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Tapani Paavonen
trademark of Finland. From the 1960s onwards, many chemical industries (SITC
section 5) grew to become significant export industries to the point that Finland has
been a net exporter of dyes from the late 1960s. At the same time Finland's import
dependence on chemical products has decreased. 36
The abolition of obstacles to trade and economic convergence with regard to
leading industrial countries have created a phenomenon called intra-industry trade,
i.e. import and export trade with similar products. Intra-industry trade is thus one
suitable measure for the proceeding of economic integration. 37 The Grubel-Lloyd
(GL) indices with regard to the most important trading partners show growing figures
(except for the USSR/Russia) up to the late 1980s/early 1990s, after which the
transformation period for the trade pattern in this respect seems to have ended (see
figure 3). 38
36. For Finland's trade patterns, see T. SUKSELAINEN, Finnish Export Performance in 1961-1972.
A Constant-Market-Shares Approach, Helsinki, 1974, pp.65-70; R. VOLK and H. ESKELINEN,
EEC-vapaakauppa, op.cit., pp.40-51; J.-O. ANDERSSON, Intraindustriell handel och produktcykler
i Finlands utrikeshandel 1965-80, in: Ekonomiska Samfundets tidskrift, Vol.37, No.3,
Helsingfors (The Economic Society of Finland), 1984, p.158; and K. HOFFMAN, Teollisuus, in:
Br. WAHLROOS et al. (ed.), Sotakorvauksista vapaakauppaan. Kauppa- ja Teollisuusministeriön
satavuotisjuhlakirja, Helsinki (The Ministry of Trade and Industry), 1988, pp.143-155.
37. According to empirical studies about Finland's intra-industry trade, the following main explanatory
variables have been found: competing trade with natural resources, small role of primary production
and incomes level (Aquino indices for 1981), P. PARKKINEN, Ristikkäiskauppa Suomen
ulkomaankaupassa 1981, Helsinki, 1982, pp.18-33; demand diversification measured through income
levels and the share of machinery in exports, on one hand, and economic integration measured
through dummies original EFTA country, original EEC country, Nordic country, on the other
(GL indices for Denmark, Finland, Norway and Sweden for 1965, 1973 and 1980), J.-O. AN-
DERSSON and Y. TOLONEN, Intra-Industry Trade in the Nordic Countries, in: EFTA Occasional
Paper 12/1985, Geneva, 1985, pp. 6-17; small per capita income differential, high average per
capita income, large average market size, small market size inequality, high R & D expenditure,
sufficiently low concentration ratio, not too big average plant size, low transport costs and large
direct investments (GL indices for 1985), M.-L. PARJANNE, Econometric Analyses of Intra-Industry
Trade. Evidence from Finnish Cross-Sectional Data, Helsinki School of Economics and
Business Administration, Helsinki, 1992, pp.33-47, 113-118, 129-140, 147-186 & 192-196.
38. The Grubel-Lloyd index measures the degree or share of intra-industry trade in foreign trade; the closer
to 0 the less the trade is of an intra-industrial nature and the closer to 1 the more the trade is of an
intra-industrial nature (0 ≤ GL ≤ 1). It is calculated with the formula: GL = 1 – [∑ Abs (m – x) / ∑
(m + x)], where m and x are the import and export values of each of the commodity groups. Economists
usually presume that the products concerned are genuine substitutes to each other. The present
study, however, contents itself with that the products concerned represent similar factor endowments,
which is assumed to be the case, as the rule, within 2-digit classes of SITC, which combine in a suitable
way, by and large, similar processing rates within the same industry. Figure 3 gives the GL indices on
2-digit level of SITC for divisions 51-89, i.e. industrial goods. The relative position of different trading
partners to each other, however, is essentially the same when the indices are calculated for all divisions
of SITC or at a different level of aggregation.