Finnish export industry will suffer if all countries start favouring their own
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By Anna Karsimo
Finland lives on exports. We do not live by washing each other’s shirts.
Such old words of wisdom have been repeated in economist circles more frequently than usual in recent times, when discussion has turned to the increase of protectionism in the world.
Protectionism refers to the protection of domestic production from foreign competition through the use of import tariffs and import restrictions, but also the spurning of foreign products on the emotional level. The latter is gaining ground in the EU.
Finland’s largest export countries have also suggested that now they should withdraw from international trade and favour domestic products.
For instance, Russia has already increased tariffs on foreign cars, combine harvesters, and steel as part of its anti-recession programme, and more protective walls might be in store, says Simo Karetie, a leading expert on trade policy at the Confederation of Finnish Industry (EK).
Exports are vital, especially for a small national economy. In small Western countries, the proportion of exports in GDP is significantly higher than in large countries.
The share of exports has been small specifically when times are bad.
In the recession years of the last decade Finnish exports were the equivalent of 20 per cent of GDP. Now the figure is nearly 40 per cent.
When the number of unemployed grows in an economy, consumption decreases. Exports bring vital additional demand.
So exports also make it possible to increase production. Correspondingly, the import of foreign goods and services erodes demand for domestic production.
From the point of view of the whole, the difference in exports and imports is the most decisive.
When exports exceed imports, goods and services produced in Finland sell better.
This brings income to Finnish employees and to the public economy.
When extra income from exports is used to buy Finnish products, it will directly benefit companies in this country and their employees.
If exports fall below imports, it is difficult to boost the income of the citizenry, which is needed to pay for the goods, with domestic market production alone.
Helsingin Sanomat / First published in print 11.2.2009
More on this subject:
 Growth in protectionism begins to strain relations between EU countries
ANNA KARISMO / Helsingin Sanomat
anna.karismo@hs.fi
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