Finland-Regional Economic Integration

Until 1917 the Grand Duchy of Finland enjoyed a privileged position as a relatively advanced part of the Russian Empire, supplying metal products and ships in exchange for agricultural goods. These ties collapsed, however, when political tensions between the Bolshevik regime and the Finnish Republic precluded commercial agreements. The interwar pattern was reversed in the years following World War II, as reparations payments and barter trade grew into a close trading relationship in which Finland exported industrial goods, especially capital goods, in exchange for raw materials and fuels--an arrangement roughly parallel to that which had existed before 1917.

Starting in the late 1950s, however, Finland broke away from its dependence on the Soviet market, successfully opening its economy to the two West European trading blocks, the European Economic Community (EEC--see Glossary) and the European Free Trade Association (EFTA--see Glossary). Expanded trade with the West did not imply renunciation of profitable exchanges with the East, however, because Finnish commercial ties with the Soviet Union and with the other members of the Council for Mutual Economic Assistance (CMEA, CEMA, or Comecon--see Glossary) deepened after 1960. By the late 1980s, Finland provided a unique example of a neutral country with a free-market economy that had developed increasing economic interdependence with both the market economies of Western Europe and the planned economies of Eastern Europe.

Although many Western observers saw in Finnish foreign economic policy the dominance of security concerns over economic interests, close inspection revealed a mixture of motives. The guiding principles of postwar foreign policy--Finland's need to assure the Soviet Union that it did not have to fear threats from (or through) Finnish territory as well as Finland's practice of active neutrality--influenced trade policies toward the East, especially in the immediate postwar years. Such concerns blocked Finnish participation in the Marshall Plan and in the Organisation for European Economic Co-operation (OEEC), which was established to coordinate the use of Marshall Plan aid (see Foreign Relations , ch. 4). Trade with the East also served important economic interests, however, driving the rapid development of the metalworking industries during the 1950s and helping to absorb labor released from the modernizing farm sector. In the years after the 1973 oil crisis, Finnish exports to the Soviet Union also provided an essential market at a time of recession in Western markets. Commentators suggested that by the 1980s, the Finns, less concerned with security than they had been in the early postwar years, based policy decisions almost exclusively on market considerations.

Data as of December 1988