	Imports of services to Norway from the world, and from China. 	USD b	ill	ion	 	
World	 	36.8	 	
China	 	0.066	 	
Source: www.unstats.un.org	 	
Investment	 	
More and more	 Norwegian companies 	are 	invest	ing	 in China	, and Chinese companies have started to 	
invest in Norway. According to official Chinese figures, Norway had made 258 separate invest	ments 	
in China at the time 	(2008) 	of the Feasibility Study. 	That year saw the establishment of 	three Chinese 	
companies in Norway	: ZTE, COSCO and Air China.	 	
 	
3.2 Baseline scenario for trade in goods	 	
We assume that the baseline scenario can build on the curr	ent 	most	-favoured nation (	MFN	) applied 	
tariff rates as detailed in WTO (2010). See also the general comments with respect to the Doha 
Round above	. Key points concerning the current tariff rates are as follows:	 	
Import tariffs	, Norway	 	
Norwegian tariffs on g	oods are concentrated on a sub	-set of agricultural goods. According to WTO 	
(2010) the simple 	most	-favoured	-nation (	MFN	) average of import tariffs on agricultural goods is 	
43.2	%. About half of the agricultural import volume is tariff	-free. For non	-agricultu	ral goods the 	
average tariff rate is only 0.5	%,	 and 	with 	97	% of such import	 tariff	-free. Import tariffs are 	
unimportant for tax revenue	s in Norway	, representing o	nly 0.3	% of 	the total	. 	
Among agricultural products	, animal products have the highest MFN tari	ffs	 ‒ almost 140	% on 	
average. 	Some products 	here 	have very high tariff rates	, e.g.	 live ducks weighing less than 185 	
gramme	s (555	%) and frozen boneless meat of bovine animals (119 NOK/kg). The tariff on dairy 	
products is also high	, 64	% on average	, but may be l	ess 	relevant	 for imports from 	distant	 countries 	
like	 China. Physical conditions for imports may be better for cereals and preparations, which have an 	
average MFN applied tariff of 52	% (max 494	%). Rice has a tariff of 1.74 NOK/kg, but half of the tariff 	
lin	es in this subheading are tariff	-free. China has a strong industry in oilseed fats and oils. The 	
Norwegian average MFN applied tariff on such items is 31	% (max 295	%). 	 	
Among non	-agricultural goods	, clothing is almost the only category with a significant N	orwegian tariff	 	
‒ 10.7	% for m	ost clothing items	. Th	at tariff is confined to processed products, while textiles have an 	
average tariff of 0.5	%. For these products, Norway practi	ses	 ‘tariff escalation’	, whereby	 tariff rates 	
increase with the degree to which 	the products are processed.	 	
Import tariffs	, China	 	
Norwegian export faces an average import tariff to China of 9.0	% (WTO 2010). 	One fifth	 of 	export	s 	
are	 tariff	-free. China has an average MFN applied tariff on agricultural goods of almost 16	%. Only 	
0.7	% of i	ts import is tariff	-free (	see 	Table 3.3 below). The country has an average tariff on non	-	
agricultural goods of almost 9	%. Around half of non	-agricultural import is tariff	-free	. Some 3%	 of 	
Chinese tax revenue	s come from import tariffs. 	 	
The average tariff o	n agricultural goods is fairly evenly distributed among subcategories and China 	
does not impose very high tariffs on any good	s. The average import tariff on fish is lower than the 	
average for (other) agricultural goods, at 10.7	%. The import tariffs on the 	various	 categories of fish

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	18	 	
are of interest to Norway. Frozen Atlantic salmon 	is subject to	 an import tariff of 10	%. Fresh or 	
chilled salmonidae (excl. species of trout) 	has	 12	%, prepared and preserved salmon also 12	%. Frozen 	
mackerel, cod and haddock are 	also important to Norway (Feasibility Study	 2008	). Import tariffs	 for 	
mackerel and cod are	 10	%, and	 12	% for haddock	. 	
As to	 non	-agricultural goods	, the average MFN tariffs are also quite even across goods. Non	-electrical 	
machinery	 ‒ an important category f	or Norway	 ‒ has an average tariff of 7.8	%,	 with a maximum of 	
35	% and a tariff	-free share of 9	%. Transport equipment has a tariff of 11.5	%. 	
Some 	authors	 have argued that effective tariff rates in China are lower than the nominal tariff rates 	
because of spe	cial economic zones, other discretionary measures, and trade through Hong Kong 	
(Fisman and Wei, 2004; Vennemo et al., 2008). 	 	
 
Table 3.3	 	Average applied MFN import tariffs per main category	, %	 	
Norway	 	China	 	
Agricultural goods	 	Non	-agricultural goods	 	Agricul	tural goods	 	Non	-agricultural goods	 	
43.2	 	0.5	 	15.7	 	8.7	 	
 
The baseline scenario assumes that applied tariffs will remain at approximately the same level as 
currently. The main driver for lower tariffs seems to be the Doha negotiations, and	, having	 decided 	
no	t to include	 any impact 	from	 the	se negotiations on the baseline	, we do not see compelling 	
evidence for lower tariffs in the baseline. Nor do we see compelling evidence for higher tariffs in the 
baseline. The 	existing 	WTO agreement sets maximum tariffs on m	ost goods	, and wherever applied 	
tariffs are lower than the maximum there seems to be an expectation not to increase them. 	 	
Non	-tariff barriers (NTBs) Norway and China	 	
Trade facilitation is one of the topics on which countries have made significant progres	s during the 	
Doha negotiations.	11 We assume that some trade facilitation is likely to result from the general 	
agreement that has been achieved during the negotiations, regardless of whether there will be a 
conclusion of the negotiations. However, 	considerab	le uncertainty 	remains 	concerning the specific 	
content and modalities of the trade facilitation that will occur and the specific trade effects 	of such 	
trade facilitation for trade between Norway and China. Against this background, we find it 
appropriate to	 apply a conservative estimate of the potential trade facilitation 	to be expected	 under 	
the baseline scenario.	 	
The Global Enabling Trade Report	, published by the World Economic Forum	 (WEF 2010)	, includes a 	
system of indexes where countries are scored on se	veral parameters including non	-tariff barriers 	
(NTBs). The score on the non	-tariff barrier indicator is explained as follows:	 	
This index is constructed as the average of two NTM	-related variables. The variables included 	
are the percentage of trade affected	 by non	-tariff measures (NTMs) and the average number 	
of notifications for products affected by NTMs, for products with imports larger than 0. 
Politically motivated NTMs, such as embargos, have been excluded. 	 	
 	 	 	11 See Draft Consolidated Negotiating Text of 21 April 2011, WTO doc. TN/TF/W/165/Rev.8.

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	19	 	
In 2010 China obtains a score for non	-tariff b	arriers of almost 24,	 putting	 it at no. 34 in the world 	
(34	th best). Norway 	scores	 4, making it	 no. 9 in the world. 	Thus,	 the potential for reducing NTBs 	
seems to be significantly higher for China than for Norway.	12 	
The WTO Trade Policy Review of China carr	ied out in June 2010 (TPR China 2010) focused on NTBs. 	
The WTO Secretariat Report on China’s Trade Policy notes that:	 	
Apart from import prohibitions (to protect public interest, environment, or in accordance with 
international commitments), China has conti	nued to use non	-tariff border measures (such as 	
import and export licensing) as instruments of its trade and industrial policies. State trading is 
still used to manage trade in certain imports and exports of, 	inter alia	, some agricultural 	
products and crud	e and processed oil.	 	
… The General Administration of Quality Supervision, =nspection and Quarantine (AQS=Q) has 
reformed its entry	‒exit inspection procedures and introduced a direct release system to 	
facilitate trade.	13 	
In 2009, 	import permits	 were required	 for a total of 95 product groups, including ozone	-depleting 	
substances, old mechanical and electronic products, toxic materials, and radioactive isotopes and 
their compounds. Some of these may be positive from an environmental point of view, others 
negati	ve. We will discuss 	the 	implications of free and freer trade later. In addition, a system of 	
automatic import licenses was applied for statistical purposes, covering 560 product groups, 
including poultry, vegetable oil, tobacco, chemical fertilizers, coal,	 natural rubber, iron ore, crude and 	
processed oil, steel, machinery products, automobile components, and ships. Products allowed to be 
imported 	only 	by state	-trading enterprises or other enterprises fulfilling certain requirements	 (inter 	
alia	 in order to 	protect the environment and exhaustible resources	), included grain (	hereunder	 	
wheat, maize, and rice), sugar, cotton, chemical fertilizer, tobacco, and crude oil and processed oil.	14 	
Preshipment inspection	 requirements are	 required for, 	inter alia	, imports	 of solid waste used as raw 	
materials and certain used electronic products deemed to affect public health and 	the 	environment. 	
As noted by th	e 	WTO T	rade 	Policy 	Review	, ‘China has designated some foreign institutions to 	
conduct PSI and to issue certificates	. It is not clear to the Secretariat whether China sends people or 	
institutions abroad to conduct PS= inspections.’	15 We are not aware that such PSI	s are	 conducted	 in 	
Norway for goods to be exported to China. In 2009, China required 	sanitary and phytosanita	ry (	SPS	) 	
inspection for a total of 4,815 product groups. The lists of products for which such inspection is 
required change significantly from year to year. Reforms, including inspection at destination, have 
been introduced in order to facilitate trade.	16 	
Less than 20% 	of Chinese 	product standards	 are mandatory.	17 China operates a compulsory product 	
certification system in order to ensure human health and safety, life and health of animals and 
plants, and environmental protection	, among other things	.18 It has 	signed regional and multilateral 	
mutual recognition agreements on certification and accreditation, and has established relevant 
institutions in accordance with ISO	 standards.	19 	
 	 	 	12 UNCTAD is said to maintain a database for NTBs as part of its TRAINS database. We accessed TRAINS but 
were not able to find in	formation on NTBs for China and Norway.	 	13 WT/TPR/S/230/Rev.1 at 24, paras. 3 and 4. 	 	14 Ibid	. at 34, paras. 34	‒36. 	15 Ibid	. at 25, para. 12.	 	16 Ibid	. at 37	‒88, paras. 51	‒52. 	17 Ibid	. at 35, para. 43.	 	18 Ibid	. at 38, para. 55.	 	19 Ibid	. at 39, para. 59.

Environmental implications of a Sino	-Norwegian FTA	 	
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The Agreement between Norway and China on 	Economic, 	Industrial and 	Technical 	Coo	peration (25	 	
September 	1980, Beijing) and the 	Long Term Trade Agreement between Norway and China (15	 June 	
1982, Oslo)	 established a Mixed Commission 	charged	, inter alia	, with 	dealing with	 NTBs. In addition, 	
more specific agreements addressing NTBs include 	the Protocol between Norway and China on 	
certification and inspection procedures regarding fertilizers (30	-06	-2000, Oslo), the MoU between 	
Norway and China on Cooperation in the Field of the World Trade Organisation Agreement on 
Sanitary and Phytosanitary 	Measures (6	 November 	2008, Beijing), and the Agreement on Fisheries 	
Cooperation (26	 March 	2007, Beijing)	, the latter set to expire after five years. To our knowledge 	
there has not 	yet 	been agreement to extend it.	 While these agreements provide a framework 	for 	
resolving differences regarding NTBs through various procedures, they do not 	establish	 mutual 	
recognition agreements or substantive rules regarding the adoption or content of NTBs.	 	
In conclusion, the baseline scenario assumes that there will 	be 	a gener	ally 	low level of NTBs, but that 	
there is a high degree of uncertainty and the level of NTBs may differ significantly 	from sector to	 	
sector. Th	is scenario 	further 	assumes that political factors are likely to 	raise	 the level of uncertainty, 	
at least in the 	short term, and that technical cooperation between Norway and China within the 	
current framework will contribute to a 	considerable	 long	-term reduction of this uncertainty.	 	
Government procurement	 	
China is an observer to the WTO Government Procurement Agreem	ent (GPA) and has since 	
December 2007 negotiated for accession. To our knowledge, no final decision	 has 	yet been taken 	
concerning China’s	 accession	.20 According to t	he TPR of China	, ‘China has not signed any bilateral, 	
regional, or multilateral agreement on	 government procurement’.	21 Chinese accession to the GPA 	
will promote transparency and could significantly reduce trade	-related problems associated with 	
corrupt practices.	 	
Domestic measures aimed at controlling export	 	
China’s Accession Protocol (WT/L/432) d	ealt with issues relevant to restrictions on export. Section 5 	
liberalized the right to trade, but retained the right to subject 	various	 products to 	state trading	, 	
including the right to export. The products covers 134 HS sub	-headings (8	-digit level), and 	include 	
tea, rice, corn, soy bean, tungsten ore, ammonium paratungstates, tungstate products, coal, crude 
oil, processed oil, silk, unbleached silk, cotton, cotton yarn, woven fabrics of cotton, antimony ores, 
antimony oxide, antimony products, and silver.	 Export licenses and quotas	 are addressed in section 8 	
para. 2 of the Accession Protocol, which states that ‘foreign individuals and enterprises and foreign	-	
funded enterprises shall be accorded treatment no less favourable than that accorded to other 
indiv	iduals and enterprises’. According to section 9 para. 2 of the Protocol, 	price controls	 for 	
exported goods would be limited to the following categories of products: tobacco, edible salt, natural 
gas, and pharmaceuticals, as well as products subject to gove	rnment guidance pricing: grain, 	
vegetable oil, processed oil, fertilizer, silkworm cocoons, and cotton. Section 11 para. 3 of the 
Protocol obliges China to eliminate all 	taxes and charges	 applied to exports unless specifically 	
provided for in Annex 6, whic	h 6 lists 84 HS numbers, overwhelmingly metals and some chemicals, 	
for which maximum export taxes and charges range between 20	% and 40 %.	 	
In addition to the commitments listed in the Accession Protocol, several undertakings in the 	Working 	
Party Report on C	hina’s accession to the WTO (WT/ACC/C:N/49) are legally binding.	22 Of particular 	
interest in relation to export controls are commitments set out in paras. 18 (non	-discriminatory 	
 	 	 	20 Accordin	g to the TPR, China has submitted a revised offer which in 2010 was subject to consultations, 	ibid	. at 	
39, para. 62.	 	21 Ibid. at 41, para. 69.	 	22 See section 1 para. 2 of the Accession Protocol and para. 342 of the Working Party Report.

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treatment of enterprises), 46 (sales of state	-owned enterprises), 62 (price con	trols), and 83(d) (right 	
to export for foreign	-invested enterprises).	 	
In general, Chinese rules and procedures regulating export mirror those applied to import. In 
addition, China applies a regime of export taxes	, applied ‘with a view to curtailing exports	 of certain 	
products, including restricting exports of highly polluting and high	-energy	-consuming products; 	
promoting environmental protection; improving sustainable economic development; and conserving 
natural resources.’ China argues that such measures a	re in accordance with Art. XX of GATT.	23 	
Moreover, value added taxes are frequently not fully rebated upon export. The WTO Secretariat 
made the following assessment of the effectiveness of a broad range of export restraints, including 
export prohibitions, q	uotas, licensing requirements and taxes, as well as less	-than	-full rebate of VAT 	
on exports and state trading arrangements:	 	
… export restraints may not be the best way to achieve some of the objectives/rationales 
mentioned above. In particular, restricting	 the export of some highly polluting or high	-energy 	
consuming products is not the most economically efficient way to protect the environment 
or reduce energy consumption. Nor are export restraints the best way to conserve natural 
resources. China is starti	ng to consider more suitable internal (rather than trade) measures 	
to achieve these objectives. Although the Government increased its export restrictions on 
rare earth by, for example cutting export quotas or increasing export taxes, it has imposed 
domesti	c production caps on rare earth and is considering levying an environmental tax on 	
the production/extraction of natural resources during the 12	th Five	-Year period (2011	‒15), 	
with a view to preserving non	-recyclable natural resources and protecting the envi	ronment.	24 	
Export prohibitions and licensing are generally applied to implement China’s obligations under 
environmental treaties, such as CITES and the Basel Convention. A total of 	almost	 300 groups of 	
products are subject to export prohibition or licensing	.25 China also controls export by requiring 	
certain goods to be exported through state trading enterprises	, for the purposes of ‘ensuring stable 	
domestic supply; avoiding drastic price fluctuations in international markets; safeguarding food 
safety; and pro	tecting exhaustible and non	-recyclable natural resources and the environment.’	26 	
We assume that those export restrictions that are related to China’s implementation of 
environmental treaties will remain unchanged. The description of Chinese mechanisms to c	ontrol 	
export in the TPR indicates that they are fairly well established and are not frequently amended. On 
the one hand, we 	note	 that some Chinese export restrictions are subject to dispute settlement in the 	
WTO (see the box below),	27 and that criticism ha	s been directed against export restrictions on ‘rare 	
earth	s’ (see section 3.1 above). On the other hand, future competition for scarce natural resources 	
may provide China with strong incentives to maintain or introduce new export restrictions. Against 
this	 background, we assume that China’s use of export restrictions will remain fairly stable, 	whereas	 	
products subject to such restrictions may vary over time.	 	
 	 	 	23 Ibid. at 43, para. 	77.	 	24 Ibid. at 44.	 	25 Ibid. at 45, paras. 82 and 86.	 	26 Ibid. at 46, para. 88.	 	27 China 	– Measures Related to the Exportation of Various Raw Materials, DS 394, 395 and 398, cases initiated 	
by the US	A, the EU and Mexico. The panel report (WT/DS394/R) 	has been appealed by China (WT/DS394/11) 	
and the US	A (WT/DS394/12).

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Box 3.1	 	Panel Report: China 	‒ Measures related to the export of various raw 	
materials	 	
 	
Intellectual property rights	 (IPR)	 	
Chinese policies regarding intellectual property rights were key issues during negotiations of China’s 
accession to the WTO. While 	IPR	 are not singled out for special treatment in China’s Accession 	
Protocol, such issues were dealt with in great detail in the Working Party Report.	28 The TPR of China 	
shows that the domestic use of intellectual property rights in China has increased rapidly 	in recent 	
years, and that China’s reforms of rules and procedures are effective in practice.	29 The baseline 	
scenario assumes that China will continue to encourage domestic applications for 	IPR	, and further 	
reinforce its implementation of existing rules and 	procedures to secure such rights. We also assume 	
that China will promote a ‘balanced’ approach to 	IPR	 by supporting	 technology transfer, availability 	
of compulsory licensing, capacity building, as well as benefit sharing relating to genetic resources.	 	
 	
3.3	 Baseline scenario for trade in services 	 	
Trade in services between Norway and China is regulated by the	 General Agreement on Trade in 	
Services	 (GATS	), including the respective Schedules of specific commitments of Norway (WTO doc. 	
GATS/SC/66/) and China (W	TO doc. GATS/SC/135). Our focus in the following is on the specific 	
commitments as set out in the Schedules. There are three main distinctions that are essential to our 
analysis of trade in services:	 	
- 	The distinction between horizontal commitments and speci	fic commitments. This distinction 	
follows from the respective 	schedules. Horizontal commitments (including restrictions) apply 	
across sectors, while specific commitments apply for the specific sector only.	 	
- 	The distinction between commitments regarding mark	et access, as defined in article XVI of 	
GATS, and national treatment, as defined in article XVII of GATS. In most cases, China and 
Norway have undertaken the same range of commitments under both provisions.	 	
 	 	 	28 WT/ACC/CHN/49 	paras. 251	‒305, including commitments undertaken in paras. 252, 256, 259, 263, 265, 270, 	
275, 284, 286, 288, 291, 292, 296, 299, 302, and 304	 305.	 	29 WT/TPR/S/230/Rev.1 at 6	1‒68.	 	
Th	e dispute	 concerns four types of export restrain	t on	 bauxite, coke, fluorspar, magnesium, 	
manganese, silicon carbide, silicon metal, yellow phosphorus and zinc	. Upon its accession to the 	
WTO, China undertook to eli	minate all export duties	 except for a number of products listed in an 	
Annex	 to its Protoco	l of Accession.	 China also committed not to apply export quotas.	 The Panel 	
found that China's export duties were inconsistent with the commitments that China had agreed to 
in its Protocol of Accession	 and	 that export quotas imposed on some of the raw mater	ials were 	
inconsistent with WTO rules.	 China's Protocol of Accession did not allow the general exceptions in 	
Article XX of the GATT 1994 to justify its export duties. 	Even if China were able to rely	 on certain 	
exceptions available in the WTO rules to justify its export duties, it had not complied with the 
requirements of those exceptions.	 China was not able to demonstrate that it imposed these 	
restrictions in conjunction with restrictions on domestic	 production or consumption of the raw 	
materials so as to conserve the raw materials	, or that 	its export duties and quotas would lead to a 	
reduction of pollution in the short	- or long	-term and therefore contribute towards improving the 	
health of its people.	 The Panel also found that certain aspects of China's export licensing regime 	
are inconsistent with WTO rules.	 Findings of the panel have been appealed by China and the US.	 	
Source: <http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds394_e.htm>

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- 	The distinction between four ‘modes of supply’: (	1) cross	-border supply, (2) consumption 	
abroad, (3) commercial presence and (4) presence of natural persons, as defined in article I:2 
of GATS.	 	
Horizontal commitments	 	
The 	Norwegian	 Schedule	 sets	 general restrictions for all sectors on modes 3 and 4 of supp	ly 	
(commercial presence	; presence of natural persons)	 in the form of g	eneral authorization procedures 	
for acquisition	, and a reservation concerning 	the 	extension of beneficial treatment of branches and 	
agencies of companies established within the European 	Economic Area. There are general 	
exemptions regarding 	the 	extension of subsidies to foreign services or service providers. Restrictions 	
also apply to the presence of natural persons.	 	
According to the 	Chinese	 Schedule, mode 3 of supply is subject to some ge	neral market access 	
restrictions, involving in particular establishment of equity joint ventures, branches and 
representative offices, as well as the ownership and rental of land. Mode 4 of supply (presence of 
natural persons) is in general restricted (‘un	bound’), except for some categories of managers, 	
executives, specialists and services salespersons. All existing subsidies to domestic services suppliers 
in the sectors of audio	-visual, aviation and medical services are unbound with regard to national 	
trea	tment and mode 3 of supply.	 	
Specific commitments	 	
Norway	 has undertaken extensive commitments for modes 1	‒3 of supply in most sectors. The main 	
exception, in addition to the horizontal reservations mentioned above, 	concerns	 restrictions on 	
mode 4 of supply,	 where Norway has noted that this mode remains restricted/unbound for almost all 	
sectors. There are some sectors of 	environmental relevance	 where Norway has not undertaken 	
commitments in its 	schedule.	30 These include the following: 	 	
1) Research and developmen	t services on natural sciences as well as interdisciplinary research 	
and development services	 	
2) Real	-estate services involving own or leased property	 	
3) Services incidental to mining	 	
4) Services incidental to energy distribution	 	
5) Postal services	 	
6) Health	-related and 	social services	 	
7) Maritime transport services	 	
8) Internal waterways transport	 	
9) Pipeline transport	 	
In addition, some restrictions apply to environmental services, including 	the	 horizontal restriction 	
that commitments in this sector ‘do not include public service 	functions whether owned and 	
operated or contracted out by local, regional or central government’. Moreover, mode 1 of supply 
(cross	-border supply) remains unbound for both market access and national treatment within all sub	-	
sectors of environmental service	s. Finally, there are specific reservations concerning market access 	
for mode 3 of supply (commercial presence) for refuse disposal services and cleaning services of 
exhaust gases regarding the existence of monopoly situations. Norway has significant poten	tial for 	
undertaking further commitments in the transport sector.	 	
 	 	 	30 When a country undertakes commitments within a sector, its schedule will state ‘none’ for the sector in 
question. In addition, the country may include a reservation, for example in the form of ‘none, except for …’. 
Where a country does not undertak	e commitments, its schedule will state ‘unbound’. If the country nevertheless 	
wants to undertake limited commitments in this sector, it may note ‘unbound, except for …’.

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China	 has in general undertaken fewer commitments than Norway in most sectors. China has 	
extensive reservations concerning mode 3 of supply (commercial presence)	, requirements 	
concerning joi	nt ventures in particular. 	As noted in t	he Feasibility Study (	2008:	 51): ‘	By the end of 	
2006, China has opened more than 100 services sectors, accounting for 62.5% of the WTO’s Service 
Sectoral Classification List (W/120). Considering China’s status as a d	eveloping economy, the services 	
market of China is quite liberalised.’	 As indicated by this statement, many of these reservations have 	
been phased out over time, and we may thus assume that they have been eliminated. In the 2010 
Trade Policy Review (TPR) o	f China, the WTO Secretariat makes the following assessment of China’s 	
policy since the 2006 TPR:	 	
The Government has placed more emphasis on developing services by way of further 
liberalization of sectors, including financial services, telecommunications, 	and tourism. While 	
the presence of SOEs is considerable in key services sectors, such as banking, 
telecommunications, and civil aviation, and there are still significant restrictions on foreign 
investment and private	-sector activities, China has adopted so	me measures to further 	
liberalize services, particularly financial services, telecommunications, and tourism. China's 
commitments under the General Agreement on Trade in Services have not changed since its 
previous Review; the authorities consider that Chi	na had already implemented some of its 	
GATS commitments ahead of the dates envisaged, and recent reforms are part of an ongoing 
liberalization process since its accession to the WTO.	31 	
The 2010 TPR proceeds to assess services sectors. Of particular interest	 to this report is the 	
assessment of air transport and maritime transport, 	both of 	which indicate a high level of 	
liberalization and stability in the regulatory framework.	32 A reform to open up the tourism sector was 	
undertaken in 2009.	33 The TPR contains no	 assessments of other services sectors 	pertinent	 to this 	
report.	 	
In some 	environmentally relevant 	sectors	, China has not undertaken commitments in its 	schedule. 	
These include the following:	 	
1) Veterinary services	 	
2) Research and development services (all)	 	
3) Market	 research and public opinion polling services	 	
4) Services related to management consulting	 	
5) Services incidental to mining	 	
6) Advisory and consulting services related to manufacturing 	 	
7) Services incidental to energy distribution	 	
8) Investigation and security activitie	s 	
9) Building	-cleaning services	 	
10)	 Health	-related and social services	 	
11)	 Pipeline transport	 	
In addition, there are some restrictions of particular interest in an environmental context. These 
include the following:	 	
1) Architectural services, engineering services, integ	rated engineering services, urban planning 	
services: Mode 1 (cross	-border supply) 	– cooperation with Chinese professional organi	zations 	
is required (except scheme design).	 	
 	 	 	31 WT/TPR/S/230/Rev.1 at 79, para. 46.	 	32 Ibid	. at 91	‒96.	 	
33 Ibid	. at 97	‒98.

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2) Related scientific and technical consulting services 	– focusing at on	- and offshore 	petroleum 	
exploitation: Mode 3 (commercial presence) 	– Only in the form of petroleum exploitation in 	
cooperation with Chinese partners.	 	
3) Construction and related services 	– same restrictions apply to the whole sector: Mode 3 	
(commercial presence): Limited t	o projects with specified rates of foreign funding.	 	
4) Distribution services: Mode 1 (cross	-border supply): unbound for several commission agent 	
services, wholesale trade services and retailing services.	 	
5) Environmental services 	– same restrictions apply to the	 whole sector: Mode 1 (cross	-border 	
supply, market access): unbound except for environmental consultation services. Mode 3 
(commercial presence): Foreign service suppliers engaged in environmental services are 
permitted to provide services only in the form	 of joint ventures, with foreign majority 	
ownership permitted.	 	
6) International maritime transport services 	– except cabotage: Mode 3 (commercial presence): 	
Chinese flag requires joint venture not exceeding 49	% foreign investment	; the chairman of 	
the 	board of	 directors and the general manager of the joint venture shall be appointed by the 	
Chinese side. Other forms of commercial presence for the supply of such services are 
unbound. Auxiliary services require joint ventures	, with 	foreign majority ownership	 allo	wed 	
in most cases	. Norway and China have signed a bilateral agreement on marine transport, see 	
below.	 	
7) Internal waterways transport services 	– limited to freight transport: Mode 1 (cross	-border 	
supply): Limited to international shipping in ports open to for	eign vessels. Mode 3 	
(commercial presence): unbound.	 	
8) Air transport services 	– limited to repair and maintenance services and computer reservation 	
systems: Restrictions apply to mode 1 and mode 3 of supply.	 	
Bilateral cooperation	 	
A bilateral Agreement on Mar	itime Transport between Norway and China (4	 December 	2003, 	
Shanghai).	 Article 5 provides for national treatment regarding access to ports and other facilities, but 	
is limited to ports that are open for the entry of foreign vessels. Article 8 offers rights 	of non	-	
discrimination regarding multi	-modal transport services. Article 9 extends the right to commercial 	
presence and article 10 extends rights related to key personnel beyond what follows from the GATS 
Schedules. Articles 14	‒20 contain rules concerning personnel on board ships, including their rights of 	
entry and conditions for employment.	 	
Norway and China have bilateral cooperation of importance to various services sectors, including 
environmental services. 	Here we may menti	on	 the following:	 	
- 	MoU on Cooperation in the Field of Water Resources between the Ministry of Water 
Resources of China and the Ministry of Petroleum and Energy of Norway, signed 10	 June 	
2010	 	
- 	MoU on Cooperation in the Petroleum Sector between the Ministry of	 Petroleum and Energy 	
of Norway and the National Energy Administration of China, signed 12	 January 	2009	 	
- 	MoU on Environmental Cooperation between the Ministry of the Environment of the 
Kingdom of Norway and the Ministry of Environmental Protection of China,	 signed 30	 June 	
2008	 	
- 	MoU on Enhancing Cooperation in Energy Conservation and Renewable Energy between the 
Ministry of Petroleum and Energy of Norway and the National Development and Reform 
Commission of China, signed 27	 September 	2006	 	
These bilateral agree	ments do not focus specifically on trade in services, but they provide a 	
framework within which trade in services is likely to be facilitated.

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Conclusion	s 	
Our	 baseline scenario for trade in services assumes that the horizontal and specific commitments will	 	
remain the same for Norway and China, and that current trends of unilateral liberalization of services 
in both countries will continue at a moderate pace. Such unilateral liberalization does involve 	some 	
uncertainty	, as political and administrative decisi	ons 	may	 reverse the level of liberalization. 	This	 	
baseline scenario assumes that political factors are likely to increase the level of uncertainty, at least 
in the short term, and that technical cooperation within the current cooperative framework will 	hel	p 	
to reduce	 this uncertainty	 ‒ especially for sectors of relevance to environmental services	, and at least 	
in the long term. The Maritime Transport Agreement 	has 	secur	ed	 a high level of liberalization for the 	
maritime transport sector.	 	
 	
3.4 Baseline scenar	io for investment 	 	
The Agreement Between the Government of the People’s Republic of China and the Government of 
the Kingdom of Norway on the Mutual Protection of Investment (hereafter the BIT	 – bilateral 	
investment treaty	) was signed on 21	 November 	1984 an	d remains in force. 	‘=nvestment	’ is broadly 	
defined	 in the B=T, and includes ‘concessions to search for and exploit natural resources’ 	(art.	 1). Each 	
party undertakes to admit investment from the other party in accordance with its laws and 
regulations, whi	le offering the investors fair and equitable treatment and protection 	(art.	 3). 	Also 	
relevant for the right of establishment 	is 	Article 5.3 of the Long Term Trade Agreement between 	
Norway and China	: ‘The Contracting Parties shall, in accordance with laws a	nd regulations in their 	
respective countries, permit organizations, enterprises and firms of the other country engaged in 
foreign trade between the two countries to establish permanent representations, offices or joint 
offices by two or more firms in respe	ctive countries.’ A	s noted in	 the Feasibility Study	 (2008:	 92): 	
‘China and Norway have already carried out effective cooperation on trade and investment 
promotion under the framework of the Sino	‒Norwegian Mixed Commission for Economy and Trade, 	
established	 in 1980. A sub	-committee to the commission, for promoting bilateral investments, was 	
formed in September 2006.’	 	
The BIT contains a general MFN obligation which does not apply to free trade areas, taxation 	or 	
frontier trade (art	. 4). Expropriation or simil	ar measures shall be undertaken only for public purposes, 	
in accordance with legal procedures, in a non	-discriminatory manner, and pursuant to compensation 	
without undue delay (art	. 5). The right of transfer is protected with the reservation ‘in accordance	 	
with its laws and regulations’ (art	. 6). There is mandatory dispute settlement between the state 	
parties after a 	6-month consultation 	period 	(art.	 8). In cases 	of disagreement regarding the amount 	
of compensation pursuant to an act of expropriation, the p	rivate party may choose to bring the case 	
before the domestic courts of the party in question	, or before an international arbitral tribunal 	
(Protocol para. 2). There are no other rights of investor	‒state dispute settlement under the BIT, but 	
the MFN obligation can possibly extend the right to investor	‒state dispute rights in accordance with 	
commitments of the parties under other BITs (Norway has accepted mandatory investor	‒state 	
dispute settlement i	n several BITs, including its BIT with Hungary, see art	. IX).	 	
The 2010 TPR of China concludes that the Chinese regulatory regime regarding investment had 
‘remained largely unchanged’ from 2006 to 2010. Minor adjustments have been made to the tax 
regime and	 to lists of encouraged investments, in particular in western regions of China.	34 	
Here we should note	 China’s use of ‘Special Economic Zones’ (SEZ) in order to promote development 	
through investment. Five such zones were established during the 1980s	, prim	arily to attract foreign 	
direct investment (FD=), expand China’s exports, and accelerate the infusion of new technology. 
 	 	 	34 WT/TPR/S/2	30/Rev.1 at 21	‒22.

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Measures designed to attract FDI included streamlined administrative control, relative independence 
for local planning authorities, dir	ect access by foreign entrepreneurs to provincial	- and central	-level 	
planning units, tax breaks, reduced duties on imported equipment and production materials, free or 
low	-rent business accommodation, flexibility in hiring and firing workers, depreciation 	allowances, 	
negotiated limited access to the domestic Chinese market for goods produced within the SEZ, and 
residence and work permits and income tax exemption for foreigners working within the SEZ (Yeung, 
Lee and Kee 2009:	 230	‒1). As policy reform elsewhe	re in China has been mode	lled on experiences 	
from the SEZs, policy differences between these zones and the rest of China are now insignificant. 
According to a Chinese reply during the 2010 TPR of China, the SEZ ‘is now more a geographic 
concept. … Nowadays	, access requirements concerning foreign and/or domestic investment are 	
generally applied nationwide and there are no other requirements for enterprises to fulfill if they 
want to be established in SEZs.’	35 	
In conclusion, 	our	 baseline scenario assumes that 	investment flows	 will depend partly on unilateral 	
decisions to open up sectors, 	many 	of which will fall under services sectors (market access and 	
national treatment in regard to mode 3 of supply 	– commercial presence), and partly on bilateral 	
cooperation b	etween Norway and China. There seems to be a 	considerable	 potential for 	greater	 	
investment between Norway and China, both currently capital	-exporting countries. The baseline 	
scenario assumes that 	investment protection	 will remain at the current level, whic	h is fairly low when 	
compared to other BITs. We do not know whether the level of investment protection has been of 
significance to investment decisions so far	, but o	ther studies have indicated that the level of 	
investment protection is 	generally	 of minor i	mportance for investment decisions.	 	
4. Screening	 	
In order to provide scenarios that are focused, we 	conducted	 a screening on the basis of the 	
Methodology Report (Fauchald and Vennemo	 2011	: 48	‒57) before developing the scenarios. Final 	
conclusions regarding screening and scoping, taking into account the scenarios, 	are	 provided in 	
chapter 7 below.	 	
4.1 Trade in goods	 	
Tariffs	: Import to Norway of non	-agricultural products, except for clothing, is 	not subject to tariffs of 	
any significance, and can thus be excluded from further 	discussion here	. By contrast, i	mport to 	
Norway of agricultural products is generally subject to 	fairly high	 tariffs. Our preliminary screening 	
excludes dairy products and liv	e animals	, on	 the	 assumption that negotiation results will not lead to 	
any changes 	in current relevant measures that w	ould	 affect trade between China and Norway. 	No 	
other agricultural products have been excluded	 	
Norwegian export to China is subject to sign	ificant tariffs in all product categories. Our preliminary 	
screening excludes agricultural products (other than fish and fish products)	, on the	 assumption that 	
negotiation results will not lead to any changes 	in current relevant measures that w	ould	 affect 	trade 	
between China and Norway. Other products than those mentioned remain on the table.	 	
Non	-tariff barriers	 (TBT)	: Norway has not entered into substantive TBT and SPS commitments in 	
relevant EFTA treaties (see EFTA	‒Singapore FTA articles 12 and 13, EFTA	‒Korea FTA articles 2.7 and 	
2.8, and EFTA	‒Chile FTA articles 16 and 17). The China	‒New Zealand FTA contains separate chapters 	
with detailed provisions on sanitary and phytosanitary measures (chapter 7, articles 73	‒88)	 and 	
technical barriers to trade (chapter 8, articles 89	‒102). Against this background, it 	seems	 likely that 	
the 	Sino	‒Norwegian	 FTA will contain TBT and SPS rules, but such rules will 	probably not 	go 	very far	 	
beyond existing commitments in the WTO. 	In ligh	t of the above and information gathered during our 	
 	 	 	35 WT/TPR/M/230/Add.1 at 4	‒5.

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consultations with stakeholders, we concluded that formal agreements between Norway and China 
regarding mutual recognition of conformity assessments should be excluded from further 
assessment	 here	. Norway 	and China can be expected to negotiate bilateral mutual recognition 	
agreements only if 	the 	EU has negotiated or is negotiating parallel agreements with China.	 	
One issue raised during the public hearing of the Methodology Report was 	the 	import	, through 	
Chin	a, of 	timber and timber products	. It was	 asked whether the FTA may affect Norwegian policies to 	
support other countries’ efforts to prevent illegal logging. We observe that Norwegian concerns in 
this respect 	relate	 not to Chinese timber, but to timber impo	rted to or in transit through China. 	
Norway does not apply tariffs on timber or timber products. We may thus conclude that Norwegian 
measures in respect of such timber would be non	-tariff measures and would be based on the origin 	
of timber imported through	 China, or on the origin of timber used for timber	-based products 	
imported from China. 	 	
Government procurement	: The issue of government procurement was not addressed in any detail in 	
the Feasibility Study. None of the Chinese FTAs examined contains rules o	n government procurement 	
that go beyond indicating future cooperation in this respect (FTAs with Peru art. 151, and Chile art. 
105). Against this background, th	is report will not consider government procurement.	 	
 	
4.2 Trade in services	 	
General issues	: In the Methodology Report 	(Fauchald and Vennemo 2011	) we made two assumptions 	
concerning future commitments regarding trade in services: 1) 	that 	cross	-border supply of services 	
(mode 1) will remain ‘unbound’ where the Norwegian and Chinese 	schedules of specific	 	
commitments state ‘Unbound due to lack of technical feasibility’	;36 and 2) that supply through 	the 	
presence of natural persons (mode 4) will remain ‘Unbound except as indicated in the horizontal 
section’ if so noted in the 	schedules. 	Further research	 has s	hown	 that technological development	s 	
have brought significant improvement in 	opportunities for 	cross	-border supply of services (mode 1) 	
in many sectors,	37 and that China and Norway are likely to undertake commitment for mode 1 of 	
services. Moreover, 	in line	 with input from the Chinese research team, we found it necessary to 	
assess 	the 	consequences from liberalization of presence of natural persons (mode 4). These changes 	
will be reflected in the scenarios. 	– I 	
The Norwegian 	schedule	: Our screening on the ba	sis of commitments undertaken in Norway’s 	
schedule has allowed us to exclude 	several	 categories of services	 (Fauchald and Vennemo 2011: 12	–	
14 and 48	–55)	. In addition, we have excluded several service sectors	, assuming	 that (a) negotiation 	
results will not 	lead to any changes 	in current relevant measures that w	ould	 affect trade between 	
China and Norway, or (b) 	the activities in question or associated activities	 involve	 no significant 	
environmental effects, or (c) a specific assessment of the negotiation resu	lt concludes that it is 	
unlikely to lead to 	major	 changes of the incentives of relevant actors. Against this background, we 	
conclude that the following services sectors remain on the table:	 	
 	Environmental services	: points of interest are mode 1 of supply (c	ross	-border supply); some 	
reservations concerning government monopoly; and the horizontal reservation: ‘These 
commitments do not include public service functions whether owned and operated or 
contracted out by local, regional or central government’	 	
 	Busines	s services	 related to mining and energy distribution	 	
 	Research and development services	 related to natural sciences, as well as interdisciplinary 	
research and development services	 	
 	 	 	36 WTO docs. GATS/SC/66 and GATS/SC/135, respectively	. 	37 See, 	inter alia	, WTO doc. S/C/W/320 para. 74.

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Transport services	 include rail transport, road transport, air transport and 	maritime transport, all of 	
which may be relevant to the FTA. Transport between Norway and China, 	in practice	 air transport 	
and maritime transport, will be addressed separately below. 	Norway has undertaken commitments 	
in GATS concerning rail transport with 	regard to pushing and towing, maintenance and repair, as well 	
as support services. No commitments have been undertaken regarding passenger and freight 
transport. With one minor exception	 (cross	-border supply of maintenance and repair services	), 	
Norway’s cu	rrent	 FTAs do not include any additional commitments. Hence, 	we assume that an	 FTA 	
with China 	will	 not affect rail transport significantly. The same applies to road transport services, 	
where relevant existing FTAs include only one minor concession: no requ	irement of national 	
registration on vehicles used for passenger or freight transport.	 	
Norway could undertake commitments regarding 	health services	, and such commitments could be 	
relevant to the extent that they address environment	-related health	 matters	. However, we find that 	
such commitments are unlikely to be undertaken	; and that	, even if such commitments are 	
undertaken, the environmental effects of such commitments can be 	expected	 to be insignificant.	 	
The Chinese 	schedule	: Our screening on the basis of 	commitments undertaken in China’s 	schedule 	
has allowed us to exclude some services. In addition, we have excluded several of the services 
sectors on the basis of the assumptions mentioned immediately above. 	Against this background, we 	
conclude that the fol	lowing services sectors remain on the table:	 	
 	Professional services	: points of 	potential 	interest are architectural services, engineering 	
services, integrated engineering services, urban planning services and veterinary services	 	
 	Research and development ser	vices 	 	
 	Other business services	: points of interest may be management consulting and services 	
incidental to mining and energy distribution	 	
 	Environmental services	: of interest 	here 	are market access mode 1 (cross	-border) 	– ‘Unbound 	
except for environmental c	onsultation services’, and mode 3 (commercial presence) 	– 	
‘Foreign services suppliers engaged in environmental services are permitted to provide 
services only in the form of joint ventures, with foreign majority ownership permitted’	 	
Transport between Norwa	y and China:	 The air transport services 	pertinent	 to this study are 	
addressed in the Agreement on Civil Air Transport between the Government of the People’s Republic 
of China and the Government of the Kingdom of Norway, signed in 1973 and subsequently revi	sed.	38 	
In accordance with this Agreement, there are few restrictions on air transport between China and 
Norway. Issues concerning air transport 	are	, in accordance with current practice, 	to 	be resolved in 	
bilateral agreements outside the scope of the FTA	, so	 a Sino	‒Norwegian	 FTA will not directly affect 	
the conditions for air transport between 	the two countries	. Indirect effects (increased transport as a 	
consequence of increased trade) will be considered where relevant.	 	
Maritime transport services are current	ly not bound in the Norwegian GATS Schedule. Such services 	
are to some extent bound in China’s GATS Schedule. Several of 	Norway’s	 FTAs contain commitments 	
regarding maritime services. The effect of including such provisions in 	an	 FTA with China must be 	
ass	essed in light of the existing bilateral agreement between Norway and China. It is our assessment 	
that the commitments undertaken in	 Norway’s	 FTAs do not provide 	for 	market access, national 	
treatment or other commitments that go significantly beyond the co	mmitments undertaken in the 	
bilateral agreement between Norway and China. Against this background, we assume that 	an	 FTA 	
between 	the two countries	 will not directly affect marine transport 	to any great extent	. Indirect 	
effects will be considered where rele	vant.	 	
 	 	 	38 The Agreement has not formally entered into force, but is used as a basis for Chinese and Norwegian 
regu	lation of air traffic between the countries.

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4.3 Investment	 	
Establishment	: Establishment (the right to invest across borders) is in general not liberalized through 	
bilateral FTAs	, beyond specific commitments undertaken in services sectors (modes 3 and 4 of 	
supply). Relevant provisions in bilat	eral investment treaties and chapters of FTAs do in general 	
contain soft obligations to cooperate in order to facilitate investment flows between the countries. 
Against this background, we assume that the investment chapter of the FTA will not contain 
prov	isions that will significantly change the right of establishment in Norway or China beyond what 	
follows from article 3 of the 	current	 B=T between China and Norway: ‘Each contracting party shall 	
encourage nationals or companies of the other contracting part	y to invest in its territory, and shall 	
admit such investments in accordance with its laws and regulations …’.	 	
Investment protection	: In light of commitments undertaken in the current BIT between China and 	
Norway, our screening has excluded th	ree issues: e	xpropriation, transfers and mandatory state	–state 	
dispute settlement	 (Fauchald and Vennemo 2011: 12	–14 and 55	–56)	. Against this background, we 	
have identified the following issues as remaining on the table:	 	
 	Non	-discrimination provisions, including most	-fav	oured	-nation and national treatment	 	
 	‘Umbrella clause’ (i.e. a clause that protects contractual rights)	 	
 	Performance requirements	 	
 	Fair and equitable treatment, depending on whether it will be subject to investor	–state 	
dispute settlement	 	
 	Mandatory investor	–state dispute settlement	 	
 	Provisions to promote the environmental performance of investment or investors	 	
 	
5. Free trade scenario	 	
Our	 free trade scenario focuses on those topics that remain after the above screening. 	
Environmental measures taken to mitigate ad	verse environmental effects or to enhance beneficial 	
environmental effects will be addressed in the green trade scenario below. For Norway, the free 
trade scenario is based on statements in the 	2008 	Feasibility Study and commitments undertaken in 	
EFTA Free	 Trade Agreements with Singapore (2002), Chile (2003), Korea (2005) and Peru (2010).	39 	
These FTAs have been selected partly due to their geographical proximity to China and partly due to 
their comprehensiveness and recent conclusion. For China, the free tra	de scenario is based on 	
statements in the Feasibility Study, as well as commitments undertaken in China’s FTAs with Chile 
(2005), New Zealand (2008), Peru (2009) and Costa Rica (2010).	40 These FTAs have been selected 	
mainly 	because of	 the characteristics of	 the countries that are parties,	 and because they have been 	
concluded	 recent	ly. 	
In addition to these FTAs, which have been considered systematically, we have consulted 	several	 	
other FTAs on an 	ad hoc 	basis, including the FTAs between EFTA and Hong Kong (20	11) and between 	
China and ASEAN (2004) and China and Singapore (2008)	 in particular. We have also consulted 	
several bilateral investment treaties.	 	
 	
5.1 Trade in goods	 	
 	 	 	39 EFTA Free Trade Agreements can be accessed here: 	http://www.efta.int/free	-trade/free	-trade	-agreements.aspx	. 	40 China’s Free Trade Agree	ments can be accessed here: 	http://fta.mofcom.gov.cn/english/index.shtml	.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	31	 	
Tariffs	 	
We distinguish between Norwegian and Chinese import tariffs.	 	
Norwegian import tar	iffs: 	We assume that 	a Sino	‒Norwegian FTA	 will eliminate all tariffs on clothing. 	
This seems to be an obvious bargaining chip on the Norwegian side	; see also the Feasibility 	Study 	
(2008:	 48). 	Further, s	ome agricultural goods will be subject to significant tariff reductions in th	is 	
scenario. The candidates for tariff reductions are 	items	 of interest to China	 but of low	 significance 	to 	
Norwegian farmers. 	Chinese	 interest is stimulated if transport costs are low and/or the Chinese cost 	
advantage is high. 	This will probably exclude	 dairy	 product 	and live animals. 	We also note that t	he 	
significance for Norwegian farmers is 	probably 	low if Norway hardly produces the good	s in question	. 	
Rice is an example that fits both categories	; other examples could be f	rozen meat, oils and grains. 	
Box 5.1	 shows	 that there may be environmental issues related to trade in agricultural goods	, unless 	
there are 	proper regulat	ions	 for health and sanitation issues.	 	
Box 5.1	 	Possible environmental issues of rice 	(15 February 2011)	 	
 	
Chinese import tariffs: 	The exper	ience from other bilateral FTAs is that China is willing to phase out 	
its import tariff on various categories of seafood. Table 5.1 sho	ws	 the agreed tariff schedules 	
between China and Chile. The initial tariffs are similar to those currently facing Norwegi	an sea 	
products, around 10	‒12	%. The China	‒Chile FTA stipulates that tariffs are 	to be 	eliminated gradually 	
over 	a 5‒10 year	 period	. Similar concessions, although 	generally somewhat	 more far	-reaching, were 	
offered by China in its FTA with Peru (	Table 5.2). 	On this basis	, our	 free 	trade 	scenario assumes that 	
Chinese import tariffs facing Norwegian sea products 	will be eliminated, immediately	 or gradually.	 	
There is also reason to argue that Chinese tariffs 	will be lifted 	on some or all industrial products of 	
interest to Norway.

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Table 5.1	 	FTA between China and Chile 	as regards	 chilled and frozen seafood	 	
Category	 	Tariff rate	, %	 	Phasing	-out of tariffs	 	
Fresh or chilled trout	 	12	 	‘Year 10’ (10% by signature, thereafter 10% annually)	 	
Fresh or chilled Atlantic 
salmo	n 	
10	 	‘Year 10’ (as above)	 	
Fresh or chilled halibut	 	12	 	‘Year 5’ (20% by signature, thereafter 20% annually)	 	
Fresh or chilled herring	 	12	 	‘Year 5’ (as above)	 	
Fresh or chilled cod	 	12	 	‘Year 5’ (as above)	 	
Fresh or chilled haddock	 	12	 	‘Year 5’ (as above)	 	
Fres	h or chilled mackerel	 	12	 	‘Year 5’ (as above)	 	
Fresh or chilled fish, nes	 	12	 	‘Year 10’ (10% by signature, thereafter 10% annually)	 	
Fresh or chilled fish liver & 
roe	 	
12	 	‘Year 5’ (20% by signature, thereafter 20% annually)	 	
Frozen trout	 	12	 	‘Year 10’ (10% by 	signature, thereafter 10% annually)	 	
Frozen Atlantic salmon	 	10	 	‘Year 10’ (as above)	 	
Other frozen halibut	 	10	 	‘Year 2’ (50% by signature, 50% after one year)	 	
Frozen herring	 	10	 	‘Year 2’ (as above)	 	
Frozen cod	 	10	 	‘Year 5’ (20% by signature, thereafter 20% an	nually)	 	
Frozen haddock	 	12	 	‘Year 5’ (as above)	 	
Frozen mackerel	 	10	 	‘Year 10’ (10% by signature, thereafter 10% annually)	 	
Frozen fish, nes	 	10	 	‘Year 10’ (as above)	 	
Frozen fish liver & roe	 	10	 	‘Year 10’ (as above)	 	
Fresh or chilled fish fillets 
and other fis	h meat	 	
12	 	‘Year 10’ (as above)	 	
Atlantic salmon	, smoked	 	14	 	‘Year 5’ (20% by signature, thereafter 20% annually)	 	
Smoked herring	 	16	 	‘Year 5’ (as above)	 	
Smoked fish (excl. salmon 
& herring)	 	
14	 	‘Year 10’ (10% by signature, thereafter 10% annually)	 	
Frozen sh	elled shrimp	 	8 	‘Year 1’ (100% by signature)	 	
Frozen shrimp in shell	 	5 	‘Year 5’ (20% by signature, thereafter 20% annually)	 	
Other frozen crabs, nes	 	10	 	‘Year 10’ (10% by signature, thereafter 10% annually)	 	
Mussels, frozen, dried, 
salt	ed or in brine	 	
14	 	‘Yea	r 10’ (as above)	 	
Source	: FTA between Chile and China, Annex 1, Section 2, including the Schedule of China.	 	
 
Table 5.2	 	FTA between China and Peru 	as regards	 chilled and frozen seafood	 	
Obligation undertaken	 	Product categories (tariff rates as above)	 	
Duties	 are exempt from tariff elimination	 	- 	Frozen fish liver & roe	 	
Duties shall be removed in 10 equal annual 
stages beginning on the date this Agreement 
enters into force, and such goods shall be duty	-	
free, effective January 1st of year 10 (parallel to 
‘Year 10	’ above)	 	
- 	Fresh or chilled trout	 	
- 	Fresh or chilled Atlantic salmon	 	
- 	Frozen trout	 	
- 	Frozen Atlantic salmon	 	
- 	Other fish fillets and fish meat, fresh or 
chilled	 	
- 	Smoked fish (excl. salmon & herring)	 	
- 	Other frozen crabs, nes	 	
- 	Mussels, frozen, dried, salted or in brine	 	
Duties shall be removed in 	eight	 equal annual 	- 	Frozen mackerel

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stages beginning on the date this Agreement 
enters into force, and such goods shall be duty	-	
free, effective January 1st of year eight	 	
- 	Frozen fish, nes	 	
- 	Other frozen fillets	 	
Duties shall be remo	ved in 	five	 equal annual 	
stages beginning on the date this Agreement 
enters into force, and such goods shall be duty	-	
free, effective January 1st of year five (parallel 
to ‘Year 5’ above)	 	
- 	Fresh or chilled halibut	 	
- 	Fresh or chilled herring	 	
- 	Fresh or chilled co	d 	
- 	Fresh or chilled haddock	 	
- 	Fresh or chilled mackerel	 	
- 	Fresh or chilled fish, nes	 	
- 	Fresh or chilled fish liver & roe	 	
- 	Frozen haddock	 	
- 	Atlantic salmon smoked	 	
- 	Smoked herring	 	
Duties shall be eliminated 	entirely	 and such 	
goods shall be duty	-free on the date this 	
Agreement enters into force (parallel to ‘Year 1’ 
above)	 	
- 	Other frozen halibut	 	
- 	Frozen herring	 	
- 	Frozen cod	 	
- 	Flours, meals & pellets of fish, fit for 
human consumption	 	
- 	Frozen shelled shrimp	 	
- 	Frozen shrimp in shell	 	
Source	: FTA between Peru and China, Annex 2, inc	luding the Schedule of China.	 	
Non	-tariff barriers	 	
1) 	Trade facilitation	: According to the Feasibility Study (	2008:	 77) ‘	China and Norway Customs could 	
strengthen their existing relationship to further facilitate bilateral trade. Furthermore, the inclusion 
of provisions on customs procedures and trade facilitation in a future FTA would be beneficial to 
Sino	‒Norwegian goods trade.’ Among the Norwegian FTAs examined, the EFTA	‒Peru FTA is most 	
advanced 	as regards	 modalities for trade facilitation. Article 2.4 a	nd Annex VII set out general 	
obligations to simply procedures for trade in goods and related services	; there are also	 more detailed 	
provisions covering 	the 	use of international conventions, recommendations and standards; 	
simplification of international tra	de procedures; risk management in the application of control by 	
customs and other border agencies; advance rulings; and cooperation on trade facilitation within the 
framework of the Joint Committee and in relevant multilateral for	ums	 governing trade facili	tation. 	
Article 2.5 establishes a Sub	-Committee on Trade in Goods, Rules of Origin and Customs Matters. In 	
addition, article 2.10 prohibits requirements of consular transactions, including related fees and 
charges, in connection with the import of goods 	from 	the other party. 	 	
Among the Chinese FTAs examined, the FTAs with New Zealand, Chile and Costa Rica contain	, 	
respectively,	 chapters on customs procedures and cooperation (chapter V), 	on 	customs procedures 	
and trade facilitation (chapter 4), and 	on 	custom	s procedures (chapter 5). Of particular 	relevance	 are 	
references in these chapters to the 	1973 	International Convention on the Simplification and 	
Harmonization of Customs Procedures, detailed provisions on advance rulings, and provisions on 
release of good	s within 48 hours. 	Both China and Norway are parties to th	is c	onvention.	 	
Against this background, and in light of the limitations 	facing 	Norway as party to the EEA Agreement, 	
we have chosen to base our free trade scenario on trade facilitation in line with	 the arrangements 	
provided for in the EFTA	‒Peru FTA.	 	
2) 	Technical barriers to trade	: As noted in	 the Feasibility Study (	2008:	 85)	, ‘A possible FTA between 	
China and Norway would develop bilateral cooperation through identifying principles, disciplines and 
procedures for dealing with technical requirements, standards and conformity assessment that affect 
bilateral trade. … =n the context of a possible FTA, China and Norway will have the opportunity: … to

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	34	 	
identify and eliminate existing unjustified technica	l barriers to promote bilateral trade; … to 	
strengthen cooperation on mutual recognition of conformity assessment; and to carry out bilateral 
cooperation in the field of technical regulations, standards and conformity assessment.’ The 
Norwegian FTAs exami	ned are limited to 	issues of 	conformity assessment. The Korean and Peruvian 	
FTAs, articles 2.8 and 2.14, respectively, contain relevant provisions on mutual recognition of 
conformity assessment bodies and results, but leave specific undertakings for future	 negotiations. 	 	
The Chinese FTAs go further than the Norwegian FTAs in setting out rules on and promoting future 
cooperation regarding technical barriers to trade (see chapter 8 of the FTA with New Zealand, 
chapter VIII of the FTA with Chile, and chapter 7	 of the FTAs with Peru and Costa Rica). 	Of China’s	 	
FTAs, the one with New Zealand is most advanced in this respect. Its chapter 8 includes elaborate 
provisions concerning regulatory cooperation (focusing, 	inter alia,	 on health, safety, and the 	
environment)	, conformity assessment procedures, transparency, technical assistance, and a detailed 	
provision establishing a TBT committee.	 	
Against this background, and in light of the limitations Norway faces as party to the EEA Agreement, 
we have chosen to base our f	ree trade scenario on TBT rules in line with those included in the 	
EFTA	‒Peru and EFTA	‒Korea FTAs.	 	
3) 	Sanitary and phytosanitary measures	: According to the Feasibility Study (	2008:	 82)	, ‘a possible free 	
trade agreement China and Norway would have the opport	unity to strengthen cooperation on SPS 	
issues and establish common understanding to related principles and implementation mechanisms.’ 
Among the opportunities listed are ‘enhanced consultation and cooperation’, ‘improve SPS 
operations and associated regula	tory practices’, ‘agreeing on the principles to be applied by both 	
sides with respect to inspection, testing and certification procedures’, and ‘without prejudice to the 
EEA Agreement, agreeing on the principles of harmonization, equivalence, transparency	 and 	
regionalization’. 	Of	 the Norwegian FTAs examined, the EFTA	‒Peru FTA contains the most advanced 	
SPS provision. 	Its a	rticle 2.13 includes an obligation not to restrict market access unless there is 	
scientific justification (para. 3), an obligation to de	velop bilateral agreements when necessary (para. 	
5), and the establishment of a forum for SPS experts (para. 7). 	 	
The Chinese FTAs go further than the Norwegian FTAs in setting out rules on and promoting future 
cooperation regarding SPS measures (see chapt	er 7 of the FTA with New Zealand, chapter VII of the 	
FTA with Chile, and chapter 6 of the FTAs with Peru and Costa Rica). 	Of China’s	 FTAs, the one with 	
New Zealand contains the most advanced and extensive chapter on SPS measures, 	with	 elaborate 	
provisions 	concerning implementing agreements, risk analysis, adaptation to regional conditions, 	
equivalence, verification, certification, import checks, cooperation, notification, and exchange of 
information.	 	
Against this background, and in light of the limitations 	Norway faces as party to the EEA Agreement, 	
we have chosen to base our free trade scenario on SPS rules in line with those included in the 
EFTA	‒Peru FTA.	 	
Export controls	 	
The 	2008 	Feasibility Study does not consider export controls. The Chinese FTAs contain few rules 	
regarding export measures. Rules 	on	 export restrictions incorporate art. XI of GATT (art. 11 of FTAs 	
with Costa Rica, and Peru), but	 some of these agreements 	provide an opening	 for flexibilities through 	
lists of measures in annexes.	41 China has not made use of such flexibilities to any 	great	 extent.	42 Art. 	
 	 	 	41 See in particular Annex 1to the FTA with Costa Rica, wherein Costa Rica has listed a 	range	 of products for 	
which expor	t restrictions may be continued.	 	42 The most extensive use was in the FTA with Costa Rica, wherein China listed ‘(a) measures related to the 
protection of the environment and natural resources pursuant to applicable domestic law and the provisions

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11	 of its	 FTA with New Zealand contains a potentially far	-reaching obligation to l	imit the use of 	
export controls	: 	
1. A Party shall not adopt or maintain any non	-tariff measures on the … exportation of any 	
good destined for the territory of the other Party except in accordance with its WTO rights 
and obligations or in accordance with o	ther provisions of this Agreement. 	 	
2. Each Party shall ensure its non	-tariff measures permitted in paragraph 1 are not prepared, 	
adopted or applied with a view to, or with the effect of, creating unnecessary obstacles to 
trade between the Parties.	 	
Rules r	egarding administrative fees and formalities incorporate relevant WTO rules, in particular arts. 	
III and VIII of GATT (FTAs with Chile art. 9, Costa Rica art. 13, New Zealand art. 9, and Peru art. 13). In 
addition, the Chinese FTAs contain 	generally	 detail	ed rules for determining the country of origin.	 	
Norway’s FTAs contain provisions regarding 	the 	abolition of export restrictions	, provisions	 more far	-	
reaching than those of China. 	For 	example	, according to art. 9.2 of the Norway	‒Chile 	FTA	, ‘The 	
Parties shal	l, on the date of entry into force of this Agreement, abolish all customs duties on exports 	
of goods of a Party in trade between the Parties.’ Similar provisions are included in the FTAs with 
Korea (art. 2.3), Singapore (art. 8), and Peru (art. 2.8). Moreo	ver, art. 15.1 of the FTA with Chile states 	
that ‘all import or export prohibitions or restrictions on trade in goods of a Party between the EFTA 
States and Chile, other than customs duties and taxes, whether made effective through quotas, 
import or export	 licenses or other measures, shall be eliminated, except as provided for in Annex V==.’ 	
The annex does not list exemptions of interest	 here	. Article 15.2 states that: ‘No new measures as 	
referred to in paragraph 1 shall be introduced.’ Similar provisions	 are included in 	Norway’s 	 FTAs 	
with Korea (art. 2.5) and Singapore (art. 9). The FTA with Peru 	offers	 greater	 flexibility in this respect, 	
as it is limited to incorporating GATT art. XI and include some additional flexibilities (art. 2.9 and 
Annex IX).	 	
All the FTAs examined contain general exceptions that are parallel to those of GATT art. XX. Of 
particular interest in relation to export controls that are justified on the basis of environmental 
concerns are GATT art. XX(b) and (g). In addition, art. XX(i) 	and (j) are relevant from a broader 	
perspective which includes sustainable development, i.e. social and economic aspects.	 	
Against this background, and given the sensitivities of the export	-control issue due to current 	
disputes between China and third count	ries, 	we base our	 free trade scenario on the restrictions on 	
export controls contained in the FTA between China and New Zealand.	 	
Intellectual property rights	 (IPR)	 	
According to the Feasibility Study (	2008:	 87) a	 Norwegian	 FTA with China could strengthen 	
‘cooperation on the implementation of intellectual property rights, including in relation to legal, 
administrative and implementation processes’ and establish ‘cooperative mechanisms to settle 
problems identified in the intellectual property rights area’. 	 	
All the Norwegian FTAs examined contain provisions regarding intellectual property rights. The FTA 
with Peru differs from the other	s in containing	 provisions that will be considered in the green trade 	
scenario below. 	Of 	the FTAs, the one with Chile (which i	s parallel to those of Singapore, see art. 54 	
and Annex XII, and Korea, see arts. 7.1	‒7.3 and Annex XIII) and 	with 	Peru contain the most far	-	
reaching provisions 	as to	 IPR 	protection. The FTA with Chile contains obligations regarding a 	
minimum level of protection and non	-discrimination (both 	NT	 and 	MFN	 treatment) in art. 46; 	
obligations to 	undertake to become parties to 	several	 multilateral treaties within specified time 	
 	 	 	 	 	 	
establish	ed in Article 159 (General Exceptions) of this Agreement; and (b) actions authorized by the Dispute 	
Settlement Body of the WTO.’

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limits in Annex XII art. 2; as well as references to the TRIPS Agreement with regard to geographical 
indications, acquisition and maintenance of 	IPRs	, and enforcement in Ann	ex XII arts. 6	‒8. 	Of 	
particular interest here is the following obligation in Annex XII art. 3 to:	 	
ensure in their national laws at least the following: (a) adequate and effective patent 
protection for inventions in all fields of technology. …; (b) each Party shall make 	available an 	
extension of the patent term to compensate the patent owner for unreasonable curtailment 
of the patent term as a result of the marketing approval or sanitary permit process; and (c) 
compulsory licensing of patents shall only be granted under t	he terms of the TRIPS 	
Agreement and the Doha Ministerial Declaration adopted on 14 November 2001 by the 
World Trade Organization.	 	
In addition, Annex XII art. 4 contains rules on extended protection of pharmaceutical and agricultural 
chemicals in cases wher	e information must be submitted in the process of granting a marketing 	
approval or a sanitary permit to products which utili	ze new chemical entities. According to the 	
provision, the parties ‘shall protect such data against disclosure, except where necessar	y to protect 	
the public, or unless steps are taken to ensure that the data are protected against unfair commercial 
use.’ Finally, art. 5 of Annex X== provides for effective protection of industrial designs for a period of 
at least 15 years. 	 	
Norway’s FTA w	ith Peru contains many of the same provisions as the FTA with Chile. One notable 	
difference is art. 6.9 concerning patents, which is parallel to art. 27 of TRIPS. An additional element 
is, however, the provision according to which ‘a Party that does not pr	ovide patent protection for 	
plants, shall undertake reasonable efforts to make such patent protection available consistent with 
paragraph 1.’ Article 6.11 	provides for	 extensive additional protection of pharmaceutical products 	
and agricultural chemical pro	ducts relating to approval procedures that require access to 	
‘undisclosed information’.	 	
Three of the Chinese FTAs address intellectual property rights in detail. Some of the issues covered 
will be further explored in the green trade scenario below. 	As rega	rds	 the free trade scenario, the 	
provisions of particular interest are the following: a provision incorporating the TRIPs Agreement into 
the FTA with New Zealand (art. 161.3); provisions on border measures in the FTAs with Costa Rica 
(art. 114) and Peru (a	rt. 147); and provisions on geographical indications in the FTAs with Costa Rica 	
(art. 116) and Peru (art. 146). In general, the Chinese FTAs do not contain provisions that extend 	IPR	 	
protection beyond 	China’s	 WTO obligations. However, some of the provisio	ns specify the obligations 	
in more detail.	 	
Against this background, we assume that Norway and China are likely to have differing priorities 
regarding intellectual property rights. However, among the EFTA countries, Switzerland 	has	 	
promot	ed	 strict 	IPR 	prote	ction	, wh	ereas	 Norway has in many negotiation processes maintained 	
positions more in line with the interests of developing countries. The free trade scenario will 
therefore not include all the provisions t	o be found in EFTA’s FTAs. The free trade scenario 	builds on 	
the obligations of the TRIPS Agreement supplemented by more specific obligations regarding 
geographical indications and border measures. It also includes non	-discrimination obligations 	
(national treatment and most	-favoured	-nation).	 	
 	
5.2 Trade in 	services	 	
Norw	ay has made public its	 offers in the Doha Round.	43 We assume that, as a minimum, such 	
commitments will be included in 	a Norwegian	 FTA with China. In addition, we base our scenario on 	
 	 	 	43 WTO doc. TN/S/O/NOR/Rev.1, see 
http://www.regjeringen.no/upload/kilde/ud/bro/2006/0015/ddd/pdfv/296029	-tjenestevedlegg.pdf	.

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commitments made by Norway through 	the 	EFTA FTA	s with Singapo	re, Chile and Korea (	as yet there 	
have been	 no commitments in the FTA with Peru). China has not 	made public 	its Doha Round offers	, 	
so our	 scenario will 	draw on	 China’s	 commitments in 	its 	FTAs with Chile, New Zealand, Costa Rica and 	
Peru.	 	
Horizontal commitm	ents	 	
Norwegian offers in the Doha Round include the opening up for purchases of property	/real estate	 in 	
Norway. Importantly, Norway 	has 	maintain	ed	 reservations regarding access to subsidies. We base 	
the free trade scenario on the assumption that Norway wil	l undertake horizontal commitments vis	-à-	
vis China in accordance with the Norwegian offer during the Doha negotiations.	 	
The Chinese 	schedule in its FTA with New Zealand includes the same the horizontal commitments as 	
in its WTO 	schedule (its New Zealand 	schedule does not cover mode 4 of supply).	44 Interestingly, 	
China has not included the reservation concerning national treatment of some categories of 
subsidies for mode 3 in its 	schedule with Peru.	45 This	 indicates	 that national treatment regarding 	
subsidies 	for commercial presence may be on the table in the negotiations with Norway. In addition, 	
China’s s	chedule with Peru includes modifications regarding mode 4 of supply. We consider that such 	
Chinese commitments would depend on reciprocity, and that Norway m	ight	 possibly reciprocate	, 	
given its	 willingness to consider such commitments in the Doha negotiations.	46 Our	 free trade 	
scenario will therefore include such commitments in 	both 	the Chinese and the Norwegian schedules.	 	
Specific commitments 	– Norway 	 	
Service	s related to 	mining	: Norway has undertaken full commitments for modes 1	‒3 in the FTAs with 	
Chile and Korea, and in the Doha negotiations has offered to do the same. Against this background, 
we assume in 	the free trade scenario that full commitments are undertaken for modes 1	‒3 of supply, 	
i.e. that the Norwegian schedule lists	 them as ‘none’ for market access a	s well as 	national treatment 	 	
Services related to 	energy production and distribution	: Norway has undertaken full commitments for 	
modes 1	‒3 in relation to construction, exploration and development of energy resources in 	its FTA 	
with Chile, and has offered to undertake the same commitment in the Doha negotiations. 	Further	, 	
Norway has undertaken full commitments for modes 1	‒3 in relation to energy commercialization 	
services, including trading and brokering for energy, energy	 products, and fuels, in 	its	 FTA with Chile, 	
and has offered to undertak	e the same commitment in the Doha negotiations. However, the latter 	
commitments contain one reservation	, as mode 1 remains unbound in relation to commission agent, 	
wholesale trade and 	retailing services relating to electricity; as well as for intermediation of financial 	
energy derivat	ives and related auxiliary services. Against this background, 	we base 	the free trade 	
scenario on commitments parallel to those undertaken by Norway in 	its	 FTA with Chile.	 	
Research and development services	: In 	its	 FTA with Singapore	, Norway has undertaken full 	
commitments for modes 1	‒3 of research and development services related to 	the 	natural sciences, 	
and interdisciplinary research and development services	. However, no such commitments have been 	
undertaken in 	its	 other FTAs	, nor has	 Norway offered to undertake such commitments in the Doha 	
negotiations. On the one hand, commitments for such services m	ight prove	 a sensitive issue in 	
 	 	 	44 The horizontal commitments in Chin	a’s	 schedules with Costa Rica and Chile do not 	differ 	significantly from 	
its WTO 	schedule.	 The Chinese 	schedule 	with Chile contains some apparent errors, and we thus have not fully 	
assessed whether additional horizontal commitments have been undertaken under this FTA.	 	45 The relevant reservation in China’s WTO 	schedule 	reads as follows	: ‘(3) Unbound for all the exis	ting 	
subsidies to domestic services suppliers in the sectors of audio	-visual, aviation and medical services.’	 	46 See Collective Request, Mode 4 	– Movement of Natural Persons (8 March 2006) sponsored by, 	inter alia	, 	
Norway, available at http://www.regjeringe	n.no/upload/kilde/ud/nyh/2006/0078/ddd/pdfv/282784	-mode4.pdf.

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relation to China due to p	ossible	 competition between Norwegian and Chinese researchers. 	
Moreover, China has not undertaken commitments for such services in its FTAs. On the other hand, 
both 	countries	 have interests in further cooperation regarding research and technology transfer,	 and 	
have several bilateral agreements that facilitate such cooperation, including in the field of 	the 	
environment. Against this background, 	our	 free trade scenario assumes that Norway undertake	s 	
commitments parallel to those undertaken in 	its	 FTA with Sin	gapore.	 	
Environmental services	: The horizontal reservation for environmental services (	‘commitments do not 	
include public service functions whether owned and operated or contracted out by local, regional or 
central government’) is upheld in the Norwegian s	chedules under the FTAs, and Norway has not 	
offered to eliminate this reservation in the Doha negotiations. 	In the free trade scenario 	we thus 	
assume that this reservation remains.	 	
Norway has undertaken full commitments regarding mode 1 of supply for all e	nvironmental services 	
in the FTA with Chile	; it has	 also	 made a similar commitment 	its	 FTA with Korea but with a 	
reservation for advisory services. 	In the Doha negotiations	, Norway has offered to undertake 	
commitments regarding mode 1 for advisory services	 regarding wastewater, waste and remediation 	
and clean	-up of soil and water, as well as noise, protection of biodiversity and landscape, and other 	
environmental and ancillary services. Against this background, the free trade scenario assumes that 
Norway u	ndertakes full commitments regarding mode 1 of supply of all environmental services.	 	
Norway has 	generally discontinued	 its reservation concerning mode 3 of supply 	for refuse disposal 	
services and cleaning services of exhaust gases regarding the existence o	f monopoly situations in its 	
recent 	FTAs	 (Chile, Korea and Hong Kong)	. In the Doha negotiations, Norway has offered to eliminate 	
this reservation in relation to waste. Against this background, the free trade scenario assume	s that 	
Norway eliminates 	this	 res	ervation.	 	
Specific commitments 	– China 	 	
Professional services	: China has not undertaken additional commitments in relation to architectural 	
services, engineering services, integrated engineering services or urban planning services in any of 
the FTAs examin	ed. 	Our	 free trade scenario thus assumes that China will not undertake additional 	
commitments in these sectors.	 	
Research and development services	: The FTA with Peru is the only Chinese FTA that contains 	
additional commitments for research and development s	ervices. These commitments are related to 	
the 	natural sciences ‘	except for R&D services listed in the Catalogue of Prohibited Foreign Investment 	
=ndustries of the Catalogue for the Guidance of Foreign =nvestment =ndustries of China’. China has 
undertaken f	ull commitments for mode	s 2 and 3 of supply (incl	. allowing	 wholly foreign	-owned 	
enterprises). Given that Norway 	might	 be willing to reciprocate (see above), the free trade scenario is 	
based on the same commitment as in 	China’s	 FTA with Peru.	 	
Other busines	s services	: China does not seem interested in opening up its markets for services 	
related to management consult	ancy	, as it has not undertaken relevant commitments in any FTAs. 	
Indeed, its	 FTA with New Zealand even seems to include weaker commitments for su	ch services than 	
those undertaken by China in its WTO 	schedule. Moreover, China has not undertaken commitments 	
regarding energy distribution. Thus, 	in the 	free trade scenario 	we do	 not assume further 	
commitments for management consult	ancy	 services or servi	ces incidental to energy distribution. 	 	
China has, however, undertaken commitments for services incidental to 	mining	 in its FTAs with Peru, 	
Chile and Costa Rica, including full commitments regarding modes 2 and 3 of supply. The 	sole	 	
remaining reservation i	s that mode 3 of supply regarding market access applies 	only 	to 	oil and gas 	
exploitation in cooperation with Chinese partners. Moreover, China’s FTA with Chile include	s 	
additional commitments covering some mining	-related services: scientific technical cons	ulting 	
services; field services for iron, copper and manganese; geological, geophysical and other scientific 
prospecting services; as well as sub	-surface surveying services. These are full commitments for

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modes 1	‒3 of supply, with 	the	 reservation that market access for mode 3 is limited to prospecting 	
and surveying services for iron, copper and manganese in cooperation with Chinese partners. 	Our	 	
free trade scenario is based on commitments parallel to those underta	ken by China in its FTA with 	
Chile.	 	
Environmental services	: While China has not undertaken commitments that go beyond its WTO 	
commitments in its FTAs with Peru and Costa Rica, it has undertaken some additional commitments 
in 	its	 FTAs with New Zealand and C	hile, according to which	 wholly foreign	-owned enterprises will be 	
permitted under mode 3 for all sub	-sectors. Unless otherwise stated,	 our	 free trade scenario 	
assumes that Chin	a’s	 commitments will be in accordance with those undertaken in its WTO 	schedule	, 	
supplemented by those undertaken in 	its	 FTAs with 	New Zealand and Chile.	 	
Domestic regulation	 	
One remaining question is whether Norway and China will negotiate more specific rules regarding 
certain 	regulatory issues under the GATS. 	Here we	 focus on ‘domes	tic regulation’ as defined in article 	
VI of GATS. Norway has indicated some interest in further developing the disciplines related to 
domestic regulation under GATS. However, we are not aware of any specific Norwegian proposal in 
this respect	. We	 note	 that	 some 	Norwegian FTAs contain rules that 	in some respects 	go beyond 	
article VI of GATS. 	The FTAs with Hong Kong (art. 3.7) and Chile (art. 28) extends some of the rules to 	
sectors in which commi	tments have not been undertaken. None of the recent FTAs contai	n rules that	 	
go beyond article VI of GATS to an extent that is relevant for the purpose of this report. 	China’s FTA 	
with New Zealand contains rules that might be of some interest 	here: see	 articles 111.3 (	minor 	
procedural issues when processing application	s for permits to supply services), and 113 (cooperation 	
on recognition of qualifications). We consider that there is low probability that Norway and China will 
undertake 	important	 new commitments regarding regulatory issues in 	an	 FTA	; and that if such 	
comm	itments are included in the FTA, they are unlikely to be of significance from an environmental 	
perspective. 	Thus,	 our	 free trade scenario 	does	 not include additional commitments regarding 	
‘domestic regulation’.	 	
 	
5.3 Investment	 	
Establishment	 	
The right of es	tablishment is partly covered by commitments in the services sector where countries 	
undertake commitments for modes 3 and 4 of supply. These issues are 	examined	 in section 5.2 	
above. In the following, we will consider whether the free trade scenario sh	ould	 include additional 	
rules regarding establishment in a chapter on investment.	 	
According to the Feasibility Study (	2008:	 73), 	various	 aspects of the FTA will ‘provide an improved 	
investment environment’. :owever, such effects are 	to be seen as 	indirect cons	equences of 	
elements of the FTA, and there is in the 	Feasibility 	Study no reference to any specific rules on 	
establishment. In addition, 	it refers to cooperation undertaken in joint bodies since 1980 and 	
proposes 	that	 such cooperation 	be continued 	within t	he framework of the FTA (	2008:	 92	‒93). These 	
proposals are general and do not include 	the 	development of legal commitments. 	 	
Some of Norway’s FTAs contain rules of relevance to the right of establishment. Article 40 of the FTA 
between EFTA and Singapore extends the obligation of national 	treatment to ‘the establishment, 	
acquisition, expansion … of investments’. This general obligation is subject to some limitations 
regarding subsidies (art. 40.3), treatment offered by regional or local authorities (art. 40.4), and 
specific exemptions (art.	 46 and Annex XI). Articles 30	‒37 of 	Norway’s	 FTA with Chile contain rules 	
regarding establishment that are even more far	-reaching as they do not contain the general 	
exceptions for subsidies and treatment offered by regional or local authorities. The subsequent FTAs

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with Korea (se	e art	. 1.4) and Peru (see chapter 5) do not contain any obligations concerning 	
establishment.	 	
The draft Norwegian model bilateral investment treaty (BIT) contains a provision that is similar to the 
one in art. 34 of the Chile FTA. 	In a	rticle [3] it extends 	NT	 obligations to ‘the establishment, 	
acquisition, expansion, … of investments’.	47 The model BIT contains no general exceptions along the 	
lines of the Singapore FTA, but opens for specific exceptions to be listed in an annex.	 	
The Chinese FTAs examined do not c	ontain provisions extending national treatment to 	
establishment. Relevant provisions include provisions extending 	MFN	 treatment to establishment, 	
but with significant exemptions (New Zealand art. 139 and Peru art. 131), and otherwise only 
recommendatory pr	ovisions to promote investment (Chile art. 112, New Zealand art. 151 and Peru 	
art. 128).	 	
Against this background, it is unclear whether establishment is a realistic option in the negotiations 
between China and Norway. However, given the interest 	shown by t	he 	Norwegian authorities in 	
including establishment in the 	NT	 obligation, we have decided to cover this issue in our free trade 	
scenario.	 	
Investment protection	 	
In light of the third version of the Chinese Model BIT	48 and the draft Norwegian Model BIT as wel	l as 	
the existing FTAs of China and Norway	, we 	find it unlikely that the investment chapter of the FTA will 	
include a most	-favoured	-nation clause, an umbrella clause or provisions on performance 	
requirements beyond those that are included for services. Mor	eover, the 1984 BIT between Norway 	
and China include a fair and equitable treatment provision. Against this background, we 	have 	
decided to base 	the free trade scenario on the following obligations in addition to those contained in 	
the 1984 BIT between Norw	ay and China:	49 	
National treatment	: The draft Norwegian Model BIT contains an unqualified NT obligation (art. 3.1), 	
and	 a possibility of listing specific exceptions in an annex to the agreement (art. 3). Norway’s FTA 	
with Singapore contains a similar NT obl	igation in arts. 40 and 46.	 	
The NT provision of the 	Chinese Model BIT is introduced by the following general qualification: 	
‘Without prejudice to its laws and regulations’ (art. 3.2). Article 138 of China’s FTA with New Zealand 
does not contain any such qu	alification, but art. 141 exempt any ‘existing non	-conforming measures 	
maintained within its territory’. The parties undertake to ‘endeavour to progressively remove’ such 
measures. China’s FTA with Peru contains similar provisions (arts. 129 and 130), and 	includes an 	
additional exception for ‘the right to adopt or maintain any measure that accords differential 
treatment to socially or economically disadvantaged minorities and ethnic groups’ (art. 129.3).	 	
Against this background, 	the design of a NT provision	 in the FTA remains uncertain. In light of the 	
Norwegian discussion of NT clauses in BITs and FTAs, we have decided to use the NT obligation in the 
Norwegian draft Model BIT as basis for our free trade scenario.	 	
Investor	–state dispute settlement	: One reas	on why Norway has negotiated few treaties covering 	
investment protection in recent years is concerns regarding 	the settlement of 	investor	–state 	
 	 	 	47 The text is available at: 
http://www.regjeringen.no/upload/NHD/Vedlegg/hoeringer/Utkast%20til%20modellavtale2.doc.	 	48 Text from Gallagher and Shan (2009)	: 433	‒437. 	49 The 1984 BIT contains provisions on fair and equitable treatment, most	-fav	our	ed-nation treatment, 	
expropriation and transfer.

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dispute	s. As the current Norwegian draft Model BIT 	contains	 a provision allowing for 	such	 	
settlement, our free t	rade scenario include	s this option.	 	
Both the Norwegian and the Chinese Model BITs provide for a duty to negotiate prior to submitting 
the dispute to arbitration. Moreover, both Model	 BIT	s contain	 provisions requiring some degree of 	
exhaustion of domestic r	emedies, the Chinese being more demanding than the Norwegian. Both 	
Models provide for the 	International Center for the Settlement of Investment Disputes (ICSID) as the 	
arbitration arrangement to be used. In addition to these elements, the Norwegian Model r	equire	s 	
that the investor 	shall have	 incurred loss. We might assume that a similar requirement would in 	
practice apply under the Chinese Model as well. The Chinese Model provides for a period of six 
months to pass between the investor raises the case with 	the relevant authorities and the case is 	
brought to arbitration. No similar provision is included in the Norwegian Model, but we may assume 
that a similar period would normally be needed for an investor to fulf	il its obligation to settle the 	
dispute amicab	ly. 	Only t	he Chinese Model includes a ‘fork in the road’ provision	: a provision forcing 	
the investor to make a definitive choice between national remedies and international arbitration.	 	
Against this background, we have decided that the investor	–state dispu	te settlement option of the 	
free trade scenario will include the following elements: (a) a duty to attempt to resolve the dispute 
for a minimum of four months prior to bringing the case to international arbitration, (b) a duty to 
attempt domestic remedies 	where such are reasonably available, and (c) ICSID to be the only 	
available arbitration arrangement.	 	
 	
5.4 Measures to avoid negative environmental consequences	 	
General measures	 	
In light of the general clauses included in the Chinese and Norwegian FTAs exam	ined for the purpose 	
of this report, 	our	 free trade scenario will be limited to preambular text. All the preambles of the 	
FTAs examined, except 	that	 between China and Costa Rica, contain references to environmental 	
protection. We may distinguish three ways	 in which the FTAs refer to environmental protection: (a) 	
general agreement to promote environmental protection, i.e. no specific link to the FTA (EFTA	–Chile 	
FTA); (b) agreement that trade liberalization or economic integration should contribute positively	 to 	
environmental protection, i.e. an indirect link to the FTA (EFTA	–Korea, EFTA	–Singapore, and China	–	
New Zealand FTAs); and agreement that the FTA should be implemented in a manner consistent with 
environmental protection, i.e. a direct link to the FTA (	EFTA	–Peru, China	–Chile, and China	–Peru 	
FTAs). For the purpose of avoiding negative environmental consequences of the FTA, we assume that 
preference will be given to 	the approach most likely to influence the interpretation and application 	
of the provisions 	of the FTA in an environmentally	-friendly manner. We consider those preambular 	
clauses that are directly linked to the implementation of the FTA to be most likely to influence the 
interpretation and application of the FTA, and will therefore use the preamb	ular clauses of the EFTA	–	
Peru, China	–Chile, and China	–Peru FTAs as bases for our free trade scenario.	 	
Measures related to trade in goods	 	
In light of the general clauses included in the Chinese and Norwegian FTAs, 	our	 free trade scenario in 	
relation to trad	e in goods will be limited to the inclusion of general exceptions. All the FTAs examined 	
contain such exceptions and cover the elements set out in GATT art. XX(b) and (g). We may 
distinguish five ways in which the FTAs incorporate general exceptions: (a) 	general incorporation into 	
the agreement by reference (China	–Chile and China	–New Zealand FTAs); (b) general incorporation 	
into specific chapters of the FTA through reference (China	–Costa Rica and China	–Peru FTAs); (c) 	
general incorporation into only the tr	ade in goods chapter of the FTA through reference (EFTA	–Peru 	
FTA); (d) incorporation through reference, but with unclear scope (EFTA	–Korea FTA); and (e)

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reproduction of the text of GATT art. XX made applicable to the whole FTA (EFTA	–Chile and EFTA	–	
Singapor	e FTAs). In addition, some of the FTAs specify that the environmental clauses extend to living 	
and non	-living natural resources (China	–Costa Rica, China	–Peru, and China	–New Zealand FTAs).	 	
The ways in which the FTAs refer to GATT article XX thus differ sign	ificantly as regards the scope of 	
the	ir provisions. We find that many of these differences can be ascribed to poor drafting of the FTAs, 	
in particular the EFTA FTAs, and that the intentions of the parties to the FTAs do not differ as much as 
the FTAs as su	ch 	might 	indicate. We find the main outstanding question to be whether the general 	
exceptions shall extend to rules concerning technical barriers to trade (covered by the TBT 
Agreement of the WTO) and sanitary and phytosanitary measures (covered by the SPS	 Agreement of 	
the WTO). All the Norwegian FTAs as well as the China	–Costa Rica and China	–Peru FTAs can be 	
interpreted to extend the general exception to TBT and SPS obligations. However, the Norwegian 
FTAs remain 	somewhat 	unclear.	 	
Against this background, 	our 	free trade scenario will include a reference to GATT art. XX(b) and (g), 	
and the scope of this provision will extend to TBT and SPS obligations.	 	
Measures related to trade in services	 	
In light of the general clauses included in the Chinese and Norwegian	 FTAs, the free trade scenario in 	
relation to trade in services will be limited to the inclusion of a general exception in line with GATS 
art. XIV to be applicable only to the services chapter. 	China’s	 FTAs with Costa Rica (art. 159.2) and 	
with 	New Zealand	 make clear that GATS art. XIV(b) as applied in the FTAs include environmental 	
measures. The free trade scenario will include a clarification along these lines. 	 	
Measures related to investment	 	
The draft Norwegian Model BIT contains two provisions aimed at 	offsetting potential negative effects 	
of investment commitments on environmental policy. According to art. [12]	, which carries the 	
heading ‘Right to regulate’:	 	
Nothing in this Agreement shall be construed to prevent a Party from adopting, maintaining 
or en	forcing any measure otherwise consistent with this Agreement that it considers 	
appropriate to ensure that investment activity is undertaken in a manner sensitive to health, 
safety or environmental concerns.	 	
The second provision is the general exception inc	luded in art. [24]:	 	
Subject to the requirement that such measures are not applied in a manner which would 
constitute a means of arbitrary or unjustifiable discrimination between investments or 
between investors, or a disguised restriction on international 	[trade or] investment, nothing 	
in this Agreement shall be construed to prevent a Party from adopting or enforcing measures 
necessary	50: … ii. to protect human, animal or plant life or health; … or v. for the protection 	
of the environment. [footnote in the 	original]	 	
The third version of the Chinese Model BIT, which dates from the mid	-1990s, does not contain any 	
relevant provision to accommodate environmental policy concerns. However, 	there is 	one recent 	
Chinese FTA 	with	 a general exception that applies to th	e investment rules 	– art. 159.2 	of the FTA with 	
Costa Rica states that art. XIV of GATS applies to the chapter containing rules on investment and that 
the provision extends to environmental measures necessary to protect human, animal or plant life or 
healt	h. In addition, art. 200 of 	China’s	 FTA with New Zealand states that art. X=V is ‘incorporated into 	
and made part of this Agreement, 	mutatis mutandis	.’ As this FTA contains separate chapters on 	
 	 	 	50 For greater certainty, the concept of 	‘necessity	’ in this Article shall include measures taken by a Party as 	
provided fo	r by the precautionary principle, including the principle of precautionary action.

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services and investment, it is unclear whether the exception 	is to	 apply	 only to the services chapter 	
or be extended to the investment chapter	 as well	. The fact that the general exceptions are contained 	
in a provision towards the end of the FTA and not in the individual chapters, and 	moreover 	that the 	
provision refer	s to investment in para. 3	, suggest	s that the exception might be extended to the 	
investment chapter. 	 	
Against this background, 	we base our 	free trade scenario on the incorporation of a reference to art. 	
XIV of GATS, supplemented by a statement that the pr	ovision applies to environmental measures.	 	
 	
6. Green trade scenario	 	
 	
6.1 Introduction	 	
The green trade scenario 	builds on	 the free trade scenario	, but with	 the measures to secure free 	
trade complemented by additional measures to enhance 	the	 positive enviro	nmental impacts and 	
safeguard against negative impacts.	 	
In this chapter we describe trade facilitation and safeguarding measures in the green trade scenario. 
Discussion of the i	mpacts of the green trade scenario	, with	 recommendations for action at the 	
nati	onal and international levels	, is	 deferred to chapter 9. 	 	
The green trade scenario is an attempt at bringing forward the discussion o	n how to promote and 	
safeguard the environment in the context of trade. Both China and Norway have contributions to 
make in	 this context. 	For a more detailed presentation of	 Chinese challenges and points of view	, see	 	
Hu Tao (2011). 	 	
One core issue for the green trade scenario is whether and to what extent 	current	 bilateral 	
environmental cooperation sh	ould	 be integrated into t	he agreement. There 	exist	 several bilateral 	
agreements between China and Norway that relate to environmental issues, 	of which we may note 	
the following	 in particular (	presented in inverse chronology	): 	
- 	MoU on Cooperation in the Field of Water Resources betw	een the Ministry of Water 	
Resources of China and the Ministry of Petroleum and Energy of Norway, signed 10	 June 	
2010;	 	
- 	MoU on Cooperation in the Petroleum Sector between the Ministry of Petroleum and Energy 
of Norway and the National Energy Administration o	f China, signed 12	 January 	2009;	 	
- 	MoU on Environmental Cooperation between the Ministry of the Environment of the 
Kingdom of Norway and the Ministry of Environmental Protection of China, signed 30	 June 	
2008;	 	
- 	Agreement on Fisheries Cooperation between the Mi	nistry of Fisheries and Coastal Affairs of 	
Norway and the Ministry of Agriculture of China, signed 26	 March 	2007; 	 	
- 	MoU on Enhancing Cooperation in Energy Conservation and Renewable Energy between the 
Ministry of Petroleum and Energy of Norway and the Natio	nal Development and Reform 	
Commission of China, signed 27	 September 	2006.	51 	
 	 	 	51 An assessment of the Sino	–Norwegian environmental cooperation until 2005 has been carried out by Wu 	
Xiaofu et al. (2007).

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In light of the mandate for this report, as well as the fact that many of the agreements are well 
established and concern environmental issues	 only partially, we have 	decided agains	t basing	 our	 	
green trade scenario on integrati	ng	 existing bilateral agreements between Norway and China. 	 	
A second core issue is whether and to what extent th	e scenario sh	ould	 include possibilities of future 	
environmental cooperation to be initiated and or	ganized under the agreement. 	Here w	e have 	
concluded that the green trade scenario shall provide for some options 	as to	 such cooperation. The 	
assessment of such initiatives will	, as far as possible	, take into account interaction with existing 	
bilateral coop	eration. 	 	
 	
6.2 General measures	 	
We assume that	, under a green trade scenario	, the general provisions concerning the relationship 	
between 	the 	environment and trade in the preamble of the FTA will further underline and specify the 	
objective of ensuring that 	the FTA avoids negative environmental consequences and contributes to 	
improved environmental conditions. Th	is scenario will include the following categories of provisions 	
in the preamble of the FTA:	 	
- 	a statement on the relationship between the FTA and exist	ing environmental agreements	; 	
- 	a statement concerning the interpretation of obligations under the FTA in light of 
environmental commitments and policies; 	 	
- 	a statement concerning the national implementation of the FTA in light of environmental 
policy measure	s; 	
- 	a statement concerning the future cooperation under the FTA in light of environmental 
objectives.	 	
In addition, the free trade scenario 	has 	includ	ed	 provisions in the main body of the FTA. 	In particular	, 	
four categories of provisions are relevant, in ad	dition to the general exceptions discussed in section 	
5.4 above: (1) 	linking the objective of the FTA to environmental objectives and/or sustainable 	
development	; (2) 	linking the basic principles of the FTA to environmental principles, such as the 	
precautio	nary principle and the polluter pays principle	; (3) 	including elements in the FTA that could 	
contribute to more effective implementation and e	nforcement of environmental policy	; 	(4) 	
obligations to not lower environmental standards or relax environmental me	asures in order to gain 	
competitive advantages.	 	
A working group under EFTA has issued draft model provisions concerning environment	al and labour 	
standards to be included in future EFTA free trade agreements (EFTA Paper, 2010). The green trade 
scenario will	 use the language of the draft model provisions as a starting point. Further elaboration of 	
relevant provisions 	is undertaken in chapter 9 along with 	an	 assessment of potential effects of such 	
provisions.	 	
 	
6.3 Defining environmental goods and services	 	
Ther	e is no general agreement on the definition of 	‘environmental goods	’ for the purpose of the 	
negotiations in the Doha Round, and the approach of the negotiators has therefore been to develop 
lists of environmental goods.	52 Environmental services, on the othe	r hand, have been identified in 	
WTO’s ‘W/120’ document,	53 and, although there is 	considerable	 discussion of the scope of 	
environmental services, the schedules of most countries reflect the definition of environmental 
services in the W/120 document. The main	 international institutions that have undertaken work to 	
 	 	 	52 See, e.g. WTO doc. TN/TE/INF/6, para. 47.	 	53 Ser	vices Sectoral Classification List, WTO doc. MTN.GNS/W/120.

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clarify the environmental goods and services concepts are the OECD, APEC and UNCTAD (see box 
6.1). The OECD and APEC have elaborated lists of environmental goods and services.	 	
The negotiations on env	ironmental goods and services in the WTO face a 	range	 of challenging issues, 	
including striking a balance between the trade and economic interests of various groups of countries, 
how to deal with criteria based on processes and production methods (PPMs), h	ow to deal with 	
‘multiple	-use’ products and services, how to relate to certification schemes, how to update lists in 	
light of new knowledge and technological development	s, and concerns regarding the capacity of 	
customs authorities to deal with special trea	tment of certain goods. These issues are 	generally	 of less 	
concern in the negotiations between Norway and China. Moreover, 	although 	agreement between 	
Norway and China on lists of environmental goods and services and experiences thereby gained may 
be referr	ed to in subsequent WTO negotiations, 	they 	would not be decisive for future positions in the 	
WTO. 	Experience so far in the WTO and concerns regarding future negotiations should therefore not 	
prevent Norway and China from addressing environmental goods and 	services in their negotiations.	 	
Of particular interest in 	the	 Chinese	–Norwegian context is how 	to deal with proposals and 	
suggestions that have been 	put forward by	 developing countries, including ‘non	-timber forest 	
products, products based on traditional k	nowledge (TK) and products made from natural fibres such 	
as jute and coir.’ (WTO CTESS 2004, para. 58), as well as ‘biotrade and trade in organic agricultural 
products’, including goods and services derived from the sustainable use of biodiversity (UNCTAD 
2004, para. 24).	 	
Box 6.1	 	Definitions of ‘environmental goods’ and ‘environmental services’	 	
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defining	 environmental goods and services	 	
UNCTAD: ‘An environmental good can be understood as equipment, material or technology used to 
address a particular environmental problem or as a product that is itself “environmentally 
preferable” to other similar products	 because of its relatively benign impact on the environment. 	
Environmental services have been defined as: (a) services provided by ecosystems (e.g carbon 
sequestration); or (b) human activities to address particular environmental problems (e.g. 
wastewater 	management).’	 	
OECD / Eurostat have defined environmental industry as: ‘activities which produce goods and 
services to measure, prevent, limit, minimize or correct environmental damage to water, air and 
soil, as well as problems related to waste, noise and 	ecosystems.’	 	
The 	OECD list	 of environmental goods was the result of an exercise intended to illustrate, primarily 	
for analytical purposes, the scope of the ‘environment industry’. =t flowed directly from joint OECD 
and Eurostat work on a manual for nationa	l statisticians to assist them in measuring their national 	
environmental industries. On the basis of the general categories of goods and services, the Joint 
Working Party on Trade and Environment added examples of specific goods. The OECD’s larger list 
waV	 created deductively: starting from general categories based on the classifications in the 	
environment industry manual, it added specific examples in order to produce an estimate of 
average tariffs on a previously undefined class of goods<	 	
The 	APEC list	 started with nominations, not unlike the request	-offer procedures traditionally used in 	
trade negotiations. This yielded a list of goods which was then arranged according to an agreed 
classification system. Since the aim of the APEC list was to obtain more f	avourable tariff treatment 	
for environmental goods, APEC member economies limited themselves to specific goods that could 
be readily distinguished by customs agents and treated differently for tariff purposes. For this 
reason, issues related to 	‘like produ	ctV	’, products defined by particular processes or production 	
methods, and products defined by their life	;cycle impacts were not addressed, with the result that 	
some goods were omitted from the list that were included on the OECD list. 	 	
Sources: UNCTAD 2003	, OECD 2005.

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For the purpose of this 	report, we regard the core of the concept ‘environmental goods and services’ 	
to be goods and services that 	promote	 the	 protection and preservation of the environment. This 	
concept can be extended to cover goods and services that promote the 	broader objective	 of 	
sustainable development. Moreover, it can be extended to products and services that can be 
deemed as showing	 par	ticularly 	good environmental performance	 when compared to other like 	
products or services, when the environmental impact throughout their life	-cycle	 is tested against a 	
list of environmental indicators. We base our definition of environmental goods and ser	vices 	in the 	
core concept	, and ope	n up for extending the concept in the two directions indicated.	 	
Given	 the differences between Norway and China regarding level	s of trade liberalization, we 	note	 	
that China will 	probably	 have to undertake more far	-reaching 	trade concessions than Norway in 	
order to promote trade in environmental goods and services. 	In the following	, we	 explore how the 	
core concept of environmental goods and services can be extended in light of Chinese interests. 	Here 	
we assume that both Norwa	y and China would support a definition that prevents misuse in the sense 	
that it c	ould	 lead to increased trade in goods or services that are environmentally harmful. 	 	
To further explore the concept, it is helpful to consider the different aspects of the ‘e	nvironment’. 	
:ere we classify ‘environment’ according to spatial nature of the environmental externality. =n 
economic theory it is the externality that gives a reason for public policy, including facilitation of 
trade in environmental goods and services. H	ence, it 	seems	 reasonable to focus on the externality in 	
order to identify environmental goods and services. 	 	
Going f	rom the micro	- to the macro	-level	, we may distinguish the indoor environment, outdoor 	
environment, local environment, national environment,	 regional environment and global 	
environment, 	as shown in F	igure 6.1. 	 	
Figure 6.1	 	Environmental externalities from the micro	- to the macro	-level	 	
 	
 
Indoor environmental quality 	has become	 a huge health problem. In poor (	predomina	ntly 	rural) 	
households	, cooking and heating often leads to very high levels of indoor air pollution. 	
Concentrations of particulate matter and SO	2 may reach 500	‒1000 	µg/m	3 or more, far higher than 	
outdoor levels. The WHO estimates that two million people wo	rldwide die prematurely each year 	
because of indoor air pollution.	 	
Outdoor, local and national environmental problems are the normal environmental problems that 
are addressed by national environmental policies. The major problems are air pollution, water 
pollution, solid waste, ecosystem degradation, land use, noise and radiation.	 	
Micro	 	Macro 	 	
Scale of	 environment	 
Regional 
environment 	 	
Local 
environment 	 
National environment 	 	Global 
environment 	 	
Outdoor 
environment	 	
The Conventional Environment

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Regional and global environmental problems have been recognized in the past decades. Major 
regional and global problems 	include	 climate change, ozone depletion, biodiversity loss,	 persistent 	
organic pollutants and other hazardous substances. Regional and multilateral environmental 
agreements 	have sought to deal with	 such environmental problems	, with varying degrees of 	
effectiveness. 	 	
A list of environmental goods and services could	 be structured as follows:	 	
 	Indoor environmental goods and services	 are relevant for improving the indoor environment;	 	
 	Local environmental goods and services	 are relevant for improving the outdoor, local 	
environment; 	 	
 	Global environmental goods and services	 are relevant for improving the regional and global 	
environment.	 	
This list, with entries for indoor and global environmental goods and services, is in some senses 
broader than the current definitions used by the OECD, APEC, UNCTAD and WTO. It recognizes th	e 	
human need	 for a good global and indoor environment. At the micro (indoor) level it corresponds to 	
initiatives of the WHO, and at the macro (global) level it fits into the UNFCCC, the Montreal Protocol, 
the CBD and other multilateral environmental agreem	ents. Moreover, it takes more clearly into 	
consideration the major interests of developing countries, as it includes main focuses on 
environmental issues of particular concern to those suffering from poverty, a	s well as	 on 	
environmental problems for which 	developing countries may provide goods and services.	 	
 	
6.4 The environmental priorities of China and Norway	 	
As part of an FTA between China and Norway a green trade scenario is likely to focus on 
environmental goods that correspond to the environmental prio	rities of 	the two counties	. 	
The environmental priorities of China	 (for more details, see Hu	 Tao, 	2011) have traditionally been:	 	
Indoor > outdoor/local/national > global 	 	
Since the introduction of the concept of ‘scientific development’ and as recently rec	onfirmed in the 	
12	th Five 	Year 	Plan, the Chinese priorities have changed to:	 	
Indoor + outdoor/local/national + global	 	
In general, we can observe that Chinese priorities have 	shifted	 from a high priority of indoor but also 	
of outdoor local environmental pro	blems, to regarding all groups of environmental problems as 	
equally important.	 	
The environmental priorities of Norway 	were traditionally similar to the traditional priorities of China	: 	
indoor and local problems first, then national, then global. However, i	n recent years the indoor, local 	
and even national environmental problems 	have	 diminished greatly	, while global environmental 	
problems, climate change	 in particular, are emerging and large. The current priorit	ies	 in Norway 	
could therefore, in very broad te	rms, be illustrated as follows:	 	
Global > outdoor/local/national > indoor	 	
Thus we see that	 global environmental problems are emerging higher on the agenda of both 	
countries. 	Having mastered	 some local and national problems	, Norway may also be interested in 	
exporting 	related 	environmental goods, services and technologies. China also has a significant 	
environmental industry interested in expanding its market shares. 	 	
It may also be noted that the international community	 (including the UN, the WTO and the WHO	) 	
may see it as its particular role to focus on global problems such as climate change, and on public 
health issues like indoor air pollution	, deeming it better to leave	 outdoor local and national 	
environmental issues to the national governments.

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6.5 Trade 	in goods	 	
Identification of ‘environmental goods’	 	
The EU, the 	USA	, Canada, Japan and other countries including Norway have presented to the 	
negotiations under the Doha Ministerial Declaration a list of 153 goods by HS entry (Committee on 
Trade and Environme	nt Special Session, 2009) that	, according to the sponsors	, should ‘	(1) 	be 	
particularly important 	– even critical 	– for environmental protection, and workable from a customs 	
facilitation perspective; (2) 	have the potential for a high degree of convergence a	mong Members; 	
and (3) serve as	 a basis for further work and negotiation under paragraph 31 (iii) of the Doha 	
Declaration.’	54 The list includes ‘	air compressors mounted on a wheeled chassis for towing’, 	
considered an example of air	-handling equipment for pol	luted air; ‘industrial mufflers’ to reduce 	
engine noise, etc. In other words, 	the list is both	 detailed and 	specific	 list. None of the 153 goods 	
have been	 explicitly suggested by Norway. There 	have also been	 many other initiatives to isolate 	
environmental 	goods	, and many problems along the way (see e.g. Sugathan, 2009). 	 	
One weakness of the 	‘153	-list	’ is that it 	does not cover 	the whole spectrum of environmental goods. 	
In particular, 	there are 	only a few products relate	d to the indoor environment and global	 	
environment. Most of China’s demand for indoor environmental goods and global environmental 
goods is missing, such as indoor ventilation equipment and indoor drinking water equipment. 	 	
As part of th	e present	 report	, a new list of 227 goods has been develo	ped by a Chinese team of 	
researchers	: see Hu	 Tao, 	2011. The list primarily reflects Chinese perspective	s, and is based on the 	
following considerations:	 	
- 	Demands for improving the indoor, local and global environment	 	
- 	To expand employment, in particular in Ch	ina	 	
- 	To facilitate export and trade	 	
- 	To recognize special and differential treatment for some goods that are less competitive	 	
 	
Tariffs on environmental goods	 	
Since Norway has zero import tariff on most industrial goods	, a ‘green’ initiative to exempt the gre	en 	
goods from import tariff is unlikely to produce any change for the country, unless such a list is 
extended to agricultural goods. According to Sugathan (2009) China has an average import tariff 
between 	5 and 10%	 on the goods listed in the 153	-list. Hu T	ao (2011) indicates a range of	 4 to 8%	. 	
We assume that the green trade agreement will eliminate tariffs on designated environmental goods. 	 	
Non	-tariff barriers and environmental goods	 	
The green trade scenario focuses on the relationship between non	-tariff	 barriers to trade and 	
environmental goods. We have identified four main elements that can be relevant in this context: (1) 
to facilitate trade between in such goods, establishing a ‘fast track’ for environmental goods; (2) 	the 	
possibility of taking into a	ccount environmental concerns in decisions regarding import and export, 	
e.g. Chinese export restrictions; (3) 	to take into account environmental concerns when developing 	
domestic standards; and (4) 	to take into account environmental concerns when develop	ing 	
international standards.	 	
The green trade scenario includes these four elements. A selection of these elements 	is further 	
elaborated in chapter 9 based on the draft model provisions concerning the environment and labour 
 	 	 	54 See JOB(09)/132 of 9 October 2009, p. 4, para. 11.

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standards to be included in future 	EFTA free trade agreements (EFTA Paper, 2010). In order to study 	
the potential effects of such elements, chapter 9 will consider the application of the elements in 
specific case studies (cl	ean	-en	ergy products and carbon capture and storage (CCS)	-related pr	oducts).	 	
In light of the above discussion of Chinese export controls (see in particular 5.1), the green trade 
scenario will consider the option of accommodating such measures to the extent that they are 
justifiable from an environmental perspective.	 	
Intell	ectual property rights	 	
Many low	-cost countries, including China, regard IPRs as key barriers against developing their 	
environmental industry. 	Some 80%	 of China’s environmental industry firms are small and medium 	
enterprises with less than 15 million 	yuan (	about 13 million NOK) 	in 	fixed assets. The technological 	
level of most firms is about the same as in developed countries of the 	19	80s or 	19	90s. Only about 	
20	% of firms have 	filed 	their own patents. Foreign patents are often too expensive to buy. The green 	
trade scenario will consider how IPR can be regulated in the FTA in order to promote the use of 
environmental goods and encourage technology transfer, while at the same time 	achieving	 the level 	
of IPR protection required 	under	 the TRIPs Agreement. This asp	ect of IPRs will be considered where 	
relevant in the case studies in chapter 9. On the basis of Chinese FTAs, we have identified the 
following elements that will be included in the green trade scenario for this purpose:	 	
- 	A reference to general principles to	 be applied when considering IPR issues under the FTA. 	
Article 161 of the FTA with New Zealand identifies the following three principles: ‘certainty 
over the protection and enforcement of intellectual property rights’, ‘minimise compliance 
costs for busine	ss’, and ‘facilitate international trade through the dissemination of ideas, 	
technology and creative works’ (see also art. 144.2 of the FTA with Peru, as well as the FTA 
between EFTA and Peru, art. 6.2);	 	
- 	A provision that the protection and enforcement of i	ntellectual property rights should 	
contribute to the promotion of technological innovation and the transfer and dissemination 
of technology (see art. 113.2 of the FTA with Costa Rica); and	 	
- 	A provision to prevent practices which constitute abuse of intellec	tual property rights by 	
right	s-holders	, or unreasonably restrain competence or adversely affect or limit technology 	
transfer (see arts. 144.4 and 147 of the FTA with Peru).	 	
One central issue in the trade and environment debate has been the relationship bet	ween 	
obligations under the CBD, supplemented by the Nagoya Protocol on Access to Genetic Resources 
and the Fair and Equitable Sharing of Benefits arising from Their Utilization, and the TRIPs 
Agreement. The free trade scenario includes options for resolvin	g the tensions between the effective 	
protection of IPRs, 	patents 	in particular, and efforts to preserve and protect biodiversity and ensure 	
the sharing of benefits from the use of genetic resources. Many of 	China’s	 FTAs have included 	
provisions that deal w	ith these issues. Provisions that can be included and the potential effects of 	
such provisions will be assessed in chapter 9.	 	
Other measures	 	
The report from the Chinese research team (see Hu	 Tao, 	2011) 	highlights 	a further two regulatory 	
areas and measures	 of relevance for facilitating trade in environmental goods	: low demand	, and 	
public procurement. Measures to deal with the problem of 	low demand	 for environmental goods and 	
services will be further explored in section 9.2.	 	
The second barrier is related to 	procedures and routines for 	public procurement	. The municipality is 	
usually the 	sole	 consumer of many environmental goods, especially those that are packaged with 	
investment, see below. 	In China	, suppliers 	often 	compete to get the best relations with the m	unicipal 	
government	, rather than 	competing 	on the basis of technology and cost	-effectiveness. The trade 	
policy review of China 	offers	 the following assessment:

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Since its previous Trade Policy Review in 2008, China has continued to take steps to improve 
tra	nsparency. Nonetheless, some aspects of China's trade policy regime remain complex and 	
opaque. … The complexity and opacity can leave scope for administrative discretion and thus 
corruption. According to a 2008 Corruption Perceptions Index, which measures	 perceptions 	
of corruption among public officials and politicians in 180 countries, China ranked 72nd, with 
a score of 3.6 out of 10; in 2005, it ranked 78th (out of 159 countries) with a score of 3.2. A 
2007 joint Circular by the Supreme People's Court a	nd Supreme People's Procuratorate on 	
the Opinions to Address the Issues in Handling Criminal Cases Involving the Taking of Bribes 
explicitly classifies as bribery certain acts by government officials, such as securing benefits 
for someone and, in return, a	ccepting corporate shares from the person without due 	
payment. The Government recently adopted various measures to enhance transparency in 
the public sector.	55 	
For the reasons that we excluded public procurement in the screening (see chapter 4) we will not 
further explore these issues in the green trade scenario.	 	
One additional measure to be considered is the use of 	countervailing measures	 in relation to 	
environmental goods or services. The controversies linked to Chinese exports of wind	-power 	
equipment and 	solar panels, where the 	USA	 has raised cases claiming that Chinese subsidized 	
exports is causing injury to US producers	, and that China should compensate the 	USA	 or 	else 	the 	USA	 	
will impose countervailing duties.	56 Similar issues are relevant in a Norwegian	 context, as illustrated 	
recently by the notification to Oslo 	Stock Exchange	 by the Renewable Energy Corporation ASA (REC) 	
that it 	is considering	 closing down production capacity at three of its factories in Norway.	57 Building 	
up production capacity for ren	ewable energy equipment is a high priority from an environmental 	
perspective	, in Norway and China	 alike	. 	
The establishment of renewable energy industry may require government support, 	not least	 since 	
renewable energy competes with fossil fuels. It can als	o be argued that it is particularly important 	to 	
make	 cheap production capacity for renewable energy available in developing countries 	like	 China	, 	
where the increase in 	energy	 demand is high 	but	 average ability to pay is low. Moreover, China can 	
argue that	 countervailing measures must be 	seen	 in light of the principle of common but 	
differentiated responsibilities, as set out in Principle 7 of the Rio Declaration, as well as the 
obligations undertaken to promote technology development and transfer, and to pr	ovide new and 	
additional financial resources for such purposes according to the UN Framework Convention on 
Climate Change art. 4.1(c), 4.3 and 4.5. It is also relevant that the obligations of developing countries 
under the UNFCCC are made dependent on deve	loped countries fulfilling their obligations of 	
technology transfer and commitment of financial resources (art. 4.7). Against this background, we 
assume that China will have an interest in limiting the possibility of using countervailing measures in 
sector	s of green technology with a particular focus on the renewable energy industry. Box 6.1 	makes 	
clear	 some of the challenges in the solar	 energy	 sector as seen from a Chinese perspective. 	 	
 	 	 	55 TPR China, WT/TPR/S/230, p. 12, para. 9.	 	56 See China 	— Measures concerning wind power equipment, dispute DS419, and ‘U.S. Solar Panel Makers 	Say 	
China Violated Trade Rules’,	 New York Times	, 19 October 2011.	 	57 Notification to Oslo 	Stock Exchange (Oslo 	Børs	) 28 September 2011, see 	
www.newsweb.no/newsweb/search.do?messageId=29	0338	.

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Box 6.	2 	Trade measures against Chinese exports of solar power technol	ogies 	 
 	
From a Norwegian perspective, and in light of the above	-mentioned challenges 	facing REC	, we 	
assume that Norway may want to maintain the possibility of protecting environmental industries 
from sudden changes in levels of competition. This can be do	ne through safeguards measures, and 	
need not 	entail	 countervailing duties or anti	-dumping duties. In the FTA between EFTA and Hong 	
Kong, Norway has undertaken ‘not [to] apply countervailing measures as provided for under Article 
VI of the GATT 1994 and Par	t V of the WTO Agreement on Subsidies and Countervailing Measures’ 	
(art. 2.11(1)). Moreover, Norway has undertaken ‘not [to] apply anti	-dumping measures as provided 	
for under Article VI of the GATT 1994 and the WTO Agreement on Implementation of Article VI	 of the 	
GATT 1994’. 	 	
Subsidies and dumping may also be detrimental to the environment. One area where elimination of 
subsidies may prove environmentally beneficial is fisheries subsidies (see paras. 28 and 31 of the 
Doha Declaration). Similarly, some indus	trial and agricultural subsidies, as well as anti	-competitive 	
practices	, have been recognized as promoting or supporting environmentally harmful activities.	 	
Against this background, the green trade scenario will assume that Norway and China undertake not 
to apply countervailing duties and anti	-dumping duties in relation to environmental goods. We also 	
assume that this obligation is extended to services associated with such products. 	Further, the	 	
scenario assumes that countervailing and anti	-dumping measures	 remain available where they can 	
be justified on the basis of environmental or other grounds. 	 	
 	
6.6 Trade in services	 	
Environmental services	 	
Environmental services represent one main category of services	 ‒ category 6 of the WTO Services 	
Sectoral Classification List (MTN.GNS/W/120). According to the Feasibility Study (	2008:	 63):	 	
Several Norwegian businesses in the environmental services sector are already engaged in 
the Chinese market, providing various ser	vices such as advanced solutions enabling recovery 	
and recycling of materials, biological wastewater treatment for both the industrial and 
municipal sectors. There is, moreover, reason to believe that given favourable conditions, the

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trade of environmental	 services between Norway and China has potential to grow 	
substantially.	 	
The Norwegian and Chinese 	schedules specify the following sub	-categories of environmental 	
services:	 	
Norway	 	China	 	
A. Sewage Services (CPC 9401)	 	A. Sewage Services (CPC 9401) 	 	
B. Refus	e Disposal Services (CPC 9402)	 	B. Solid Waste Disposal Services (CPC 9402)	 	
C. Sanitation and Similar Services (CPC 9403)	 	C. Cleaning Services of Exhaust Gases (CPC 9404)	 	
D. Other	 	
- Noise abatement services (CPC 9405)	 	
- Nature and landscape protection ser	vices (CPC 	
9406)	 	
- Other environmental protection services (CPC 	
9409)	 	
- Cleaning services of exhaust gases (CPC 9404)	 	
D. Noise Abatement Services (CPC 9405)	 	
 	E. Nature and Landscape Protection Services 
(CPC 9406)	 	
 	F. Other Environmental Protection Servi	ces (CPC 	
9409)	 	
 	G. Sanitation Services (CPC 9403)	 	
 
While Norway and China differ somewhat in how they organize their classification of environmental 
services, they include the same broad categories.	 However, t	his classification of environmental 	
services 	has been criticized. The WTO Secretariat notes that:	 	
Classification of environmental services contained in W/120 has been repeatedly criticized 
for being obsolete. Its focus on infrastructure services and end	-of-pipe technologies is 	
considered too narrow a	nd many consider that it does not account for developments which 	
have occurred in the environment industry over the last 20 years.	58 	
Several proposals have been launched to revise the classification, 	but 	there is currently no general 	
consensus on this issue	.59 Environmental consulting 	is o	ne important service sector that is not 	
explicitly identified in the above categories, and which is subject to differing opinions regarding its 
classification.	60 Several services that have been classified elsewhere have been 	identified as being 	
‘environment	-related’, including business services (e.g. advisory and pre	-design architectural and 	
engineering services, various research and development services, technical testing and analysis 
services, services related to forestry, 	and services incidental to manufacturing), construction services 	
(e.g. construction of waterworks, sewer systems, and waste treatment facilities), and distribution 
services (e.g. wholesale trade services of waste and scrap and materials for recycling).	61 Th	e UN 	
Statistics Division issued a new version of the Central Product Classification (CPC version 2) on 31 
December 2008	, significantly revis	ing	 the former classification of environmental services.	62 	
 	 	 	58 WTO doc. S/C/W/320, para. 	49.	 	59 Ibid. paras. 65	–72.	 	60 Ibid. paras. 52	–56.	 	61 Ibid. para. 	50.	 	62 See 	http://unstats.un.org/unsd/cr/registry/cpc	-2.asp	 and ibid. paras. 	61–64.

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The Chinese research team observes that China 	is pursuing	 negotiations on environmental services 	
with 	various	 trading partners, including Chile, Singapore, Australia and New Zealand	; further,	 that 	
these negotiations use the UN CPC classification and consider using the proposal advanced by 	the 	EU 	
in the Doha Round	 (see Hu Tao, 2011). Recent Norwegian schedules in EFTA FTAs follow the 	EU 	
proposal with only minor adjustments (see Norwegian schedules in the FTAs with Chile and Korea). 
The Norwegian schedule in 	its	 FTA with Hong Kong, however, differs from other schedu	les	: it is based 	
on the revised (but not the most recent) UN CPC (	the	 CPC provisional	, not CPC version 2), and 	
contains the following in the form of reservations (Appendix 4 of the FTA):	 	
49. Sector: 	 	
Sub	-Sector:	 	
Industry Classification: 	 	
 
 
 
 
 
 
 
 
 
Type of R	eservation: 	 	
 
Level of Government: 	 	
Legal basis:	 	
Reservation: 	 	
ENVIRONMENTAL SERVICES	 	
 
CPC Prov. 9401 Sewage services	 	
CPC Prov. 9402 Refuse disposal services	 	
CPC Prov. 9403 Sanitation and similar services	 	
CPC Prov. 9404 Cleaning services of exhaust gases	 	
CPC Prov. 9405 Noise abatement services	 	
CPC Prov. 9406 Nature and landscape protection services	 	
CPC Prov. 9409 Other environmental protection services n.e.c.	 	
CPC Prov. 96322 Preservation services of historical sites and buildings	 	
CPC Prov. 96332 Nature res	erve services including wildlife preservation 	
services	 	
Market Access (Article 3.5)	 	
National Treatment (Article 3.6)	 	
All 	 	
 
Public service functions in the environmental sector, whether owned and 
operated or contracted out by municipal, regional or central g	overnment 	
are exempted from market access and national treatment obligations.	 	
Norway reserves its right to maintain or modify any scheme or measure of 
the type described above.	 	
50. Sector: 	 	
Sub	-Sector:	 	
Industry Classification: 	 	
Type of Reservation: 	 	
 
Leve	l of Government: 	 	
Legal basis:	 	
Reservation: 	 	
 	
ENVIRONMENTAL SERVICES	 	
 
CPC Prov. 9409 Other environmental protection services n.e.c. 	 	
Market Access (Article 3.5)	 	
National Treatment (Article 3.6)	 	
All	 	
 
Norway reserves the right to designate institutions resp	onsible for 	
radiation surveillance for public purposes, and to give exclusive rights for 
the supply of such services for public purposes.	 	
 
We observe that China and Norway 	show	 some flexibility when defining environmental services for 	
the purpose of negot	iating FTAs. The green trade scenario assume	s that flexibility will be available 	
during negotiations of the China	–Norway FTA.	 	
Above we outlined an approach to the concept of environmental goods and services that emphasizes 
indoor environmental quality and 	global environmental quality in addition to the conventional 	
themes of 	outdoor environmental quality. For services 	in particular,	 such an emphasis is broader 	
than the current definitions. An additional element highlighted by the Chinese research team (see 	Hu	 	
Tao, 	2011) 	concerns	 China’s advantages in sectors of lab	our	-intensive services, as well as in sectors 	
where there are close links between environmental goods and associated services. Given the

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conclusion of our screening (section 4.2), the green trade s	cenario will not include additional 	
commitments regarding mode 4 of supply (presence of natural persons) for environmental services.	 	
Environmental services are often supplied in conjunction with environmental goods and tend to 
represent the predominant ele	ment in the package (about 65	% in value terms), 	with some	 sectoral 	
variations.	63 Developed	-country markets are now considered to be mature	; growth is modest, 	but	 	
they are expected to continue to dominate exports of environmental services in the future.	64 The	 	
environmental sector in developing and transition economies represented about 14% of the global 
industry in 2006	. While t	hese countries are net importers of environmental services	, some of them 	
have started to export, mainly on a regional basis	. T	heir gre	atest export niches appear to be in 	
environmental engineering, testing and analysis, research and development and consultancy. 
Environmental services markets are experiencing significant growth in developing countries.	65 Small 	
and medium	-sized enterprises, 	prevalent in developing countries, represent an important share of 	
the market, especially in non	-infrastructure environmental services	 like	 air and noise pollution 	
abatement services, and environmental consulting.	66 	
The Feasibility Study describes the Norwe	gian market for environmental services as follows (	2008:	 	
63): ‘Partially due to a history of rigorous environmental regulations, the Norwegian market for 
environmental services is diverse and advanced, and the Norwegian providers of environmental 
services 	have years of experience meeting strict requirements. Norwegian actors hold specialised 	
competence in niches such as renewable energy, waste management, sewage treatment, and air and 
water surveillance technology and systems.’ Moreover, ‘China has opened a	ll categories of 	
environmental services except environmental quality monitoring and pollution source inspection. 
Foreign enterprises may establish joint ventures with Chinese enterprises in China, and there is no 
limitation on ownership’	 (ibid).	 	
The green 	trade scenario will be based on the assumption that further liberalization of trade in 	
environmental services may be both to the benefit and to the disadvantage of the environment	. This 	
will depend	 on the commitments undertaken and the interaction between 	such commitments and 	
existing or future domestic measures to protect the environment, as well as the structure of the 
existing industry. For example, commitments regarding market access for refuse disposal services 
may strengthen or weaken domestic measure	s taken to protect the environment. It is particularly 	
important to take into account the possibility of negative environmental impacts for services such as 
wastewater treatment, refuse collection and disposal, or street cleaning, which are typically provi	ded 	
to local communities	 by 	the 	public authorities.	67 	
Against this background, the green trade scenario will contain a mix of various commitments in order 
to realize ‘win	‒win’ (trade and environment) and ‘win	‒win	‒win’ (trade, environment	, development) 	
oppor	tunities and avoid environmentally harmful consequences of commitments. The scenario will 	
not be limited to environmental services as defined in the Norwegian and Chinese WTO schedules	, 	
but	 will take into account Chinese export interests as indicated above	. The specific elements of the 	
green trade scenario 	are	 elaborated in relation to the specific sectors to be considered in chapter 9.	 	
Other issues	 	
Subsidies	: As indicated above, subsidies may have positive and negative environmental effects. The 	
green trad	e scenario will aim at enhancing positive and reducing negative effects of subsidies in 	
services sectors. 	 	
 	 	 	63 Ibid. pa	ra. 7.	 	64 Ibid. para. 9.	 	65 Ibid. para. 10.	 	66 Ibid. para. 11.	 	67 Ibid. para. 	5.

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Article XV of GATS contains only an obligation to undertake negotiations and consultations on 
subsidies. The Norwegian WTO schedule contains a horizo	ntal reservation regarding subsidies: 	
subsidies remain unbound for modes 1 and 2 of supply, and full commitments are undertaken in 
relation to market access for modes 3 and 4 of supply. In relation to national treatment and mode 3 
of supply, Norway lists t	he following reservation: ‘Eligibility for subsidies may be limited to juridical 	
persons established in Norway. Unbound for research and development subsidies’, and the following 
reservation in relation to mode 4: ‘Subsidies available to natural persons ma	y be limited to 	
Norwegian citizens’. China’s schedule contains the following horizontal reservation for national 
treatment and mode 3 of supply: ‘	Unbound for all the existing subsidies to domestic services 	
suppliers in the sectors of audio	-visual, aviation	 and medical services.’ China has undertaken 	only 	
limited commitments in relation to mode 4 of supply. We can thus observe that China has 
undertaken broader commitments than Norway in relation to modes 1 and 2, and that the 
commitments in relation to modes	 3 and 4 are comparable.	 	
The green trade scenario assumes that both countries have some flexibility regarding the regulation 
of subsidies. With regard to subsidies for environmental purposes, it assumes that the possibility of 
raising cases against such su	bsidies as well as the application of countervailing measures will be 	
limited. With regard to subsidies that 	act to 	support activities that are harmful to the environment, 	
the scenario 	assumes that 	it will remain possible to raise	 cases 	against such subsid	ies	, as well as 	to 	
apply	 countervailing measures. 	Further	, it assumes that the latter subsidies might be subject to 	
consultation in order to discuss the possibility of eliminating such subsidies.	 	
General exception	: The general exception included in GATS ar	t. X=V states: ‘	Subject to the 	
requirement that such measures are not applied in a manner which would constitute a means of 
arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a 
disguised restriction on trade in se	rvices, nothing in this Agreement shall be construed to prevent the 	
adoption or enforcement by any Member of measures: … b. necessary to protect human, animal or 
plant life or health’. The Marrakesh Ministerial Decision on Trade in Services and Environment	 notes 	
that ‘since measures necessary to protect the environment typically have as their objective the 
protection of human, animal or plant life or health, it is not clear that there is a need to provide for 
more than is contained in paragraph (b) of Artic	le X=V’. 	Further	: 	
In order to determine whether any modification of Article XIV of the Agreement is required 
to take account of such measures, to request the Committee on Trade and Environment to 
examine and report, with recommendations if any, on the rela	tionship between services 	
trade and the environment including the issue of sustainable development. The Committee 
shall also examine the relevance of inter	-governmental agreements on the environment and 	
their relationship to the Agreement.	 	
There has been n	o agreement to proceed with reform of art. XIV on the basis of the reports provided 	
by the Committee. While many states have specif	ied	 these issues in the general exceptions contained 	
in their bilateral FTAs, EFTA has not done so in any of the FTAs examine	d (see FTAs with Chile art. 44, 	
Hong Kong art. 3.16, Korea art. 3.15, and Singapore art. 33), and the EFTA consolidated draft model 
provisions concerning the environment merely refer to GATS art. XIV.	 	
The Chinese FTAs follow a somewhat more nuanced approac	h. The FTA with Chile (art. 44) only 	
refers to GATS art. XIV	; the FTAs with Costa Rica (art. 159.2) and New Zealand (art. 200.2) state that 	
the exceptions apply to environmental measures	; and the FTA with Peru (art. 193.2) contains 	
language t	hat	 indicate	s a broad interpretation of the exception.	 	
We note that the general exception of GATT provides for more flexibility as regards environmental 
measures than does the general exception of GATS. We also note that only in exceptional disputes 
have measures been a	ccepted as justified on the basis of the 	GATT 	general exception. The green 	
trade scenario will be based on a general exception in relation to services that includes the same

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flexibilities as those of the general exception of GATT, and that the general exce	ptions make 	it clear 	
that they apply to measures to protect the environment.	 	
 	
6.7 Investment	 	
The relevant environmental elements included in the draft Norwegian Model BIT are the following:	 	
- 	Identification of sustainable development as a basic objective (pr	eamble).	 	
- 	Inclusion of the objective of making investment and environmental protection mutually 
supportive (preamble).	 	
- 	Specification of the relationship between national treatment and measures taken to protect 
the environment (footnote to art. [3]).	 	
- 	The rig	ht to take measures of financial security to remedy environmental damage under the 	
provision on transfer (art. [9.3.ii(d)]).	 	
- 	A provision on not lowering environmental standards (art. [11]).	 	
- 	A provision on the right to regulate (art. [12]).	 	
- 	Measures to ensu	re that dispute settlement proceedings take appropriately into account 	
environmental perspectives (the possibility of submitting amicus curiae briefs: art. [18.3] and 
transparency of proceedings: art. [19]).	 	
China has not included any comparable elements i	n its Model BIT, and has to our knowledge not 	
developed any comparable provisions in the BITs that it has signed so far. The green trade scenario 
will include the provisions of the draft Norwegian Model BIT.	 	
In addition, the green trade scenario will consi	der 	how	 additional elements related to the 	
environmental performance of investors can be integrated 	into the FTA. Such elements will be based 	
on the OECD Guidelines for Multinational Enterprises as updated in 2011.	68 The revised chapter on 	
the environment c	ontains the following elements (	text 	reproduced in its entirety):	 	
Enterprises should, within the framework of laws, regulations and administrative practices in 
the countries in which they operate, and in consideration of relevant international 
agreements, 	principles, objectives, and standards, take due account of the need to protect 	
the environment, public health and safety, and generally to conduct their activities in a 
manner contributing to the wider goal of sustainable development. In particular, enterp	rises 	
should:	 	
1. Establish and maintain a system of environmental management appropriate to the 
enterprise, including:	 	
a) collection and evaluation of adequate and timely information regarding the 
environmental, health, and safety impacts of their activiti	es;	 	
b) establishment of measurable objectives and, where appropriate, targets for 
improved environmental performance and resource utilisation, including periodically 
reviewing the continuing relevance of these objectives; where appropriate, targets 
should 	be consistent with relevant national policies and international environmental 	
commitments; and 	 	
c) regular monitoring and verification of progress toward environmental, health, and 
safety objectives or targets.	 	
2. Taking into account concerns about cost, b	usiness confidentiality, and the protection of 	
intellectual property rights:	 	
 	 	 	68 See 	http://www.oecd.org/dataoecd/43/29/48004323.pdf	.

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a) provide the public and workers with adequate, measureable and verifiable (where 
applicable) and timely information on the potential environment, health and safety 
impacts of th	e activities of the enterprise, which could include reporting on progress 	
in improving environmental performance; and	 	
b) engage in adequate and timely communication and consultation with the 
communities directly affected by the environmental, health and sa	fety policies of the 	
enterprise and by their implementation.	 	
3. Assess, and address in decision	-making, the foreseeable environmental, health, and safety	-	
related impacts associated with the processes, goods and services of the enterprise over 
their full li	fe cycle with a view to avoiding or, when unavoidable, mitigating them. Where 	
these proposed activities may have significant environmental, health, or safety impacts, and 
where they are subject to a decision of a competent authority, prepare an appropriate	 	
environmental impact assessment.	 	
4. Consistent with the scientific and technical understanding of the risks, where there are 
threats of serious damage to the environment, taking also into account human health and 
safety, not use the lack of full scientifi	c certainty as a reason for postponing cost	-effective 	
measures to prevent or minimise such damage.	 	
5. Maintain contingency plans for preventing, mitigating, and controlling serious 
environmental and health damage from their operations, including accidents 	and 	
emergencies; and mechanisms for immediate reporting to the competent authorities.	 	
6. Continually seek to improve corporate environmental performance, at the level of the 
enterprise and, where appropriate, of its supply chain, by encouraging such activi	ties as:	 	
a) adoption of technologies and operating procedures in all parts of the enterprise 
that reflect standards concerning environmental performance in the best performing 
part of the enterprise;	 	
b) development and provision of products or services tha	t have no undue 	
environmental impacts; are safe in their intended use; reduce greenhouse gas	 (GHG)	 	
emissions; are efficient in their consumption of energy and natural resources; can be 
reused, recycled, or disposed of safely;	 	
c) promoting higher levels of 	awareness among customers of the environmental 	
implications of using the products and services of the enterprise, including, by 
providing accurate information on their products (for example, on greenhouse gas 
emissions, biodiversity, resource efficiency, o	r other environmental issues); and	 	
d) exploring and assessing ways of improving the environmental performance of the 
enterprise over the longer term, for instance by developing strategies for emission 
reduction, efficient resource utilisation and recycling	, substitution or reduction of use 	
of toxic substances, or strategies on biodiversity.	 	
7. Provide adequate education and training to workers in environmental health and safety 
matters, including the handling of hazardous materials and the prevention of env	ironmental 	
accidents, as well as more general environmental management areas, such as environmental 
impact assessment procedures, public relations, and environmental technologies.	 	
8. Contribute to the development of environmentally meaningful and economica	lly efficient 	
public policy, for example, by means of partnerships or initiatives that will enhance 
environmental awareness and protection.	 	
In their comprehensive book on Chinese Investment Treaties, Gallagher and Shan (2009) have 
proposed a new Chinese mo	del BIT which would include the following reference to the OECD

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Guidelines (at 445, article 13): ‘The Parties agree to encourage investors to conduct their investment 
activities in a socially responsible manner, by complying with the OECD Guidelines for Mu	ltinational 	
Enterprises and participating in the United Nations Global Compact.’	 	
 	
7. Scoping	 	
 	
7.1 Introduction	 	
According to	 the mandate from the 	Norwegian 	Ministry of the Environment, this report 	is to 	assess 	
the 	consequences of a future FTA between Norway	 and China for three elements	: environmental 	
policy, environmental regulation, and the physical environment. The assessment 	is limited to those 	
parts of the FTA that are assumed to have the greatest impact on the three elements. In addition, the 
assessment	 shall result in proposals to mitigate negative and enhance 	the 	positive consequences for 	
the environment and related policy and regulation.	 	
With the help of the Chinese research team	, this report 	has sought to	 integrate	, to some extent,	 	
effects in China a	s well as Norway. However, it is unavoidable that most of the focus is on effects in 	
Norway as well as on measures to mitigate 	the 	negative and enhance positive effects relevant in a 	
Norwegian context. 	 	
Given the mandate to assess 	the 	regulatory and polic	y effects, on the one hand, and 	the 	physical 	
effects, on the other hand, 	we have sought to	 strike a balance between case studies and general 	
studies of potential regulatory and policy effects. Case studies are 	necessary for assessing the	 	
physical impacts. 	Case studies 	have been selected	 primarily on the basis of potential physical 	
impacts. However, the usefulness of the case studies in relation to the assessment of regulatory and 
policy effects will also be taken into account. This chapter 	explains	 our choi	ce of case studies.	 	
While regulatory and policy effects can be studied through case studies, such studies must be 
supplemented by generalized normative studies of regulatory and policy effects. 	For these	 	
generalized studies 	we take as our point of departur	e selected elements of the FTA, based on the 	
free trade and green trade scenarios. 	In t	his chapter 	we explain	 our choice of elements to be 	
subjected to closer scrutiny.	 	
The assessments in chapters 8 and 9 will be based on the two main scenarios elaborated 	above. We 	
have found it appropriate to relate the scoping directly to those two scenarios.	 	
 	
7.2 Free trade scenario	 	
Case studies	 	
Trade in goods	: Our	 environmental assessment of the FTA 	focuses 	on two categories of goods: 	
Norwegian salmon and Chinese clothi	ng.	 	
The arguments for focusing on Norwegian salmon are as follows:	 	
 	Export of fish is currently subject to a tariff of about 	10%	 upon import to China. In addition, 	
although	 countries will need to inspect fish 	due to	 health concerns	, the trade in fish is by 	
nature dependent on a speedy transit through customs. 	 	
 	The free trade agreements between Chile and China, and Peru and China specify that Chinese 
import tariffs 	are to	 be lowered from about 	10%	 to zero in ten years, with five years specified 	
for some vari	eties. 	 	
 	‘Fish and marine life’ is currently the largest export category from Norway to China	, so	 	
improving the terms of trade for fish is likely to be important for Norwegian industry.

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 	The production of fish (catching and/or farming) is generally acknowled	ged to 	give rise to	 	
environmental concerns. Transport of fish, in particular fresh and chilled fish, 	involves	 	
additional concerns. 	 	
The arguments for focusing on Chinese clothing are as follows:	 	
 	Clothing is the only non	-agricultural category of goods curre	ntly subject to a tariff 	(approx. 	
10%) 	on import to Norway. 	 	
 	Clothing is the main export item from China to Norway	, and has a considerable potential for 	
expansion	. 	
 	There are significant environmental concerns related to clothing and textile production	, no	t 	
least d	ischarges to water,	 as well as g	reenhouse gas emissions during transport.	 	
Services	: The environmental assessment will focus on one category of services: mining. The 	
arguments for focusing on mining are the following:	 	
 	The e	nvironmental consequences	 of mining are in general significant.	 	
 	Norway has not yet undertaken commitments regarding mining	-related services in the WTO.	 	
 	Mining is a growing sector in Norway, and is subject to recently revised legislation that has 
been adopted with a view to promote	 search for and exploitation of mineral resources.	 	
 	Mining is an industry that is of 	considerable	 interest to China and within which China has 	
significant experience	. China 	is likely to	 be interested	 in invest	ing	 in the Norwegian mining 	
industry.	 The two co	untries	 have strong and complementary competencies in these areas.	 	
 	With g	lobal warming	, possibilities	 for transporting minerals between Norway and China 	
through the North	-East 	Passage will improve 	considerably	 in the relatively near future.	 	
General studies	 of regulatory and policy effects	 	
As the free trade scenario does not establish 	any major	 new general obligations regarding trade in 	
goods 	or intellectual property rights beyond those 	applicable	 under the WTO, we will not undertake 	
any assessment of regula	tory and policy effects of these aspects of 	a Sino	‒Norwegian	 FTA. The 	
environmental regulatory and policy assessment of the free trade scenario will thus focus on new 
commitments in the fields of services and investment.	 	
Services	: The environmental assessment will focus on commitments regarding mode 4 of 	supply 	
(presence of natural persons) for the following reasons:	 	
 	Mode 4 of supply is of 	considerable	 interest to China, and Chinese enterprises have 	
experience in the delivery of 	such 	services.	 	
 	Norway has indicated some flexibility regarding new commitments	 for mode 4, in particular 	
during the Doha 	Round.	 	
 	Mode 4 of supply raises questions regarding the application and applicability of the exporting 
and importing countries’ rules and policies.	 	
 	In particular,	 this concerns	 the possibilit	ies	 of the importing co	untry to ensure high levels of 	
environmental performance of services in a life	-cycle perspective.	 	
Investment	: The environmental assessment will focus on commitments regarding national treatment	 	
(NT)	 in combination with the access to investor	–state dispute 	settlement for the following reasons: 	 	
 	Wh	ereas	 Chinese investments in Norway have	 as yet	 been limited, China is currently an 	
important capital	-exporting country	. G	iven the complementarity of the Norwegian and 	
Chinese economies, we assume that Chinese inves	tments in Norway will increase.	 	
 	Although Chinese investors 	have 	only exceptionally been involved in investor	–state disputes	 	
so far, China has been involved in 	several	 disputes in the WTO and is increasingly making use 	
of international dispute settlement. W	e therefore assume that 	the 	Chinese authorities will

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not have major reservations against Chinese investors making use of investor	–state dispute 	
settlement options.	 	
 	Case law in investment arbitration shows that national treatment is potentially an important	 	
legal basis for investors seeking to challenge environmental rules or policies. 	 	
 	The draft Norwegian Model BIT contains language 	further specify	ing	 the 	NT	 provision in 	
relation to public health, safety and the environment.	 	
 	
7.3 Green trade scenario	 	
Contra	ry to the free trade scenario	 ‒ where we consider that regulatory and policy effects will be 	
sector	-specific rather than of a general nature, and that regulatory and policy effects 	have	 mainly 	
already follow	ed	 from relevant WTO obligations	 ‒ in the green trade scenario,	 regulatory and 	policy 	
effects have a more prominent position. We have therefore decided to assess 	the 	general regulatory 	
and policy effects 	first, so that	 the subsequent case studies can build on and illustrate the general 	
assessments of regulatory and policy effects. 	 	
General studies of regulatory and policy effects	 	
Integration of general clauses on the environment	: We distinguish four categories of general clauses 	
on the environment to be further studied: 	preambular text, substantive provisions regarding 	
objective and p	rinciples, substantive provisions that directly concern rights and duties, and 	
procedural rules. We consider that such general clauses are relevant to the more specific rules on 
trade in goods (to a limited extent), trade in services (to a somewhat 	greater	 extent), and investment 	
(to an important extent). We focus on these rules for the following reasons:	 	
 	There is broad discussion of the extent to include such elements in the WTO and FTAs.	 	
 	FTA negotiations can be used as a possibility of exploring and discu	ssing such issues with 	
trading partners in order to exchange views and further refine positions.	 	
 	Some agreement	 on these issues has already been established within Norway and between 	
Norway and its trading partners.	 	
 	There is a general need to clarify the r	elationship between trade liberalization and other 	
policy areas.	 	
Fast track for environmental goods and services	: The environmental assessment will focus on 	
mechanisms to ensure facilitated trade in environmental goods and services, including ‘trade 
facili	tation’, restrictions on countervailing measures, and extended commitments for environmental 	
services, for the following reasons: 	 	
 	Trade facilitation is 	among	 the topics on which countries have made significant progress 	
during the Doha negotiations.	69 	
 	Reduc	ed risk of changes in border control requirements and procedures.	 	
 	The effects of expanding concepts of environmental goods and services.	 	
 	The possibility of undertaking additional commitments: 	the perspective of 	developed vs. 	
developing countr	ies; s	ervices 	vs. goods.	 	
 	Tailoring the concepts to developing	-country perspectives	 	
 	Environmental goods and services as part of technology transfer 	– the obligations to carry 	
out technology transfers under MEAs.	 	
 	Compatible	 with Sino	‒Norwegian environmental cooperation	 	
 	 	 	69 See Draft Consolidated Negotiating Text of 21 April 2011,	 WTO doc. TN/TF/W/165/Rev.8.

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Ex	port controls of goods	: The environmental assessment will focus on Chinese measures to control 	
the export of goods for the following reasons: 	 	
 	This topic offers an important opportunity for 	promoting	 Chinese interest in the FTA.	 	
 	The topic is controversial,	 and likely to become increasingly 	so,	 due to population increase. 	 	
 	Chinese arguments before the WTO panel 	have 	emphasize	d broader sustainable 	
development objectives.	 	
 	There have been and remain significant environmental problems related to raw materials 
production.	 	
Intellectual property rights	 (IPR	): The environmental assessment will focus on how to approach 	IPR	 	
under the FTA for the following reasons: 	 	
 	Norway and China have had similar positions of as regards the interaction between 	IPR,	 	
patents	 in particu	lar, and biodiversity issues.	 	
 	The 	IPR 	issue has be	come	 stalled in WTO negotiations, and there is a need to move ahead in 	
bilateral negotiations.	 	
 	Chinese FTAs contain clauses that are of interest from a Norwegian perspective.	 	
Case studies 	 	
To illustrate the	 general points set out in the section on regulatory and policy effects we discuss two 	
case studies	: clean energy	, and	 CCS	. These case studies 	integrate rules concerning goods, services 	
and investment. 	The reasons 	for focusing	 on these cases are the follow	ing:	 	
 	Clean energy and CCS are environmental	ly-friendly technologies that involve goods trade, 	
services trade, investment and R&D. An investment may entail purchase of equipment 
(goods) with certain environmental characteristics. Based on the investment, R&	D is 	
performed in a pilot phase (in terms of adapting technology to a new environment and 
developing new technologies), and environmental services may be offered. Services are also 
essential in the construction phase. It 	is relevant	 to discuss how	 an FTA	 may	 serve to 	fast	-	
track and facilitate environmental	ly-friendly technologies	 here	. 	
 	China is the largest hydroelectric producer in the world, and Norway is the largest in Europe. 
China is the 	world’s 	largest wind	-power producer (in terms of installed capaci	ty)	, and 	Norway 	
has considerable	 wind	-power resources. Hence there is a potential for further trade, 	
investment and R&D in the area of clean energy. 	 	
 	Norway has an ambitious pro	gramme	 for developing pilot CCS technology. China has 	
indicated an interest in	 experimenting with CCS on coal	-fired power plants and industrial 	
facilities. Hence there is a potential for further trade and investment in the area of CCS.	 	
 	
8. Environmental impacts of the free trade scenario	 	
In this chapter we examine 	the 	environmental 	impacts of the free trade scenario. 	After	 some 	
remarks on the literature and the 	‘pollution haven	’ and 	‘race to the bottom	’ hypotheses we discuss 	
possible environmental impacts o	n fish farming in Norway if consumption of Norwegian fish 	
increases in China. 	This is followed by a discussion 	of the	 environmental impacts of 	greater	 textile 	
production in China	, and then	 of increased liberalization of mining services. Finally we discuss policy 	
and regulatory impacts. 	 	
8.1 The ‘pollution haven’ and ‘race to the bo	ttom’ hypotheses	 	
The environmental impacts of free trade	 have attracted massive	 interest from civil society 	and the	 	
research community. 	According to t	he ‘pollution haven hypothesis’	, international investors and 	
businesses set up polluting factories in coun	tries 	with	 weak environmental legislation and/or

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enforcement, and 	then 	export the goods back to the rich world. A search of the phrase 	‘pollution 	
haven hypothesis	’ on Google Scholar 	November 7, 2011 	return	ed	 1810 hits. 	 	
The empirical literature on 	‘polluti	on havens	’ has	, however,	 failed to find significant effects. A key 	
reference in the field	, by Norwegian professor Gunnar Eskeland with Ann Harrison (2003	), conclude	s: 	
‘Although we find some evidence that foreign investors locate in sectors with high levels	 of air 	
pollution, the evidence is weak at best. We then examine whether foreign firms pollute less than 
their peers. We find that foreign plants are significantly more energy efficient and use cleaner types 
of energy.’ The finding that foreign plants are 	more energy efficient has been explained by the fact 	
that the constituency of foreign firms is foreign. 	In 	‘The case of the missing pollution haven 	
hypothesis’ (Millimet and List, 2004)	, the authors	 write that ‘while neoclassical theory and 	
conventional wi	sdom both surmise that local economies will suffer de	leterious effects from stricter 	
environmental regulations, empirical studies have largely failed to validate such claims.’ Kearsley and 
Riddel (2010) conclude	: ‘we estimate EKCs for seven oft	-studied pol	lutants and find little evidence 	
that pollution havens pay a significant role in shaping the EKC’ (EKC=Environmental Kuznets curve). 
MacDermott (2009) is more sympathetic to the pollution haven hypothesis	, and concludes	: ‘use of 	
pollution emissions as a pr	oxy for environmental stringency shows evidence in support of the 	
pollution	-haven hypothesis’. 	This paper was published 	in a little	-known journal, however. 	 	
Some papers focus specifically on Chinese environmental impacts from trade liberalization (Vennemo 
et al.	, 2008	; He	, 2006	; Shen	, 2008). These 	contributions	 find small impacts	: e	missions and discharges 	
of some compounds fall	, and they rise for others. One 	explanation can be	 that these papers tend to 	
see trade liberalization as an issue of shifting produc	tion, and not (	merely	) increased production. 	 	
In a series of important papers, Glen Peters of Cicero and co	-authors have focused on the factor 	
content of trade	: to what extent international trade embodies, e.g., CO	2. The	y conclu	de	 that 	
international trade 	does indeed 	entail	 significant amounts of CO	2, with	 developing countries 	
export	ing	 CO	2 and the	 developed countries import	ing it 	(see	 Peters et al., 2011). These papers could 	
be taken to support the pollution haven hypothesis. 	One 	difference between the 	con	tributions	 of 	
Peters et al	. and the other	s is that the 	latter	 discuss 	the 	impacts of either trade liberalization or 	
stricter environmental regulation	 ‒ they	 focus on 	the 	impacts of a change in the regulatory 	
environment. 	By contrast,	 Peters 	et al.	 focus on the situation as it is and could perhaps be said to 	
have autarky as the implicit alternative. 	Moreover	, in 	today’s	 situation	, trade is imbalanced. It	 may 	
be that the impacts of a change in e.g., tariffs and non	-tariff barriers such as those of an FTA are fairly 	
small, especially if one considers balanced trade changes, but that the imbalanced basis or reference 
involves	 large movements in e.g., CO	2. At	 this point that 	must remain	 a hypothesis, however. 	More 	
research is needed to reconcile	 the seemingly small impacts on the margin and the seemingly large 	
impacts in total. 	 	
How relevant is the pollution haven hypothesis for 	a Sino	‒Norwegian FTA? 	We find	 no obvious 	
candidates for moving production from Norway to China in the interest of exporting to Norway. Also, 
as seen in previous chapters	, the tariffs and barriers to exports from China to Norway are few even 	
before the FTA. In ad	dition, investor rights are fairly well protected. 	More study is needed of t	he 	
impacts of removing remaining tariffs and barriers, e.g., on textiles; and 	on 	securing investor rights	. 	
We will	 look into this	 below, but one 	probably 	should not expect too much	 from the impacts. 	 	
The term ‘race to the bottom’ is used to describe competition to relax environmental standards, or, 
less 	gravely	, a ‘regulatory chill’, i.e. the avoidance of new or stricter environmental requirements. 	
Such a	 ‘race	’ may develop in resp	onse to relocation to pollution havens	. However, 	 given that the 	
pollution haven hypothesis 	enjoys	 limited empirical support	, the threat of a race to the bottom may 	
also be limited. 	 	
The race to the bottom hypothesis has been studied, e.g., in the context 	of the NAFTA 	(North 	
American Free Trade Agreement	) agreement between Canada, Mexico and the 	USA	 (CEC 2006). In 	
the case of US environmental policies, 	supporting 	evidence was not found. The CEC assessment

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emphasizes the need for offsetting policy intervent	ions to reduce the risk of a race to the bottom. 	
The assessment discusses how Canada 	entertained doubts	 about its commitment to the Kyoto 	
Protocol, 	fearing	 it would be at a disadvantage compared to the 	USA	, which has not ratified the 	
Protocol.	 	
The CEC Impa	ct Assessment found that the institutions created by and legal measures enforced 	
through NAFTA facilitated better environmental performance. Mexican businesses exporting to the 
other NAFTA countries implemented more environmental management actions 	– the s	o-called 	‘pull	’ 	
effect. The 	USA	 is Mexico’s largest trading partner	, so it 	is not unnatural that US consumers’ opinion 	
of Mexican goods and services 	should 	affect Mexican export businesses.	 	
In terms of the Sino	‒Norwegian FTA	, we find it far	-fetched that 	traditional	 environmental regulation 	
in Norway would be relaxed because of competition with China. The one area where competition 
with China is an issue is CO	2 regulation	, including levies and quotas. In recent years Norwegian 	
industry has argued that strict	 CO	2 regulation of firms would lead to 	‘leakage	’ out of Norway and into 	
the 	USA	, China and other countries with lax CO	2 regulation. This argument has convinced 	the 	
Norwegian authorities to grant certain exceptions and support to industry. 	 	
 	
8.2 Case study 	1 	– Export of fish from Norway to China 	 	
General	 	
As concluded in the chapter on scoping	, ‘fish’ is an environmentally important category of export 	
from Norway that is likely to be stimulated by a free trade agreement between Norway and China. 	In 	
2011 the p	roduction of farmed salmon 	was	 capped because of the problem of salmon 	lice	 (see 	
below). If this cap continues	, an	 FTA 	will of course have only small impacts 	on 	Norwegian 	fish 	
farming. The situation is to be reassessed in 2012. 	Here	 we assume that by the t	ime the impacts of 	
Sino	‒Norwegian	 FTA are in full play, perhaps ten years from now, the cap on production 	will have	 	
been lifted. 	 	
While farmed salmon in general is a big export item for Norway within the category ‘fish and marine 
life’, this is not 	the c	ase	 when it comes to export to China (Table 8.1). Salmon contributes up 22	% of 	
the export value fish to China, but 	stands for	 more than 50	% of export value of fish in general. Hence 	
there seems to be a potential for 	expand	ing the export of farmed salmon to	 China. In the following 	
we focus 	our	 analysis on 	the 	export of farmed salmon to China. Where necessary we distinguish 	
between fresh and chilled salmon on the one 	hand	, and frozen salmon on the other. 	 	
Table 8.1	 	Export of fish from Norway to China, and No	rway to the world	, NOK million	 	
Item	 	Export to China	 	Export in total	 	
Farmed salmon with head	: fresh and 	
chilled	 	
400	 	23	,200	 	
Farmed salmon, frozen	 	80	 	1600	 	
Frozen cod	 	1000	 	9800	 	
Frozen mackerel etc	. 	650	 	
Total	 	2200	 	43	,000	 [2009 data]	 	
Note: 2010 data	; sour	ce: Statistics Norway.	 	
The life	-cycle of farmed salmon	 	
Before ending up on Chinese dinner tables	, a salmon has undergone several stages 	in its life	-cycle	, 	
each involving	 environmental challenges in 	some	 form. Table 8.2 indicates the stages 	in the life	-cycl	e 	
of salmon. 	We also note	 how the weight decreases from 2.8 kg industrial fish feed to 1 kg gutted

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salmon with head, which is the main export item to China. The rest of this section explains the	se 	
matters	 further.	 	
Table 8.2	 	Stages of the salmon life	-cycle	 	
Stage	 	Weight	, kg.	 	Environmental concerns	 	
Amount of industrial fish required	 	2.78	 	Over	-exploitation of wild fish 	
stocks	 	
Amount of feed required	 	1.37	 	 Discharge of nutrients 	 	
Live 	salmon required for 1 kg of gutted 	
salmon with head	 	
1.25	 	Escapees and genet	ic 	
alteration of wild salmon	 	
Fish 	lice	 	
Salmon ready for slaughter	 	1.19	 	 	
Gutted salmon with head 	 	1.00	 	Transport emissions	 	
 
Environmental concerns related to production and export of farmed 	
salmon	 	
The Institute of Marine Research in Norway has recently 	carried out an environmental risk 	
assessment of salmon fish farming in Norway (Havforskningsinstituttet, 2010). 	It concludes that the 	
two most important environmental risks of salmon farming 	are the 	risk of (more) wild fish being 	
infected by salmon 	lice	, a	nd genetic alteration of the local stocks of wild salmon due to interbreeding 	
with escaped farmed fish. The assessment also considers 	the 	discharge of nutrients and organic 	
material, but considers this a 	comparatively 	minor problem.	 	
In their opinion provid	ed to the public hearing of the methodology report from this project, Friends 	
of the Earth Norway emphasizes as an additional important environmental issue 	the overexploitation 	
of wild fish as sources of fish feed. In some contrast to the Institute of Mari	ne Research, Friends of 	
the Earth is of the opinion that discharge of nutrients and organic material 	currently represents 	
another important environmental risk. 	 	
Chilled and fresh fish from Norway to China will have to be transported by air	, which is likely	 to entail 	
high	 greenhouse gas emissions. 	The process of farming, including the effort of catching the feed, 	also 	
leads to 	GHG	 emissions. Hence there are at least four environmental and resource impacts of fish 	
farming and export that 	should be examined	: 	
 Infectious salmon 	lice	 (including impacts of antibiotics to 	combat	 the problem)	 	
 Escapee farmed salmon and risk of interbreeding with wild fish	 	
 Overexploitation of wild fish used as fish feed	 	
 Greenhouse gas emissions	 	
Some would also include discharge of nutr	ients in such a list. Unfortunately we 	lack	 data 	in that in 	
this research.	 	
Methodology	 	
In accordance with our report on methodology (Fauchald and Vennemo, 2011) we pursue the 
analysis of environmental impacts of farmed salmon by means of a mixed partial eq	uilibrium and life	-	
cycle analysis. That is, we employ partial equilibrium methods to discuss the possible impact	s of an 	
FTA on the export volumes of salmon. We employ life	-cycle	 analysis to discuss the environmental 	
impacts of 	greater	 export of salmon. Fin	ally we employ economic general equilibrium reasoning to

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discuss 	the 	impacts induced by substitution effects, e.g., when Norwegian salmon substitutes for 	
meat or for Chilean salmon in China.	 	
Possible impact on the value of exported Norwegian salmon 	 	
In thi	s work we assume that a free trade agreement between China and Norway would reduce the 	
import tariff in China from about 	10%	, to zero. The reduction is likely to take place over a period of 	
some years, perhaps ten years. We ignore the time	-lag here. 	 	
In ad	dition to the tariff decrease	, a free trade agreement 	might	 reduce other forms of regulation 	
during customs that 	could lower	 the generalized cost of trade. To illustrate we suggest a decrease of 	
five percentage points. All in all	, it may be possible for th	e terms of trade for Norwegian salmon 	
exported to China to improve 	by 	15	%. 	
Norway’s c	urrent export of salmon to China 	stands at	 about 	NOK 	500 million	 (see Table 8.1	). For 	
comparison	, export to Japan is about 700 million. Japan is a wealthier country tha	n China, but it is 	
also much smaller in population	, with a	 GDP slightly 	less	 than 	that of 	China.	 	
Both the comparison with general exports above a	nd	 comparison with Japan 	indicate a	 potential 	for	 	
significantly 	increas	ing the	 export of salmon to China. Howev	er, it would be 	erroneous	 to attribute 	
the full difference between Japan and China to the import tariff and other barriers in China.	 	
To distil the impact of reductions in tariffs and other barriers	, economists use the concept of price 	
elasticity. 	This	 indi	cates	 by what percentage the	 consumption of a good increases when its price 	
decreases 	by 1%	. A dividing line is drawn at a price elasticity of minus one. It is in fact more common 	
to work in terms of the absolute value of the price elasticity. A price elas	ticity of one in absolute 	
value means that consumption of a good increases 	by 1%	 when 	its	 price falls	 by	 1%	. This 	then implies	 	
that the amount of money devoted to the good is the same before and after a change in price.	 	
Goods 	with	 a price elasticity lower 	than one in absolute value are called 	‘necessary goods	’ in 	
economics. 	With n	ecessary goods	, the amount of money devoted to the good increases when its 	
price increases	 ‒ so	 a necessary good takes up a larger share of the budget when its price increases. 	
Goods 	with	 a price elasticity higher than one in absolute value have the opposite property	, and t	he 	
budget devoted to such a good falls when its price rises. 	Such g	oods 	are termed	 ‘luxury goods	‘. 	
There may in fact be 	several	 explanations why a good has a price elasticity higher than one in 	
absolute value. One is the luxury explanation; this is a good you don’t really need and you are willing 
to sacrifice if it	 becomes more	 expensive	. Or, perhaps	 there exist close substitutes for the good. 	Then 	
it can make sense 	to switch 	over to	 the substitute if the price of the 	original 	good increases. 	 	
Our conjecture is that the case of Norwegian salmon in China satisfies both conditions	 for having a 	
price elasticity higher than one. For one thing it is still a luxury good that is sold to the 	upper	 middle 	
class in China, to restaurants, sushi bars	, etc. This characteristic calls for a fairly high price elasticity. 	
Secondly,	 there are good	 substitutes available	 ‒ Chilean salmon, quality meat	, etc. This characteristic 	
also calls for a fairly high price elasticity.	 	
In this work we suggest a price elasticity of 1.5 in absolute value to characterize Norwegian salmon in 
the Chinese market. A price elasticity of 1.5 is	 common for a typical luxury good. Combined with the 	
assumption of 15	% reduction in price and on the basis of 	NOK 	500 million in export value, the 	
estimated 	rise	 in export is calculated to 	NOK 	125 million. 	 	
An increase of 	NOK 	125 million brings total expor	ts to 625 million, which is lower than current sales 	
to Japan, but significantly closer to current sales to Japan than today. Remaining differences could be 
due to cultural factors	, etc.	 	
If over time the quantity sold to China increases in the baseline sce	nario, a given percentage increase 	
will imply a corresponding increase in the quantity of additional sales. We have not ventured into a

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discussion of this effect. This omission makes our estimate more conservative than it would 
otherwise 	have been.	 	
Possibl	e impact on the quantity of exported Norwegian salmon	 	
A characteristic of life	-cycle	 analysis is that 	the 	environmental characteristics of salmon are 	
calculated	 per kg of fish. In order to 	bring	 this physical information 	into line 	with the value	-based 	
info	rmation of the trade statistics, we need to know the price of fish. The price is our conversion 	
factor between the two sets of statistics. According to information from 	seafood.no	 the average 	
export price for fresh or chilled salmon exported to China was 	NOK 	31.30	/kg.	 in 2010. The average 	
for frozen salmon was slightly lower (	NOK 	29.40). Since most salmon is 	exported 	fresh and chilled	, 	
we use the rounded figure for fresh or chilled salmon	: NOK 	31.00	 per kg.	70 	
Dividing	 NOK 	125 million by 31	 we	 obtain 4	.032 m	illion kg. 	4.032 million kg equals 4032 tons. Hence 	
this price suggests that as a consequence of 	an 	FTA	, 4000 tons of salmon would be sold to China in 	
addition to the quantity currently sold. 	As indicated, f	ish sold to China is mostly 	‘gutted with head	’, 	
not fillet	ed	. 	
Possible impact on the quantity of live salmon 	 	
Having estimated the value and quantity of additional exported salmon	, we 	now turn to	 the life	-cycle	 	
study of environmental impacts. Recall that we focus on the environmental impacts described a	bove. 	
Except for CO	2, all of these impacts originate in the farming process. To calculate their magnitude we 	
first need to estimate the quantity of 	live	 salmon required for each ton of salmon sold to China.	 	
Our analysis 	indicates 	that 1.25 tons of live sal	mon 	are	 required to produce one ton of whole and 	
gutted salmon 	for sale	 (Table 8.2 above). First, a 	considerable	 number of fish die	, and some escape. 	
We calculate that dead and escaped fish contribute 5	% by weight.	71 Escapees are the source of a 	
significan	t environmental problem, see below. Second, a salmon is gutted before being ready for 	
sale.	72 	
As this reasoning makes clear	, 4000 tons of exported salmon corresponds to a 	much	 larger quantity 	
of salmon that is fed and reared. We calculate that to export 4	000 tons of salmon	, 5500 tons of living 	
fish 	are	 required. Losses during farming are included in this 	figure	. Losses during transport are not 	
included, but according to industry sources these are very low. 	 	
 	 	 	70 The trade statistics of Statistics Norway suggest a slightly higher price of 	NOK 	41	 /kg (export in value and 	
quantity of HS03021201 Farmed salmon with head, fresh or chilled.) The effect of assuming a higher price is to 
assum	e a lower quantity and lower environmental impact. If the price is 41 instead of 31 the quantity is 3000 	
tons instead of 4000 tons (4 x 3 equals 3 x 4) and all environmental impacts are scaled down by a factor of 	3:4	. 	71 This	 figure	 is based on information	 from Statistics Norway on the weight of fish production (930	,000 tons) 	
and information from the Directorate of Fishery in Norway on the number of lost fish during production (44 
million). Finally the report 	Effektiv og bærekraftig arealbruk i havbruksnæri	ngen 	– areal til begjær 	(available 	at 	
regjeringen.no	) states in section 7.7 that 	‘it is realistic to assume that the average size of the lost fish is about 1 	
kg.’ With this we have the weight of lost fish, which can be compared with the weight of produced 	fish	, and the 	
figure of	 5% is obtained.	 	72 The source of information on the percentage weight lost during gutting is 	www.skretting.no	. In the document 	
‘formler og beregninger	’ it is stated	 (p.	 4): ‘there is no absolut	e industry standard for how these units of weight 	
are relative to each other, but it is common to use these rates of conversion: Round weight = 93	% of live weight; 	
gutted weight = 84	% of live weight	.’ We use 84	% as our estimate.

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Escapees and the risk of interbreeding	 	
The fact	 that some farmed salmon escapes and go on to interbreed with wild salmon is 	of major	 	
environmental concern. 	Figure 	8.1 indicates that the amount of farmed fish in Norwegian rivers 	
exceeds by far what is deemed the	 sustainable level.	73 	
Figure 8.1	 	Amount of farmed salmon in Norwegian waterways	 	
 	
Source: Authors	 	
Against this background it is 	relevant	 to estimate the number of salmon 	that would be 	introduced 	
into Norwegian waterways as a consequence of 	a Sino	‒Norwegian FTA. Starting off from our key 	
figure of 4000 tons additional export and 5500 tons additional live salmon	, it is possible to estimate 	
the number of escapees. 	 	
Here	 we assume that the percentage share that escapes from 	‘our	’ 5500 tons equals the	 percentage 	
that currently escapes. This methodology is likely to overestimate the future 	figure	 somewhat. The 	
number of escapees 	has dropped	 dramatically in recent years, from an estimated 700	,000 individuals 	
in 2005 and 900	,000	 in 2006, to 255	,000 indivi	duals in 2010.	74 Meanwhile production has 	risen	. 	
On the other hand the 	year	-to-year 	variation in the number of escapees may be incidental	, and we 	
would not be comfortable applying a trend reduction to the percentage share of escapees. 	Similarly,	 	
we do not 	apply a trend to future production increases from the FTA as compared to the baseline. 	 	
A total of 930	,000 tons of salmon was produced in 2010. If the 255	,000 escapees 	are	 spread evenly in 	
this total	, the question 	becomes:	 how many escapees there will be i	f the 	quantity 	is 5500 tons? 	 	
The answer is 1510 escapees. 	 	
Not all the escaped fish will reach a river and get 	the	 chance to mix with wild fish. Comparing 	
historical escapes with the numbers found in waterways	, we estimate that an escapee has a 21	% 	
chance	 of reaching a river. With this information	, we are able to estimate the annual number 	that 	
actually 	reach the rivers: 315 individuals.	 	
 	 	 	73 The sustainable level is 	estimated to be 	5%	 of the stock of wild fish, i.e. the spawning stock of wild fish is able 	
to accommodate 	5%	 wild fish in the water. 	 	74 These numbers do not correspond to figure 8.1. 	There,	 the indicator is 	‘fish in waterways	’, not 	‘escaped fish	’. 	
Only one	 in five escaped fish 	actually 	reaches the waterway, see text below.

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A total of 315 additional individuals may seem a small price to pay for increasing 	Norwegian 	salmon 	
exports to China. On	 the other hand some would advocate zero tolerance towards this problem. 	 	
We repeat the assumptions behind the estimate of 315 additional individuals	 each year	: 	
 The number of escapees is 255	,000	 	
 Escapees are spread evenly among the 930	,000 tons of produced	 live fish	 	
 Escaped fish in a river live for one year (and 21	% of escapees reach a river) 	 	
 
Of course, 	in the case of	 an FTA between China and Norway	, the actual number of escapees reaching 	
a river 	is likely to	 deviate from the estimate here. The actual num	ber will depend on the location of 	
the fish farms t	hat	 produce the additional fish, the precautions taken in these farms, accidents and 	
chance events such as bad weather	, etc. As noted	, current trend	s indicate	 fewer escapees. 	 	
The assumption that 21	% of es	capees reach a river is also based on averaging. In practice the rate 	
will	 depend on which river, which farm location	, etc. Besides	, the figures for	 the number of escapees 	
and the number in rivers are uncertain estimates. 	On the other hand, e	ven a 100	% cha	nce of 	
reaching a river would imply only 1510 in	dividuals	, so	 the uncertainty in the 	figure 	of 21	% may be 	
low	 compared to the total. 	 	
Salmon 	lice	 	
The problem of sea 	lice	 has become	 a major environmental and health concern in Norwegian salmon 	
farming. 	Lic	e are	 a burden on wild fish in the farming areas and young wild fish going out to sea, and 	
of course to the farmed fish. It is estimated that 4	‒5 lice	 per fish 	are enough to	 kill	 smolt and 9	‒11 	
prove fatal to	 a young salmon.	 	
Although the amount of 	lice	 var	ies 	in the course of a	 the year and 	from year to year,	 it is estimated 	
that the current population of sea 	lice	 in Norway numbers 400 million individuals	 ‒ which 	is eight 	
times higher than the sustainable level of 50 million. 	 	
In order to reduce the number 	of sea 	lice,	 large amounts of antibiotics have been applied over the 	
last couple of years (figure 8.2). The long term impact of this application is not clear. 	 	
Figure 8.2	 	Sold amount of drugs to prevent sea 	lice	 	
 	
On this background it is 	relevant	 to esti	mate the number of additional 	lice	 that would be 	given 	
breeding room if 	salmon 	production increases 	as a result of a	 Sino	‒Norwegian FTA. The average 	
stock of 	lice	, 400 million, may be compared to the average stock of live salmon in 2010, 355 million 	
individuals. To obtain a rough indicator of 	lice	 per salmon we divide the two	, and estimate that each 	
salmon carries 1.125 	lice	. (In reality the number of 	lice	 per fish varies	, as indicated;	 see figure 8.3.	)

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Current regulation	s require	 fish	-farmers 	to initiate 	‘de	-lousing	’ pro	gramme	s if the number of 	female	 	
lice	 per fish exceed	s 0.5.	 	
Figure 8.3	 	Development of sea 	lice	 per fish in 	recent years	 	
 	
Source: Lusedata.no	 	
Recall that 5500 tons of live fish is needed for 4000 tons of gutted salmon with head. Given the 
average weight of fish at slaughter before gutting (5 kg) an additional 1.1 million fish will be farmed. 
Assuming this fish	 ha	ve	 no fewer and no more 	lice	 than the average	, the number of additional 	lice	 	
induced by the FTA becomes 1.4 million. 	 	
Now, 	1.4 million 	lice	 may seem	 low	 when	 compared to the 400	-odd	 million 	lice	 in existence, but it 	
would certainly	 add to the difficulty	 of reducing the total number of 	lice	 to 50 million. 	As	 in the case 	
of escapees	, some advocate zero tolerance towards salmon 	lice	. 	
We repeat the assumptions behind 	our	 estimate of 1.4 million additional sea 	lice	: 	
 	1.25 sea 	lice	 per fish	 	
 	Five kg slaughter w	eight of fish exported to China (1.1 million fish)	 	
 
However, as noted above,	 the number of 	lice	 varies significantly 	from season to season and from 	
year to year.	 For this and other reasons	, the figure of 1.25 per fish is uncertain. If the 	actual 	number 	
is twice that high and the number of farmed fish for China is 1.1 million 	as we have argued	, then 	the 	
additional number of 	lice	 becomes 2.8 million. Even this is small compared to the 400 million in 	
existence, but if true it adds 	further	 to the difficulty of	 achieving	 a total of 50 million.	 	
Salmon feed	 	
We now turn to	 additional demand for feed that follows from the increase in fish rearing to cater for 	
markets in China. Farmed salmon 	are	 fed a mix of fish oil, fish flour and plant	-based feed. Over time 	
the sha	re of plant	-based feed has increased, but it seems doubtful that this trend can continue 	
forever. 	One 	kg of industrial fish will 	yield	 both fish oil and fish flour, but it is fish oil that is the 	
limiting factor. 	Any leftover f	ish flour may be used to feed	 other fish, as well as poultry. 	 	
The industrial fish that go into the production of fish feed come from 	many	 sources. The contribution 	
from each source changes over time, but in 2010	, 28	% came from	 sprat, 26	% herring and 15	% 	
anchoveta, see figure 8.4. Acc	ording to the FAO	, sprat, herring and Pacific anchoveta are 	‘fully 	
exploited	’ at present. Blue whiting, which gives 1	% of the fish feed, is considered overexploited.

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Figure 8.4	 	Industrial fish in salmon feed 2010	 	
 	
 
To 	calculate	 the additional strain on i	ndustrial fish resources from additional exports to China we first 	
consider how much feed is required to 	produce 	a ton of live fish. This entity is known as the FCR 	
ratio. We set it to 1.1	,75 Hence 6000 tons of feed is required to obtain 5500 tons of live s	almon. Recall 	
that 5500 tons of live salmon is the amount required to generate 4000 tons of exports to China.	 	
To generate one ton of fish oil and flour	 requires	 two tons of live industrial fish.	76 Hence, 11	,000 tons 	
of live industrial fish 	are	 necessary to 	support 4000 tons of exports to China. 	 	
We use the 2010 data to spread this amount on the	 various	 kinds of fish available	; see	 Table 8.3. 	 	
Table 8.3	 	Amount of industrial fish required for 4000 tons of Atlantic salmon	, gutted 	
with head	 	
Industrial fish in sa	lmon feed 2010	 	% 	Tons	 	
Herring	 (Clupea harengus harengus)	 	26 	 	2 899 	 	
Anchoveta 	(Engraulis ringens)	 	15 	 	1 677 	 	
Sprat 	(Sprattus sprattus)	 	 28 	 	3 099 	 	
Mackerel 	(Trachurus trachurus)	 	3 	378 	 	
Tobis 	(Ammodyt	es sp.)	 	10 	 	1 122 	 	
Blue whiting	 (Micromesistius 	
poutassou)	 	
 1 	122 	 	
Capelin 	(Mallotus villosus)	 	 2 	244 	 	
 	 	 	75 This figure is collected from the home page of Skretting, 	www.skretting.no	. Another large Norwegian 	
producer, Lerøy, publishes a higher FCR rat	io. 	 	76 The figure is based on information from Skretting, 	www.skretting.no	. Skretting	 states 	that 14.7	% of fish feed 	
is fish oil, and that 12.5 kg fish 	yield	 1 kg fish oil.

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	71	 	
Norway pout (Trisopterus esmarkii)	 	1 	111 	 	
Menhaden	 (Brevoortia patronus)	 	7 	 800 	 	
Pearlside	 (Argyripnus iridescens)	 	 1 	133 	 	
Unknown	 	 5 	522 	 	
Sum	 	 101 	 	11 106 	 	
Source: Authors. 	 	
Of this catch	, it is the 120 tons of blue whiting that according to the FAO give the greatest reason for 	
conce	rn. 	 	
We repeat 	our underlying	 assumptions:	 	
 	An FCR ratio of 1.1	 	
 	14.8	% fish oil in fish feed, and 12.5 kg fish needed for 1 kg fish oil	 	
 	Distribution of industrial fish as of 2010	 	
 
It is of course not 	given	 that the fish produced as a result of a Sino	‒Norwegi	an FTA will match exactly 	
these requirements. The FCR ratio varies between producers, and producers are working to bring it 
down in order to save cost	s. The amount of fish oil in the feed may also 	decrease	 in the future. And 	
most importantly, global fisher	ies may stop fishing blue whiting	, without significant deterioration of 	
the 	quality of 	fish feed. Should sprat and herring move from fully exploited to over	-exploited	, the 	
environmental burden of the fish feed will be higher. 	 	
Discharges: CO	2 	
A report by	 Sintef (2009) has recently anal	ysed the impacts on CO	2 emissions of producing and 	
exporting salmon to China. 	As far as we can judge,	 the assumptions behind their analysis are quite 	
similar to th	os	e we 	employ	. These are assumptions 	as to	 the amount of live	 fish needed for a ton of 	
gutted salmon with head, the 	amounts of 	feed and its 	composition as regards	 different stocks of 	
industrial fish, and so on.	 	
However, it is the process of transport that generates by far the 	greatest	 CO	2 emissions (	see 	
Table8.4). F	resh or chilled salmon 	require air freight	, and according to the Sintef analysis one ton of 	
fish generates almost 11 tons of CO	2 emissions in the course of being 	flown	 from Norway to China. 	
By contrast, transport 	by	 sea generates one ton of CO	2.77 Assembly	 of the feed also generates 	
substantial CO	2 emissions, almost three tons per 	one 	ton of fish for sale. 	 	
Table 8.4	 	CO	2 emissions (tons) per ton of salmon exported to China	 	
 	Total 	 	Feed 
production	 	
Aquaculture 
excl. feed 
production	 	
Processing	 	Product 
transpor	t 	
Transport 
packaging	 	
Means of 
transport, and 
distance	 	
Salmon fresh 
gutted to 
China 	 	
13.86	 	2.72	 	0.14	 	0.03	 	10.83	 	0.14	 	Airfreight 
Boeing 8380 
km	 	
Salmon 
frozen to 
Shanghai	 	
4.20	 	2.72	 	0.14	 	 	0.05	 	1.18	 	0.11	 	Large 
container ship 
19461 km	 	
 	 	 	77 The analysis assumes a distance of 19	,461 km. The distance from Oslo to Shanghai through the Suez 	Canal is 	
much 	less	, 11	,030 km. Hence emissions via sea transport are lower for ships that 	can	 use the Suez 	Canal.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	72	 	
 
Above we estimated th	at 4000 tons of additional salmon would be exported to China as a 	
consequence of an FTA. 	About 80	% of current exports to China are fresh and chilled salmon	, wh	ereas	 	
20	% is frozen. These percentages are given in terms of value, but the export prices of fres	h and 	
frozen salmon are 	very similar	. 	
We apply the 80/20 division to the 4000 tons and estimate that 3250 tons are 	transported	 by air	 	
freight	. This and the production 	involved	 generate 44	,000 tons of additional CO	2. The re	maining	 800 	
tons	 are	 transported 	by	 sea. This and the production process 	involved	 generate 3350 tons of CO	2. 	
The total is 48	,000 tons of additional CO	2. Since most of this CO	2 is generated during transport it 	
constitutes a net addition CO	2 emissions. That is, even if one considers moving 	production from one 	
location to another (consumption unchanged) this CO	2 is additional. However, if one is of the opinion 	
that Norwegian salmon 	can 	substitute for, e.g., airborne Chilean salmon, the net impact on CO	2 may 	
in fact be a reduction.	 	
Substitutio	n impacts in consumption	 	
Norwegian salmon likely to substitute for Scottish salmon	, fine meat	, and similar products	. (Note the 	
points made	 in 	Box 8.1.	) This substitution will in general reduce the environmental impact of higher 	
production of Norwegian salm	on. Why? Because Scottish salmon production also has environmental 	
issues, and may be flown over a similar distance as the Norwegian 	product	. We 	may assume	 that fine 	
meat, another possible alternative to Norwegian salmon, 	will also involve	 environmental is	sue	s, like 	
discharges of organic material from manure and from the fertilizer used to produce feed; and from 
GHG	 emissions related to the same processes. 	For this project 	we have not properly	 in depth	 the 	
environmental impacts of Scottish salmon, fine meat	 or other luxury food alternatives to Norwegian 	
salmon. 	However,	 these conjectures illustrate a point made earlier	: that once general equilibrium 	
effects are taken into account	, the environmental implications of free trade often diminish compared 	
to their 	life	-cycle counterparts. But it may also be the case that Norwegian salmon 	is used to 	
substitute for something that is 	more 	environmentally	-friendly, 	such as	 organically grown vegetables. 	
To the extent that 	occurs,	 the impacts from the life	-cycle	 analysis 	are valid in the broader analysis 	
and may actually be reinforced by the removal of 	the 	health impacts of vegetables.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	73	 	
Box 8.1	 	An illustration of substitution in the case of salmon consumption in China	 	
 	
Source: The Daily Telegraph, May 10, 2011

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	74	 	
Summary	 	
Bas	ed on the combined partial equilibrium	–life	-cycle	 analysis we have found the following average 	
impacts of 	greater	 export of salmon from Norway to China 	resulting from	 an FTA	: 	
 	300 additional farmed fish reaching waterways	 	
 	1.4 million additional fish 	lice	 	
 	11	,000 tons additional fish catch, of which 122 tons overexploited blue whiting	 	
 	48	,000 tons additional CO	2. 	
 
In addition, discharges of nutrients may be a problem, but	 we have not 	delved into	 the empirical 	
consequences in this research. 	 	
The figures given i	n the bullet	ed text above	 are in a sense captured by the method used to derive 	
them: They are average figures, they do not 	reflect	 the consequences of altered practice, 	nor do they	 	
consider substitution impacts in consumption and production. For instance, 	if Norwegian salmon 	
exports 	as used as a substitute	 for Scottish salmon exports the 	global	 environmental impacts may be 	
lower	 than the 	national	 problems for Norway. 	All the same,	 the life	-cycle	 methodology 	we have 	used 	
here is a state	-of-the	-art technique 	in environmental impact assessment, and within Norway the 	
figures may pro	vide	 a useful indication of the size of the potential environmental problem.	 	
 	
8.3 Case study 2 	– Export of clothing from China to Norway	78 	
China is the largest cotton producer and th	e biggest producer and exporter of cotton textiles and 	
apparel products in the world. Following China’s access to WTO and the elimination of tariff	-rate	 	
quotas on textiles, Chinese textile exports 	have expanded rapidly, stabilizing 	at a high level	 in 	recen	t 	
years 	(table 8.5	). 	
Table 8.5	 	Chinese exports and imports of textiles and textile articles	, USD billion	 	
 	2007	 	2008	 	2009	 	
Exports	 	165.8	 	179.7	 	161.4	 	
Imports	 	25.4	 	25.0	 	21.8	 	
Source: China Statistical Yearbook 2009, 2010. 	 	
Cotton textile is estimated to mak	e up around one third of the value of products exported	 from 	
China	, i.e. US	D 47 billion. The Chinese Association for Textile Industry has estimated that China 	
produced 5.5 billion meters of cotton textile cloth in 2005.	 The cotton cloth industry occupies a	n 	
important position in the national economy and provides the means of livelihood for around 4.5 
million Chinese.	 	
The general strength of Chinese textile export 	can be seen from	 the trade figures with Norway. 	
Textiles and textile products 	represent 	the big	gest category of export from China to Norway. The 	
Feasibility Study notes that pullovers/cardigans, cotton sweaters and women	’s cotton 	trousers are 	
the most important textile articles exported. 	 	
We have established in the free trade scenario that Norwegia	n import tariffs on textiles and textile 	
products probably will be phased out. This is likely to increase the export of textiles and textile 
products, resulting in 	greater	 Chinese production and lower apparel costs for Norwegian consumers. 	
Remaining Norweg	ian suppliers could be threatened, but it could perhaps also 	bring	 new 	
 	 	 	78 Parts of this section 	are	 based on ECON: Environmental consequences of a Norweg	ian	‒Chinese Free Trade 	
Agreement, ECON	 Report no. 2008	-148. Unless otherwise noted, data are from this source.

Environmental implications of a Sino	-Norwegian FTA	 	
Vista Analysis and Fridtjof Nansen Institute (FNI)	 	75	 	
opportunities. The Norwegian textile industry has already 	basically shifted	 from 	producing 	the kind of 	
low	-cost apparel imported from China to high	-value apparel sectors	, and relaxed tr	ade barriers could 	
provide opportunit	ies	 for 	greater	 two	-way trade 	in 	textiles and apparel products.	 	
The cotton life	-cycle	 	
Among the textile products exported from China to Norway, we use cotton cloth	/clothing	 as an 	
example of possible environmental impact	. The life	-cycle	 here	 consists of multiple elements with 	
partly different environmental challenges. The elements are summarized in the 5 steps	 shown in 	
Figure 8.5	: 	
Figure 8.5	 	 Elements of the cotton production cycle	 	
 	
 
Cotton production is the process of p	roducing cotton from seeds to lint cotton in a season	-long 	
period. In the growing process, 	this production requires	 water, chemicals, electricity and machinery. 	
Carbon dioxide, local air pollutants, ammonia and nitrogen 	can	 be released to air and water fro	m the 	
application of chemical fertilizers and pesticides. Generally speaking	, Chinese agriculture consumes 	
more fertilizer relative to production than in most other countries	 today	. ‘Cotton clothes’ 	(or 	
clothing) 	is the process of spinning and dying cotton	 to become 	items of clothing	, usually with some 	
chemical fibre mixed in. 	Electricity and water 	are consumed 	in the process	; chemical waste	s are 	
discharged	 to water and 	GHGs	 and local pollutants to air. Transport from China to Norway	 requires	 	
consumes oil 	for shipping. The consumption process of cotton cloth	/clothing	 in Norway consumes 	
electricity and water, mainly during laundry. Finally, disposal of waste cotton cloth	/clothing	 at the 	
end of the life	-cycle in Norway consumes energy during collection and pre	paration for incineration. 	
Incineration in Norway produces commercial energy, but at the 	expense	 of emissions to air.	 	
Quantifying the increase in Chinese exports of cotton textiles	 	
Exports of textiles and textile products from China amounted to 	NOK 	7.2 bil	lion in 2010. Since the 	
major	 textile products exported to Norway seem to be made of cotton, we assume here for simplicity 	
that all Chinese textile export to Norway consists of cotton.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	76	 	
The average import tariff in Norway is 8.4	%79 (see Fauchald and Vennemo	, 2011). Applying a price 	
elasticity of 0.5 we estimate that Chinese export to Norway increases 7.2*0.084*0.5= 0.300 billion 
NOK if tariffs are eliminated and reference quantities are as of 2010.	 	
Environmental life	-cycle	 impacts of increased exports of tex	tiles from 	
China	 	
One problem 	in 	attempting to estimate 	the 	life	-cycle	 environmental impacts of higher exports of 	
cotton textiles from China to Norway is that available documentation o	n life	-cycle	 impacts refer	s to 	
the production of one (million) kg of text	iles, whereas the trade statistics refer to the production of 	
one (million) yuan of textiles. However, Norwegian trade statistics publish both quantity and value 
data. 	Summariz	ing	 the total quantities and values over HS	-code	s 61	-67 (which contain the texti	le 	
articles	), we get	 an average price of 	NOK 	132	 /kg. As a cross	-check we estimate the average price of 	
the main import article, namely 	cotton 	pullovers/cardigans. The average price of 	these items	 is NOK 	
124/kg	, so we have decided to apply	 a price of 	NOK 	130	 /kg. This price is our conversion factor 	
between value	-based trade statistics and quantity	-based life	-cycle	 analysis.	 	
Using a factor of 130	, the estimated	 increase in value of NOK 	300 million 	emerges as	 equivalent to a 	
2.3 million kg increase in quanti	ty, or 23,000 tons. 	 	
Carbon footprint	 	
The carbon footprint of 	1 kg of cotton cloth is given in 	Table 	8.6;	 see ECON (2008) for the derivation:	 	
Table 8.6	 	The life	-cycle	 carbon footprint	 	
Life	-cycle	 Unit	 	Kilo 	CO	2-e/	kilo	 	Tonnes 	CO	2-e from 23,000 tonnes 	
textiles	 	
Cotton production in China	 	16.1	 	370,000	 	
Cotton clothing production in 
China	 	2.8	 	64,000	 	
Transportation from China to 
Norway	 	0.2	 	4,600	 	
Consumption in Norway	 	2.7	 	62,100	 	
Waste	 	0.0	 	 	
Sum 	 	21.8	 	501,400	 	
 
According to this analysis	, the increase in Chinese 	exports of textiles may lead to as much as half a 	
million tons of additional 	GHG 	emissions. It is important to realize that this is a carbon footprint 	
assuming no supply	-side constraints or substitution in demand. The life	-cycle	 impact 	indicated 	here is 	
simply	 a mechanistic response to the increase in final demand for clothing.	 	
Almost all the 	rise	 in 	GHG	 emissions is estimated to 	occur	 during cotton production. 	Cotton 	
production in China is carried out in many ways. In remote areas	, some farmers still 	rely 	on	 	
traditional farming systems, using only small quantities of oil and electricity, and larger quantities of 
human and animal labour. In some other areas, such as 	the 	Northern Xinjiang Autonomous Region, a 	
more energy	-intensive farming system has developed	. 	
About one third of Chinese	 cotton production takes place in the Xinjiang Autonomous Region	, with	 	
the remain	der carried out	 in central and eastern part of China. Textile factories in coastal areas 	
increasingly use imported cotton instead of domestically 	produced cotton in their production. Most 	
often the cotton is imported from United States, the Commonwealth of Independent States 
 	 	 	79 MFN, average.

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(Uzbekistan in particular), India and Pakistan and even from African countries. Hence, the 	figure	s in 	
Table 8.6 represent an u	nderlying diversity of production technologies and trade in cotton with other 	
countries. Still	, we get an indication of	 the relative magnitudes involved in textile production.	 	
Economic responses, reactions and rebound effects	 	
An increase in exports of some	 commodity, in this case textiles, and associated increased production 	
of everything that goes into the production of this commodity, 	will	 rarely 	be 	the end state of the 	
economic response. In ECON (2008) the relation between partial and full impacts of a C	hinese 	
increase in production of textiles is discussed. It is 	noted	 that 	the economy cannot use more labour 	
or capital than is available. Nor can it run down (or up, for that matter) the current account. On this 
basis ECON (2008) follows the economic flows	 in a Computable General Equilibrium exercise: 	 	
…the initial increase in exports to Norway is about 450 million Yuan, or 437 million to be 
precise	80. However, the macroeconomic increase in 	all	 export of textile & apparel from China 	
is 250 million Yuan. Thi	s is of course a much lower 	figure	. In other words, export to other 	
countries falls. The reason textile export to other countries falls is that the stimuli provided 
by increased import demand from Norway creates an upwards pressure on wages and 
income in (	the textile sector of) China. The upward pressure is the result of increased 	
competition for resources of production when additional demand from Norway is factored 
in. The pressure is of course extremely small, but all 	figure	s are small in this marginal ex	ercise 	
and the pressure on wages and income has a 	considerable	 relative	 impact. The 	
macroeconomic consequence of the pressure on wages and income is to increase costs of 
production and reduce ordinary exports of textile & apparel. This is how the economy m	akes 	
room in the current account for the export stimulus to Norway. 	 	
The macroeconomic effect reduces exports of textiles & apparel from 437 million to 250 
million. By the time the increase has filtered through to total export of 	all	 goods and services 	
the	 initial increase is capped considerably once more. The total increase in export is only 23 	
million Yuan. The reason is that export from other sectors than textile & apparel reacts in a 
similar pattern to export of textile & apparel: This export falls back	 and modifies the initial 	
export increase.	 	
To illustrate this point the table below 	(Table 8.7) 	is presented in ECON (2008). It distinguishes 	
between the direct, embodied and economy	-wide impacts of increasing 	exports of 	textile	s and 	
apparel from China to 	Norway. The direct impact is similar to the impact denoted 	‘cotton clothing 	
production	’ in 	Table 8.6 above. It calculates impacts in the 	clothing 	production sector. The embodied 	
impact equals the direct impact plus impacts further up the chain of productio	n. The embodied 	
impact equals the sum of clothing production and cotton production in 	Table 8.6 above. Both 	
analyses find the embodied impact to be about ten times the direct impact. 	 	
Perhaps the most interesting entry in 	Table 8.7 	concerns	 the economy	-wid	e impact. 	This	 includes the 	
embodied impact, but it also includes other impacts in the economy. These impacts are negative 
(lower pollution) since other sectors contract in order to make room for 	greater	 export of textile and 	
textile products. The economy	-wide impact falls back to a magnitude that is lower than the initial, 	
direct impact. 	 	
One may say that the economy	-wide impact shows a generali	zed rebound	 effect, collecting all the 	
economy’s responses to the initial change. The details of the rebound	 effe	ct can always be discussed, 	
but 	the	 general message from economy	-wide analysis 	is that it is quite significant. 	 	
All impacts discussed so far have been on the Chinese side. On the Norwegian side there is also a 
considerable rebound effect. Most of the Norw	egian impact originates from 	the 	electricity used to 	
 	 	 	80 Note that this 	figure	 is very	 similar to the 300 million we estimated above for th	e present	 report.

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operate washing machines for laundry. On the margin this electricity is carbon	-intensive since 	
Norway belongs to a joint European electricity market. On the other hand, electricity production in 
Europe i	s subject to the Emission	s Trading System, which caps overall carbon emissions. This implies 	
that a stimulus to higher emissions, e.g., because demand from washing machines increases, is 
counteracted by lower emissions elsewhere in Europe. 	 	
Table 8.7 	 	Impa	cts of increasing textile & apparel exports from China to Norway	 	
Pollutant	 	Direct impact	 	Embodied impact	 	Economy	-wide impact	 	
CO	2 	22	 	207	 	7 	
SO	2 	0.12	 	82	 	0.04	 	
COD	 (chemical 	
oxygen demand) 	 	
0.17	 	41	 	0.02	 	
Note: 	 	Increased textile & apparel export to Norway 	is 437 million Yuan. Unit for impact is tons/(Million Yuan in 	
increased textile & apparel export to Norway)	. 	
Discharges to water	 	
Agriculture and the textile industry are two of the most water	-resource consum	ing	 sectors in China. 	
Accord	ing to Shen (2006) t	he textile industry discharged 1.72 billion tons of wastewater in 2005 and 	
represented	 7 per cent of total industrial effluent	, which made it the fifth most polluting industry	 in 	
the country	. Its COD 	(chemical oxygen demand) 	discharge was the fourth larges	t in the country and 	
represented	 6.05 per cent of total COD emissions. 	 	
The production	-related environmental impacts 	of cotton 	cloth exports in 2005 are summarized in 	
Table 	8.8	. The most significant environmental impact is wastewater effluent	. To export 1 	meter 	of 	
cotton cloth, 31.4 k	gs wastewater 	are	 discharged 	into the water	ways	. 	
Table 8.8	 	Cotton cloth 	export	 and direct environmental impacts	 in 2005	 	
Export	s and Emissions 	 	Production	 	Increase compared with 	
previous	 year 	 	
Increase 	% 	
Export amount	 	
(million	 meter	s) 	
5,496	 	795	 	14.46	 	
Associated amount of 	COD	 	
(thousand ton	s) 	
140.4	 	20	.696	 	14.74	 	
Waste water discharge	 	
(million ton	s) 	
172.80	 	25	.472	 	14.74	 	
Water consumption	 	
(million ton	s) 	
216	 	27	.825	 	12.88	 	
Coal consumption 	 	
(tce million ton	s) 	
2.43	 	0.358	 	14.73	 	
Sour	ce: Shen (2006) 	 	
The vast water usage and wastewater discharge	s are	 alarming given China’s 	current	 water stress. The 	
unprecedented economic development has put great strains on natural resources	, and water scarcity 	
in North China 	has become one of	 the coun	try’s	 most pressing environmental problems. Between 	
1990 and 2002	, there were more than 120,000 water	-related conflicts reported to the Chinese 	
Ministry of Water Resources.	 	
A sobering picture is painted by 	Table 8.7 above. It indicates direct, embodied and	 economy	-wide 	
discharges to water of COD. Again the embodied impact is much higher than the direct impact, but 
the embodied addition and more is retracted by the economy	-wide impact. According to this 	
analysis, 	the 	impacts of increased textile exports on C	OD discharges are not 	excessively	 large.

Environmental implications of a Sino	-Norwegian FTA	 	
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Mitigating measures	 	
The 	Chinese farmers could decrease the GHG emissions of	 the cotton production process	 somewhat 	
by shifting towards lower fertilizer use and eventually to 	organic cotton farming. Similarly, if co	tton 	
cloth production 	could follow cleaner production technology with China’s environmental	ly-friendly 	
label certification, 	that	 also could reduce a certain amount of GHG emission	s as well as water 	
pollution. 	As for Norway, t	he mitigation measures availabl	e centre on	 more environ	ment	ally	-friendly	 	
laundry processes, for example using detergent	-free washing powder	, and	 natural drying instead of 	
electric 	tumble 	drier	s. 	
In order to reduce waste of fertilizer	, measures 	could be introduced 	to internalize the en	vironmental 	
cost of fertilizers. Lower fertilizer use has several environmental benefits beside carbon emissions. 
For instance, it has been 	indicated	 that the recurring pollution of Tai Lake (Taihu) is due to	 mainly	 	
fertilizer pollution from farming. 	Anoth	er way of decreasing the emissions related to farming 	
practices is to spread information regarding sustainable farming practices of cotton, including the use 
of fertilizers. 	Well	-balanced fertilizer application is not only environmentally sustain	able but 	also 	
economically beneficial for farmers	, so better	 information should be of interest to all parties. 	 	
An FTA c	ould	 also be coupled with consumer communication measures in Norway aimed at limiting 	
emissions related to cotton imports. This communication c	ou	ld be directed at 	laundry	 practices but 	
also aimed at informing consumers of the environmental sustainability of the cotton clothing they 
choose to buy. By affecting demand, supply practices can also be altered. This kind of information is 
possible	, as Chi	na has used the textile e	co	-label 	the 	‘Environmental Friendly Product Label	’ since 	
1996 and has reached an agreement on mutual recognition with White Swan Pro	gramme	 products. 	
The authorities are also planning to develop a new label related to low	-carbon pr	oduct standards. 	 	
 	
8.4 Case study 3 	– Services associated with mining 	 	
There is 	growing	 interest in Norwegian mineral resources	, related 	partly 	to Chinese restrictions and 	
taxes on 	the 	export of certain minerals (see section 9.3 below	; see also World Trade	 Report 2010 	
concerning the broader context). There are plans to re	-open mines and establish new ones. The 	
mining industry in Norway has essentially been privatized, and 	today 	most of the large export	-	
oriented companies are 	owned, 	wholly or partly	, by fore	ign investors. Approximately 61% of the 	
industry’s turnover is for export. 	Minerals not exported are mostly used as raw materials 	in the 	
minerals industry (NGU and DM 2011: 11).	 	
The mining industry is particularly important for the settlement and economic 	viability of rural areas 	
of Norway. Norwegian municipalities have in their land	-use plans set aside 2313 localities that may 	
be used for mining activities (NGU and DM 2011: 9). The prospect	 of future mining activities has been 	
a main element in the Norwegi	an Government's Strategy for the High North (2006, p. 65 	in 	
particular	) and has been followed up through subsequent funding of mapping activities.	81 From these 	
perspectives, future mining activities are strategically important to the Norwegian 	government. T	he 	
following four main challenges have been identified by 	the 	Norwegian authorities responsible for the 	
industry: (1) 	the 	search for and exploitation of mineral resources; (2) research and development 	
related to all stages of the life	-cycle of minerals; (3	) competition for qualified employees; (4) securing 	
availability of mineral resources in land	-use management (NGU and DM 2011: 34). The authorities do 	
not list environmental issues among the main challenges.	 	
 	 	 	81 NGU 2011 at 12: ‘In 2010,	 the Norwegian government promised NGU NOK 100 million over the next four 	
years to map the mineral resources in northern Norway.’

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Currently, the EU is heavily dependent on import	 of minerals (Farhorizon 2011: 3). Norway sees this 	
as a business and development opportunity that fits well with 	its own 	strategic priorities (NGU and 	
DM 2011: 34). According to an assessment made by the 	EU 	Commission:	 	
The 14 raw materials listed below ar	e critical because the risks of supply shortage and their 	
impacts on the economy are higher compared with most of the other raw materials. Their 
high supply risk is mainly due to the fact that a high share of the worldwide production 
mainly comes from a ha	ndful of countries: China (antimony, fluorspar, gallium, germanium, 	
graphite, indium, magnesium, rare earths, tungsten), Russia (platinum group metals), the 
Democratic Republic of Congo (cobalt, tantalum) and Brazil (niobium and tantalum).	82 	
According to th	e Geological Survey of Norway	 (NGU)	, ‘China’s dominance in many ore and mineral 	
markets has led to a geopolitical situation where old reserves come to the forefront again, and new 
mapping starts. The EU looks upon Norway and the Barents Region as one of th	e most promising 	
areas to secure Europe’s supply of important ores and minerals.’ (NGU 2011: 12). 	Moreover	, global 	
warming 	can be expected to	 facilitate Norwegian export of mineral resources to China through the 	
North East Passage (Støre 2011: 17	‒19). 	 	
Nor	way adopted a new Minerals Act in 2009 which in essence continues and updates the prior legal 	
regime, and facilitates future exploration and exploitation of the resources. A new 	Directorate of 	
Mining under the Ministry of Trade and Industry has subsequentl	y been established. The Geological 	
Survey of Norway remains an agency under the Ministry	, with the responsibility to generate and 	
make available information, and carry out research. According to 	its	 instructions from the Ministry, 	
the NGU is not to compete	 with private enterprises where such enterprises are able and fit to carry 	
out the activities in question (Tildelingsbrev 2011: 2).	 	
China’s mining industry is complex. China is a leading country in the mining and minerals industries, 
and has significant wo	rld market shares in a broad range of mineral products. 	Much	 of 	its	 industry 	is 	
export	-oriented and advanced. Chinese enterprises have important and updated experience within 	
many sub	-sectors and in carrying out mining activities in the form of mode 4 of s	upply. 	Moreover, 	
Chinese enterprises are outward	-looking and have significant investment interests abroad.	83 In a 	
report that has been approved by Chinese authorities, t	he OECD (2006: 12) concluded that	: ‘Stronger 	
efforts are needed by the 	[Chinese] 	governm	ent to ensure that	 Chinese corporations operating 	
overseas, particularly in such environmentally	-sensitive industries as forest	 products and mining, are 	
positive contributors to China’s stated goal of building an international reputation	 for sound 	
environm	ental management and sustainable development.	’ 	
The main environmental challenges facing 	the 	Norwegian mining industry relate to 	the 	deposit of 	
waste	 matter	, emission	s from	 chemicals, and land	-use issues. Of particular concern are emissions 	
and waste that m	ay harm the quality of freshwater resources and the marine environment. The 	
Norwegian fjords are particularly vulnerable due to their fragile ecosystems and limited 	water 	
ex	change (Bjercke 2011). The Norwegian minerals industry and relevant research instit	utions have 	
stated that future exploitation of many mineral resources will depend on 	being able to deposit	 waste 	
and pollutants into the marine environment (Geonor 2010: 12	, 42).	 	
Based on the above information, 	including the many environmental challenges a	ssociated with the 	
Chinese mining industry, 	we find the following consequences if Norway undertakes full commitments 	
in the mining sector:	 	
 	 	 	82 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and th	e Committee of the Regions: 	Tackling the Challenges in Commodity Markets and on 	
Raw Materials,	 COM(2011) 25 final at 21.	 	83 See 	http://www.chinamining.org/index.html	.

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Table 8.9	 	Norway: Consequences of commitments regarding mining services 	 	
Mode of 
supply	 	
Primary (economic / 
trade) 	consequence	 	
Regulatory consequences	 	Environmental 
consequences	 	
Mode 1	 	
Cross	-border 	
supply	 	
Increased outsourcing of 
analytical and surveillance 
related activities to China. 
Limitations on the 
activities of NGU due to 
the prohibition against 
competition wit	h private 	
service suppliers.	 	
Increased difficulty of 
regulating and controlling the 
quality of the service.	 	
Increased risk of 
harmful emissions 
from accidents and 
ordinary operation.	 	
Mode 2	 	
Consumption 
abroad	 	
No significant effects.	 	 	 	
Mode 3	 	
Commercial 
presence	 	
Some increase in Chinese 
investments relative to 
investment from other 
countries. Chinese 
investors may have a 
preference for exporting 
raw materials in short 
supply to China.	 	
The possibility that Chinese 
investors could challenge 
environmental req	uirements 	
on the basis of investment 
protection rules included in 
the FTA or under the current 
BIT between China and 
Norway, e.g. non	-	
discrimination in light of the 
potential need to strengthen 
environmental policy 
measures as the industry 
develops and env	ironmental 	
impacts accumulate (see also 
section 8.6 below).	 	
Increase in foreign 
investment may lead 
to increased political 
pressure to exploit 
mineral resources that 
otherwise could have 
been left unexploited 
due to environmental 
concerns.	 	
Mode 4	 	
Presence	 of 	
natural 
persons	 	
Chinese enterprises will 
increase the use of 
Chinese workers on 
mining sites in Norway. 
This is particularly 
relevant due to the 
current lack of skilled 
work force in Norway.	 	
While Norwegian legislation 
will apply to Chinese workers 
in 	Norway, significant 	
compliance and enforcement 
issues are likely to arise.	 	
Increased risk of 
harmful emissions 
from accidents and 
ordinary operation.	 	
 
As indicated in Table 8.9, we foresee that Norwegian commitments in the mining sector are likely to	 	
have	 some negative regulatory and environmental impacts. In particular, we emphas	ize	 the 	
challenges that such commitments may have for compliance and enforcement of Norwegian rules 
and standards. Possible mitigating measures 	include 	the following:	 	
 	The Norwegia	n schedule could list reservations under mode 1 and mode 4 of supply relating 	
to national treatment, to ensure future possibilities of establishing quality control with 
Chinese service suppliers or Chinese services.	 	
 	The FTA could include arrangements to 	promote	 cooperation among Chinese and Norwegian 	
authorities and industries in the mining and environmental sectors (see the box below).

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 	Measures could be taken to strengthen the capabilities of relevant Norwegian monitoring 
and enforcement authorities. 	 	
Box 	8.2	 	Provision on Mining and Industrial Cooperation in China’s FTA with Chile	 	
 Article	 113	 	
 1. The aims of cooperation in mining and industry sectors carried out in the mutual interest of the 
Parties and in compliance with their policies, will be:	 	
(a) to en	courage, where appropriate, government agencies, research institutions, universities, 	
private companies and other research organizations in each other’s country to conclude direct 
arrangements in support of cooperative activities, programs, projects or joi	nt ventures within 	
the framework of this Agreement;	 	
(b) to focus cooperative activities towards sectors where mutual and complementary interests 
exist; and	 	
(c) to build on existing agreements and arrangements already in place between the Parties such 
as in	tergovernmental protocols, or association agreements between copper companies and 	
corporations of the Parties.	 	
2. Mining and Industrial cooperation may include work in, but not be limited to, the following areas:	 	
(a) bio	-mining (mining using biotechnology 	procedures);	 	
(b) mining techniques, specially underground mining, and conventional metallurgy;	 	
(c) productivity in mining;	 	
(d) industrial robotics for mining and other sector applications;	 	
(e) informatics and telecommunication applications for mining and i	ndustrial plant production; 	
and	 	
(f) software development for mining and industrial applications.	 	
3. In pursuit of the objectives in Article 104, the Parties will encourage and facilitate, as appropriate, 
the following activities including, but not limited 	to:	 	
(a) exchange of information, documentation and institutional contacts in areas of interest;	 	
(b) mutual access to academic, industrial and entrepreneurial networks in the area of mining 
and industry;	 	
(c) identification of strategies, in consultation wit	h universities and research centres, that 	
encourage joint postgraduate studies, research visits and joint research projects;	 	
(d) exchange of scientists, researchers and technical experts;	 	
(e) promotion of public/private sector partnerships and joint ventur	es in the support of the 	
development of innovative products and services specially related to productivity in the sector 
activities;	 	
(f) technology transfer in the areas mentioned in paragraph 2; and	 	
(g) designing of innovation technology models based in p	ublic/private cooperation and 	
association ventures.	 	
 	
8.5 Mode 4 of supply of services	 	
The free trade scenario assumes that Norway will undertake some commitments regarding mode 4 
of supply. Nevertheless, we need to take into account the probability that N	orway will maintain 	
major reservations. There are currently three main horizontal reservations relating to mode 4 of 
supply in the Norwegian GATS schedule:	 	
1. Establishment: General authorization procedures for acquisition: National treatment: 	 	
a. Foreign citize	ns residing in Norway who purchase or lease real property for housing, 	
secondary residences and business activities without a concession are subject to the 
condition that the real property is acquired for their own personal use.

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b. A concession can only be g	ranted when it is not contrary to the public interest. An 	
acquisition is normally judged on the impact it will have on future activity and 
employment in the company and the society as a whole. Legislation governing 
acquisitions has traditionally been lib	erally applied. It authorizes the setting of 	
conditions, in a large majority of the cases involving over 1/3 of foreign ownership 
related to voting shares. Conditions are	 largely standardized. Two conditions are 	
regarded as important and are stipulate	d in most cases: a majority of the board and 	
its chairman must be Norwegian nationals and, the transactions between the 
Norwegian company and the foreign owner must be based on OECD's principle of 
arm's length prices.	 	
2. All sectors: Subsidies: National treat	ment: Subsidies available to natural persons may be 	
limited to Norwegian citizens.	 	
3. All sectors: Movement of personnel: 	 	
a. Market access: Unbound, except for the temporary presence and without requiring 
compliance with an economic needs test of categories A a	nd B below: A. Managers 	
and executives, specialists as intra corporate transferees, provided that the service 
supplier is the corporation to which these are attached. Temporary entry, stay and 
work limited to a two year period. … B. Business visitors. Te	mporary entry, stay and 	
work limited to a three month period …	 	
b. National treatment: Unbound except for measures concerning the categories of 
natural persons referred to in the market access column.	 	
The Norwegian Doha offer proposes the following amendments 	to these commitments:	 	
1. Text to be changed to the following: A foreign citizen that purchases or leases real property 
as a secondary residence must apply for a concession if the citizen neither lives in Norway, 
nor has been living in Norway for at least five	 years.	 	
2. Unchanged.	 	
3. a. The following exception is added: C. Temporary presence of natural persons providing 
services without being employed by a juridical person who has commercial presence in 
Norway. Access is subject to the following conditions: … 	84 	
Almos	t all sectors include the following commitment under mode 4 for both market access and 	
national treatment: ‘Unbound except as indicated in the horizontal section’. 	 	
In order to further clarify the free trade scenario regarding mode 4 of supply, we note tha	t Norway 	
participated in a collective request regarding mode 4 in 2006. The request noted that: 	 	
All aforementioned interested Members are willing to consider, with due respect for their 
national policy objectives and the level of development of individual	 members’ commitments 	
in this mode of supply …	 	
It is recognized that specific commitments in Mode 4 are primarily horizontal. The coverage 
of categories is also narrow and restricted mainly to personnel related to commercial 
presence. The coverage of categ	ories de	-linked from commercial presence is extremely low. 	
Substantial improvements in the coverage of such categories and substantial removal of the 	
 	 	 	84 WTO doc. TN/S/O/NOR/Rev.1.

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market access limitations for each of them is the key objective that would lead to improved 
market access 	in Mode 4.	85 	
The request concern two categories of service suppliers: 	contractual service suppliers	, defined as: 	
‘Employees of a foreign based company/partnership/firm who enter the territory of another WTO 
Member temporarily in order to perform a service p	ursuant to a contract(s) between their employer 	
and a service consumer(s) in the territory of the other Member …’, and 	independent professionals	, 	
defined as: ‘Natural persons who enter the territory of another WTO Member temporarily in order to 
perform a s	ervice pursuant to a contract(s) between them and any service consumer located in the 	
territory of the other Member …’.	 	
According to the request, commitments would ‘be restricted for provision of services at a level of 
complexity and specialty that require	, at a minimum, a diploma or a university degree, or 	
demonstrated experience’. For contractual service suppliers, commitments would be extended to 
‘personnel with requisite qualifications to fill positions responsible either for management of 
operations’. 	The service supplier would only be allowed to perform services related ‘to the service 	
activity which is the subject of the contract’. The requesters ask that ‘Economic Needs Tests should 
be removed or substantially reduced. In case of the latter, they sho	uld be applied on a non	-	
discriminatory basis.’	 	
The requesters 	list 	a broad range of ‘sectors/sub	-sectors of interest’. The following are of particular 	
relevance	 here:	 	
1. Architectural services (CPC 8671)	 	
2. Engineering services (CPC 8672)	 	
3. Integrated engineering 	services (CPC 8673)	 	
4. Urban planning and landscape architectural services (CPC 8674)	 	
5. Research and Development services (CPC 851 + 852 +853)	 	
6. Management consulting services (CPC 865)	 	
7. Services related to management consulting (CPC 866)	 	
8. Technical testing & analy	sis services (CPC 8676)	 	
9. Related scientific and technical consulting services( CPC 8675)	 	
10.	 Maintenance and repair of equipment (not including maritime vessels, aircraft or other 
transport equipment) (CPC 633 + 8861	‒8866) [not requested in relation to independent 	
professionals]	 	
11.	 Specialty design services (CPC 87907)	 	
12.	 Construction and related engineering services (CPC 511	‒518)	 	
13.	 Environmental services (CPC 9401 + 9402 + 9403) 	 	
In the following we assume Norway will be rea	dy to undertake commitments in accordance with the 	
above request	, provided that China reciprocates.	 	
In our view,	 the primary consequence of such commitments 	will be	 that Chinese enterprises, 	
including enterprises where Chinese investors own a large share, 	will expand their use of Chinese 	
professionals in Norway. We also consider it likely that Norwegian enterprises as well as foreign	-	
owned enterprises will expand their use of Chinese professionals, although to a lesser degree. We 
note that important parts o	f the Chinese work	-force are becoming highly educated, although 	
language remains a main obstacle. 	Foreign	-language issues would be less important for Chinese 	
 	 	 	85 Coll	ective Request, Mode 4 	– Movement of Natural Persons (8 March 2006) sponsored by, 	inter alia	, Norway, 	
available at http://www.regjeringen.no/upload/kilde/ud/nyh/2006/0078/ddd/pdfv/282784	-mode4.pdf

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enterprises. We also note that average salar	ies	 for Norwegian full	-time employees in the private 	
sector 	are the	 highest in Europe.	86 The above request states that: ‘Wage parity will not be a pre	-	
condition of entry. However, this does not preclude fixation of certain minimum wages and/or salary 
thresholds based on average salaries in the host country.’ =	t can therefore be assumed that wage 	
difference	s between Norwegian and Chinese employees will be large. Against this background, we 	
conclude that commitments regarding mode 4 of supply are likely to increase 	considerably 	the 	
presence of Chinese workers in 	Norway within certain service sectors.	 	
While Norwegian legislation and business standards will apply to Chinese workers in Norway, 
significant compliance and enforcement problems may occur due to lack of knowledge regarding 
Norwegian rules and practices. L	anguage difficulties and related communication challenges between 	
Chinese workers and Norwegian employees, customers and public authorities are likely to aggravate 
such problems. Depending on the character of the activity in question, compliance and enforc	ement 	
problems 	may well lead to	 greater	 risk of harmful environmental effects from the activity or from 	
accidents that may occur as a result of the activity. Possible mitigating measures are the following:	 	
 	Norway could exclude from the list of potential se	rvices those service categories 	deemed	 	
particularly sensitive from an environmental perspective. 	 	
 	The Norwegian schedule could list reservations under mode 4 of supply relating to national 
treatment, to ensure future possibilities of establishing quality c	ontrol with Chinese service 	
suppliers or Chinese services.	 	
 	The FTA could include arrangements to 	promote	 cooperation among Chinese and Norwegian 	
authorities.	 	
 	Measures could be taken to strengthen the capabilities of relevant Norwegian monitoring 
and enforc	ement authorities. 	 	
 	
8.6 National treatment of investment	 	
Introduction	 	
The scope of the 	NT	 provision under the free trade scenario includes the pre	-establishment phase. 	
We take the following as the point of departure for our assessment (identical to the dr	aft Norwegian 	
Model BIT): 	 	
1. Each Party shall accord to investors of the other Party and to their investments, treatment 
no less favourable than the treatment it accords in like circumstances* to its own investors 
and their investments, in relation to the	 establishment, acquisition, expansion, management, 	
conduct, operation and disposal of investments.	 	
2. National treatment shall not apply to the reservations set out in Annex [A].	 	
*[footnote] The Parties agree/ are of the understanding that a measure appli	ed by a government in 	
pursuance of legitimate policy objectives of public interest such as the protection of public health, 
safety and the environment, although having a different effect on an investment or investor of 
another Party, is not inconsistent wi	th national treatment and most favoured nation treatment when 	
justified by showing that it bears a reasonable relationship to rational policies not motivated by 
preference of domestic over foreign owned investment	. 	
In addition, the free trade scenario incl	udes 	investor	–state dispute settlement, including the 	
following limitations: (a) a duty to attempt to resolve the dispute for a minimum of four months prior 
 	 	 	86 See 	http://www.ssb.no/english/subjects/06/lonn_en/	.

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to bringing the case to international arbitration, (b) a duty to attempt domestic remedies where su	ch 	
are reasonably available, and (c) ICSID to be the only available arbitration arrangement.	 	
We note that 	the 	Norwegian authorities have made the following general assessment of the above 	
NT	 provision:	 	
The scope of the provision … will probably not be grea	ter than what the Norwegian 	
authorities have already committed themselves to through Norwegian law and the general 
principles of administrative law associated with equal treatment and prohibition of unfair 
discriminatory treatment. There may be a need to c	onduct regulation that is in practice less 	
favourable for a foreign investor than for a Norwegian investor on the basis of important 
social considerations. There may also be differences arising out of specific discretionary 
judgments, more stringent requir	ements over time and local variations. If the state can 	
document that there are objective grounds for discriminatory treatment, this is not in conflict 
with the provision. The Norwegian authorities’ right and obligation to regulate important 
sectors of soc	iety on the basis of rational variations will probably be retained in full.	87 	
Initially, we may distinguish between origin	-based differential treatment (e.g. 	when 	foreign 	
investments are subject to higher taxes due to their origin), and origin	-neutral diffe	rential treatment 	
(e.g. 	when 	one category of activities 	is subject to stricter emission standards than another category 	
of activities). Origin	-based differential treatment to the disadvantage of foreign investors or 	
investments will be unlawful under the N	T provision. Such measures may, however, be listed in the 	
annex mentioned in para. 2 of the provision, and thus not be unlawful. Measures providing for origin	-	
based differential treatment are easy to identify, and 	listing them in the annex	 would not pose a	ny 	
great	 problem One concern is, however, that listing such measures is likely to 	step up	 the political 	
pressure to eliminate the measure in question. Measures that may be particularly vulnerable are 
those	 that involve privileges to the local population, e	.g. in relation to the management or 	
exploitation of natural resources. 	In our view,	 there is a low risk that this arrangement may have 	
negative impacts on environmental regulation. In order to mitigate such impacts, we would 
recommend that the FTA should 	not include ‘standstill’ and ‘rollback’ arrangements for such 	
measures, and that it should be possible to list new measures, after providing sufficient justification 
for the necessity of the measures, without triggering a duty to compensate. 	 	
The 	NT provis	ion can 	serve as the 	basis for challenging measures that are formally origin	-neutral, i.e. 	
that apply in the same manner to foreign and domestic investors or investments.	88 Measures that are 	
origin	-neutral would in general not be listed in the annex, and wo	uld thus not enjoy general 	
exemption from the NT provision. The main reason for this assumption is that such rules would in 
general not be regarded as discriminatory, and that listing them in the annex would 	mean admitting	 	
that the measure has been taken f	or discriminatory purposes. Issues related to origin	-neutral 	
differential treatment will be considered in 	further	 detail below.	 	
Which measures are covered?	 	
The NT provision would apply to the ‘	establishment’, ‘acquisition’ and ‘expansion’ of investments. 	
The establishment phase would cover situations where Chinese private parties or public authorities 
enter into contracts regarding investments, the associated rules regarding such contracts, and public 
regulations regarding permits or concessions to acquire 	investments or carry out activities, such as 	
for example mining.	 	
 	 	 	87 Comments on the Model for Future Investment Agreements. 19 December 2007 at 18, available at 
http://www.regjeringen.no/upload/NHD/Vedlegg/hoeringer/2008/Forklarende%20vedlegg%20(engelsk)%20	-	
%20final.doc	. 	88 See e.g. Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID case no. 
ARB/03/29, deci	sion 27 August 2009, para. 390 and UNCTAD: 2005: 34.

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Moreover, the NT provision would apply to the ‘management’, ‘conduct’ and ‘operation’ of the 
investment. Assuming that the investment has been lawfully established, the NT obligation would 
ap	ply to amendment to existing permits or concessions, new rules, new taxes, new subsidies, as well 	
as (other) general or individual decisions that affect the investment and its associated activities. 	 	
Finally, the NT provision would apply to the ‘disposal’ 	of the investment. This cover the sale, 	
expropriation, forced elimination, or forced transfer of the investment. Rules regarding 
expropriation, bankruptcy, security measures, financial security, etc. would be covered by this 
element of the provision.	 	
We th	us conclude that the NT provision in essence would cover all regulatory and economic 	
measures that may affect an investment during its life	-cycle	.89 	
The non	-discrimination obligation	 	
On the basis of case law, we distinguish three main approaches to origin	-neutral discrimination: (1) 	
whether the differential treatment is based on criteria that are arbitrary or void of objective 
justification,	90 (2) whether the differential treatment pursues a discriminatory objective or has 	
discriminatory effects (an aims	-and	-effects test),	91 and (3) to identify investors or investments that 	
are comparable and determine whether there is less favourable treatment of foreign investor(s) or 
investment(s) when compared to domestic investor(s) or investment(s).	92 Some of the case law,	 in 	
particular case law under NAFTA, combines these approaches.	93 On the basis of development	s in 	
case law, we find that the approach most likely to be applied in the future is 	one	 based on alternative 	
(3): to identify investors or investments that are comp	arable and determine whether there is less 	
favourable treatment of foreign investor(s) or investment(s) when compared to domestic investor(s) 
or investment(s), and to supplement such considerations with an assessment of whether there is 
evidence of discrim	inatory intent.	 	
 	 	 	89 See, in the same direction, 	Merrill & Ring Forestry L.P. v. Canada	, UNCITRAL (NAFTA), award, 31 March 	
2010, para. 79: ‘This is a broad definition indeed, as it includes almost any conceivable measure t	hat can be with 	
respect to the beginning, development, management and end of an investor’s business activity.’	 	90 See 	Consortium R.F.C.C.v. Kingdom of Morocco	, ICSID case no. ARB/00/6, para. 74: ‘lorsque la différence 	
de traitement entre investisseurs natio	naux et étrangers repose sur des critères arbitraires ou dénués de tout 	
fondement objectif.’	 	91 See 	LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic	, ICSID 	
case no. ARB/02/1, para. 146, and 	Siemens AG v. Argentine Repu	blic	, ICSID case no. ARB/02/8, paras. 	
320	‒321. 	 	
92 See 	Marvin Roy Feldman Karpa v. United Mexican States	, ICSID case no. ARB(AF)/99/1, paras. 166	‒188, 	
Champion Trading Company and Ameritrade International Inc. v. Arab Republic of Egypt	, ICSID case no. 	
ARB/0	2/), para. 128, 	ADF Group Inc. v. United States of America	, ICSID case no. ARB(AF)/00/1, paras. 	
155	‒157, 	Técnicas Medioambientales Tecmed S.A. v. United Mexican States	, ICSID case no. ARB(AF)/00/2, 	
para. 181, 	CMS Gas Transmission Company v. Argentine Repub	lic, ICSID case no. ARB/01/8, paras. 293	‒294, 	
Metalpar S.A. and Buen Aire S.A. v. Argentine Republic	, ICSID case no. ARB/03/5, paras. 160	‒164, and 	
Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan	, ICSID Case no. ARB/03/29, 	
para	. 390, 	Merrill & Ring Forestry L.P. v. Canada	, UNCITRAL (NAFTA), award, 31 March 2010, paras. 	
83	‒94, and 	Grand River Enterprises et al. v. United States of America	, UNCITRAL (NAFTA), award 12 	
January 2011, paras. 165	‒171.	 	93 See 	S.D. Myers, Inc. v. The Gove	rnment of Canada,	 UNCITRAL (NAFTA), paras. 243	–55; 	Methanex 	
Corporation v. The United States of America	, UNCITRAL (NAFTA), part IV, section B, paras. 6	–19; 	Pope & 	
Talbot Inc. v. The Government of Canada (award 2)	, UNCITRAL (NAFTA), para. 78, and 	Alpha Proj	ektholding 	
GmbH v. Ukraine	, ICSID case no. ARB/07/16, paras. 426	‒428.

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In general, the trend in case law seems to indicate that investors face a 	heavy	 burden of proof when 	
invoking 	NT	 provisions. We also observe that investors frequently fail to produce relevant evidence 	
to substantiate their claims of violati	on of 	such	 provisions. This is	, in our view	, to a significant extent 	
related to the lack of clarity and predictability related to national treatment provisions. Such lack of 
clarity and predictability seems to lead to results that are unfavourable to inves	tors. One main 	
challenge for investors is to determine wh	om to	 use as a basis for comparison. Case law remains 	
unclear in this regard. 	At the one extreme, an investor can be faced with the challenge of 	
demonstrating that the measure in question has effects	 that would 	generally	 be unfavourable to 	
foreign investors. 	At the other extreme, an investor could choose among a broad range of domestic 	
investors and demand to be compared to the investor that receives the most favourable treatment 
among them. Currently	, an arbitration panels may be open to approaches that include the two 	
extremes as well as intermediary approaches.	 	
The provision we consider would refer to investors ‘in like circumstances’. Similar language has been 
used in NAFTA art. 1102, and would mak	e case law under NAFTA particularly relevant. The trend in 	
this case law may possibly indicate that a foreign investor may choose to be compared to the 
domestic investor who receives most favourable treatment, but that the range of relevant domestic 
invest	ors is defined very restrictively, i.e. that the concept ‘in like circumstances’ 	serves to	 narrow 	
the range of relevant domestic investors to a small group.	94 For the purpose of this assessment, it is 	
of importance to assess which criteria might be relevant	 when determining whether investors are ‘in 	
like circumstances’. On the basis of case law, we can 	note that	 one important criterion concerns	 	
regulatory circumstances (i.e. investors are subject to the same regulatory framework). This criterion 
extends to a	ll measures taken by public authorities, as well as to jurisdictional issues. Of particular 	
interest here is whether environmental or other physical circumstances of the investors could be 
relevant. The starting point is that such circumstances could be re	levant, but that the extent to which 	
they are relevant and their relative importance remain uncertain. The time at which the 
circumstances should be considered is also important, 	especially	 if the	 public authorities claim that 	
the environmental situation h	as deteriorated or that the accumulated impact on the environment 	
differs from previously. While the 	time aspect	 is relevant, the extent to which new circumstances are 	
relevant and the importance attributed to such new circumstances remains unclear.	 	
We als	o observe that the general trend in international arbitration seems to be to invoke the 	‘fair 	
and equitable treatment	’ provisions rather than the 	national treatment	 provisions. There is 	
considerable	 overlap between the two, in particular where the 	former	 also include a non	-	
discrimination clause. Efforts are 	being 	made to further specify fair and equitable treatment 	
provisions	; the version included in the draft Norwegian Model BIT is among the narrow provisions, 	
due to its limitation to customary internation	al law, and does not refer to non	-discrimination: ‘Each 	
Party shall accord to investors of the other Party, and their investments treatment in accordance 
with customary international law, including fair and equitable treatment and full protection and 
secur	ity.’ The Sino	‒Norwegian BIT contains a somewhat broader provision on fair and equitable 	
treatment: the duty to accord ‘fair and equitable treatment and protection’. 	 	
Against this background, we find that there is a low but slightly higher than average (w	hen compared 	
to BITs and other FTAs) probability that an investor will invoke the NT provision under a 
Sino	‒Norwegian FTA	, mainly due to the lack of alternative legal bases for claims	 and the high degree 	
of discretion provided for by Norwegian legislation	. We also find that the probability that an investor 	
will invoke the NT is likely to increase	, mainly due to expected clarification of the interpretation of 	
the NT clause	. The burden of proof to be fulfilled by an investor invoking the NT provision will rem	ain 	
unclear in the near future, but 	will probably 	be clarified in the medium term (five to ten years). The 	
 	 	 	94 See, in particular, 	Merrill & Ring Forestry L.P. v. Canada	, UNCITRAL (NAFTA), award, 31 March 2010, 	
paras. 83	‒94.

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substantive result of such clarification is difficult to predict, but we assume that such clarification will 
attempt to establish a fair balance betw	een the interests of investors and states, as seen from the 	
perspective of investment tribunals.	 	
Public authorities’ possibility of defending measures	 	
The footnote 	to the 	draft Norwegian Model BIT allows the state to maintain a measure that 	
otherwise would	 be inconsistent with the NT clause if it can show that the measure ‘bears a 	
reasonable relationship to rational policies not motivated by preference of domestic over foreign 
owned investment’. 	Some k	ey elements in this provision need to be clarified	: what	 constitute 	
‘rational policies’	; when is there a ‘reasonable relationship’ between the contested measure and 	
such policies	; and how to determine whether the policies are ‘motivated by preference of domestic 	
over foreign owned investment’. As a starting poi	nt, we observe that it would be the state that 	
carries the burden of proving that these conditions are fulfilled. In the following, we will 	indicate	 	
some issues 	that arise	 in relation to the conditions.	 	
The requirement that the policies be ‘rational’ can b	e read as a requirement that the measures that 	
constitute parts of the policies 	should be suited for achieving	 the aim of the policies. Moreover, it can 	
be argued that	, in order to be ‘rational’	, the policy must pursue legitimate policy objectives. 	Which 	
interests would be relevant when taking decisions under environmental legislation	? While it would 	
be legitimate to consider environmental concerns when taking decisions under the Pollution Control 
Act, it is more questionable whether it would be relevant to	 consider social or economic interests, 	
e.g. local employment or tax revenue	s. We observe that Norwegian legislation in general provide	s for 	
broad margins of appreciation 	in deciding issues under environmental legislation, and that social and 	
economic inte	rests frequently play a significant and sometimes decisive role in such decisions.	 In our 	
view	, t	he extent to which such approaches to environmental decision	-making will fulfil the 	
requirement of ‘rational policies’ remains unclear. 	 	
The requirement that t	here be a ‘reasonable relationship’ between measures and the policies can be 	
read as 	requiring	 that the measures must be aimed primarily at achieving the objectives of the 	
policies. If the effects of the measures are to promote the objectives of other poli	cies	 ‒ in the case of 	
environmental measures: increased employment or development of rural areas	 ‒ it can be concluded 	
that 	such	 measures do not have a ‘reasonable relationship’ to the policies. T	o a large extent, t	his 	
requirement overlap	s with the requirement 	that the policies be ‘rational’.	 	
The state must also show that the policies are not ‘motivated by preference of domestic over foreign 
owned investment’. The starting point here is that there is a measure that is in violation of the NT 
rule. The assumption 	is therefore that the measure is discriminatory. The state would thus face the 	
difficult task of demonstrating that the measure is part of broader policies that cannot be regarded 
as being motivated by discriminatory preferences. The starting point for suc	h a defe	nce	 would be to 	
prove	 the motivation of the policies when they were adopted	, through documents related to the 	
decision	-making process. In addition, 	one would have to	 demonstrate that the policies have not 	
subsequently been applied in a discriminato	ry manner. 	 	
Against this background, we find that the footnote would allow states to justify measures that 
otherwise would be regarded as unlawful under the NT provision, but that the threshold would be 
rather high. We also observe that this provision woul	d place 	greater	 emphasis on the motivation of 	
public authorities, and that this would allow a broad range of arguments and materials to be brought 
forward during dispute settlement. This 	could	 significantly 	raise	 the cost of proceedings to the 	
parties to a	 dispute. 	 	
Conclu	ding remark	s 	
The probability that the NT provision will have consequences for environmental policy depends on 
the characteristics of Chinese investments in Norway. If Norway undertakes commitments in

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accordance with what is assumed under s	ections 8.4 and 8.5 above, it is likely that Chinese 	
investments would increase significantly in certain sectors, including mining, petroleum and energy 
production. 	The 	Norwegian authorities concluded that	, despite the NT provision, ‘Norwegian 	
authorities’	 right and obligation to regulate important sectors of society on the basis of rational 	
variations will probably be retained in full.’	95 We 	have arrived at	 a different conclusion. There is a 	
high threshold 	for	 applying the general non	-discrimination obligat	ion according to general 	
administrative law in Norway	, and w	e find that the NT obligation would constitute a lower threshold. 	
In particular, we find that application of the broad discretion given to environmental authorities 
under current legislation would	 be vulnerable under the NT provision. We also find that the	re might 	
be limited possibilities of	 taking environmental considerations under legislation that does not aim at 	
environmental protection and that does not include provisions explicitly stating tha	t environmental 	
considerations are relevant.	 	
 
9. Environmental impacts of a green trade scenario	 	
In this chapter we examine environmental impacts of the green trade scenario. We start by 
discussing possible impacts of 	integrating general clauses on the env	ironment	 into the agreement. 	
We then anal	yse impacts of 	fast	-tracking environmental goods and services	. We briefly discuss 	
impacts of 	export duties and controls of environmentally damaging goods	. Thereafter we anal	yse the 	
issue of 	intellectual property rig	hts	, in particular with respect to impacts on biodiversity. 	See section 	
7.3 for a discussion of why these themes are in focus in the green trade scenario.	 	
Promoting a green trade agenda often involves trade in goods, trade in services, research and 
develop	ment, and investment in an integrated whole. To bring out this facet of a green trade 	
scenario we briefly discuss possible impacts with respect to two clusters	: ‘clean energy’ and ‘carbon 	
capture and storage’. 	This choice is further explained in	 section 7.	3. 	
A green FTA between China and Norway may provide stimulus to the international negotiations of 
trade relations. For instance, the question of how to delineate a list of green (environmental) goods 
has been vexing in the WTO for some time. Hu Tao (2011) 	provides further details to the discussion 	
of how bilateral negotiations can contribute to multilateral processes. We 	do	 not 	deal with	 this issue 	
in further detail, but would encourage readers to keep this perspective in mind when studying the 
assessments 	below.	 	
 	
9.1 Integration of general clauses on the environment	 	
Introduction	 	
This section considers the possible effects of including provisions to avoid negative and enhance 
positive environmental effects of the FTA. The selection of clauses has been made 	on the basis of 	
clauses contained in the WTO Agreement, existing bilateral agreements, in model agreements, and in 
the EFTA paper on ‘draft model provisions concerning the environment and labour standards in EFTA 
Free Trade Agreements’. The analysis 	is bas	ed on experiences with similar clauses in other 	
agreements, in particular 	those 	based on case law.	 	
 	 	 	95 Comments on the Model for Future Investment Agreements. 19 December 2007 at 18, available at 
http://www.regjeringen.no/upload/NHD/Vedlegg/hoeringer/2008/Forklarende%20vedlegg%20(engelsk)%20	-	
%20final.doc	.

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The analysis focus	es on the following groups of provisions: preambular text, substantive provisions 	
regarding objectives and principles, substantive provisio	ns regarding rights and duties of states, and 	
procedural rules. 	 	
Preambular text	 	
Almost all the preambles of the FTAs considered for the purpose	s of this report contain some 	
provisions regarding sustainable development and/or environmental protection.	96 The	 preamble of 	
the China	–Chile FTA	 offers a	 standard formulation: 	 	
Recognizing	 that this Agreement should be implemented with a view toward … promoting 	
sustainable development in a manner consistent with environmental protection and 
conservation;	97 	
Another fo	rmulation that prescribes a more active pursuit of environmental objectives can be found 	
in the preamble of the EFTA	–Peru FTA:	 	
PROMOTE environmental protection and conservation, and sustainable development;	 	
One of the FTAs refers only to the objective of p	romoting sustainable development.	98 	
The 	most elaborate formulation of the relationship between the FTA and environmental issues can 	
be found in the EFTA	–Hong Kong FTA:	 	
REAFFIRMING their commitment to pursue the objective of sustainable development and 
reco	gnising the interdependence and mutual supportiveness of trade, environment and 	
labour policies in this respect;	 	
RECALLING their rights and obligations under multilateral environmental agreements 
applicable to them, …;	 	
AIMING to create new employment oppor	tunities, raise the living standards of their people 	
and improve their living conditions through liberalising trade and improving levels of 
protection of health and safety and of the environment; …	 	
DETERMINED to implement this Agreement in line with the ob	jectives to preserve and 	
protect the environment through sound environmental management and to promote an 
optimal use of the world’s resources in accordance with the objective of sustainable 
development; …	 	
ACKNOWLEDGING the importance of good corporate gov	ernance and corporate social 	
responsibility for sustainable development, and affirming their aim to encourage enterprises 
to take into account internationally recognised guidelines and principles where appropriate;	 	
In the following, we assess the potential	 implications of including the following provisions concerning 	
the relationship between the FTA and environmental issues in the preamble of the FTA:	 	
1. a statement on the relationship between the FTA and existing environmental agreements	; 	
2. a statement concerni	ng the interpretation of obligations under the FTA in light of 	
environmental commitments and policies; 	 	
3. a statement concerning the national implementation of the FTA in light of environmental 
policy measures; and 	 	
 	 	 	96 One exception is the China	–Singapore FTA.	 	97 Similar sta	tements can be found in the China	–Pakistan, China	–Peru, China	–New Zealand, EFTA	–Korea, 	
EFTA	–Peru, and EFTA	–Singapore FTAs.	 	98 See the China	–Costa Rica FTAs

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4. a statement concerning the future cooperat	ion under the FTA in light of environmental 	
objectives.	 	
Preambular language can have consequences for the subsequent life of an FTA, in particular in 
relation to its interpretation, implementation, and which items are brought onto the agenda for 
future coo	peration. 	 	
The 	interpretation	 of an FTA becomes a	n especially	 important issue when disputes are brought to 	
arbitration under the FTA. However, there 	have been hardly any	 examples of such arbitration cases 	
so far. Arbitration proceedings are most likely to 	occur where private parties are allowed to bring 	
forward cases. Such opportunities are generally available only under the investment chapter of the 
FTA. In such cases, the preambular language of the FTA may influence the interpretation of specific 
provisio	ns of the investment chapter. In a bilateral context, it is likely that an arbitration tribunal will 	
pay particular attention to the intention of the parties to the FTA, and the extent to which such 
intentions are expressed in the preamble of the agreement	 will be of significant support to the 	
tribunal. Moreover, a tribunal will frequently be faced with the choice of how it should relate to case 
law from other arbitration tribunals and the WTO. If the FTA defines the intention of the parties in 
the preamble	, this should provide	 the tribunal wi	th an improved basis for determining the relevance 	
and importance of such case law. In sum, while it currently seems unlikely that arbitration will take 
place under the FTA, we observe that if such arbitration should oc	cur, preambular language could 	
constitute 	important	 guidance for the tribunal when interpreting the FTA.	 	
In addition, the interpretation of provisions of the FTA will be relevant during consultations between 
the authorities of China and Norway regarding sp	ecific cases or more general policy developments. 	
Such consultations are likely to occur on a regular basis	, and statements and analyses concerning the 	
interpretation of the provisions can be presented during such consultations. Consultations are likely 
to place even more emphasis on the parties’ intentions than are arbitration tribunals. Preambular 	
language may constitute a significant source of support for such statements and analyses. 	 	
Against this background, we find that preambular language, including 	statements on the 	relationship 	
between the FTA and existing environmental agreements, is unlikely to have effects in the short 
term, but that it is likely to be of some importance to the interpretation and application of the FTA in 
the medium and long term	. 	
During the initial phase after the conclusion of the FTA, the 	implementation	 of the FTA is a domestic 	
policy issue to be determined 	through	 national decision	-making procedures. Preambular text of the 	
FTA may be of some significance for the process of bui	lding political support to the FTA, as references 	
to text in the preamble can demonstrate the good intentions of the parties 	in drafting the FTA. 	
However, the preamble is less likely to be of significance when the national authorities consider 
specific leg	islative, regulatory or other policy measures to be taken in the context of accepting the 	
FTA, as such measures are considered and adopted essentially in response to the substantive 
obligations undertaken in the FTA. During the subsequent phases, for examp	le when countries design 	
institutional structures to follow up the FTA, preambular language may play a	n important	 role. 	
Preambular language may be of importance to the composition of domestic institutional structures 
and when defining their mandate (e.g. s	hould mechanisms be established to consult environmental 	
expertise	; and to what extent will institutions be expected to take into account environmental 	
effects). During consultation between the parties concerning the implementation of the FTA, parties 
can 	refer to preambular language in support of their views. We find that preambular language, 	
including such language on the interpretation of the FTA and the relationship between the FTA and 
existing environmental agreements, is likely to be of some importanc	e to the implementation of the 	
FTA in the medium and long term.	 	
The FTA will constitute a basis for 	future cooperation	 among the parties to the FTA. Provisions 	
regarding such cooperation will be considered in more detail below. Preambular text may be relev	ant

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when specifying the general framework for such cooperation. However, pream	bu	lar text is unlikely 	
to be of importance if the framework for such cooperation already is specified in relevant provisions 
of the FTA. The importance of the preamble in this co	ntext will thus depend on the degree to which 	
the framework for future cooperation is spelled out in relevant provisions.	 	
Substantive provisions regarding objective and principles	 	
In the following, we assess the potential implications of including the foll	owing provisions regarding 	
objective and principles in the main text of the FTA:	 	
1. Linking the objective of the FTA to environmental objectives and/or sustainable development	 	
2. Linking the basic principles of the FTA to environmental principles, such as the pr	ecautionary 	
principle and the polluter pays principle.	 	
In general, 	China’s and Norway’s FTAs do include 	a provision that sets out the general 	objectives	 of 	
the FTAs. In contrast to most of the preambles of the agreements, such provisions 	generally 	do not 	
make explicit reference to	 environmental issues or sustainable development. One exception is art. 	
2(1) of the FTA between China and Costa Rica: ‘The objectives of this Agreement are to: … (f) confirm 
their commitment to the promotion of trade and reaffirm t	heir aspiration to achieve an appropriate 	
balance between the economic, social and environmental components of sustainable development’. 
Likewise	 art. 1.1(2) of Norway’s FTA with :ong Kong: ‘The objectives of this Agreement are: … (h) to 	
develop internati	onal trade in such a way as to contribute to the objective of sustainable 	
development and to ensure that this objective is integrated and reflected in the Parties’ trade 
relationship;’. =n addition, the :ong Kong FTA contains the following provision in the	 environmental 	
chapter: 	 
Article 8.1	 	
2. The Parties recognise that economic development, social development and environmental 
protection are interdependent and mutually supportive components of sustainable 
development. They underline that closer economic p	artnership can play an important role in 	
promoting sustainable development.	 	
3. The Parties reaffirm their commitment to promote the development of international and 
bilateral trade in such a way as to contribute to the objective of sustainable development 	and 	
to integrate and reflect this objective in the Parties’ trade relationship.	 	
The EFTA draft model provisions concerning the environment include the following provision 
regarding the objective: 	 	
1. The EFTA States and [State] shall establish a free trade ar	ea by means of this Agreement and 	
the complementary agreements on trade in basic agricultural goods, concurrently concluded 
between [State] and each individual EFTA State, with a view to spurring prosperity and 
sustainable development.	 	
2. The objectives of th	is Agreement, which is based on trade relations between market 	
economies and on the respect of democratic principles and human rights, are: … to develop 
international trade in such a way as to contribute to the objective of sustainable 
development and to e	nsure that this objective is integrated and reflected in the Parties’ 	
trade relationship;	 	
We note that the EFTA draft model refers to 	‘sustainable development	’, but	 does not mention 	
environmental issues specifically. 	 	
Provisions on the objectives of FTAs h	ave similar functions as have preambular texts	, but	 substantive 	
provisions in FTAs carry more weight. This point is underlined in China’s FTA with Costa Rica, which

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states in art. 2(2) that: ‘The Parties shall interpret and apply the provisions of this Agr	eement in the 	
light of its objectives set out in paragraph 1’. :owever, we note that the above	-mentioned provisions 	
are formulated in 	broad language and that lack of specificity is likely to reduce the importance of 	
references to environment	-related issues	 ‒ especially if	 provisions use the sustainable development 	
concept rather than 	referring 	to environmental protection or aspects of such protection. 	 	
In order for substantive provisions regarding the objective of the FTA to be of some importance, such 
provi	sions must be sufficiently specific. We 	further	 observe that the effectiveness of language to 	
strengthen environmental perspectives in the preamble could be undermined if the main body of the 
FTA contains a provision on the objective of the FTA that does n	ot link the objective to 	
environmental objectives. 	 	
Only one of the FTAs examined contai	ns 	provisions that in general link the 	principles	 of the FTA to 	
environmental principles. Th	is is the 	EFTA	–Hong Kong FTA	. According to its	 art. 8.5: 	 	
The Parties reaffi	rm their commitment to the effective implementation in their respective 	
domestic law and practices of the multilateral environmental agreements applicable to them, 
as well as their adherence to environmental principles reflected in the international 
instru	ments referred to in Article 8.1.	 	
The instruments mentioned in art. 8.1 are the Stockholm Declaration (1972), the Rio Declaration 
(1992), and the Johannesburg Plan of Implementation on Sustainable Development (2002). In 
addition, China’s FTA with Peru ment	ions environmental principles in 	its 	art. 145(2): ‘The Parties 	
acknowledge and reaffirm the principles … established in the Convention on Biological Diversity …, 
and encourage the effort to establish a mutually supportive relationship between the TRIPS 
Agr	eement and the Convention on Biological Diversity, regarding genetic resources and the 	
protection of traditional knowledge and folklore.’ One core source for the identification of 
environmental principles that are universally accepted is the Rio Declaratio	n on Environment and 	
Development (1992). 	We find the following principles to be of particular 	relevance	 in the context of a 	
bilateral FTA with China:	 	
Principle 8: To achieve sustainable development and a higher quality of life for all people, 
States should	 reduce and eliminate unsustainable patterns of production and consumption 	
and promote appropriate demographic policies.	 	
Principle 9 States should cooperate to strengthen endogenous capacity	-building for 	
sustainable development by improving scientific unde	rstanding through exchanges of 	
scientific and technological knowledge, and by enhancing the development, adaptation, 
diffusion and transfer of technologies, including new and innovative technologies.	 	
Principle 11: States shall enact effective environmental	 legislation. Environmental standards, 	
management objectives and priorities should reflect the environmental and development 
context to which they apply. Standards applied by some countries may be inappropriate and 
of unwarranted economic and social cost t	o other countries, in particular developing 	
countries.	 	
Principle 14: States should effectively cooperate to discourage or prevent the relocation and 
transfer to other States of any activities and substances that cause severe environmental 
degradation or ar	e found to be harmful to human health.	 	
Principle 15: In order to protect the environment, the precautionary approach shall be widely 
applied by States according to their capabilities. Where there are threats of serious or 
irreversible damage, lack of full 	scientific certainty shall not be used as a reason for 	
postponing cost	-effective measures to prevent environmental degradation.	 	
Principle 16: National authorities should endeavour to promote the internalization of 
environmental costs and the use of economi	c instruments, taking into account the approach

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that the polluter should, in principle, bear the cost of pollution, with due regard to the public 
interest and without distorting international trade and investment.	 	
A selection of such principles could be re	ferred 	to 	in the FTA. On the one hand, linking the basic 	
principles of the FTA	 (such as non	-discrimination and elimination of unnecessary barriers to trade	) to 	
such environmental and sustainable development principles may be difficult and has to our 
knowle	dge not been attempted previously. On the other hand, such a process could serve to clarify 	
the role of the FTA within the broader challenges of promoting sustainable development	; moreover, 	
it could	 further specify general statements concerning the objecti	ve of the FTA and thus clarify how 	
the FTA 	is subsequently	 to be interpreted, implemented, and further developed through subsequent 	
cooperation. 	 	
We find it difficult to predict the value added by further specifying the relationship between basic 
principle	s of the FTA and environmental and sustainable development principles. Where the FTA 	
contains an elaborate provision defining the objective of the FTA and how it relates to environmental 
issues, the value added by an additional provision concerning princip	les 	is likely to	 be low. Where the 	
FTA’s provision on objective is general, we consider the value that could be added by a provision on 
principles to be more significant but still limited.	 	
Substantive provisions concerning rights and duties	 	
The inclusion o	f general exceptions that cover environmental protection in FTAs has been discussed 	
above in section 5.4 (free trade scenario). 	Ex	isting FTAs differ somewhat in how they regulate general 	
exceptions. In addition to general exceptions, some FTAs include addi	tional provisions aim	ed	 at 	
avoiding certain physical or regulatory environmental consequences. Such provisions have been 
identified in the EFTA draft model provisions. In the following, we assess the potential implications of 
including the following provis	ions concerning rights and duties of states in the main text of 	a 	
Sino	‒Norwegian	 FTA:	 	
1. General exceptions	 	
2. Relationship to multilateral environmental agreements	 	
3. ‘Not lowering standards’	 	
4. Right to regulate	 	
In accordance with the conclusion in section 6.1, we will not consider the inclusion of more extensive 
provisions on environ	mental cooperation in the FTA.	 	
General exceptions	: One issue regarding general exceptions is their 	scope of application	. First, we will 	
discuss 	the 	inclusion of general exceptions that extend their scope of application to environmental 	
protection. As exist	ing general exceptions in GATT and GATS are have been interpreted broadly in 	
this respect, we observe that it is unlikely that such an extension would be controversial. Moreover, 
we find that such an extension will have insignificant effects for the possib	ilities of defending 	
contested environmental measures under 	a Sino	‒Norwegian	 FTA, as such measures would be 	
covered by the provisions currently included in FTAs. 	 	
Secondly, we address the extension in the FTA of the application of general exceptions to the	 whole 	
agreement. This would mean that the exceptions could be invoked in relation to rules concerning 
sanitary and phytosanitary measures, technical barriers to trade, subsidies, dumping, trade	-related 	
investment measures ( ‘performance requirements’	 in p	articular), intellectual property rights, and, if 	
relevant, government procurement. One issue is whether such extension of the scope of the general 
exceptions could be a problem in relation to the obligations of Norway and China under the WTO 
Agreement, in	 particular the conditions of art. XXIV:8(b) of GATT. According to this provision	, an FTA	 	
must prescribe that ‘restrictive regulations of commerce (except, where necessary, those permitted

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under Articles … XX) are eliminated on substantially all the trade 	…’	99 On the one hand, it can be 	
argued that an extension of the general exception would allow countries to introduce restrictive 
regulations of commerce beyond what is currently allowed under the WTO Agreement. Moreover, 
the 	lex specialis	 rule 	regulating	 the relationship between GATT and other agreements in Annex 1A to 	
the WTO Agreement (see the General interpretative note to Annex 1A	 to the WTO Agreement)	 can 	
be invoked as an argument against applying the exception to obligations under the other agreements 
of Annex 1A. On the other hand, it can be argued that an extension of the general exception would 
only allow measures that would be permitted under art. XX of GATT. While we are in some doubt, we 
find the latter approach to the application of art. XXIV:8(b	) mo	re convincing and in accordance with 	
the wording of art. XXIV of GATT. In any case, the effects of extending the general exception to other 
rules are limited due to the strict conditions that must be fulfilled by countries invoking the 
exception. Never	theless, such extension m	ight prove	 useful	 in situations where it would be 	
particularly important to maintain the possibility of using trade restrictive measures for 
environmental purposes.	 	
A second issue concerning general exceptions is the requirement 	that there be a	 relationship 	
between the contested measure and the objective that it pursues. 	Several	 approaches to this 	
relationship in the two provisions of GATT are 	especially 	relevant from an environmental perspective 	
(art. XX(b) 	– ‘necessary’ and (g) 	– ‘relating to’). The question here would be whether a less onerous 	
requirement would be a problem in relation to art. XXIV:8(b) of GATT. Since such a provision would 
go beyond measures that are ‘permitted under’ art. XX of GATT, we 	deem	 it not unlikely that	 less 	
onerous conditions would risk not being in compliance with art.XXIV:8(b) of GATT. On the other 
hand, we doubt that such an issue would be sufficiently important to prevent	 an FTA	 from being 	
accepted under art. XXIV of GATT. A similar reasoning would 	apply under GATS art. V:1(b). However, 	
as this provision is more flexible than art. XXIV of GATT, our conclusion under GATS is less certain.	 	
Finally, the third issue is whether the FTA would be allowed to relax the conditions set out in the 
preambles	 (chap	eaux) 	of art. XX of GATT and art. XIV of GATS. We apply a reasoning that is parallel to 	
that immediately above, and come to the same conclusions here.	 	
Relationship to multilateral environmental agreements (MEAs)	: The issue of the relationship between 	
the W	TO Agreement and MEAs has been on the agenda of the WTO and GATT for more than 20 	
years. Little has been achieved in terms of establishing rules 	to 	govern the relationship within the 	
WTO. The issue is particularly relevant for treaties that explicitly regu	late trade in hazardous goods 	
and treaties aim	ed	 at controlling certain production practices. Relevant issues appear frequently, 	
recently relating to Chinese support to producers of renewable energy equipment, which is relevant 
in relation to Chinese commi	tments under the UN Framework Convention on Climate Change.	100	 	
The relationship between the FTA and existing multilateral treaties can be addressed in two distinct 
ways. The most far	-reaching is to include a general clause stating that the FTA does not affec	t rights 	
and obligations under all existing treaties (a so	-called ‘safeguard clause’). Such clauses can be found 	
in almost all FTAs analy	sed for the purpose	s of this study.	101	 Such a clause would ensure that 	a 	
Sino	‒Norwegian	 FTA would not affect obligations 	under existing MEAs. A more limited approach 	
would be to adopt a provision stating that the FTA will not affect the rights and obligations of the 
parties under certain specified treaties. This would be particularly relevant for MEAs that regulate 
 	 	 	99 There is a similar provision in art. V:1(b) of GATS, but this requirement is not 	pertinent	 here, s	ince the general 	
exception of GATS covers all relevant rules concerning trade in services. 	There is no general regulation of these 	
issues in the Agreement Establishing the WTO.	 	100 See WTO case WT/DS419.	 	101 Such clauses can be found in art. 1.4 of the EFTA	–Pe	ru FTA, art. 4 of the EFTA	–Chile FTA, art. 1.4 of the 	
EFTA	–Hong Kong FTA, art. 1.5 of the EFTA	–Korea FTA, art. 4 of the EFTA	–Singapore FTA, art. 3 of the 	
China	–Chile FTA, art. 3 of the China	–Costa Rica FTA, and art. 3 of the China	–New Zealand FTA.

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internati	onal trade in certain products or services.	102	 On the one hand, this approach would limit the 	
number of MEAs that would be protected. On the other hand, it would allow for more specific 
regulation of the relationship between the FTA and the MEAs. 	 	
We find th	at the effects of including general reservations are likely to be limited. There have been 	
few, if any, situations 	of clear conflict between MEAs and obligations under FTAs	; moreover	, should	 	
such situations 	arise,	 one could invoke the general exceptions. O	nly in exceptional cases could a 	
measure taken to follow up obligations under a MEA arguably not qualify under general exceptions	 ‒ 	
for example	, where only one of the states in question is party to the MEA.	 	
The Chinese example concerning support to production of renewable energy equipment (e.g. wind 
turbines) illustrates the complex issues that may nevertheless arise.	103	 Under art. 4.1	(c) of the 	
UNFCCC, China has an obligation to: ‘Promote and cooperate in the development, application and 
diffusion, including transfer, of technologies, practices and processes that control, reduce or prevent 
anthropogenic emissions of greenhouse gases … 	in all relevant sectors, including the energy, 	
transport, industry, agriculture, forestry and waste management sectors’. While Chinese support to 
production of renewable energy equipment would serve to fulfil its obligations according to this 
provision, it	 is clear that China has no specific duty to provide such support under the UNFCCC. A 	
general ‘savings clause’ would not resolve this challenge. A more specific clause 	regulating	 the 	
relationship between specific agreements in more detail could address suc	h challenges and resolve 	
them in fav	our	 of measures taken to follow up general obligations under MEAs. 	 	
The EFTA draft model provisions take a different approach to these issues. One general provision on 
the relationship to other international agreements i	s not finalized	; another provision focusing on 	
MEAs states: ‘	The Parties reaffirm their commitment to the effective implementation in their laws 	
and practices of the multilateral environmental agreements to which they are party, as well as their 
adherence 	to environmental principles reflected in the international instruments …’ A parallel 	
provision has been included in art. 8.5 of the EFTA	–Hong Kong FTA. These provisions do not address 	
the compatibility of measures taken in accordance with MEAs in relation 	to FTAs, and are therefore 	
not relevant in the following. 	 	
Against this background, and in light of the lack of obligations to take specific measures in most 
MEAs, we find that the most effective approach to ensuring appropriate regulation of the 
relations	hip between the FTA and MEAs would be to adopt a provision that contains more precise 	
rules regarding the relationship between the FTA and a limited number of MEAs. Such a provision 
should regulate the relationship in cases where the measure in question is	 taken to achieve results 	
provided for in the MEA.	 	
Not lowering standards	: The only of the FTAs anal	ysed	104	 that includes a 	‘not lowering standards	’ 	
clause is the EFTA	–Hong Kong FTA. Article 8.4	 states that	: 	
 	 	 	102 An exa	mple of such a provision can be found in 	NAFTA 	art. 104: ‘1.In the event of any inconsistency 	
between this Agreement and the specific trade obligations set out in: (a) the [CITES], (b) the Montreal Protocol 
…, (c) the Basel Convention … , or (d) the agreem	ents set out in Annex 104.1, such obligations shall prevail to 	
the extent of the inconsistency, provided that where a Party has a choice among equally effective and reasonably 
available means of complying with such obligations, the Party chooses the altern	ative that is the least 	
inconsistent with the other provisions of this Agreement.	 	
2. The Parties may agree in writing to modify Annex 104.1 to include any amendment to an agreement referred 
to in paragraph 1, and any other environmental or conservation agr	eement.’	 	103 WTO case WT/DS419.	 	104 The first example of 	such 	a clause is art. 1114.2 in the investment chapter of NAFTA: 	‘The Parties recognize 	
that it is inappropriate to encourage investment by relaxing domestic health, safety or environmental measures. 
Acc	ordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from,

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1. The Parties will faithfully enforce their envir	onmental laws, regulations and standards.	 	
2. Subject to Article 8.3 [right to regulate], a Party will not:	 	
(a) weaken or reduce the level of environmental protection provided by its laws, regulations 
or standards with the sole intention to encourage invest	ment from another Party or to seek 	
or enhance a competitive trade advantage of producers or service providers operating in that 
Party; or	 	
(b) waive or otherwise derogate from, or offer to waive or otherwise derogate from, such 
laws, regulations or standard	s in order to encourage investment from another Party or to 	
seek or enhance a competitive trade advantage of producers or service providers operating 
in that Party.	 	
As is the case with the whole environmental chapter of the EFTA	–Hong Kong FTA, compliance w	ith 	
this provision can be subject 	only 	to consultations between the parties and not to ordinary dispute 	
settlement (see art. 8.8(3)). The EFTA draft model provisions contains a similar provision:	 	
(a) A Party shall not fail to effectively enforce its enviro	nmental … laws, regulations or 	
standards in a manner affecting trade or investment between the Parties.	 	
(b)… a Party shall not a) weaken or reduce the level of environmental … protection provided 
by its laws, regulations or standards with the sole intentio	n to encourage investment from 	
another Party or to seek or to enhance a competitive trade advantage of producers or service 
providers operating in its territory, or b) waive or otherwise derogate from, or offer to waive 
or otherwise derogate from, such law	s, regulations or standards in order to encourage 	
investment from another Party or to seek or to enhance a competitive trade advantage of 
producers or service providers operating in its territory.	 	
Is the inclusion of an opportunity to bring cases to dispu	te settlement 	likely 	to 	have a considerable 	
effect on	 the degree to which states can be expected to comply with this provision	? We consider it 	
highly unlikely that one state will bring any case forward to dispute settlement on the basis of such a 
provision	. We also 	deem	 it highly unlikely that states would accept to give private parties the right to 	
bring forward such disputes. Hence, we consider that the major impact of providing the possibility of 
inter	-state dispute settlement would be that states may th	reaten to bring forward such disputes	, 	
which might promote the achievement of	 good	-faith consultations. In this respect, we find that the 	
inclusion of a dispute settlement option might have some effect.	 	
We note that the provisions quoted above 	are 	in some 	senses rather broad, as they apply to 	
measures that ‘weaken or reduce the level of protection’ and in situations where such measures are 
adopted in order to ‘enhance a competitive’ trade advantage. :owever, it might be difficult for a 
complainant state to 	satisfy	 the burden of proving that these conditions are fulfilled. In particular, we 	
find that an obligation to demonstrate the ‘sole intention’ of another state, as prescribed in the 
EFTA	–Hong Kong FTA	, might 	prove	 particularly burdensome.	 	
In light of our	 findings in chapters 2 and 3, we 	deem	 it unlikely that Norway or China will have 	
lowering of environmental standards as part of their general policy within certain geographical areas 
or within specific sectors. Nevertheless, questions regarding relaxation	 of such standards may surface 	
from time to time as a result of specific situations, for example when the competitiveness of an 
industry is significantly weakened. The existence of a high	-level consultation mechanism 	mandated 	
to deal with disputes could 	prove	 important in the rare cases that might occur.	 	
 	 	 	 	 	 	
such measures as an encouragement for the establishment, acquisition, expansion or retention in its territory of 
an investment of an investor. If a	 Party considers that another Party has offered such an encouragement, it may 	
request consultations with the other Party and the two Parties shall consult with a view to avoiding any such 
encouragement.’

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Right to regulate	: The only	 one	 of the FTAs anal	ysed that includes a general	105	 provision on the right 	
to regulate is the EFTA	–Hong Kong FTA (art. 8.3):	 	
Recognising the right of each Party to establish its ow	n level of environmental protection and 	
to adopt or modify accordingly its domestic law and policies in a manner consistent with this 
Agreement, each Party will seek to ensure that its domestic law, policies and practices 
provide for and encourage high lev	els of environmental protection, consistent with 	
standards, principles and agreements referred to in Article 8.5, and will strive to further 
improve the level of protection provided for in domestic law and policies.	 	
The EFTA draft model provisions contains	 a similar provision:	 	
1. Recognising the right of each Party, subject to the provisions of this Agreement, to 
establish its own level of environmental … protection, and to adopt or modify accordingly its 
relevant laws and policies, each Party shall seek to	 ensure that its laws, policies and practices 	
provide for and encourage high levels of environmental … protection, consistent with 
standards, principles and agreements referred to in Articles …, and shall strive to further 
improve the level of protection p	rovided for in those laws and policies.	 	
2. The Parties recognise the importance, when preparing and implementing measures related 
to the environment … that affect trade and investment between them, of taking account of 
scientific, technical and other infor	mation, and relevant international standards, guidelines 	
and recommendations.	 	
It is clear that such provisions cannot establish a separate legal basis for justifying environmental 
measures that would otherwise be in violation of the FTA. However, such prov	isions might have 	
some impact on the interpretation of other provisions of the FTA. We find that such impact is 
unlikely to be significant	, due to the existence of separate preambular language and provisions that 	
define the purpose of the FTA. In addition,	 locating such provisions in a separate chapter on the 	
environment 	could	 detract from the general impact such provisions	 would	 otherwise have had	, if	 	
they 	had 	been included among the general provisions of the FTA. 	 	
Procedural rules	 	 	
In this section we cons	ider rules that might facilitate future cooperation among the states in order to 	
avoid adverse and enhance positive environmental effects of 	a Sino	‒Norwegian	 FTA. We will not 	
consider provisions regarding general cooperation under 	such an	 FTA	: our focus wi	ll be on those 	
provisions that specifically concern procedures 	for	 deal	ing	 with environmental issues. 	 	
Among the FTAs anal	ysed for this study, the China	–New Zealand FTA and the C	hina	–Chile FTA set up 	
frameworks for separate agreements on environmental coop	eration. We have been able to access 	
only the Environmental Cooperation Agreement with New Zealand. The scope of the cooperative 
arrangement established by this environmental agreement is limited to the mandate set out in the 
environmental cooperation agre	ement. Beyond the reference to the Environmental Cooperation 	
Agreement in art. 177 of the China	–New Zealand FTA, there is no link between the two agreements. 	
Hence, there is no specific mechanism in place in either agreement 	for	 follow	ing	 up on 	possible 	
en	vironmental consequences of the FTA. 	 	
One example of an environmental side agreement that 	does	 link up with the associated free trade 	
agreement is the 	North American Agreement	 on	 Environmental Cooperation (NAAEC)	, which is 	
 	 	 	105 Art. 43 of t	he EFTA	–Singapore FTA includes a provi	sion that is limited to investment: 	‘Nothing in this 	
Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure consistent 
with this Chapter that is in the public interest, such as measures to meet health, safety or e	nvironmental 	
concerns.	’

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closely associated with 	NAFTA. Ar	guably, the NAAEC is of limited relevance to the Sino	–Norwegian 	
FTA negotiations due to its regional character and 	its 	focus on transboundary environmental 	
challenges. It can also be noted that 	the environmental cooperation based on the NAAEC seems to 	
have	 been very limited in recent years.	106	 Nevertheless, the NAAEC contain	s some provisions of more 	
general interest, in particular on how to establish links between	 an FTA	 and environmental 	
cooperation. The following tasks are identified for the Council (art. 1	0.3 and 10.6):	 	
(b) without reducing levels of environmental protection, establishing a process for 
developing recommendations on greater compatibility of environmental technical 
regulations, standards and conformity assessment procedures in a manner consis	tent with 	
the NAFTA. …	 	
6. The Council shall cooperate with the NAFTA Free Trade Commission to achieve the 
environmental goals and objectives of the NAFTA by:	 	
(a) acting as a point of inquiry and receipt for comments from non	-governmental 	
organizations and 	persons concerning those goals and objectives;	 	
(b) providing assistance in consultations under Article 1114 of the NAFTA where a Party 
considers that another Party is waiving or derogating from, or offering to waive or otherwise 
derogate from, an environme	ntal measure as an encouragement to establish, acquire, 	
expand or retain an investment of an investor, with a view to avoiding any such 
encouragement;	 	
(c) contributing to the prevention or resolution of environment	-related trade disputes by: (i) 	
seeking to	 avoid disputes between the Parties, (ii) making recommendations to the Free 	
Trade Commission with respect to the avoidance of such disputes, and (iii) identifying experts 
able to provide information or technical advice to NAFTA committees, working groups 	and 	
other NAFTA bodies;	 	
(d) considering on an ongoing basis the environmental effects of the NAFTA; and	 	
(e) otherwise assisting the Free Trade Commission in environment	-related matters.	 	
In addition, the NAAEC provides for enforcement measures linked to NAF	TA, as failure to pay a 	
‘monetary enforcement assessment’ may justify suspension of benefits under NAFTA (see art. 36).	 	
We distinguish between two main issues. The first is cooperative arrangements used to mitigate 
negative environmental consequences of th	e FTA. An example can be the case between the EU and 	
China/	USA	 concerning carbon quotas in aviation (see box 9.1 below). The second is cooperative 	
arrangements to enhance cooperation among environmental authorities 	in dealing	 with 	
environmental challenges 	more broadly. The latter cooperative arrangements are in general 	
contained in environmental side agreements. 	 	
As to the former cooperative arrangements, we find that they can be of considerable importance 	to 	
resolve difficult	 environmental issues, such as 	those described in box 9.1. In addition to dealing with 	
the case in the context of the FTA, such arrangements may also serve as a means to avoid bringing 
the	 cases onto the agenda of the WTO. Depending on the cases to be considered, it may be essential 	
to 	make sure 	that such cooperative arrangements	 ‒ in the case of FTAs normally referred to as 	
commissions or committees	 ‒ ensure effective representation of environmental perspectives. When 	
we compare the institutional and procedural rules that govern the mee	tings of such commissions or 	
 	 	 	106 Judging from its website (	www.cec.org	), the 	level of 	activity has declined substantially, and for no apparent 	
reason. No annual report has been published since the 2004 report	; there are no proje	cts plans beyond 2012	; and 	
the average number of registered citizen submissions on enforcement matters has decreased since 2006. 
Literature searches provide little information on the 	past seven years.

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committees to those of the dispute settlement mechanism, we find, in the FTAs examined for this 
study, that the latter 	are	 far more elaborate and sensitive to environmental concerns than the 	
former. 	In practice, cooperative arr	angements are likely to constitute a more effective means for 	
ensuring effective integration of environmental concerns than the dispute settlement mechanism. 
We therefore recommend that 	greater	 emphasis be placed on defining the mandate, procedures and 	
ins	titutional issues regarding the commission(s) or committee(s) to be established under the Sino	–	
Norwegian FTA. 	Inspiration for such provisions 	may	 be found in the provisions of the NAAEC quoted 	
above.	 	
Box 9.1	 	Airlines and EU carbon quotas	 	
 	
As to arrangem	ents 	to enhance cooperation among environmental authorities to deal with 	
environmental challenges more broadly, we refer to our conclusion	s in section 6.1. We focus on 	
arrangements that 	facilitate future environmental cooperation to be initiated and organi	zed under 	
the agreement. Such an institutional arrangement must be designed so 	as to	 take into account 	
interaction with existing bilateral environmental cooperation. We have considered whether such an 
arrangement should be made part of the FTA itself	 (e.g.	 in a separate chapter of the FTA or as a sub	-	
committee	), or be organized under a separate environmental agreement. We consider that the 	
degree of independence from other institutions under the FTA will be the main distinguishing factor. 
The respective adv	antages and disadvantages of different degrees of independence will depend on 	
the tasks to be assigned to the institutional arrangement. Given the complexities of such 	matters 	and 	
the limited information 	available	, we 	lack a	 sufficient basis for further co	nsideration of these issues.	 	
 	
9.2 Fast track for environmental goods and services

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Current barriers to trade and investment in environmental goods and 	
services	 	
Both China and Norway have thriving environmental industries. The environmental industry in China	 	
has been estimated to consist of 11,623 firms, 	with	 a turnover of 457 billion 	yuan and 	employing	 1.59 	
million	 persons	 in 2004 (Hu Tao, 2011). 	International export from China of green goods from this 	
environmental industry was estimated to 	USD 	6.19 billion	 (about 40 billion 	yuan). The export of 	
services was much lower, about 	USD 	0.05 billion. The Norwegian environmental industry has been 	
estimated to consist of 2015 firms in 2008, 	with 	a turnover of 	NOK 	167 billion and employ	ing	 41,000 	
persons 	(Menon, 2010)	. To our knowledge, reliable estimates of exports from the Norwegian 	
environmental industry do not exist.	 	
Several sources discuss barriers to trade and investment in environmental goods and services. 
According to the Feasibility Study ‘favorable conditions	’ will cause trade to grow. 	This would seem to 	
imply	 that the Feasibility Study is of the opinion that significant barriers currently exist	, but	 the 	text	 is 	
vague 	as to what the barriers are (Feasibility Study, p. 63):	 	
Since the accession to the WTO, China	 has opened all categories of environmental services 	
except environmental quality monitoring and pollution source inspection. … Several 
Norwegian businesses in the environmental services sector are already engaged in the Chinese 
market, providing various s	ervices such as advanced solutions enabling recovery and recycling 	
of materials, biological wastewater treatment for both the industrial and municipal sectors. 
There is, moreover, reason to believe that given favourable conditions, the trade of 
environment	al services between Norway and China has potential to grow substantially.	 	
According to Hu Tao (2011) there are three main barriers 	to the development of the environment 	
industry 	in China: 	Intellectual property rights (IPR), low demand for environmental goo	ds and 	
services, and what he denotes ‘imperfect market due to demand side monopoly’. 	He further notes 	
that	 the problem of IPR is that most firms in the environment industry are small or medium	-sized 	
enterprises (SMEs) that cannot afford to buy foreign	-owne	d patents. This hampers the development 	
of the Chinese environment industry. Below we discuss the question of IPR in relation to biodiversity 
and clean energy. While Hu Tao (2011) reflects on the demand side there is of course also a supply 
side to IPRs. I	t provides an incentive to developers of intellectual property. The challenge with 	
respect to IPR is to balance the concerns of demand and supply. 	 	
The second barrier mentioned by Hu Tao (2011) is low demand for environmental goods. He 
associates the low d	emand with the fact that the polluter pays principle is not followed: ‘Pollution 	
costs are not being internalized due to poor environmental enforcement of laws and regulations.’ To 
the extent that environmental enforcement selectively target	s foreign firms	, the issue is potentially 	
of interest to a Green Trade Agreement. If so	, the question may be how to avoid unfair 	
discrimination (rather than how to extend the favo	urs implied by ‘fast	-track’). To the extent that 	
environmental enforcement is generally weak	, and/or environmental regulation is weak, fast	-	
track	ing	 is not the answer. If a bilateral trade agreement 	can 	provide an answer at all	, it would have 	
to be regulations to compensate for the weak environmental regulation.	 	
The third barrier mentioned by Hu 	Tao, ‘imperfect market due to demand side monopoly’	, is a 	
reference to the claim that public procurement at the regional and local level in China is not always 
decided on merit: ‘The competitors race up to their necks by good relations with the municipal 
government rather than technology and cost	-effectiveness.’ Similar concerns have been raised by the 	
2010 WTO Trade Policy Review	 (see section 6.5	). While public procurement is outside our scope, fast	-	
track arrangements may alleviate this problem. 	 	
ECON (200	8) has discussed t	he question of barriers to the development of the environment industry 	
in Norway	, and 	concludes as follows:

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… a FTA could benefit Norwegian	–Chinese environmental technology exchange through: (1) 	
highlighting institutional complications in	 the Chinese system; (2) through promoting 	
connections between Norwegian firms, Chinese counterparts and Chinese authorities (3) and 
finally through contributing to awareness of environmental challenges and management 
thereof.	 	
This conclusion is based on i	nterviews with Norwegian environmental technology firms active in 	
China and with the Norwegian Science and Technology Councillor (Innovation Norway) at the time. A 
quantitative assessment of the importance of these barriers is not given, but the collective	 	
experience of the firms is that the barriers are quite high.	107	 The first item mentioned (‘institutional 	
complications in the Chinese system’) may refer to some of the same issues as raised by :u Tao 
under the heading ‘imperfect market due to demand side m	onopoly’. Fast	-tracking environmental 	
goods and services may alleviate the problems mentioned. 	 	
In chapter 3 above, we referred to quantitative assessments of non	-tariff barriers. In particular the 	
World Bank Ease of Doing Business Surveys indicate that No	rwegian procedures for export and 	
import seem to be some of the least cumbersome in the world, wh	ereas	 the Chinese procedures are 	
about the global average. Norwegian procedures require seven days of document preparation and 
handling, and 729 USD for a stan	dardized cargo of goods to be imported to Norway. In China the 	
same procedure requires 24 days and 545 USD. While this applies to standardized cargo it may 
indicate the situation for environmental goods and services as well. 	See section 3.1 for further 	
dis	cussion.	 	
=n the following, we assess selected options for ‘fast	-tracking’ environmental goods and services. By 	
‘fast	-tracking’ we refer to measures t	o facilitate market access for such goods and services, including 	
trade facilitation, streamlining of techn	ical regulations, institutional measures, and measures to 	
reduce costs of import. Due to the differences between goods and services, we will deal with these 
separately.	 	
Assessment of options for fast	-tracking environmental goods	 	
Measures to fast	-track envi	ronmental goods depend on the possibility of easily 	identifying and 	
separating out	 such goods. There is no commonly agreed customs classification of environmental 	
goods. As indicated in section 6.5, Norway and China could agree on a list of environmental g	oods 	
based on existing :S classification. Norway is among the proponents of the ‘153	-list’, but has not 	
presented individual proposals for goods to be placed on the list.	108	 Hence, we may assume that 	
Norway is flexible with regard to the specific content of 	a list of environmental goods, provided that 	
such a list is limited to goods that are ‘	particularly important 	– even critical 	– for environmental 	
protection, and workable from a customs facilitation perspective’.	109	 The assessment of 	Hu Tao 	
(2011) indicates 	that 	China might prefer a more extensive list of products, a list that 	could perhaps	 	
include goods that 	might	 be questionable in light of the basic requirement indicated in the proposal 	
supported by Norway.	 	
China and Norway could agree on a list during neg	otiations of the FTA, or could agree to commence 	
negotiations of a list. As a minimum, such a list should include goods that are recognized as 
important to ensure technology transfer in the context of MEAs. Moreover, China and Norway 
should agree on basic 	conditions that should be fulfilled for a product to be listed. The latter is no 	
easy task, as	 has been shown	 by the extensive discussions of this issue referred to in section 6.3. In 	
our opinion, the negotiators should consider the possibility of reaching	 agreement on a list of criteria 	
 	 	 	107 The firms were Aker Solutions, Elkem, Green Clean Ene	rgy, Malthe Winje, Pöyry Environment China and 	
StatoilHydro. 	 	108 See JOB(09)/132 of 9 October 2009.	 	109 Ibid. at 4, para. 11.

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to be considered on a case	-by	-case basis. A separate procedure could be established whereby 	
proposals for goods to be listed could be submitted to a group of experts which should carry out the 
assessment and recommend wheth	er the product should be listed or not. In light of product 	
development and new knowledge of environmental problems, it would also be necessary to establish 
procedure for de	-listing products no longer regarded as sufficiently environmentally beneficial. W	e 	
recommend that the institutional and regulatory framework to be established for listing products be 
made flexible in order to facilitate listing and de	-listing of products, while at the same time ensuring 	
a reasonable level of predictability and access t	o justice for relevant market actors. The latter 	will be	 	
particularly important in cases concerning de	-listing.	 	
The next issue is 	to 	establish 	relevant measures to ensure fast	-tracking	 of environmental goods. As 	
indicated above (section 5.1) the EFTA	–Peru 	FTA (see arts. 2.4, 2.5 and 2.10, as well as annex VII) can 	
be used as a starting point for considering measures to facilitate trade between China and Norway. 
We have also identified 	several	 other initiatives that could be relevant to facilitate trade in 	
environmental goods (see sections 5.1 and 6.5). 	Here it should be noted	 that Norway’s obligations 	
under the EEA Agreement limit the options available when negotiating facilitated market access for 
goods under bilateral FTAs, in particular in the areas of te	chnical barriers to trade and sanitary and 	
phytosanitary measures.	 	
Against this background, we consider that fast	-tracking could involve the following measures:	 	
- 	Elimination of tariffs on environmental goods (in practice relevant to China	 only);	 	
- 	Implement m	easures to secure increased trade facilitation, as a minimum those indicated in 	
the most recent consolidated negotiating text of the WTO, with a particular focus on: 
facilitated access to ‘advance rulings’ (negotiating text art. 3), reduction to a minimum 	of 	
fees and charges imposed on or in connection with importation and exportation (art. 6), 
facilitated release and clearance of environmental goods (art. 7), reduction of formalities and 
documentation requirements (art. 10.2), increased use of internationa	l standards where 	
relevant (art. 10.3), elimination of pre	-shipment inspection requirements (art. 10.5), and 	
extended right of temporary admission of goods (art. 10.10);	110	 	
- 	Measures to encourage trade in environmental goods, in particular facilitated access 	to 	
export credit	111	 and other forms of lawful and generally accepted forms of support to 	
facilitate export (the latter could take as their point of departure obligations to ensure 
technology transfer according to MEAs);	 	
- 	An undertaking not to impose counterva	iling and anti	-dumping duties on environmental 	
goods;	112	 	
- 	Ensure that communications and consultations regarding import and export of 
environmental goods are given high priority in relevant institutions established under the 
FTA.	 	
We consider it essential tha	t China and Norway agree	, during the negotiations of the FTA	, on the 	
main modalities for 	dealing with	 national measures in a fast	-track arrangement. Agreement on these 	
issues might be harder to achieve at a later stage when these modalities would not be co	nsidered as 	
part of a broader package deal. However, 	the 	specific technical details of the various elements to be 	
included could be left for future clarification.	 	
 	 	 	110 See TN/TF/W/165/Rev.11 of 7 October 2011.	 	111 Both the Norwegian GIEK and the Chinese SINOSURE are members of the Berne Union, see 	
http://www.berneunion.org.uk/index.html	. 	112 See the heading ‘Other measures’ under section 6.5 above.

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Assessment of options for fast	-tracking environmental services	 	
Measures to fast	-track environ	mental services depend on the possibility of easily 	identifying and 	
separating out	 such services. 	Although	 environmental services 	are	 identified as a separate category 	
of services in the Chinese and Norwegian schedules (see sections 6.3, 6.4 and 6.6), the 	question 	
remains whether an agreement 	on	 fast	-tracking environmental services should be based on these 	
lists. There are four main challenges associated with these lists: (1) the current classification is old 
and needs to be updated; (2) the lists 	have been	 elaborated on the basis of whether the services 	
concern environmental issues	, and not	 whether they contribute to environmental protection; (3) 	
there are numerous services classified elsewhere in the schedules that have the potential of 
contributing signif	icantly to environmental protection;	113	 and (4) there is a close link between 	
environmental goods and services (see section 6.6)	, so	 a classification of the latter 	must take due	 	
account	 of the classification of the former.	 	
Against this background, we recomme	nd that efforts to identify environmental services for the 	
purpose of fast	-tracking be de	-linked from the classification of environmental services in the 	
schedules, as well as from efforts to reclassify environmental services in the WTO	114	 and the UN.	115	 	
Moreo	ver, we recommend that the negotiators consider whether the modalities of identifying 	
relevant environmental services could be based on an approach similar to that proposed for 
environmental goods above.	 	
The next issue is the establishment of 	relevant meas	ures to ensure fast	-tracking	 of environmental 	
services. Trade barriers that are relevant to trade in services differ 	considerably	 from those relevant 	
for trade in goods. Two main issues need to be 	dealt with 	when considering fast	-tracking 	
environmental ser	vices: (1) the range of national measures to be regulated, and (2) the modes of 	
supply of services to be addressed. 	 	
As to the 	former	, we note that border measures are general	ly insignificant in relation to trade in 	
services. Hence, fast	-tracking 	will 	need	 to focus on other national measures, such as market access 	
regulation, domestic regulation and taxes, subsidies, government procurement, and monopolies. We 
acknowledge that limiting states’ possibility 	to make	 use of such national measures in relation to 	
environmental services may raise politically sensitive issues. Against this background and in light of 
the limited progress achieved in the WTO and bilateral trade negotiations regarding disciplines on 
‘domestic regulation’ (art. V= of GATS), recognition (	art. VII of GATS), monopolies (art. VIII of GATS), 	
government procurement (art. XIII of GATS), and subsidies (art. XV of GATS), we consider that 
measures to fast	-track environmental services should as a starting point focus on market access (art. 	
XVI of GA	TS) and national treatment (art. XVII of GATS). If we were to prioritize among other national 	
measures to be addressed, we would recommend that recognition and monopolies be considered.	 	
As to the modes of supply to be addressed, one recent report on facili	tation of trade in services 	
complementary to climate friendly technologies (Kim 2011: vii) concludes as follows:	 	
A review of major trading countries’ specific commitments to liberalize trade in these 
services shows that only a handful of the countries have	 made a full commitment. The 	
principal Modes of supply for the complementary services of climate change mitigation 	
 	 	 	113 One study concerning climate	-friendly technologies (Kim 2011: vii) finds that: ‘“Complementary serv	ices of 	
climate change mitigation technologies” that cut across multiple key mitigation sectors identified by the 
Intergovernmental Panel on Climate Change (IPCC) 	– i.e. energy supply, transport, buildings, industry, 	
agriculture, forestry and waste 	‒ largely fall into the following Centralized Product Classification (CPC) groups: 	
other professional, technical and business services; construction services; and sewage and waste collection 
treatment and disposal and other environmental protection service	s.’ 	114 See WTO doc. S/C/W/320.	 	115 CPC version 2, see 	http://unstats.un.org/unsd/cr/registry/cpc	-2.asp	.

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technologies are ‘commercial presence’ (Mode 3) and ‘movement of natural persons’ (Mode 
4). Yet these Modes of supply appear to be largely li	mited, as the majority of countries 	
concerned have put specific as well as horizontal limitations on them. Members’ 
commitments on ‘Cross	-border supply’ (Mode 1) across all three CPC groups are becoming 	
increasingly important for the facilitation of trade 	in these services, as the provision of 	
services through Mode 1 is increasing together with new channels of electronic supply. Yet 
the majority of trading countries concerned left this Mode of supply unbound, as they 
considered it inapplicable, particularly	 in the case of construction services.	 	
We note that both China and Norway have undertaken extensive commitments in relation to modes 
2 and 3 of supply (consumption abroad	, and commercial presence). Moreover, both states have 	
mainly refrained from undertaki	ng commitments in relation to mode 1 of supply (cross	-border 	
supply) due to ‘lack of technical feasibility’, and that there seems to be considerable willingness to 
reconsider this issue. Some concerns regarding national security and jurisdiction need to be	 taken 	
into account in the context of such reconsiderations. The most controversial issue remains mode 4 of 
supply (presence of natural persons), mainly 	because of	 employment concerns and immigration 	
control. We also observe that mode 4 of supply is likely	 to be a high priority from the Chinese side.	 	
We thus recommend that particular attention be paid to facilitating modes 1 and 4 of supply. In our 
view, the extent to which progress can be made with respect to 	these two 	modes of supply remains 	
questionable.	 There are also uncertainties as to the extent to which it will be practicable to establish 	
separate approaches to such modes of supply for those environmental services that are selected for 
fast	-tracking. These issues will need to be further studied by ne	gotiators.	 	
As in relation to environmental goods, we consider it essential that China and Norway agree	, during 	
the	ir FTA	 negotiations	, on the main modalities for 	dealing with	 national measures in a fast	-track 	
arrangement. 	Achieving a	greement on these issue	s might be harder at a later stage when these 	
modalities would not be 	seen 	as part of a broader package deal. However, 	as noted, the more 	
specific technical details of the various elements to be included could be left for future clarification.	 	
 	
9.3 Export 	controls of goods	 	
=n view of the Chinese use of export controls, which from China’s perspective 	is justified 	to a 	
considerable	 extent on the basis of environmental considerations (see section 3.2), we consider it 	
likely that the flexibilities of introducin	g such measures will appear on the agenda of the trade 	
negotiations between Norway and China. One general discussion 	concerns	 the extent to which 	
environmental objectives in relevant sectors should be sought through export restrictions or, 
alternatively, t	hrough domestic regulation of the relevant sectors.	116	 Under the WTO, t	he general 	
approach to this issue has been that trade measures, such as export restrictions, should 	not	 be taken 	
if less trade	-restrictive measures are reasonably available.	117	 One formulat	ion of particular interest is 	
the footnote to art. 5.6 of the SPS Agreement:	 	
… a measure is not more trade	-restrictive than required unless there is another measure, 	
reasonably available taking into account technical and economic feasibility, that achieves	 the 	
appropriate level of sanitary or phytosanitary protection and is significantly less restrictive to 
trade.	 	
We also note	 art. XX(g) of GATT	, which	 requires that	, in order for an export restriction to be lawful, it 	
must be ‘	made effective in conjunction 	with restrictions on domestic production or consumption’.	 	
 	 	 	116 On the role of export controls as compared to other trade measures, see 	World Trade Repo	rt 2010,	 section D.	 	117 Such an approach has been promoted in case	 law related to the ‘necessity	 requirement’ in art. XX of GATT, 	
see WT/CTE/W/203.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	107	 	
Above, we have pointed out that some Norwegian FTAs introduce additional controls on the use of 
export restrictions (section 5.1). In addition, as 	a party to the EEA Agreement, Norway is closely 	
rel	ated to the policy of EU in this respect. 	In relation to rare earth	s: ‘the EU proposed trade 	
disciplines on export restrictions (including bans, quotas, duties and non	-automatic export licences) 	
in all relevant negotiations, bilateral or multilateral (for 	example in the Free Trade Agreement with 	
Korea and in provisions on export duties on a series of raw materials, including wood, in the context 
of Russia's WTO accession).’	118	 	
Further,	 some export restrictions have been introduced by MEAs. Such export restric	tions can be 	
prescribed primarily in order to protect the environment of the country of destination (export of 
hazardous chemicals and waste, nuclear materials, and genetically modified organisms),	119	 the global 	
environment (protection of the ozone layer and	 against nuclear disasters),	120	 or the environment of 	
the country of origin (endangered species and natural resources management).	121	 	
In the following, we will consider: (1) the need for flexibilities that go beyond those available under 
the general exceptions	 of the FTA (see section 5.4); (2) which options would be available; and (3) 	
whether 	the 	inclusion of such additional flexibilities would be in accordance with art. XXIV:8(b) of 	
GATT.	 	
(1) =n light of Norway’s adherence to many instruments that seek to cont	rol exports for 	
environmental reasons, we assume that Norway recognizes the legitimacy of such measures. 
Norway’s interest seems to us to be related mainly to ensuring environmental protection in 
developing countries. However, we also observe that several 	Norwegian FTAs include additional 	
controls on export restrictions (see section 5.1).	 	
When considering the need for flexibilities in 	an	 FTA between Norway and China, we 	should 	
distinguish between situations in which the countries agree bilaterally or multil	aterally to the use of 	
export controls, and situations in which export controls are imposed unilaterally by one country. In 
the former 	case	, it is unlikely that one country will challenge the other country’s resort to export 	
controls as long as such measur	es are in accordance with the agreement. We therefore consider that 	
an	 FTA between Norway and China 	will	 not need to include additional flexibilities in relation to such 	
measures. 	 	
The question 	remains:	 would be a need to include additional flexibilities i	n relation to 	unilateral	 	
decisions to control export	? The starting point is that the country controlling export in such cases 	
must fulfil the following three conditions in order to justify the measure under the general 
exceptions (see art. XX(g) of GATT):	 	
 	 	 	118 Communication from the Commission to the European Parliament, the Council, the European Economic and 	
Social 	Committee and the Committee of the Regions: 	Tackling the Challenges in Commodity Markets and on 	
Raw Materials,	 COM(2011) 25 final at 12.	 	119 See the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their 	
Disposal (1989), Joi	nt Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive 	
Waste Management (1997), the Rotterdam Convention on the Prior Informed Consent Procedure for Certain 
Hazardous Chemicals and Pesticides in International Trade (1998), th	e Cartagena Protocol on Biosafety to the 	
Convention on Biological Diversity (2000), and the Stockholm Convention on Persistent Organic Pollutants 
(2001).	 	120 Montreal Protocol on Substances that Deplete the Ozone Layer (1987), and Treaty on the Non	-Prolifera	tion 	
of Nuclear Weapons (1968).	 	121 Convention on International Trade in Endangered Species of Wild Fauna and Flora (1973), International 	
Tropical Timber Agreement (2006). See also the Voluntary Partnership Agreements between the EU and 
selected countries: 	http://ec.europa.eu/environment/forests/flegt.htm	.

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- 	The measure must be related to (interpreted in case	 law as equivalent to ‘primarily aimed 	
at’) the conservation of an exhaustible natural resource;	 	
- 	It must be made effective in conjunction with restrictions on domestic production or 
consumption (Interprete	d in case	 law as a requirement of ‘even	-handedness’ in the 	
imposition of restrictions upon the production or consumption); 	 	
- 	It must not constitute a means of arbitrary or unjustifiable discrimination between countries 
where the same conditions prevail, or 	a disguised restriction on international trade.	 	
Case	 law related to art. XX of GATT indicates that these requirements should be pract	ised	 relatively 	
restrictively	, and thus that the country taking the export control measure has a significant burden of 	
proo	f. For example, in the case China 	– Measures Related to the Exportation of Various Raw 	
Materials, the panel found that:	 	
Since a domestic restriction on production affects both domestic and foreign users of the 
resources, the Panel is of the view that China	 has not demonstrated that its regime for 	
refractory	-grade bauxite and fluorspar will not lead to an uneven	-handed imposition on 	
foreigners. Although there is no textual basis requiring identical treatment under 
Article	 XX(g), it is difficult to see how 	‒ if no 	similar or parallel r	estrictions are imposed at all 	
on domestic users or on domestic consumption and all limitations are placed upon the 
foreign consumers 	alone	 ‒ the export restrictions can be considered even	-handed. [emphasis 	
in the original]	122	 	
Th	e panel report has been appealed, and the panel’s reasoning regarding art. XX(g) is likely to be a 	
significant topic on appeal. One important issue in this case is how to deal with arguments based on 
the need to protect infant industries, the need to promo	te industrial development to achieve 	
sustainable development objectives, and the need to secure access to raw materials for domestic 
industries.	 	
Some of the Chinese FTAs have integrated some flexibility to implement export controls through 
listing of measu	res in annexes, but China has made only limited use of such flexibilities.	123	 In light of 	
the above case against China, we find it likely that flexibilities regarding export controls will be higher 
on the agenda of Chinese authorities in their bilateral nego	tiations than previously. 	 	
(2) There are four main options that could be considered in	 an FTA	 between Norway and China: (a) 	
relaxation of the conditions for invoking the general exception concerning exhaustible natural 
resources; (b) introduction of a sepa	rate exemption regarding export controls for environmental 	
purposes; (c) an interpretative note to the relevant general exception explaining the intentions of the 
parties as to its application to export controls; and (d) an annex to the FTA in which the pa	rties may 	
list 	general	 and/or 	specific	 exceptions.	 	
In our view,	 option (a) would be far	-reaching and 	would 	go beyond the specific needs associated with 	
export restrictions, since it would be available to all categories of trade restrictions. Moreover, this	 	
option would raise the most significant issues as regards compatibility with art. XXIV:8(b) of GATT. 
Hence, we 	will not	 consider this option in further detail.	 	
Option (b) would be limited to export controls, and thus more relevant to the specific needs 
identified above than option (a). It could also 	give rise to	 important	 issues in relation to art. XXIV:8(b) 	
of GATT, but would be less controversial due to its limited scope. One 	question	 is whether this option 	
 	 	 	122 WT/DS394/R, para. 7.465.	 	123 The most extensive use is in Annex 1 of the FTA with Costa Rica, wherein China listed ‘(a) measures related 	
to the protection of the environment and natural resources pursuant to applicable domestic law and the 	
provisions established in Article 159 (General Exceptions) of this Agreement; and (b) actions authorized by the 
Dispute Settlement Body of the WTO.’

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	109	 	
would provide a balanced approach to the intere	sts 	regarding the	 availability of export controls. This 	
would 	depend 	primarily on the conditions that would have to be fulfilled in order to invoke the 	
exception. Moreover, the rights and duties of Norway and China under the WTO Agreement would 
not be affe	cted by such an exception. Hence, one of the countries could bring a case to the WTO	, 	
should it consider that the other party 	is making	 too extensive use of the exception. This illustrates 	
the complex issues that might arise in relation to the WTO Agreemen	t if China and Norway in their 	
bilateral relations agree on exceptions more far	-reaching than those of the WTO Agreement. In our 	
view, there is a distinction 	to be made 	between general exceptions in FTAs that in essence specif	y 	
the parallel provisions of t	he WTO Agreement, and exceptions that come in addition to those of the 	
WTO Agreement. Option (b) would fall in the second category. Against this background, and in light 
of the practice in Norwegian FTAs of controlling the use of export restrictions, we 	wi	ll not consider 	
this option in further detail.	 	
Options (c) and (d) would	, in our view	, merit further consideration during negotiations. An 	
interpretative note (option c) would not change the rights and obligations of Norway and China 
according to existing 	obligations under the WTO Agreement, 	and c	ould provide additional guidance 	
and predictability 	on	 how 	to apply 	the relevant exception. Option (d) would go even further in 	
providing predictability to relevant actors. It would also ensure that the respective 	interests of 	
Norway and China could be taken appropriately into account when deciding to list or de	-list 	
measures in the annex. Whether listing should be available for general rules or specific measures or 
both,	124	 as well as procedures for listing and de	-listing, would need to be considered in further detail 	
during negotiations. 	Consideration could also be given to combining	 options (c) and (d).	 	
(3) As to compatibility with art. XXIV:8(b) of GATT, we find it unnecessary to further consider options 
(a) and (b	). In our view, options (c) and (d) should be seen as specifications of which measures are 	
‘permitted under Articles … XX’ of GATT. =n our view, these options do therefore not raise 
noteworthy issues in relation to art. XXIV:8(b).	 	
In conclusion, we find th	at export controls 	may,	 in some situations	, constitute an important means 	
for promoting environmental interests. 	Further,	 that in most cases, export controls will generate 	
more diverse resource supplies	 in the long run	. Here	 we 	quote	 the 	World Trade Report	 (2010: 6	): 	
Certain natural resources, particularly fuels and mining products, can be subject to extreme 
price volatility. This is a source of uncertainty that adversely affects investment and 
production decisions. 	 	
 	
9.4 Intellectual property rights (IPR)	 	
As indicated in section 6.5, we 	will	 consider the following issues regarding intellectual property 	
rights: (1) a reference to general objectives and principles to be considered when applying the IPR 
rules of the FTA; (2) a provision to prevent practices w	hich constitute abuse of intellectual property 	
rights by right	s-holders or unreasonably restrain competence or adversely affect or limit technology 	
transfer; and (3) the relationship between IPR and genetic resources in light of the Convention on 
Biologica	l Diversity.	 	
(1) The TRIPS Agreement sets out general objectives and principles in articles 7 and 8:	 	
Article 7 	Objectives	 	
The protection and enforcement of intellectual property rights should contribute to the 
promotion of technological innovation and to t	he transfer and dissemination of technology, 	
 	 	 	124 See 	ibid.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	110	 	
to the mutual advantage of producers and users of technological knowledge and in a manner 
conducive to social and economic welfare, and to a balance of rights and obligations.	 	
Article 8 	Principles	 	
1. Members may	, in formulating or amending their laws and regulations, adopt measures 	
necessary to protect public health and nutrition, and to promote the public interest in 
sectors of vital importance to their socio	-economic and technological development, provided 	
that	 such measures are consistent with the provisions of this Agreement.	 	
2. Appropriate measures, provided that they are consistent with the provisions of this 
Agreement, may be needed to prevent the abuse of intellectual property rights by right 
holders or th	e resort to practices which unreasonably restrain trade or adversely affect the 	
international transfer of technology.	 	
The question 	here	 is whether there is a need to further elaborate such objectives and principles in 	
order to promote environmental interes	ts. 	Except for issues relating to genetic resources (to be 	
addressed below), the objectives and principles that are included in relevant provisions of Chinese 
FTAs do not explicitly promote environmental interests or go beyond the objectives and principles	 	
set out in the TRIPS Agreement (see section 6.5). 	 	
Article	 7 of the TRIPS Agreement refers to technology development, dissemination and transfer in 	
order to promote ‘social and economic welfare’. This reference thus focuses 	on 	only two of the 	
pillars of s	ustainable development, 	omitting	 the third pillar 	– the environment.	 There is a significant 	
focus on transfer and dissemination of technology in order to enhance the ability of developing 
countries to protect the environment. As indicated elsewhere in this	 report, China has expressed 	
concerns that 	intellectual property rights (IPRs)	 are or could be applied 	so as to	 prevent 	the	 	
dissemination and transfer 	of 	technology	 important to protect the environment (see sections 6.5, 9.5 	
and 9.6).	125	 Moreover, we note th	at effective technology dissemination and transfer is an essential 	
element under most MEAs, and that there are 	important	 problems associated with the 	
implementation of such provisions.	126	 While including a reference to the environment in provisions 	
on object	ives and principles governing IPRs may not have 	major	 short	-term effects, it could have 	
more significant effects in the medium or longer term. Our analysis of parallel issues in section 9.1 
above is of relevance in this context.	 	
(2) One concern of countrie	s that 	are 	primarily ‘consumers’ of =PR is that right	s-holders could limit 	
their access to the patented goods or technologies. One recent study finds that:	 	
Whereas overall there is little CET [cl	ean	-en	ergy technologies] out	-licensing activity towards 	
devel	oping countries among the survey participants, the general level of such activity is no 	
lower than in other industries. Moreover, findings from other industries indicate that there 
are a number of hurdles to overcome in out	-licensing due to factors such as	 the transaction 	
costs involved, identifying a suitable partner and the right licensing conditions (i.e. pricing 
and the geographical or exclusive scope of the agreement). Indeed, the willingness to out	-	
license is often much higher than the actual level of	 licensing. As the results of the present 	
survey show, this trend seems to be even greater for CETs.	 	
 	 	 	125 There may be numerous alternative reasons for failure to achieve effective technology transfer, see e.g. 	
Painuly and Fehnann 2002.	 	126 See e.g. Zhong 2010; UNEP, EPO and ICTSD: Patents and clean energy: bridging the gap between evidence 	
and policy. F	inal report (2010) (available at 	
http://documents.epo.org/projects/babylon/eponet.nsf/0/cc5da4b168363477c12577ad0	0547289/$FILE/patents_cl	
ean_energy_study_en.pdf	); and UNEP: Technology Transfer and Cooperation under the Convention on 	
Biological Diversity. Towards more effective implementation (2010) (available at 
http://www.unep.org/dec/PDF/TechnicalTransferCBD.pdf	).

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	111	 	
This overall difficulty with markets for licensing may create particular challenges in the case 
of CETs, where rapid diffusion is needed. Thus there is a n	eed for improving market 	
conditions and encouraging licensing in the context of efforts to enhance technology transfer 
to developing countries. For the time being, where licensing agreements have been entered 
into, the main beneficiaries are actors in Chin	a, India, Brazil and Russia.	127	 	
There are thus reasons to question the extent to which problems of access to patented goods or 
technologies 	can be ascribed to	 ‘abuse’ of =PRs. Moreover, there are reasons to question whether 	
China will be among the countries 	that will suffer from limited access to patented goods and 	
technologies.	 	
We note that according to art. 66.2 of the TR=PS Agreement: ‘Developed country Members shall 
provide incentives to enterprises and institutions in their territories for the purpose of	 promoting 	
and encouraging technology transfer to least	-developed country Members in order to enable them 	
to create a sound and viable technological base.’ As China is not 	classified as 	a least	-developed 	
country, this provision does not apply to the relati	onship between Norway and China. Moreover, as 	
Chinese enterprises have become extensive users of IPRs, we are unsure about the extent to which 
there is need for general arrangements to encourage technology transfer. Nevertheless, we find that 
Norway and Ch	ina may have joint interests in cooperation with a view to develop	ing	 and transfer	ring	 	
environmental technologies in order to promote effective environmental protection.	 	
Against this background	 and	 from an environmental perspective	, we do not find that the	re is any 	
need	 to include provisions regarding abuse of IPRs in the FTA. We do find, however, that negotiators 	
should consider the usefulness of including IPR	-related mechanisms that may encourage 	
development and transfer of environmental technologies (see	 sections 9.5 and 9.6 below). In this 	
context, we note that China and other developing countries argue that IPR protection of 20 years 	(as 	
is currently the case in TRIPS and WIPO	), is too long	, since most environmental technologies will be 	
out	dated	 in the 	course of 	20 year	s. 	
(3) The relationship between IPR and genetic resources has been high on the agenda of Norway as a 
main supporter of international processes to ensure effective benefit	-sharing from agricultural and 	
wild genetic resources.	128	 The main star	ting point for the debate over IPR and genetic resources is 	
article 27 of the TRIPS Agreement: 	 	
1. Subject to the provisions of paragraphs 2 and 3, patents shall be available for any 
inventions, whether products or processes, in all fields of technology, p	rovided that they are 	
new, involve an inventive step and are capable of industrial application. …	 	
3. Members may also exclude from patentability: … (b)	 plants and animals other than micro	-	
organisms, and essentially biological processes for the production o	f plants or animals other 	
than non	-biological and microbiological processes. However, Members shall provide for the 	
protection of plant varieties either by patents or by an effective sui generis system or by any 
combination thereof. …	 	
Norway has ratified t	he European Patent Convention in 2007, and is thereby part of the European 	
patent system. One main consequence is that the	re are far fewer	 patent applications to the 	
Norwegian Industrial Property Office than previously, and thus that the policies of Norweg	ian patent 	
authorities 	have less 	reduced importance.	 	
 	 	 	127 UNEP, EPO and ICTSD, ibid. at 9.	 	128 The most significant instruments are the International Treaty on Plant Genetic Resources for Food and 	
Agriculture (2001) and the Nagoya Protocol on 	Access to Genetic Resources and the Fair and Equitable Sharing 	
of Benefits Arising from their Utilization to the Convention on Biological Diversity (2010).

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Nevertheless, we consider that there is a potential for Norway and China to contribute to reducing 
the tensions between the effective protection of IPRs, patents	 in particular, and efforts to preserve 	
an	d protect biodiversity and ensure the sharing of benefits from the use of genetic resources. Many 	
of Chin	a’s	 FTAs include provisions 	dealing	 with these issues. A ‘weak’ approach can found in art. 165 	
of the FTA with New Zealand: ‘Subject to each Party’s in	ternational obligations, the Parties may 	
establish appropriate measures to protect genetic resources, traditional knowledge and folklore.’ =n 
addition, this FTA contains a provision on cooperation and capacity building (art. 164). China’s FTAs 
with Costa R	ica and Peru can be characterized as those that are most advanced as 	regards	 	
biodiversity	-related interests. Article 111 of the Costa Rica FTA refers to the CBD, and to future 	
cooperation in order to implement benefit sharing, and art. 112 on intellectual 	property and public 	
health refers to relevant WTO decisions. More specifically, it states that when ‘interpreting and 
implementing the rights and obligations under this Chapter, the Parties shall ensure consistency with’ 
the 2001 Doha Declaration on the TR	IPS Agreement and Public Health.	 	
Among Norway’s FTAs, the one with Peru contains the most elaborate provision in art. 6.5:	 	
1. The Parties reaffirm their sovereign rights over their natural resources and recognise their 
rights and obligations under the Conv	ention on Biological Diversity with respect to access to 	
genetic resources and to the fair and equitable sharing of benefits arising out of the 
utilisation of these genetic resources.	 	
2. The Parties recognise the importance and the value of their biologica	l diversity and of the 	
associated traditional knowledge, innovations and practices of indigenous and local 
communities. Each Party shall determine the access conditions to its genetic resources in 
accordance with the principles and provisions contained in 	applicable national and 	
international law.	 	
3. The Parties recognise past, present and future contributions of indigenous and local 
communities and their knowledge, innovations and practices to the conservation and 
sustainable use of biological and genetic 	resources and in general the contribution of the 	
traditional knowledge of their indigenous and local communities to the culture and economic 
and social development of nations.	 	
4. The Parties shall consider collaborating in cases regarding non compliance wi	th the 	
applicable legal provisions on access to genetic resources and traditional knowledge, 
innovations and practices.	 	
5. According to their national law, the Parties shall require that patent applications contain a 
declaration of the origin or source of 	a genetic resource, to which the inventor or the patent 	
applicant has had access. As far as provided in their national legislation, the Parties will also 
require the fulfilment of prior informed consent and they will apply the provisions set out in 
this Ar	ticle to traditional knowledge as applicable.	 	
6. The Parties, in accordance with their national laws, shall provide for administrative, civil or 
criminal sanctions if the inventor or the patent applicant willfully make a wrongful or 
misleading declaration 	of the origin or source. The judge may order the publication of the 	
ruling.	 	
7. If the law of the Party so provides:	 	
(a) access to genetic resources shall be subject to the prior informed consent of the Party 
providing the genetic resources; and	 	
(b) access 	to traditional knowledge of indigenous and local communities associated to these 	
resources shall be subject to the approval and involvement of these communities.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	113	 	
8. Each Party shall take policy, legal and administrative measures, with the aim of facilitati	ng 	
the fulfilment of terms and conditions for access established by the Parties for such genetic 
resources.	 	
9. The Parties affirm and recognise their existing rights and obligations with respect to each 
other under the International Treaty of Plant Genetic	 Resources for Food and Agriculture of 	
the Food and Agriculture Organization.	 	
10. The Parties shall take legislative, administrative or policy measures, as appropriate, with 
the aim of ensuring the fair and equitable sharing of the benefits arising from th	e use of 	
genetic resources or associated traditional knowledge. Such sharing shall be based on 
mutually agreed terms.	 	
While this provision covers important issues, we find that it 	is couched 	mainly 	in ‘soft’ language	: 	
there is a possibility of 	heightening	 its effectiveness 	by	 strengthening the language and adding 	
procedural and institutional mechanisms. In our view, this provision 	offers	 a good starting point for 	
negotiations with China. 	 	
 	
9.5 Case study 4 	– Clean energy 	 	
According to 	the 	Pew Center (2011) 	China in 2010 invested 30	% more than the second country 	
(Germany) and 60	% more than the third country (United States) in new renewable energy. In recent 	
years China has consistently invested more in renewable energy than any other country. 	 	
Following this 	investment spurt	, China	 has emerged as	 the country with the highest capacity of 	
hydro, mini	-hydro and wind energy	, with	 capacities supported by 	strong and 	growing industries. For 	
instance, four of the global top ten wind turbine manufacturers are Chinese (	GWEC, 2010). 	 	
Also 	Norway 	has	 considerable renewable energy resources. 	With some	 150 years	 of experience in 	
the field, t	he country 	gets	 99	% of its electricity supply from hydropower, and electricity is used for 	a 	
wide range of	 purposes. 	As	 in China, hydrop	ower in Norway is backed	 up	 by a significant industry 	
with	 competence in engineering design, turbine generation, construction	, etc. 	 	
Norway also has 	considerable	 wind	-power potential, but exploitation 	here	 is in its infancy. Over time 	
Norway may seek to de	velop 	this	 potential both onshore and offshore.	 For	 offshore wind the 	
technologies are less mature, but China and Norway may join together to develop the	se technologies 	
further	. A green trade agreement	 might stimulate	 R&D, investment and trade in clean ene	rgy.	 	
These facts suggest that China and Norway may cooperate in a green trade agreement to further 
develop clean energy. 	As to	 hydro, 	Norway’s	 potential 	is mainly	 exploited	 already	, so 	the investment 	
potential lies in China	: here	 Norwegian competence and i	ndustry 	could	 contribute. 	As to	 onshore 	
wind	, the	re are 	potential	s in 	both countries. As 	the industry is in China	, Chinese competence and 	
industry m	ight	 contribute to building onshore wind farms in Norway. 	 	
For these potentials to materialize it is importa	nt that Norwegian firms are allowed to compete for 	
tenders in China, and 	that 	Chinese firms are allowed to compete in Norway. Firms and consortia 	
should be allowed to establish arrangements 	appropriate to the	 relevant initiative. Trade in goods 	
and service	s related to the investments should face as few obstacles as possible, and transboundary 	
movement of labour and capital likewise. 	 	
Exporting advanced technology 	gives rise to issues of i	ntellectual property rights (IPRs)	. Traditionally, 	
at least from the p	erspective of the exporting nation, the question has been how to ensure that the 	
importing country pays for the use of intellectual property. 	Now	, in the context of climate change 	
negotiations	, the issue of IPR has been addressed from the opposite angle. U	nder the heading of 	
‘technology transfer	’ the question is how developing (importing) countries can access state	-of-the	-	
art clean technology.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	114	 	
As	 mentioned in section 9.4	, these different perspectives on IPR show up in the cl	ean	-en	ergy sector. 	
On the one ha	nd, there is an urgent need to develop new renewable technology solutions that are 	
cheaper and more reliable than today. This will require time	-consuming and costly R&D, which needs 	
a payment in order not to stall. Patents and intellectual property rights 	are	 the traditional answer. On 	
the other hand, there is an equally urgent need for the immediate dissemination of improved 
technologies as they are developed. This will require low barriers to adoption, including low prices to 
consumers. Developing countri	es, among them	 China	, stress	 that IPR is a barrier. 	And as noted	 in 	
section 9.4, transaction costs represent another barrier.	 	
The basic idea of technology transfer as understood in climate negotiations is for governments or 
their representatives (e.g., fun	ds) in developed countries to act as middlemen that purchase 	
technology from developed	-country firms, thus hono	uring IPR and stimulating innovation	; and 	
transfer technology to developing countries at discounted prices	, or 	gratis	. There is precedent for 	
suc	h a practice (or at least a similar 	one,	 with	 firms and governments shar	ing	 the bill) from the 	
pharmaceutical industry in the case of HIV and other medicines to Africa. In the context of climate 
change, developed countries 	meeting 	in Copenhagen 2009 indica	ted 	their 	willingness to contribute 	
USD	 100 billion annually from 2020 for climate adaptation and mitigation	, including technology 	
transfer/IPR.	129	 	
While these are 	global 	initiatives,	 an FTA	 between China and Norway should 	include	 reference to the 	
issue and	 should 	not include provisions that unduly reduce the scope for export of advanced clean	-	
energy technologies. We also recommend that negotiators should, when considering institutional 
arrangements under the FTA, explore the possibility of establishing a fo	rum 	where	 disagreements 	
about breach of IPRs could be discussed constructive	ly and practical solutions sought. 	 	
 	
9.6 Case study 5 	– Carbon 	capture and storage (CCS)	 	
Carbon capture and storage is a key technology for fighting climate change. According a re	cent IEA 	
study, CCS will contribute more than any other technology to reaching global carbon emission goals 
by 2050 (IEA, 2010). The IEA finds that 	achieving	 carbon emission goals without CCS would be 70	% 	
more expensive. 	 	
China is 	expected 	to play a key ro	le in the deployment of CCS technologies. The IEA study suggests 	
that 600 facilities 	should be	 built in China by 2050, more than in any other country.	 Also 	Norway is 	
interested in CCS	, and has initiated a	 significant research and development pro	gramme.	 Amo	ng the	 	
stated aims of the pro	gramme	 is to contribute to the global accumulation of knowledge of the 	
technology and stimulate its adoption worldwide. 	 	
Norwegian 	R&D here	 focuse	s on post	-combustion CCS	, whereby	 a chemical solvent absorbent such 	
as monoethano	lamine is added to the flue gas in order to 	release	 the 	CO	2. The advantage of 	this 	
method	 is that 	it can be 	retrofit	ted	 on traditional fossil	-fuel power plants. China has recently installed 	
far more fossil fuel power plants than any other country, 	with	 mor	e to come over the next few years. 	
Post	-combustion technology seems essential if China is to live up to 	IEA 	expectations. 	 	
At present t	here is one major CCS demonstration plant in China, and about ten minor demonstration 	
plants	: thus, 	precedent	s exist	 for 	joint development and implementation of CCS technology between 	
China and Norway. Such a joint pro	gramme	 would most probably involve trade, investment and 	
research in green goods and services in an integrated whole.	 An FTA	 could conceivably facilitate 	
coope	ration on CCS by allowing the necessary goods free passage across borders	; further, it might 	
allow	 free transfer of the specialist labour required for building and operating CCS facilities (visa 	
 	 	 	129 For more on technology transfer in practice and the many contentious issues that arise (	including	 resale of 	
modified technologies back to developed countries) see e.g., Alfsen	 et al.	 2009.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	115	 	
procedures, work permits), facilitate transfer of IPR (see ab	ove), facilitate investment, and facilitate 	
research cooperation	, including 	such matters as 	research visits	 and	 toll	-free transfer of research 	
equipment	.

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Vista Analysis and Fridtjof Nansen Institute (FNI)	 	116	 	
 	
Tables, figures and boxes	 	
 
Tables	 	
Table 1.1	 	Impacts of mode 1 	– 4 commitments for Norwegian mining 	 	
Table 3.1	 	Export of services from Norway to the world, and to China. USD billion	 	
Table 3.2	 	Imports of services to Norway from the world, and from China. USD billion	 	
Table 3.3	 	Average applied MFN import tariffs per main category, %	 	
Table 5.1	 	FTA between Chin	a and Chile as regards chilled and frozen seafood	 	
Table 5.2	 	FTA between China and Peru as regards chilled and frozen seafood	 	
Table 8.1	 	Export of fish from Norway to China, and Norway to the world, NOK million	 	
Table 8.2	 	Stages of the salmon life	-cycle	 	
Table	 8.3	 	Amount of industrial fish required for 4000 tons of Atlantic salmon, gutted with head	 	
Table 8.4	 	CO	2 emissions (tons) per ton of salmon exported to China	 	
Table 8.5	 	Chinese exports and imports of textiles and textile articles, USD billion	 	
Table 8.6	 	The 	life	-cycle carbon footprint	 	
Table 8.7 	 	Impacts of increasing textile & apparel exports from China to Norway	 	
Table 8.8	 	Cotton cloth export and direct environmental impacts in 2005	 	
Table 8.9	 	Norway: Consequences of commitments regarding mining services	 	
Figur	es	 	
Figure 3.1	 	Trends in Norwegian imports from China and exports to China, NOK billion 	 	
Figure 3.2	 	Main import items to Norway from China, NOK billion 	 	
Figure 3.3	 	Main export categories from Norway to China 	 	
Figure 6.1	 	Environmental externalities from the	 micro	- to the macro	-level	 	
Figure 8.1	 	Amount of farmed salmon in Norwegian waterways	 	
Figure 8.2	 	Sold amount of drugs to prevent sea lice	 	
Figure 8.3	 	Development of sea lice per fish in recent years	 	
Figure 8.4	 	Industrial fish in salmon feed 2010	 	
Figure 8.5	 	Elements of the cotton production cycle	 	
Boxes	 	
Box 3.1	 	Panel Report: China ‒ Measures related to the export of various raw materials 	 	
Box 5.1	 	Possible environmental issues of rice (15 February 2011)	 	
Box 6.1	 	Definitions of ‘environmental goods’ and ‘environmental services’	 	
Box 6.2	 	Trade measures against Chin	ese exports of solar power technologies 	 	
Box 8.1	 	An illustration of substitution in the case of salmon consumption in China 	 	
Box 8.2	 	Provision on Mining and =ndustrial Cooperation in China’s FTA with Chile	 	
Box 9.1	 	Airlines and EU carbon quotas

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