Essay Sample on Trade in Iceland

Introduction

Iceland is the 106th largest export economy in the world. Iceland is a good country to trade with since it has an economy which is among the freest in the 2018 index. Iceland enjoys free movement and trade of labor, capital, services, and goods with the EU despite withdrawing its application for membership in the European Union in 2015.This facilitates trade as it helps in enhancing an easy movement of goods and services between Iceland and another country. In Iceland, the economic freedom score is at 77.0.The investment freedom in Iceland helps others countries to be able to operate their business within the country easily. Inflation in Iceland was contained in Iceland, and this makes it a desirable country to trade with since the prices of the products and services tend to be predictable. The high usage of communication and information technology, high level of education as well as consumer buying -habits make Iceland a suitable country for trade (Matthiasson, 2008).

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In Iceland trade is facilitated through the implementation of the European Economic Area agreement. Through this, there is the implementation of common competition rules, rules for state aid and government procurement between the EU and Iceland and a lot of economic integration which helps in the facilitation of trade.

The dangers of relying on export for economic growth is that a country becomes more dependent on foreign markets. This is because to achieve an economic growth that is dependent on the country's export; the country is required to have something or export a product that people in another country are willing to buy and therefore depending highly on foreign demand. The other danger is that it results in limited opportunity and sustainability since a country is trying to grow through exports no person will be willing to import and therefore making growth impossible. There is suppression of wages in a country that depends on exports from their economic growth. To sustain an economy that is dependent on exports a country has to ensure that their cost of labor remains relatively low to be able to have competitive prices in other countries. The other danger is that the country aims at fulfilling the primary needs of another foreign country and ends up neglecting their domestic priorities (Benner, 2011).

American businesses need to think about the taxation rate in Iceland. The taxation rate in Iceland has always been considered to be high. American businesses also need to think about labor in Iceland whereby the minimum wage in Iceland is determined on the grounds of seniority, education, and nature of work.

Conclusion

The economy of Iceland mainly depends on fishing whereby 40% of the country's export earning is from fish and employs 8% of the workforce. As a result of fish stocks reduction, Iceland has diversified its economy into service and manufacturing industries. The tourism sector of Iceland has also expanded. This has resulted in the demand for goods and services increasing as well since there is more money in circulation within the economy and hence people are willing to spend more on the goods and services (Boulhosa, 2010).

References

Baldursson, F. M., & Portes, R. (2013). Capital controls and the resolution of failed cross-border banks: the case of Iceland. Capital markets law journal, 9(1), 40-54.

Benner, M. (2011). How export-led growth can lead to take-off (No. 222). University of Luneburg Working Paper Series in Economics.

Boulhosa, P. P. (2010). Of fish and ships in medieval Iceland. The Norwegian Domination and the Norse World c. 1100-c, 1400, 175-97.

Matthiasson, T. (2008). Spinning out of control, Iceland in crisis. Nordic Journal of political economy, 34(3), 1-19.