Marko Nokkala

2. Finland-Russia trade: trends and possibilities

2.1 Trade patterns

The foreign trade of Russia has undergone a structural change (Rautava 1998b). Since 1992, the volume of trade has increased significantly, yet the volume has been roughly equal to that of Sweden, a country considerably smaller than Russia with its massive spatial dimensions and vast population. Growth has taken place in both exports and imports.

Regarding trade between Finland and Russia, the value of trade between Finland and Russia fell by 65 per cent in 1991. Already in 1992 an increase in the value took place, helped by the devaluation of Finnish Markka in 1991. Another change that took place was that in the number of enterprises trading with Russia. While under the Soviet regime the number of companies was 1,000, the number increased to 2,000 by the end of 1993.
The structure of trade between Finland and Russia in 1997 is described in the Table 1. As it shows, the exports and imports take place in quite different areas of economy.
Table 1. Structure of Finland’s trade with Russia, 1997. (Rautava 1998a).

Imports from Russia		Exports to Russia
Product	Share, %	Product	Share, %
Energy	53,6	Machinery	33,0
Medals and minerals	8,4	Food and beverages	13,2
Wood	11,4	Chemical products	10,7
Machinery	2,2	Textiles and clothing	3,0
Steel products	8,7	Paper and board	7,9
Chemical products	6,8	Raw materials and energy	5,0
Other	8,9	Other	27,2

The feature of this trade pattern is that Finland imports energy and raw materials from Russia to be used in production in Finland. At the same time, Finland exports products with value added, e.g., products with more labour inputs. This in turn means that the export volumes can be lower, yet their value per ton is usually higher than that of imports from Russia. From the Finnish point of view, the setting is very attractive, and it seems that the development of such a trend is

2.2 Legislative framework

Perhaps an area, which has been most problematic over the years in the trade between Finland and Russia, has been the legislative framework. The framework has been subject to revision frequently, yet the developments have not been entirely positive. In fact, the frequent changes have created unstable environment for trade. Changes have taken place in terms of inflation, taxes, tariff rates and trade regulations. Especially the land transport has suffered from changes in the requested documents and delays at the customs offices. These changes have been imposed by the Russian authorities and the Finnish authorities have been forced to respond from time to time with their own restrictions and other measures to correct the situation. All in all, it seems like most of the problems so far could have been avoided, if the authorities had an operating discussion platform, capable to supervise all levels of officials involved in the cross-border trade.

As pointed out by Kuurma (1998), the circumstances can be improved by the Russia joining the World Trade Organisation (WTO), assuming it will implement the procedures and standards of WTO in a reasonably short period of time. However, another problem is the Russian administrative effectiveness, which seems to be lagging behind Western standards. Authorities in customs offices have created delays with their time-consuming and costly procedures. Such behavioural patterns are more difficult to change than legislative framework.
All in all, the problems currently troubling the trade do not seem all too difficult, if we consider them from the strategic trade policy aspect. This is area, where certain joint actions should be taken by both Finnish and Russian authorities to solve the possible bottlenecks in the administration.

2.3. Transit-trade: opportunities or threats?

Finland is not only European periphery with potential non-EU trading partners behind the border. One area in which rural areas in Greece have experienced a significant boost in their economic activity is the transit-trade. The development has been promoted by EU financed road investments. These investments, in their turn, have turned a periphery in the European context into an integral part of the core European transport network. As presented in the 15^th International Meeting of the European Conference of Ministers of Transport, in Thessaloniki 2000, the change has brought along significant changes in the economic activity in the rural regions of Greece.

According to Oikarinen (1998), the transit-trade has been growing at a pace faster than that of the Finnish exports. The collapse that took place in the early 1990s due to the changes in the former Soviet Union has been replaced by new growth. The levels of best years under Soviet regime are almost reached in the current volume of trade, an indication of the vast potential of Russia as a trade partner.
The transit-trade involves the development of ports as well. The strategic location of Finnish ports is relatively good: distance from Finnish ports to St. Petersburg area is short and the proposed investments in this paper could make the access even smoother. Finland has currently lost bulk shipments to Baltic countries in transit trade, but the shift back to utilising Finnish networks could take place due to improved facilities and roads.