HOT AND COLD NORWEGIAN ICE TALKS

C O N F I D E N T I A L OSLO 001039

SIPDIS



SIPDIS

EUR/NB (MMCDOWELL),DEPARTMENT OF COMMERCE (DAS PDYCK,
LMARKOWITZ),STATE PASS TO USTR, DEPARTMENT OF HOMELAND
SECURITY FOR US COAST GUARD

E.O. 12958: DECL: 10/05/2017
TAGS: ECON EPET ENRG EINV
SUBJECT: HOT AND COLD NORWEGIAN ICE TALKS


Classified By: DCM Kevin M. Johnson, reasons 1.4 (b) and (d)


1. (SBU) Summary. On October 4, U.S.-Norwegian Informal
Commercial Exchange (ICE) talks were held in Oslo, covering a
wide variety of trade issues. Key U.S. matters included
pharmaceutical patent protection, IPR issues, a Norwegian car
tax adversely affecting American cars, the Government Pension
Fund (Global)'s exclusion process, oil and energy matters,
the potential Norwegian banning of certain anti-flammable
chemicals and industrial R&D cooperation. From the Norwegian
perspective, the crucial issue was the ongoing salmon
dispute, in addition to US legislation concerning offshore
oil royalties, governmental contracts with the US Coast Guard
and garnering USG interest in the Northern East West (NEW)
freight corridor. The USG delegation was led by Commerce
Deputy Assistant Secretary for Europe Paul Dyck, with
Norwegian Ministry of Trade and Industry State Secretary
Rikke Lind chairing Norway's delegation. Major highlights
included Lind's pledge to move forward with a joint
U.S.-Norwegian experts meeting to investigate the
pharmaceuticals issue, and DAS Dyck consulting USG colleagues
concerning the ongoing salmon dispute. The GON warned they
may take the salmon case to the WTO if progress is not made.
All sides welcomed increase attention to alternative and
bilateral cooperation on energy projects, the value and need
for increasing the number of educational exchanges, and
agreement to promote greater US wine market share. End
Summary.

Preparatory Meetings: IPR, Pharmaceuticals and Oil/Energy
-------------- --------------


2. (SBU) Following a briefing by Ambassador Whitney on
Embassy involvement in U.S.-Norwegian commercial disputes,
and areas of bilateral cooperation such as educational
exchanges, DAS Dyck attended several preparatory meetings.
The first, chaired by the local counsel for the Motion
Picture Association of America (MPAA) and the International
Federation of the Phonographic Industry (IFPI),focused on
intellectual property rights (IPR) issues. U.S.
rightsholders concerns include promoting the mandatory
filtering of copyright-infringed materials by Internet
Service Providers (ISPs),and obligating that ISPs disclose
the identity of customers committing piracy to rightsholders.
Additionally, the Norwegian Copyright Act, which allows
customers to "share" certain copyright protected audio and
video media, was reviewed. Specifically, the GON reimburses
European rightsholders through a quasi-government agency for
such "sharing," but does not target such government funds to
affected US rightsholders. A recent Norwegian customs law
was praised. The new legislation addressed a loophole where
customs officials could not inform rightsholders of seized,
suspected counterfeit/pirated goods, and give the holders an
opportunity to pursue injunctive relief. Although the new
legislation fixed this issue, it only provides rightsholders
a short 5 day window to determine whether to move forward
with costly legal relief (and, if unsuccessful, the
rightsholders inherit the burden of covering all legal costs
for the failed injunction). Local counsel also requested a
Ministry of Education meeting to convey anti-piracy concerns
to Norwegian students, and educate students that piracy is
not a "victimless" crime. Finally, urging the GON to
dedicate more financial and staffing resources to allow
Norwegian law enforcement officials to combat internet piracy
was encouraged.


3. (SBU) The local American Chamber of Commerce chapter
held a briefing on the pharmaceutical dispute. Attendees
included pharma representatives from Wyeth and Eli Lilly, in
addition to a local lobbying firm. The long-standing,
complex issue threatens significant local revenues. As
background, until 1992, Norway limited patent protection for
pharmaceuticals to the manufacturing process for a drug's
active ingredient. Although Norway introduced product
patents for pharmaceuticals in 1992, the previous system has
left a difficult legacy for pharma companies as competitors
claiming to use non-patented processes have recently entered
the market. Finland had a similar system, but recently
addressed this problem through legislation, to the general
satisfaction of the pharmaceutical companies. The Norwegian

government has refused to change the system, despite
extensive diplomatic intervention by the Embassy and the
local UK and Swiss Embassies, the USG and a lobbying campaign
through the pharma firms. (Note: Despite such efforts,
little success has been achieved, as evidenced by Pfizer's
recent court loss to a generic competitor concerning the drug
Lipitor. This drug previously accounted for 25% of Pfizer's
local revenues, resulting in lost jobs and significant lost
revenues.) Industry members and advocates pressed for the
GON to adopt the legislative model followed by Finland.


4. (C) Subsequently, DAS Dyck met with local
representatives of US oil companies, who stressed the need to
closely watch the results of the October 1 merger between
Norwegian government-controlled energy giants Statoil and
Hydro. The new company, StatoilHydro, controls 80 percent of
the Norwegian Continental Shelf (NCS)'s operatorship. Access
to supplier contracts was also discussed. (Note: Norway's
largest supplier to the energy industry, Aker Kvaerner, was
recently "bought in" by the GON in a well-publicized asset
purchase transaction, raising additional concerns of closing
access to businesses not owned by the GON). Stressing the
need for certainty and predictability, while also describing
the enormous resources within their own companies to pursue a
bid, the representatives sought GON assurances that the 20th
oil concession round would continue as planned. (Note: the
20th round has been postponed for one year, until 2009. The
representatives conceded that as awarded licenses from the
last round have not been fully exploited, given the lack of
oil rigs and extraction material, the GON had a strong
position to demand an extension of the next round.)


5. (SBU) During a pre-talk dinner, the Norwegians advocated
USG support of the NEW freight corridor, which conceivably
would involve the transshipment of goods through Norway to
the United States via countries including Sweden, Finland,
Russia, Kazakhstan and China.

Other issues: Car Tax, The Pension Fund (Global)
-------------- ---


6. (SBU) Embassy staff also briefed DAS Dyck on automotive
tax concerns. Since January 1, 2007, all non-EU tested cars
are subject to an engine displacement factor when taxes are
formulated. EU tested cars have replaced displacement with a
carbon dioxide factor. Certain American cars exported to
Norway, which are neither tested in Europe, nor use EU test
cycles, must use the displacement factor, resulting in higher
taxes. In addition, the displacement factor increased by 23%
from last year, resulting in even higher taxes on certain US
cars. The Embassy has advocated that the GON replace EU
carbon dioxide standards with analogous EPA standards, which
the GON has refused. The Norwegian government insists that
Norway must follow the EU directive concerning automobile
standards related to carbon dioxide emissions, although Post
has pointed out that establishing a tax formula does not
mandate using EU carbon dioxide standards. The American cars
affected by the new tax regime are also excluded from
complying with EU carbon dioxide emission standards, based on
a 2003 amendment to the Norwegian budget. Even if carbon
dioxide emissions are to be included as a factor, Post
advocated that EPA standards, rather than EU standards, be
used. Norway dismissed that argument, considering that EPA
figures are not "directly comparable" to EU standards.


7. (SBU) DAS Dyck was also briefed on the Norwegian Pension
Fund (Global),with current assets estimate near $330
billion. The Fund's revenues are derived from the country's
petroleum industries, and transferred into diversified
securities invested abroad. It is the largest pension fund
in Europe. The Fund also has an advisory body known as the
Council of Ethics, created to ensure that invested companies
adhere to certain ethical guidelines. Following the
Council's recommendation, the Fund divests shares from
reviewed companies. The majority of investments blacklisted
involve American companies. Most notably, Wal-Mart was
excluded by the Fund in 2006, which garnered international
media attention. (Note: The Embassy has been actively
engaged in questioning the Council's review procedures, with
Ambassador Whitney raising questions of the fairness of the



Wal-Mart divestment, and the sufficiency of the Council's
exclusion review process, urging that exclusions are based on
clear, even-handed guidelines substantiated by solid and
sound data).

ICE Talks - Multilateral/Regional Issues
--------------


8. (SBU) Representatives from the Norwegian MFA welcomed
USG commitment to seeing the successful completion of the
Doha WTO round. The GON delegation outlined that the NEW
freight corridor would build on an existing infrastructure,
and is projected to take 7-10 years to complete. Obstacles
include getting China involved and customs issues across
borders. (Note: The GON has not had extensive discussions
with either China or Russia on this concept). The Norwegians
stressed that US support was deemed crucial. The Norwegians
also raised concerns that Norwegian company Det Norske
Veritas (DNV) would be denied US Coast Guard contracts due to
recent US legislation.

Norwegian-US Bumps in the Road: Specific Issues
-------------- --


9. (SBU) DAS Dyck raised the pharmaceutical issue, noting
the deleterious effects of the pharmaceutical patent
loophole. Pointing to the Finnish solution, he questioned
whether the GON could amend existing GON legislation. The GON
delegation raised a series of counter-arguments, including
that the pre-1992 Norwegian legislation was fair and intended
to encourage competition, US pharmacy companies knew of the
issues for years and not reacted until recently, and that
fixing the loophole would unfairly prejudice generic
competitors. Moreover, the delegation questioned how
economically important this was to US pharma companies, and
that amending legislation would create an unwelcome
precedent, where other companies would be emboldened to
challenge existing legislation on a wide array of issues.
Seeking common ground, Lind promised that a meeting between
USG and GON experts on this issue must occur before Christmas
to determine what the issue involves, and how to possibly
solve it.


10. (SBU) After raising IPR concerns such as filtering and
internet piracy, and welcoming recent Norwegian customs
legislation, DAS Dyck elicited a pledge from an Education
Ministry representative to speak with industry
representatives concerning anti-piracy education (but the
difficulty of it entering into Norwegian school curricula was
noted). Concerning the recent customs legislation, DAS Dyck
urged Norwegians to increase the number of days from which
rightsholders must act, from five to ten days (an average in
Europe),and ensure that rightsholders not be unfairly
burdened with court fees if an injunction is unsuccessful. A
Trade Ministry attendee noted that it was "too early to tell"
whether the new legislation, enacted in September, was
leading to increased notifications to rightsholders. The
Norwegian delegation also advised that the GON is reviewing
the IPR law next year and will issue a White Paper on the
subject.


11. (SBU) DAS Dyck next raised the recent Norwegian
automobile tax regime. The Finance Ministry delegate held
that Norway's tax regime already had two standards (for EU
tested and non-EU tested cars),and that an additional
standard for non-EU tested US cars would not be practicable
and "open a floodgate," particularly given that other non-EU
cars, such as Japanese or Chinese manufactured, would then
likely ask for similar exemptions. DAS Dyck suggested that
there be some coordination with the US-EU dialogue on
standards.


12. (SBU) The Norwegians voiced their strong disappointment
on the long-standing salmon dispute. The issue focuses on
the U.S.-imposed tariff on fresh and chilled Norwegian
salmon, which has been in place since 1991. A recent sunset
review resulted in a tariff continuance, given that lifting
the duty was deemed to result in continued dumping. The
tariff has effectively excluded most Norwegian salmon from
the U.S. markets. (Note: the tariff does not affect imports

of Norwegian prepared and smoked salmon). Led by Ministry of
Fisheries and Coastal Affairs Secretary General Joern Krog,
the Norwegians pressed for a bilateral resolution, but warned
that they may be resigned to force the matter before the WTO
should all else fail.


13. (C) Talks then moved to the Norwegian Pension Fund
(Global). A Ministry of Finance representative emphasized
that the GON is not discriminating against U.S. companies,
and that the vast majority of the Fund's investments
(approximately 3500 businesses) included U.S. companies.
Further, the GON noted that once a U.S. company was excluded
from the Fund, another U.S. investment was acquired. (Note:
The Ambassador has consistently raised that this
replenishment does not assist the lost goodwill of a U.S.
company which has been divested). The Finance representative
noted that in 2006, only 80 businesses were investigated, but
could not provide information as to the number of U.S.
companies targeted by such investigations. After DAS Dyck
noted that the majority of divested companies were American,
State Secretary Lind remarked that this was a "coincidence."
(Note: A Wal-Mart executive informed Econ Officer that given
the vast number of Chinese and Indian suppliers used engaged
by international (and U.S.) department store rivals who have
not incurred the Council's investigatory wrath, he believes
that U.S. companies, generally, and Wal-Mart particularly,
are targeted by the Fund's exclusionary processes).


14. (SBU) The Norwegians turned to pending legislation in
Congress, whereby holders of offshore leases held in the US
Gulf of Mexico from 1998-1999 would pay billions of dollars
in additional royalties, or risk being barred from further
deepwater Gulf leasing. The Norwegians urged that the
legislation not be adopted (which would largely affect
GON-controlled StatoilHydro),claiming the pending law is
punitive and violates contractual equitable principles. The
GON delegation presented DAS Dyck with a non-paper on the
matter.


15. (C) Turning to oil and energy cooperation, DAS Dyck
raised U.S. oil company anti-competition concerns (Note:
Following the talks, DAS Dyck met with StatoilHydro
representatives who believe that the GON will be reluctant to
award the energy giant additional operatorships in next 20th
licensing round, given their predominance on the NCS).
Briefly discussing the status of Norwegian-Russian progress
on the so-called "disputed zone" (located in the Barents),
the GON delegation members were optimistic, but pointed out
that talks have been continuing for over 30 years.
Developing this area, should an agreement be had, would be
according to Lind an "area of opportunity" for both the U.S.
and Norway. (Note: Local U.S. oil companies have noted that
it is possible that some resolution is forthcoming, given
that Russian navy representatives are "not always saying no"
during talks with Norwegian officials.)


16. (SBU) Concerning carbon capture and storage (CCS),all
sides noted that was a crucial area in terms of combating
global climate change. GON delegates discussed the Norwegian
Mongstad CCS project, which focuses on carbon sequestration
from gas, while DAS Dyck brought up the US-led FutureGen
project, involving sequestration from coal. U.S. delegates
noted that Norwegian participation in FutureGen would be a
prime opportunity to tackle carbon emissions problems,
particularly challenging to the coal-reliant developing
world. (Note: Ambassador Whitney recently urged
then-Petroleum Minister Enoksen to support the FutureGen
project, which remains under GON review). All sides praised
the upcoming first shipment of liquefied natural gas to the
U.S. from the Norwegian Snohvit project as a milestone, which
opened an exciting chapter in the U.S.-Norwegian energy
relationship. Over one-half of the Snohvit project's LNG
will be destined for Cove Point, Maryland.


17. (SBU) The value of educational exchange was stressed by
the parties, particularly within the industrial research and
development sectors. The GON Education Minister will soon
visit the US to promote educational exchange, and a 2008
White Paper on Internationalization will include ways to
address certain educational funding shortfalls, which poses
serious challenges to Norwegian students seeking to study in
the U.S.


18. (SBU) DAS Dyck raised Norway's proposed legislation
banning numerous chemical substances, including DecaBDE.
This legislation goes over and beyond the EU legislation in
the Restriction of Hazardous Substances (RoHS),both in the
number and type of chemicals banned, as well as the fact that
the EU specifically exempted DecaBDE from the RoHS. A Trade
Ministry delegate noted that chemical substances were being
absorbed into the water, and filtered into the food chain,
and thus was a real and pressing concern. He vowed that
Norway would take action, even if not all scientific studies
had been finalized. State Secretary Lind jumped in, noting
that such a ban would only occur after scientific studies
proved that the chemicals were indeed harmful. She also
seemed alarmed at hearing other countries (as well as
Norwegian industry) had spoken up against the proposals. DAS
Dyck raised concerns of imposing a ban, particularly even
before scientific studies evaluating the harm of DecaBDE had
been completed.


19. (SBU) The Norwegians noted a Norwegian company, NEMKO,
is unable to test electrical equipment in the United States
because of OSHA legislation. DAS Dyck noted that Commerce
would follow-up with the Department of Labor.


20. (SBU) In a positive step, the GON agreed that encouraging
an increase Norwegian market share for US wine producers, who
currently have a minor 1.9 percent market share, was needed.

So Long, and Thanks For All the Fish?
--------------


21. (C) Comment. The pharmaceutical dispute composed the
bulk of the ICE talks. The State Secretary's pledge to
jump-start a dialogue between the USG and GON shows promise
towards resolving the issue, but the seeming intransigence
demonstrated from her colleagues in the Health, Finance and
Trade Ministries does not lead to optimism. Resolving the
salmon issue remained the crucial Norwegian item, and threats
to push the matter by the Norwegians into the WTO seemed
real. However, this matter lies in the hands of U.S.
domestic industry, which has not been amenable to dropping
the duties. Norwegian arguments and/or statements defending
their positions on certain topics (including Lind's seemingly
innocuous assertion that the majority of the Pension Fund's
divested companies were American was a mere "coincidence"),
and a Trade Ministry official's plan to ban Deca even without
the conclusion of scientific testing, were surprising and may
demonstrate the extent to which political considerations are
trumping economics or science. Positives included a
consensus on supporting CCS research, encouraging educational
exchanges, completing the Doha round, and supporting greater
U.S. wine exports into Norway. The talks were amiable, and
led to a lively debate on a host of issues. Post hopes that
State Secretary Lind's often pragmatic approach to USG
concerns (even conflicting with representatives of her own
delegation) will translate into real, positive action.


21. (U) DAS Dyck cleared on this cable.
WHITNEY