Impacts of the Possible EU-USA Trade and Investment Partnership Agreement on Finland’s Business and Industry and the Finnish Society
Research Institute of the Finnish Economy (ETLA)
Press release 15 March 2013
Ville Kaitila and Markku Kotilainen
ETLA Reports No. 8
The European Union and the United States have agreed to start negotiations on a trade and investment partnership agreement (Transatlantic Trade and Investment Partnership, TTIP). This is a major undertaking to promote international trade and investment.
The partnership agreement can be seen as a step in the liberalisation of the world economy more widely. The EU and the United States produce almost half the world’s gross domestic product. Thus, the common standards, principles and practices they work out would be a strong model for the rest of the world in liberalising international economic relations.
Commissioned by the Ministry for Foreign Affairs, the Research Institute of the Finnish Economy (ETLA) studied how the possible trade and investment partnership agreement would affect Finland’s business and industry and the Finnish society.
Lowering of barriers is useful
The removal of barriers to trade and investment reduces the costs incurred in business operations and leads to more efficient placement of production in accordance with relative strengths. The export markets for one’s own goods grow and the possibilities for imports diversify.
The fiercer competition lowers prices and in-creases pressure to innovate and develop business operations. The removal of obstacles to direct investment increases competition on domestic markets. Domestic and foreign companies that function the most effectively benefit and grow. This leads to an average increase in productivity and a rise in income level.
The agreement would mean increased business
We used a questionnaire to study the impacts of a partnership agreement. In all, 104 companies (71 from industry and 33 from service sectors) responded. US markets have at least a moderate impact on the turnover of 43 and the profitability of 40 of the responding companies. Of the responding companies, 21 are not doing business in the United States at present. The agreement, however, is meaningful to them.
Sixty of the responding companies thought that the value of their output in Finland would rise in the wake of a partnership agreement, 50 that their profitability would improve and 34 that the number of staff would increase. The export and import of goods and services would increase. Direct investment in the United States would increase, as would participation in competitive bidding for public contracts.
The majority of companies now engaging in business in the United States thought that the agreement would facilitate the sale and marketing of products as well as the rise of customer contacts. In addition, nearly half of these companies expect positive effects on the export of services, the mobility of people, internal operations within the Group and on the rise of subcontracting agreements.
About one in five of the 21 respondent companies not operating in the United States at present thought the agreement would facilitate business operations. The effects therefore would spread to the wider business field.
Small enterprises in particular would benefit
Based on the responses, the value of output, staff and profitability of smaller enterprises in Finland would increase proportionally more than that for larger companies. Foreign trade barriers restrict small enterprises more than big companies. The partnership agreement could thus diversify and expand the field of Finnish export companies.
Small enterprises assess that they would benefit from the lowering of barriers to business operations more than large companies with regard to obtaining financing, the rise of customer contacts, the conclusion of subcontracting agreements, the marketing and sale of products, and with regard to the export and import of services.
Improved well-being for citizens
In consequence of the overall liberalisation of the preconditions for trade, investment and business, citizens’ average material well-being would increase. In the long run, the impact would take place through a rise in income levels. Reducing barriers to trade would increase the choices available to households.
More information
ETLA:
Ville Kaitila, tel. +358 9 6099 0255
Markku Kotilainen, tel. +358 9 6099 0206
MINISTRY FOR FOREIGN AFFAIRS
Lauri Tierala, Political Adviser to the Minister for European Affairs and Foreign Trade, mobile tel. +358 40 841 7141; Head of Unit Anna Wickström-Noejgaard, mobile tel. +358 40 849 3391; and Head of Unit Okko-Pekka Salmimies, mobile tel. +358 40 742 8420.