From National Protection to Global Market Economy – Finnish Foreign-Trade Policies and Integration Policies since World War II

Abstract

<p> From the early years of Independence up to the beginning of the 1960s Finland practised foreign-trade policies which were conspicuously protectionist for a small West European and Nordic country highly dependent on foreign trade. Finnish import duties corresponded to those of industrial countries with large domestic market, while war-time import regulations were extended largely for protectionist purposes.</p> <p> Free-trade integration consisted of free trade in industrial goods within Western Europe. In 1961, Finland concluded a separate agreement with the member countries of the European Free Trade Association (EFTA), becoming a &ldquo;full member&rdquo; of the EFTA in 1986, and, in 1973, a free trade agreement with the European Communities (EC).</p> <p> Large-scale trade with the Soviet Union complemented the Finnish foreign trade. Integration solutions with regard to Western Europe included special arrangements to safeguard the Eastern trade.</p> <p> From the mid-1980s on, Finland oriented herself towards the emerging European Economic Space (EES), later on renamed the European Economic Area (EEA), between the Community and the EFTA. The EEA extended the principle of free trade to embrace almost all economic transactions. The EC-EFTA link was the most important element in Finland&rsquo;s globalization aspirations. The EEA entered into force in 1994 but, as a result of the next enlargement of the European Union (EU), Finland, participated in the EEA in the capacity of an EFTA country only that one year.</p> <p> After Austria and Sweden had applied for EC membership, Finland followed suit in 1992. Properly, for Finland this action was a reaction the turbulent developments in the Soviet Union and Russia. From 1995 on Finland has been a member country of the EU. Finland strove from the very beginning to the &ldquo;core&rdquo;, i.e. the Economic and Monetary Union (EMU) and was one of the original euro-area countries in 1999. The EU was joined in a spirit of &ldquo;euro ecstasy&rdquo;. Main problems appeared 15 years later.</p> <p> From the early 1960s on, the Finnish economy has undergone a profound change. Still in the 1950s, the Western exports consisted mainly of less-processed wood products while the domestic-market industries produced a large variety of relatively simple goods under the auspices of border protection. Free-trade integration diversified the exports and transformed the thus-far domestic-market industries to internationally competitive ones with markets both at home and in abroad. From the 1980s on the Finnish economy has been internationalized. For example, the big manufacturing enterprises have been transformed to multinational corporations with production units on all continents.</p>