MEMORANDUM TO FOREIGN PRODUCERS AND EXPORTERS REGARDING THE FAROES AND INTERNATIONAL TRADE RELATIONS
Geography
The Faroe Islands are an archipelago of 18 islands situated midway between Scotland, Norway and Iceland. The total land area is 1,400 square kilometres. The population is approximately 48,000.
Status
According to the Home Rule Act of 1948 the Faroes form a self-governing nation within the sovereignty of the Kingdom of Denmark. This means that internal matters are subject to legislation and administration by the Faroese authorities, while external matters, in principle, fall under Danish authorities. The Faroes, however, do in some cases act in their own name or on behalf of the Danish Kingdom internationally.The scope of Faroese autonomy in their foreign relations is provided by a treatybetween the Faroes and Denmark which is enacted by Act No. 80 of May 14th 2005 on the Concluding of Agreements under International Law by the Government of the Faroes. Trade related matters, which have been transferred to the Faroese authorities include taxes, duties, supplies, production, distribution, price controls and import and export controls.
Taxes and Duties
The Faroes form a tariff area of their own. Danish taxes, duties or trade legislation do not apply in the Faroes. The absence of tariffs was modified by the fact that a large proportion of the expenses of the Faroese Government were covered by fiscal duties levied on imports. This system was replaced by a VAT-system in 1993.
Relations to International Trade Organizations
Denmark became a member of the General Agreement on Tariffs and Trade (GATT) in 1950 and was a founding member of the European Free Trade Association (EFTA) in 1960. The GATT agreement was extended to cover the Faroes in 1954 and the EFTA agreement in 1968. In 1973 Denmark left EFTA and joined the European Economic Community (EEC). The Faroes, however, did not join the EEC. Thus, the Treaty of Rome does not apply to the Faroes. The free trade established with EFTA has nonetheless been maintained through a unilateral action by the countries concerned. A formal Free Trade Agreement was also made with the EEC in 1992 and replaced by an agreement of 6 December 1996, which entered into force on 1 January 1997. In 2001 the Faroes and the European Union finished negotiations on a Veterinary Protocol that is part of the Trade Agreement. In 2005 the Faroes also joined the Pan-Euro-Mediterranean Cumulation.
On 1 November 2006, the Faroes entered into a special economic treaty with Iceland, the Hoyvík Agreement, which established a single economic area encompassing both countries where any discrimination regarding goods, services, capital and persons is prohibited.
In addition to the EU and Iceland, the Faroes have free trade agreements with the EFTA-countries Norway and Switzerland and a Most-Favoured-Nation Treatment Agreement with the Russian Federation. The Faroes are in principle a free trader and therefore seeking the liberalisation of trade with countries worldwide.
Currency
The Faroes are a part of the Danish monetary area. Special Faroese notes are in circulation. The Faroese króna is equivalent to the Danish krone. The Danish notes are exchanged without commission in any bank in the Faroes and so is the casefor Faroese notes in Denmark.
Symbols
The Faroese flag is white with a blue-edged red cross. The flag was internationally recognized as the merchant flag of the Faroese fishing merchant marine on 25 April 1940. In 1975 a Faroese Post Office was established which issues Faroese stamps.
Foreign Trade
The Faroese economy is highly specialized. The value of exports plus imports is roughly equal to the value of the total national income. The Faroese GDP in 2008 was 2,412 million US$.[1]
Exports, which in 2009 amounted to765 million US$, are dominated by fish products (98 per cent), whereas imports cover a wide range of consumers goods. Imports amounted to approximately 784 million US$ in 2009. Usually more than two thirds of imports come from Denmark.
Trade Policy
Faroese authorities regard it as a matter of utmost importance to ensure the Faroese population a wide range of goods at the lowest possible price. Because of the high freight costs and the limited size of the market it is important to avoid all unnecessary costs. This applies especially to commission to intermediary wholesalers or subsidiaries located outside the Faroes. In order to avoid unnecessary distribution costs, it is therefore recommended that Faroese importers and foreign producers establish direct trade linkages.
If a foreign producer does not take a cooperative attitude in this respect the Faroese authorities will be ready to assist the Faroese consumers. For further guidelines refer to Act No 83 of March the 6th 1992 on Competition.
Fisheries Policy
As the Faroes are not a member of EU, they are not subject to EUs common fisheries policy and therefore not affected by EUs fisheries agreements with third countries. The Faroes have a special “third country” fisheries agreement with the EU as well as fisheries agreements with a number of other countries such as Iceland, Norway and Russia. These agreements are negotiated with the assistance or consent of the Danish Foreign Ministry.
[1]All currency conversions are calculated by using the average exchange rate for each year according to the Danish National Bank,