Study: Nearly half of Finnish companies have encountered barriers to international trade, global political situation shakes up companies’ supply chains

As many as 41% of Finnish companies have experienced trade barriers in their international operations in recent years. Most of the examined trade barriers between 2019 and 2022 occurred in countries outside the EU, especially in Russia, the United States and China. However, according to a study conducted by ETLA Economic Research for the Finnish Government, companies also encountered trade barriers in the EU.

Companies engaged in international trade still face various trade barriers, that is, regulations or practices by authorities that make it difficult for services and products to enter the market. Trade barriers include customs duties, import restrictions and subsidies directed only at domestic operators. However, not all trade barriers are detrimental to society – they can also contribute to the safety of products for people and the environment.

According to the study, as many as 41 % of Finnish companies engaged in international trade encountered trade barriers between 2019 and 2022. The vast majority of the barriers occurred in countries outside the EU, especially Russia and China. However, significantly more trade barriers than before were also encountered in the Unites States. In 2021, approximately half of Finland’s total exports were directed outside the EU area.

Russian invasion of Ukraine and the sanctions imposed in response increased barriers to trade

Within the EU, companies encountered the most trade barriers in Sweden and Germany. According to Jyrki Ali-Yrkkö, Research Director at ETLA, the Russian invasion of Ukraine has increased trade barriers.

“The probable cause of the increasing trade barriers can be found in the sanctions imposed on Russia due to the invasion as well as in Russia’s retaliatory measures. Although the vast majority of trade barriers were encountered outside the EU, some were also encountered in the EU single market. In the framework of the study, it is difficult to say whether Sweden and Germany stand out in this because they actually have a lot of trade barriers or because Finnish companies trade a lot in these two countries. In any case, it is significant that companies also encountered barriers to trade in the EU,” says Ali-Yrkkö, who was in charge of the research project.

The barriers encountered by companies in the EU were most often technical barriers to trade. As many as a third of trade barriers relate to, for example, local standards, technical regulations or country-specific testing and certification requirements. In this case, it may also be a question of promoting product safety.

In countries outside the EU, export and import bans were most common, but there were also high or discriminatory customs duties.

Half of Finnish companies report problems with availability

According to the company survey conducted for the study, as many as half of Finnish companies encountered availability problems in purchasing materials, parts or components in 2019–2022. All types of companies were affected, regardless of size and sector, but their responses varied: medium-sized companies increased purchases in Finland, while large companies started buying from neighbouring countries.

ETLA’s Jyrki Ali-Yrkkö warns against drawing too many conclusions too early, emphasising that the results of the survey indicate the nature of the change but not its intensity.

The study was conducted as part of the implementation of the Government Plan for Analysis, Assessment and Research for 2022. The study is a continuation of the surveys on trade barriers carried out in 2016 and 2013. In Finland, the Ministry for Foreign Affairs acts as the responsible authority for trade barriers outside the EU and the Ministry of Economic Affairs and Employment as the responsible authority for the EU single market.

Inquiries: Jyrki Ali-Yrkkö, Research Director, ETLA, tel. +358 46 851 0501, [email protected], and Sanna Selin, Chair of the project steering group, Director, Market Access Unit, Ministry for Foreign Affairs, tel. +358 295 350 612, firstname.lastname(at)formin.fi, and Niina Etelävuori, Senior Specialist, Ministry of Economic Affairs and Employment, tel. +358 295 047 022, firstname.lastname(at)gov.fi

The Government’s joint analysis, assessment and research activities (VN TEAS) produce data used to support decision-making, everyday operations and knowledge-based management. They are guided by the Government’s annual plan for analysis, assessment and research. The content of the reports published in the publication series of the Government’s analysis, assessment and research activities is the responsibility of the producers of the data in question and does not necessarily represent the view of the Government. For more information, visit https://tietokayttoon.fi/en.