Premier says deal with Iceland sets example for China-Europe relations

After six years of negotiations, Iceland on Monday became the first European country to sign a free trade agreement with China.

The agreement and the great benefits it will bring mark a breakthrough that is likely to give a strong impetus to China's FTA talks with the European Union and other nations in the region, experts said.

Premier Li Keqiang welcomes his Icelandic counterpart Johanna Sigurdardottir outside the Great Hall of the People in Beijing on Monday, when China and Iceland signed a free trade agreement. Wu Zhiyi / China Daily

Premier Li Keqiang and his Icelandic counterpart Johanna Sigurdardottir officiated at the signing ceremony at the Great Hall of the People.

"This is a major event in the China-Iceland relationship. It also signals that our relationship, especially in the economic field, has been lifted to a new height," Li told Sigurdardottir at the start of their talks.

During the talks, Li said the agreement not only serves as a milestone in bilateral ties, but also sets an important example for China-Europe trade ties.

He called on both sides to expand imports and investment and seek a dynamic balance in bilateral trade.

Beijing and Reykjavik should beef up cooperation in clean energy, including geothermal, as well as in geologic, oceanic and arctic studies, he said.

Sigurdardottir told Li her country is proud of being the first European country to have such an agreement with Beijing.

In a declaration issued after the talks, the two countries said they are "opposed to trade and investment protectionism, and resolve to remove trade barriers through the creation of a free trade area to contribute to the harmonious development of world trade".

They also signed cooperation agreements in fields including financing, terrestrial heat and energy saving.

The FTA agreement is an icebreaking one between China and Europe that offers an example of one-on-one trade negotiations for other EU countries, said Zhao Junjie, a researcher on European studies with the Chinese Academy of Social Sciences.

China and the EU began a new round of trade negotiations in 2007, but achieved few results because any agreement needs to be approved by all 27 members of the EU, which have various interests and concerns.

Iceland is not a member of the EU, so it's easier for Beijing and Reykjavik to reach the agreement, Zhao said.

"The China-Iceland FTA will show other European countries China's sincerity and large potential in trade cooperation, and that cooperation will bring more advantages than disadvantages to European countries," Zhao said.

China has 14 FTA partners comprising 31 economies. There are six agreements still under negotiation with other economies, including Norway and Switzerland. Denmark is also seeking FTA cooperation with China.

"The FTA with Iceland may bring pressure to other European countries and they will think about the advantages of holding bilateral FTA negotiations with China," said Cui Hongjian, a researcher on European studies with the China Institute of International Studies.

Cui said the agreement is a win-win deal. Iceland is among the countries with the most advanced geothermal technologies and applications in the world and China can learn from it.

Stocks linked to the geothermal industry in China's A-share market surged on the signing of the free trade agreement on Monday despite a slump in the market as a whole.

In return, China can offer a large market for Icelandic products, which can better help Reykjavik out of its financial difficulties, Cui added.

Before leaving for China, Sigurdardottir told China Daily that she expects the agreement to diversify trade and reduce her country's deficit.

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

"For Iceland this is a very important agreement, with one of the largest economic powers in the world," Sigurdardottir said.

She also believes the agreement will lower the price of Chinese products in Iceland, calling it "a landmark agreement" for both countries.

Icelandic Foreign Minister Ossur Skarphedinsson said earlier that the FTA is a natural continuation of bilateral cooperation and will bring immeasurable opportunities to economic cooperation in the future.

China has been Iceland's biggest trade partner in Asia since 2006, and bilateral trade reached $152 million in 2011.

Two-way trade increased by more than 21 percent in 2012, despite the global economic crisis.

Sigurdardottir arrived in Beijing on Saturday, kicking off a six-day visit to China.

She will address a business seminar on Tuesday. The seminar will focus on opportunities brought by the FTA.

Sigurdardottir will fly to the financial hub of Shanghai after meeting President Xi Jinping and former premier Wen Jiabao in the capital. Wen invited Sigurdardottir to visit China during his visit to Iceland in April 2012.

Tuo Yannan in Brussels and Liu Yedan in Beijing contributed to this story.