journal of european integration history revue d'histoire de l ...

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Tapani Paavonen
majority of the group had voted “yes”. 32 When Finland entered the European Union, at
the beginning of 1995, she was to belong to the core of the member States which were
regarded as leading the integration process. 33
VIII. Economic Adjustment to Integration
Empirical studies confirm the trade creation and the trade diversion effects of
the classical integration theory for both the FINN-EFTA agreement and the free
trade agreement with the EC. 34 From the early 1960s to the early 1970s the share of
the EFTA countries in Finland's exports and imports rose remarkably, while that of
the EEC/EC countries fell. The increasing significance of EFTA trade was, however,
mainly a result of the favourable conditions that met the Nordic market of industrial
goods. Trade grew rapidly among the Nordic countries, while the effect on
trade with the other EFTA countries was rather insignificant. The greater part of the
growth of Finland's EFTA trade came from trade with Sweden. Trade with Norway
also grew rapidly. The importance of the Nordic market remained a permanent feature,
although in the period following the free trade agreement with the EC the
share of the original EEC countries was gradually resumed. 35
More significant, however, was the obvious impact of integration on economic
growth, which was linked with profound structural changes in the Finnish economy
and foreign trade. During a couple of decades since the 1950s Finland developed
from a semi-agrarian country to an advanced industrial society. The economic
growth was more vigorous in Finland than in the Western countries in average. By
the 1990s, as a result of this convergence process, Finland caught up the per capita
income levels of most West European countries.
Finnish exports diversified considerably and eventually the traditional division export/domestic-market
industries lost ground. Imports diversified too but less noticeably.
Foreign trade ceased to be predominantly based on the comparative advantage, linked
to national factor endowment, but on the economies of scale with specialisation. Up to
the 1960s Finland's exports to Western Europe consisted mainly of scarcely processed
forest products. From 1960 to 1995 the share of forest products in exports to Western
Europe fell from 85 percent to 40 percent. At the same time especially metal and engi-
32. See e.g. W. KAISER et al., Die EU-Volksabstimmungen in Österreich, Finnland, Schweden und
Norwegen: Verlauf, Ergebnisse, Motive und Folgen, Wien, 1995, p.1; Valtiopäivät – Riksdagen
1994, Minutes, pp.5160-5161.
33. E. ANTOLA, From the European Rim to the Core: The European Policy of Finland in the 1990s,
in: Northern Dimension. The Yearbook of the Finnish Institute of International Affairs 1999, Helsinki,
1999, spec. pp.6-7.
34. For a theoretical approach to integration, see J. VINER, The Customs Union Issue, New York, 1950, pp.44-45.
35. P. KLEPPE, EFTA, NORDEK, EEC. Analys av de nordiska ländernas integrationsproblem, Stockholm,
1969, pp.66-78 & 187-192; J.-O. ANDERSSON and Y. TOLONEN, EFTA- och
EEC-avtalens inverkan på Finlands utrikeshandel, Åbo, 1980, pp. 5-22; and R. VOLK and H. ES-
KELINEN, EEC-vapaakauppa, op.cit., pp.2-5 & 38-56.