AC: Iceland

Question 1

Trade summary:

Answer 1

• Diversifying into manufacturing and service industries in last decade - tourism, software production, biotechnology.
• Geothermal and hydropower sources = substantial FDI in aluminium sector, boosted econ growth and interest from high tech firms with interest in data centres using cheap green energy.
• Tourism, aluminium smelting, and fishing = pillars of economy.
• 2010 to 2017 increase in tourists of nearly 400%

Question 2

Trade statistics:

Answer 2

Population= just over 350,000 (200,000 labour force)
GDP per capita= US$52,300
Service sector= 74.6% of GDP

Question 3

Exports

Answer 3

Total= $7.43 billion (2020)
Destinations= Netherlands 23%, UK & Germany 9%
Products exported= aluminium, fish products, aircraft, iron alloys

Question 4

Imports

Answer 4

Total= $7.55 billion (2020)
Origins= Norway 11%, Netherlands 10%, Germany 8%
Products imported= refined petroleum, aluminium oxide, carbon/graphite electronics, cars, packaged medicines.

Question 5

Services: exports and imports

Answer 5

Exports = $8.6 billion
Services exported: travel, transportation, business services, financial services

Imports = $2.55 billion
Services imported: travel business services, transportation, personal services

Question 6

Economic factors contributing to strength of Iceland trade:

Answer 6

• investment in domestic transport infrastructure
• high levels of productivity in agriculture, manufacturing and service industries
• technology in communications
• domestic market has a high purchasing power

Question 7

Environmental factor contributing to the strength of Iceland trade:

Answer 7

• access to abundant geothermal and hydroelectric power providing low cost energy for industry
• extensive coastline with natural harbours and access to well stocked fishing grounds of the Atlantic Ocean.
• natural landscape from glaciers and tectonic activity making it attractive to tourists and TV/Film industry.

Question 8

Political factors contributing to the strength of Iceland trade:

Answer 8

• stable democratic government, able to negotiate trade agreements providing access to global markets
• membership of global organisations e.g. WTO, OECD and regionally EEA giving access to EU single market and unlimited, tariff free trade with Eu countries.

Question 9

Social factors contributing to the strength of Iceland trade:

Answer 9

• highly skilled and educated work force
• English taught as a second language in schools and almost entire population is fluent.

Question 10

Opportunities of international trade

Answer 10

• multiplier effect from tourism industry which continues to recover from COVID travel restrictions
• further investment in technology industry/data centres with the abundance of cheap green energy
• continued development of trading relationship with the EU, further FDI from EU countries

Question 11

Challenges for international trade

Answer 11

• Risk of environmental damage from mass tourism with increasing popularity
• Risk of tectonic activity affecting access to country e.g. 2010 ash cloud
• Risk of over dependence on tourism, vulnerable to any future restrictions on global trade (similar to seen in COVID)
• Ageing population further limiting the labour force in decades to come.