Gertrude Enderle-Burcel, Dieter Stiefel, Alice Teichova (Hrsg.): Sonderband 9. „Zarte Bande” – Österreich und die europäischen planwirtschaftlichen Länder / „Delicate Relationships” – Austria and Europe’s Planned Economies (2006)

Pekka Sutela: Finnish Trade with the USSR: Why Was It Different?

FINNISH TRADE WITH THE USSR: WHY WAS IT DIFFERENT?* * 1*

Pekka Sutela

1 Introduction2

Trading with - and in particular exporting to - the Soviet Union was traditionally seen by many in Central and Eastern Europe as a burden to be minimized. It created undesirable dependence, strengthened through its reliance on government-level negotiations the role of state bureaucracies in the economy and furthermore tied up scarce resources in production which more often than not failed to meet world market productivity and quality requirements. On the other hand, one of the explanations often put forward for the relative success of the Finnish economy in the post-war period has been the apparent benefits derived from its trade with the Soviet Union. Thus, the standard monograph on the Finnish growth experience argues as a matter of fact that Finland benefited from Eastern trade because of a more varied export structure and higher value added content than in Western trade, together with the stability and predictability created by five-year trade agreements.3 Assuming that both attitudes are based on facts, an obvious question arises: how can trade with the USSR have been both a bad thing (for Eastern Europe) and a good thing (for Finland)? To contribute towards an answer, this paper discusses some of the peculiarities of Finnish exports to the USSR.

Another question emerged after the collapse of the Soviet market in 1991. In retrospect, were both Eastern Europe and Finland actually too dependent on trade with the USSR? In particular, how did the decline in Finnish exports to the USSR contribute to the 14 percent decline in Finnish aggregate production in the early 1990s, which was unprecedented for a post-WWII developed market economy?

To provide a background for the discussion to follow, a few remarks on the trade arrangements between Finland and the USSR are in place. Trade between the

Dieser Beitrag wurde den Herausgebern vom Autor nach der Konferenz in dankenswerter Weise für die Veröffentlichung zur Verfügung gestellt.

1 Head, BOFIT (Bank of Finland Institute for Economies in Transition), pekka,

sutela@bof.fi

. The opinions expressed in this paper are those of the author and do not necessarily reflect the views of the Bank of Finland.

2 Parts of this paper draw on Sutela, Pekka: Clearing, Money, and Investment. In: Russian and East European Finance and Trade 4/1992-93, pp. 3-29.

3 Hj erpp e, Riitta: The Finnish Economy 1860-1985. Helsinki 1989, pp. 162-163.

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