International economic relations--especially foreign trade-- have been vital for Finland throughout the twentieth century, but never have they been more so than during the 1980s. The country was self-sufficient in staple foods, and domestic supplies covered about 70 percent of the value of the raw materials used by industry. However, imports of petroleum, minerals, and other products were crucial for both the agricultural and the industrial sectors. From the end of World War II until the late 1970s, the development of modern infrastructure and new industries required substantial capital imports. Sound foreign economic relations made it possible to exchange exports for needed imports and to service the large foreign debt. A policy of removing obstacles to the mobility of commodities, services, and factors of production facilitated economic modernization.

Business leaders and government policy makers devised innovative strategies to manage economic relations. Close economic ties to the Soviet Union grew out of the postwar settlement under which Finland agreed to pay reparations and to maintain a form of neutrality that would preclude threats to Soviet security. Except for agriculture, which remained strictly protected, postwar commercial policy sought to link Finland's economy with the economics of the Nordic area and of Western Europe as closely as possible without aggravating Soviet fears that such economic ties would undermine loyalty to the East. Thus, since 1957 Finland had pursued trade liberalization and had established industrial free-trade agreements with both West European and East European countries. Spurred by these liberal policies, exports and imports had each grown to account for roughly one-quarter of GDP by the mid-1980s. By the late 1980s, Finnish industrial and service firms were going beyond trade to internationalize production by attracting foreign partners for their domestic operations and by acquiring foreign firms. Most observers believed that Finnish firms needed to follow an international tack not only to protect export shares but also to maintain their positions in domestic markets.

Custom Search

Source: U.S. Library of Congress