Finland has benefitted from free trade agreements but less than EU on average

A recent study shows that free trade agreements have had positive impacts within the EU, but their direct impact on Finland has remained below the EU average. There has been a significant increase in Finnish exports to many countries covered by the free trade agreements, but in most cases this is mainly due to the growth of trade in general as a result of globalisation. However, in certain sectors, such as the forest industry and machinery and equipment manufacturing, free trade agreements have had a key role. In Finland their impacts are felt especially through the different value chains.

The study conducted at the Research Institute of the Finnish Economy ETLA, published on 16 December 2019, assesses the growth of foreign trade created by the free trade agreements the EU is a party to, and examines the impacts of the agreements on GDP, value added, employment, and direct investments in Finland and in its main trading partner countries. The key focus of the study ‘The economic impact of EU free trade agreements for Finland and the EU’ by Katariina Nilsson HakkalaTero KuusiVille KaitilaMarkku Lehmus and Maria Wang was on assessing the economic impacts of free trade agreements concluded after Finland joined the EU.

Based on the study, free trade agreements have had positive impacts within the EU, but their direct impact on Finland has remained below the EU average. There has been a marked growth in Finnish exports to many countries that have concluded free trade agreements with the EU since 1996 but, according to the researchers, the growth is mainly explained by the growth of trade in general due to globalisation rather than the free trade agreements.

The indirect impact of free trade agreements on Finland through the different value chains of production has been greater. The impact on value added of the free trade agreements concerning goods trade that came into effect in Finland after 2004 represents about 1.6% of the total value added of exports. In addition, the agreements have a positive impact on direct investments, service trade, productivity and GDP.

The free trade agreements of the EU have had significant positive impacts on certain individual sectors in Finland. The benefits have been the greatest in the forest industry and its subcontracting chains, machinery and equipment manufacturing, and various kinds of business services that support goods trade.