Study concludes: Economic relations between Finland and the United States must be deepened

Of countries outside Europe, the United States is Finland’s most important trade partner, and the country also has a key position in efforts to promote exports by Finnish companies. Central sectors in export promotion are information and communications technology, energy and environment technology, biotechnology and the chemicals industry, said Minister for Foreign Trade and Development Paavo Väyrynen.

He chaired the event arranged by the Ministry for Foreign Affairs to release the study on economic relations between Finland and the United States that had been commissioned from ETLA, the Research Institute of the Finnish Economy.

Väyrynen pointed out that the framework also for trade and economic relations between Finland and the United States is created within the structures of the WTO, the World Trade Organization, and in transatlantic negotiations. In his view, in the current economic crisis, it is extremely important that the EU and the United States refrain from protectionist measures and effectively promote efforts to reach a new WTO agreement.

Minister Väyrynen stressed that work is done to deepen transatlantic cooperation relations in development policy as well. The EU development ministers have approved Finland’s initiative aiming at the establishment of a Transatlantic Partnership for Sustainable Development. The United States also takes a positive view of the initiative. The goal is effective efforts to eliminate poverty by acting in way that is ecologically, economically and socially sustainable. Effort is made to deepen cooperation both in global negotiations on development, economy, trade and the environment, and in practical development cooperation.

“The United States will rise from the ashes first”

Managing Director Sixten Korkman of ETLA considers that the United States still has a central position in development of the entire global economy. In Korkman’s opinion, this is not always adequately understood even in EU spheres. As an example he cited the techno-bubble burst at the start of the 2000s. At that time, statements claiming that the problem would pertain only to the United States were heard in many European capitals. Similar statements were heard last year during the initial stages of the financial crisis. Korkman predicts, however, that the United States will be able to emerge from the present crisis faster than Europe. The United States will rise from the ashes first, he summarised.

Markku Kotilainen, Head of Unit at ETLA who was responsible for the study, stressed the importance of the large American market and high technology to Finnish exports, investments and innovation cooperation.

Kotilainen used employment statistics to illustrate the dependency. If exports to the United States were to come to a complete halt and markets to replace the United States were not found, the Finnish unemployment figures would increase by about 60,000 people.

A corporate survey was also conducted for the study. The greatest problems experienced by Finns on the American market are the country’s bureaucracy and juridical complexity. The system of economic relations between Finland and the United States in principle is well-functioning, but is characterised by a relatively small number of actors and concentration of activities. Nearly half of exports consist of ships, petrol and various paper products. The contact points of economic relations should be expanded to encompass all areas of economic cooperation: trade, investment, student and researcher exchanges, and innovation cooperation.

Siilasmaa encourages angel investment

Two people had been requested to comment on the study. In his comments Risto Siilasmaa, Chairman of the Board of the data security company F-Secure Corporation, emphasised the availability of risk financing to technology companies. This activity originated in the United States and made the Silicon Valley famous.

Siilasmaa reminded listeners that medium-sized enterprises are not born out of thin air; that the background requires starting businesses whose growth, in turn, calls for venture capital. Last year, Finland channelled about 50 million euros of this sort of venture capital into 256 start-up companies. Siilasmaa considered the sum low. The bursting of the dot-com bubble at the start of the 2000s distorts statistics on the productivity of investments and, in his opinion, is still cramping enthusiasm for investment. Input in the United States appears to be more productive because investments have been made across the Atlantic longer, before the techno-bubble and its bursting.

Not everything depends on money. In Siilasmaa’s opinion, Finns would have much to learn about an attitude environment where neither failure nor success is punished. In the next few years, skilled and prosperous people will retire, and there is the danger that a great amount of know-how will disappear with them. A more encouraging atmosphere might inspire them to act as business angels, to direct their expertise and venture capital to new entrepreneurs, Siilasmaa concluded.

The second person to present comments was Terhi Mölsä, Executive Director of the Fulbright Center, which promotes student exchanges. She concurred with the conclusion of the ETLA study that called for broadening of researcher and student exchanges with the United States. American universities represent the best in the world. Only less than seven per cent of university students’ studies abroad take place in the United States. The corresponding percentage in Sweden is on 24. Personal knowledge of the United States is on a narrow base in Finland, in part because of the slight amount of student exchanges.

More to follow, Väyrynen promised

The study commissioned from ETLA is linked with the work done by the Ministry for Foreign Affairs to promote transatlantic relations both bilaterally and through the EU, in line with the Government Programme. There was a wish to obtain a clearer overall picture of the mutual economic dependence between Finland and the United States, which statistics on foreign trade and investment do not reflect adequately.

Minister Väyrynen promised that the Ministry for Foreign Affairs would ‘catch the ball’ thrown in the recommendations of the study. Further measures will be pondered within the Ministry, led by the Department for the Americas and Asia, and in cooperation with other relevant ministries and actors.

Text: Jari Sinkari
Photos: Vuokko Ritari