In terms of trade-orientation, Finland was almost 4 times more dependent on external trade than the United States in 1998. This outward focus of the economy rendered
|Trade (expressed in billions of US$): Finland|
|SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.|
it quite sensitive to disturbances in external markets. The scarcity of most natural resources (except for trees) and arable land has led to reliance on imports for raw materials. The continuing abundance of trees, plus well-developed livestock farms and a technologically advanced manufacturing base, enables the processing and exporting of imported raw materials, domestic timber and wood pulp, and machinery. The majority of its forest products go to the EU and the United States.
Finland's shared border with Russia (and previously the USSR) has had a tremendous effect on its trade practices. Finnish industry was able to supply the USSR with ships and some metalwork during World War I, but the Russian military collapse and the Bolshevik Revolution in 1917 ended that relationship. After World War II, war reparations demands from the Soviets required Finland to vastly expand its industrial capacity. This necessity led to the development of a specialized Finnish industry that made icebreakers and reinforced-hull ships. After reparations were completed in 1952, Finland and the USSR continued on a barter system, with Finland mainly trading machinery and ships in exchange for oil (a resource Finland lacks).
The collapse of the USSR in the early 1990s and the Soviet-Finnish barter system was catastrophic for Finland. Trade with Russia went from 26.7 percent of Finland's external trade in 1982 to only 2.8 percent in 1992, and the number of Finnish workers supported by economic ties with Russia plunged from 230,000 in 1981 to fewer than 50,000 in 2000. Trade with Russia in 2000 was about 5 percent of external trade.
The USSR's collapse forced Finland to focus much more on exporting to the West. Demand for timber has been a somewhat risky engine of growth, but the increasing demand for high-tech goods has helped Finland to rapidly expand its high-technology sector. Finnish and general Nordic concern with environmental issues has inspired Finland to specialize in environmental pollution-monitoring equipment for domestic and exported use. In the mid-1990s, Finland also began to increase exports to Japan and other expanding Asian economies, mostly consisting of pulp and paper products. The economic troubles of the Asian economies in the later 1990s caused a mini-recession in Finnish industry, particularly in pulp and paper exports.
Finland has been able to improve its trade situation, and has consistently run a trade surplus in the past few years with an estimated trade surplus of US$10.74 billion in 1998. Electronics overtook paper as the second largest export earner in 1998, generating over 25 percent of all export revenue. Germany and Sweden are the primary suppliers of imports, followed by the United States, Finland's most important non-EU trading partner. Finland's primary export markets (in descending order) are Germany, Sweden, the United Kingdom, and the United States.