Overview About International Trade in Finland

Main Industry Sectors Agriculture represents less than 3% of the current Finnish GNP and employes less than 5% of the population. Because of the unfavorable climate, agricultural development is limited to the maintainace of a certain level of self-sufficiency in basic products. Cereal production dominates, well ahead of milk production and animal husbandry. Finland's accession to the EU has further accelerated the process of restructuring and downsizing of this sector. Forestry is traditionally well-developed: Finland exports a rich variety of products rending from simple wooden products to high-tech tags and labels and including paper, cardboard, packaging etc. Other key industrial sectors are metal production, mechanical engineering and electronic goods. Finland specializes in exporting information and communication technologies, Nokia becoming the world leading manufacturer of mobile handsets. The service sector employs almost 70% of the population and accounts for almost 65% of the GDP.

The basis of Finland's trade policy

Finlands economic success requires the further removal of barriers to export and investment and an open import policy that promotes competition. The key challenges include customs duties and non-tariff barriers to trade and trade-distorting measures that are still prevalent in many markets. However, the trade policy agenda is subject to constant revision due, for instance, to changes in the structure of the world economy. Amidst these changes, it is important to ensure the viability of agriculture and to take care of the foundations of the welfare state. The continued existence, expansion and reinforcement of the multilateral rules-based trade policy system, embodied in the WTO, is of utmost importance for Finland. However, in order to safeguard its interests, the EU has to further deepen its bilateral trade relations especially with its principal trading partners. At the latest when the results of the current WTO round of trade negotiations are available, the EU will have to assess whether it should participate in new free trade arrangements in order to protect European competitiveness.

Global world economy

The world economy is for the first time becoming truly global. The OECD countries still dominate the world economy but East Asian developing countries, in particular, are gaining an expanding share of production, trade and investment. The Russian economy is also growing, but it is still dependent on oil and gas production. The poorest developing countries, especially in Africa, have not managed to keep pace with the emerging developing countries, and their share of the world economy has further declined. The pursuit of economic growth, global competition, specialization, and business activities based on the dispersal of the value chain are likely to further increase international trade and investment. The dismantling of barriers to trade and investment will continue. However, especially in case the multilateral trade negotiations fail, it is possible such regional and bilateral arrangements are concluded as will restrict access to and operations on markets and which in this sense will erode the international trading system. Fears and concern provoked by changes in the world economy have started to transform into growing protectionist pressures. The intensifying efforts to develop multilateral rules reveal that there is a need for improved global governance. Internationalizing companies will be less and less dependent on their original home States and on individual States in general. The mobility of companies has prompted States and regions to engage in competition on the location of the most favorable operating business environments. From the point of view of governments and nations, questions such as where companies pay their taxes, where profits are repatriated, where investments are made and where people are employed are still relevant.

Influence of EU-membership on Finland's trade policy

Membership in the EU has changed the operating environment of Finland's trade policy, and the EUs negotiating power has significantly strengthened Finlands trade policy position. Effective participation in the EUs common commercial policy requires mastering its broad agenda and success in ensuring that our national objectives are incorporated in the EUs objectives. It is therefore necessary to allocate sufficient resources for the work and to develop more proactive working methods. Instead of border protection measures, trade policy focuses more and more on national regulatory systems. Therefore, ideological and value-based choices, which have traditionally fallen within the framework of other policy sectors, play a more prominent role in trade policy than earlier.

There are more and more actors in society willing to influence trade policy, and trade policy is criticized more than before. Active political and civil society discussion on trade policy is therefore welcome. Trade policy plays an increasingly important role in protecting Finnish labor, livelihoods and welfare. Trade policy measures strengthen the competitive capacity of the Finnish economy by influencing the operating environment of business and trade outside the national borders and by ensuring a smooth flow of imports. Finlands general trade policy line has always emphasized the importance of dismantling barriers to trade and investment and participation in an open world economy. It is important that the EU continue to pursue trade policy that is in line with Finlands policy, aiming at the dismantling of barriers to trade and investment and the reinforcement of common rules for international trade.

Specific measures for developing countries

Measures carried out in different policy sectors to the benefit of developing countries must be mutually compatible and reinforcing. Trade policy decisions concerning developing countries are very significant in this context. The less developed developing countries need more effective special and differential treatment than before in the context of trade policy. It must depend on their level of development and aim at their integration into international trade and the trading system, avoiding the introduction of separate rights and obligations on a permanent basis. The trading capacity of the poorest developing countries must be supported. The more advanced developing countries should remove trade barriers more systematically than before and also take part in granting special treatment to the poorest countries.

The basis of Finland's trade policy

Finlands economic success requires the further removal of barriers to export and investment and an open import policy that promotes competition. The key challenges include customs duties and non-tariff barriers to trade and trade-distorting measures that are still prevalent in many markets. However, the trade policy agenda is subject to constant revision due, for instance, to changes in the structure of the world economy. Amidst these changes, it is important to ensure the viability of agriculture and to take care of the foundations of the welfare state. The continued existence, expansion and reinforcement of the multilateral rules-based trade policy system, embodied in the WTO, is of utmost importance for Finland. However, in order to safeguard its interests, the EU has to further deepen its bilateral trade relations especially with its principal trading partners. At the latest when the results of the current WTO round of trade negotiations are available, the EU will have to assess whether it should participate in new free trade arrangements in order to protect European competitiveness.

Objectives and instruments of trade policy

On the basis of the description of the operative environment and the general definition of the tasks of trade policy, the objectives of Finlands trade policy are here broken down in three categories as follows:
y y y

trade in goods and services, investment, and issues related to international economic activities and domestic regulation.

Trade in services has major national economic significance and notable export potential, which is why it is particularly important for Finland. That is also the case with dismantling of barriers to trade in industrial products and trade issues relating to intellectual property rights. Likewise of importance for Finland is the development of the internal market for services as a means to consolidate the EUs competitiveness and economic growth.

International economic activities and domestic regulation

The protection of inventions and innovations from illegal reproduction is one of the oldest areas of international cooperation but, as a result of globalisation, intellectual property has become an increasingly important issue also from the trade policy perspective. Competition rules are generally divided into two parts:
y y

regulations applying to the use of public support (government support) and r Regulations related to the conduct of businesses.

One of Finland's long-term objectives is to contribute to reaching an agreement in the WTO that would comprise the fundamental principles applying to trade and competition. Working life norms are a key component of companies' so-called corporate responsibility, according to which companies engage in voluntarily action to integrate social and ecological aspects into their business activities and their interaction with interest groups. Finland's objective is to increase dialogue on various forums concerning respect for the core labour rights, defined by the International Labor Organization, the ILO. From the point of view of trade policy, the main problems related to trade and the environment are linked with how to incorporate action leading to the improvement of the state of the environment into the trade policy norms.