What are the advantages and disadvantages of Finland for taking part in European Union?

The motivation to discuss on the topic:
The essay will discuss the advantages and disadvantages of Finland’s participation to European Union (EU). In Taiwan, there are economists claim that Taiwan should integrate markets of Taiwan and mainland China, but there are also many economists have oppose it. It is a very important issue for Taiwanese people. Maybe Finnish experience can provide some hints to Taiwan.

Background about the relationship between Finland and EU:
The better relationship between the two super powers USA and Soviet Union in 1985 change Finland's political position in Europe. The post-war division began to melt, and Finland could leave the control of Soviet Union. Actually, In 1961, Finland stopped the progress to became a full member of European Free Trade Association (EFTA) because of Soviet Union's suspicion. For the same reason, Finland also delayed to the Council of Europe (EC) membership. After the event in 1985, Finland can take part in the European organization although the two memberships have more symbolic meaning than practice one. Because of radical reformations from the Soviet leader Gobarchev, the Eastern Europe Bloc dissolved and Soviet Union collapsed in 1991. During the period Gobarchev leaded Soviet Union, Finland normalized the relationship with Soviet Union, and Gobarchev's administration stopped interfere in domestic decisions of Finland. Gobarchev also visited Helsinki in 1989 to confirm Finnish neutrality. Finnish foreign policy had begun to change from 1985. In 1986, Finland became a full member of EFTA and a member of EC, which started to form a tighter union then, in 1989.

By early 1990s, Finnish government gave up its neutrality policy in cold-war era and joined EU after a referendum with a majority supported the move. The decision makes Finland to be one of core members of EU. The definition of Finnish relation with its eastern and southern neighbors changes now. Right now, Finland's eastern border is not run along with the Cold War frontiers.

Advantages:
On advantages, Finland can have more close relationship with the main European countries, for example, France, Germany. Actually, Finland has prosperous times from the EU membership.
Before 1991, Russia is the most important Finland‘s trade partner. One over three Finnish export products sold to Russian. However, after Soviet Union collapsed in 1991, Finland lost her most important market. The trade recession with Russia led a significant effect in Finnish risen unemployment and the depression of Finnish economics. Then, there were two significant structure changes made Finland pass away the difficulty. The first one was her success in information and communications technology (ICT) sector. The second one was that Finnish government made the decision to have closer relationship with west European countries. So, Finland started to apply to take part in European Union in 1995 and to be successful into EU in 1999. In the same year, the situation of Finnish economics waked up again and is better and better after 1995. Right now, the most trade partners of Finland are western European countries, Germany, France, UK. Russia is the fifth major trade partner of Finland. Now, in many worldwide surveys of competitiveness, Finland is in the top position.

Finnish people also can have noticeably cheaper products and foods, including pork, eggs and many daily products, which are brought by Finnish EU membership. An obvious example is the cost of cars. Traditionally, the price of cars is higher than other countries of EU. However, in 2002, the European Court said that Finland’s tax of cars imported from other EU members is too much. This event made Finnish government have to cut the tax rate of foreign cars, and Finnish people can buy imposed cars in much cheaper price. But it also makes some problems to Finland. Alcohol problem is one of them which will be mentioned in next section.

Disadvantage:
On the disadvantage, Finland’s agriculture is hurt because of cheaper agriculture product from eastern European countries. However, Finnish agriculture is hurt by the cheap products from eastern European countries. Although Finnish government has tried many approaches to support the Finnish farmers by direct payment from Finland’s budget, the average income of Finnish farmers is decreasing during those years. After Finland become an EU member, the number of Finnish farmer continue to decrease while the average number of farmer in EU is increasing constantly. EU Commission still said that the support for Finnish farmers should be decreasing and temporary.

In addition, Finland also has to open her labor market for other EU members although the unemployment remains high in Finland. Unlike Sweden, Finland open her labor market to people from the EU member countries until spring 2006. Many Estonians, for example, have gotten their jobs in Finland. Fortunately, the noticeable negative side effects seem not apparent until now. Although Finnish relatively high unemployment rate already decreases from the peak point 15% in 1995 to about 8.4% in 2005, the rate is still over the average of all EU members and continues to trouble Finnish people.

EU’s rules also make some negative effect to Finland. A typical example is the public policy of alcohol. Finland had to give up her original alcohol policy which limits the retail sale of alcohol beverage, in 2004. Because the price levels of alcohol beverage from Estonia, one of Finnish neighbor in EU, are only about 50%, Finnish consumption of alcohol beverage raised about 10% in the same year. It is so terrible that alcohol poisoning and related illness have been the major reason to makes Finnish adult men die.

Lessons that Taiwan’s people can learn from Finnish experience:
Like Finland, Taiwan has very limited natural resource. So, Taiwan depends on exports very much. Because the market in mainland China becomes more and more important for Taiwan, many economists suggest that Taiwan’s government should try to find a way to integrate markets of Taiwan and mainland China. However, the political issues make the problem more complicated. In my opinion, if we only consider economic reasons and factors, Taiwan definitely should have some cooperation or integration with the market of China based on Finnish experience. The reason is simple: if two economy body, one is small like Finland and another one is huge like EU, should integrate together. When they merge, the small one can have most advantages. However, if they don’t integrate, the small one will be hurt more than the big one.

In the case of Finland, we can see that Finland’s economy collapsed during 1991 to 1999 because of her major trade partner Soviet Union dissolved. After Finland joined EU in 1999, Finnish economy became better and better. Original, Finland wanted to have closer political and economic relationship with western European countries and applied for EFTA and EC in 1960s. But Soviet Union opposed her desire and Finland had to delay the progress. I thought that Finland can keep off the depression in 1990s if she could take part in EFTA or EC. It shows that participation of bigger economic market is very helpful for small economic in the case of Finland’s entry into EU in 1999. Actually, the members of EU didn’t have the economic problems which Finland met when Soviet Union split off. One reason is the political factor, Western European countries don’t depend on the trade with Soviet Union very much, even than didn’t have economic relationship with Soviet Union. Another reason is the members of EU integrated a big enough economic body. It makes EU can keep its members from the hurt of other economic bodies like Soviet Union or Finland.

Before integrating with bigger economic body, Taiwan should do many preparations. At least, agriculture and farmers should be pay special attention from Taiwan’s government.

Reference:
[1] Website: http://www.finnfacts.com/english

How could Finland be able to have very advance information and communications industry? Discuss on Finnish strategy.

The motivation to discuss this topic:
In this essay, I would like to discuss the way which Finnish people to develop their information and communications industries. Finland doesn’t have much natural resource, except forest. That is why the main export products of Finland were paper and woods originally. However, after taking many years to develop information and communication sector, the main export products of Finland became electronic products. In addition, Finland owns advanced technology, high skilled employees and famous mobile phone giant Nokia now. How could Finnish people make those facts come true in the country with limited natural and human resources? What do people in Taiwan learn from Finnish experience?

The story of Nokia:
Information and communication technology (ICT) sector is the most quickly growth industry in Finland. Finnish ICT includes hundreds of small and medium size companies, but Nokia is the core undoubtly. So, if we want to understand the Finnish ICT more, it should be to talk about Nokia first.

Nokia is founded in 1865 for forest industry originally. In addition, there was two related companies, Finnish Rubber Works Ltd and Finnish Cable Works Ltd, which are founded in 1898 and 1912 respectively. Finally, the three companies combined to form the present famous Nokia in 1966. Before 1970, the branch of electronic in Nokia was very small. The main products of Nokia were cables, rubber and paper. After merging some European electronic companies in 1980s, Nokia started to develop its business on electronic consumer. Right now, Nokia is totally become a purely ICT company, the Finnish biggest firm and a leader in wireless telecommunications world-wide. Nokia is a giant in Finland and provides significant contribution to Finnish economy. In addition to Nokia's direct contribution, there are over 300 first-tier small and medium-sized suppliers to Nokia, which people call them as Nokia network. We can sum up Nokia's direct contribution to Finnish economy: 4% GDP, 1.5% GDP growth, 35% business sector R&D, 25% exports, 1% total employment and 5% manufacturing employment in 2000 [1].

Finnish experience:
It is not easy to explain why Nokia and Finnish ICT industries are so successful. Rather, the main contribution of the success is from the cooperation among historical, technological and economic factors. Except for the significant position which the communications equipment manufacture plays in Finland's industry change, I can see that network relationship in Finland, like Nokia network, push Finnish ICT development. The major reasons make the success can be concluded two points in the view of history: (1) decentralized structure of the industry and, (2) the liberalization of telecommunications early.

Originally, the market of Finnish telecommunications is very fragmented because of political outcome. In the 1800s, when Finland is a duchy of Russia, Finland started to lay cables. In order to avoid Russia control her national telephony, Finnish congress granted many telecommunication operating licenses. Finnish first telecommunication companies were established in 1870 by Finnish equipment suppliers. During twentieth century, the private telecommunications operating companies increased. In order to interconnect between networks of different operators, Finnish telecommunications proposed to nationalize and harmonize their network. However, Finnish congress rejected the proposal. It makes Finnish telecommunications industry still remain de-centralized. Different telecom equipments and format of terminals made difficulties of interconnection among networks. During the 1930s, the number of operators maximum about 800. After the peak, the number decreased to about 50 by the mid 1990s. Because there are so many operators in Finland, every operator had strong competition with each other. In addition, unlike other countries, those operators also had to face the competition from foreign companies. The real huge and the strongest competition between the operators begin in mid-1980s due to the open of long distance operations. By 1994, the competition included local and long-distance call and international telecommunications. Nowadays, many of those operators are not so important because kind of them have merged together. And Nokia and many equipment suppliers have global competitiveness.

Industry, technology and educational policies have played a role too. Finnish government changes its decision in the early 1980s. She underlined the role of innovation policies with the need to decide the priorities for allocating R&D resource. Finally, market decided the winner, ICT sector, in product market. Now, ICT was the national stronghold of Finland. Because of the reasons above, information and telecommunication technology is in the first priority in Finnish economy. Finnish high education also pay special attention on ICT.

After many years for developing, Finland has ICT sector with global competitiveness. Except for Ireland, Finland is the EU country owns most surplus of high-tech foreign trade runs. In the 1990s, there were many International studies (IMD and WEF) reported that Finland is the country with best competitiveness in the world. The reasons include Finnish science and technology abilities, her high level education and her internationalization. In addition, Finland also is the most advanced producer and has users of communications and information application. In comparison studies, both social infrastructure and technology ability form the basic structure to make Finland has the competitiveness above average. Presently, High-tech investment and skilled labors are the resource which international competition change into competition for. In other words, countries and regions are looking for money and highly educated employees. Because of Finnish development of technology, it make Finland has advantage as a corporate location. In other way, there are also weaknesses of Finland’s competitiveness. The weaknesses include high tax rate and remote location. Besides, high unemployment is the result due to deficiencies of labor market. Only focusing on ICT sector is also too dangerous if the demand of electronic or communications products falls.

Based on the discussion, I could conclude that there are two points make Finland own successful ICT. The first one is the correct strategy of Finnish government. The second one is high quality of employees.

Except for the decentralization and nationalization of Finnish telecommunication operators by Finnish law, when Soviet Union, the most important trade partner of Finland then, was destroyed in 1991, Finnish government speeded up to encourage Finnish companies to develop information and communications industries. The decision is very correct. Right now, electronic products has replaced woods to be the main export product of Finland then.

As mentioned before, the successful Finnish education is another factor makes Finland could have very good ICT industry. Comparing to traditional industries, say woods or paper industries, ICT industry need very high-quality employee very much. The most famous software from Finland is the kernel of Linux operation system. People who study computer science all know that the kernel is from a Finne who was a college student when he proposed the kernel. The case is an example of Finland’s strong ability of employee in ICT industry.

The lessons Finland can teach people in Taiwan:
Taiwan is a small island with not so many people. In addition, Taiwan’s government also pays much attention on ICT sectors. However, there is no any Taiwan’s company like Nokia. In my opinion, any country which wants to develop ICT industry has to own her leader ICT companies. For example, USA owns IBM, AT&T and Microsoft; Japan owns SONY, NEC and Toshiba; Sweden owns Ericsson; Germany owns Siemens. Of course, Finland owns Nokia. But Taiwan only owns some manufacturers, like Acer, ASUS and BanQ. Those Taiwanese companies are not big enough and can’t invest too much money into R&D department. It makes Taiwanese universities and colleges have to cover all R&D works for corporations. The difficult is the researches in universities are usually very theoretical and kind of impractical. In other way, how to make Taiwan has a small but open economy like Finland is also a issue for people in Taiwan.

Reference:
[1] J. Ali-Yrkkö, L. Paija, C. Reilly and P. Ylä-Anttila, “Nokia: A Big Company in a Small Country,” ETLA Series B162, Taloustieto Ltd, Helsinki, 2000.

Under eastern European and Asian competitions owned large amount of low-salary employees, how can Finnes to keep Finnish companies stay at Finland?

The motivation to discuss on the topic:
Recently, Taiwan’s factories start to move to other counties for cheaper labors. Finland also meets the same problem. What are solutions of Finland? Is it possible to keep those manufacturers stay at their home countries and keep jobs of blue-collar workers.

A piece of news:
In 2006, there was a piece of economic news related to both Finland and Taiwan from a newspaper. Taiwan’s largest manufacturer of electronic components Foxconn decided to dismiss 295 labors in Finland. Originally, Foxconn’s Finnish division employed more than a total of 500 people in southern Finland. Foxconn had a layoff in 2005 to close a factory in Hollola and cut 600 labors. Now, Foxconn already stops the component product in Finland and focus on consumer service. After ending the production in Finland, Foxconn started to build a huge factory in Chennai of India, close to Nokia’s and Motorola’s factories. In other words, Foxconn is following policies of other mobile phone giants. Based on the newspaper, the main cause made the layoff is Finland doesn’t have big market for low and medium-priced handsets, and it is not efficient for Foxconn to continue its mobile phone production in Finland.

One thing in the newspaper made me impressive. It said that the layoff is a very bad news for the dismissed employees because the unemployment rate in the Lahti area, the factory located on, is very high.

Finnish Experience:
By the classical economics, there are two ways to keep the growth of economics in a country, the first one is to increase the number of labors under fixed worth of output per person. The second one is to increase the worth of output per person when population is not increasing. Obviously, the reason of present growth of Finnish economics is the second one. Although Finland has to face the competition from eastern European countries with cheaper labors, Finland still can keep high-tech companies by her high-quality employees. Before eastern European countries joined European Union in 2004, the major industrial structure of Finland is already based on high-tech information and communications industry.

Because quality of employees is most important factor for IT companies, most of Finnish companies still stay at Finnish due to this reason. However, many Finnish manufacturers also start to move to eastern European countries. For example, the most famous Finnish mobile phone giant Nokia will build factory to product its handset in Romania in the middle of 2008. Salcomp, one of the world’s leading Finnish manufacturers of mobile phone chargers and power supplies for mobile phones, also have moved its factories to China, Brazil and India. The heavy employment costs in Finland make manufacturers move to eastern European and Asia with cheap labors.

In addition, in the end of 2007, also because of high cost and in order to make sure long-term profitability, Stora Enso, a big Finnish pulp and paper manufacturer, said that the company will permanently close its three factories in Finland. There will be 1100 Finnish people lose their jobs.

Finnish reaction:
There are so many bad news for Finnish labors. Actually, the reminding companies which stay at Finland are the operation part of them or need high technologies. From 1995, Finland focus on developing her innovation economics based on selling high-tech products, professional know-how and high-value services, including biotechnical industry and information and communications technology (ICT) sector. Finland government pays much attention on Finnish biotechnical industry. Through the favors of Academy of Finland, National Technology Agency of Finland (TEKES),the Finnish Innovation Fund (SITRA), Finland government organizes biotechnical companies in Helsinki SciencePark, Biomedicum in Helsinki, Turku’s BioCity, Oulu’s Medipolis and Kuopio’s Technology Center Teknia [1]. Biotechnical industry needs high-quality and professional employees and researchers more than cheaper labors. Of course the industry is very suitable for Finland.

On ICT sector, in 2007, Nokia products 36% mobile phones in the world. And, there are many successful Finnish security software companies, say Stonesoft, F-Secure and SSH. Finnish users and companies always can adopt a technology very quickly. Finland has the highest mobile phone and Internet user density in the world. Finland’s ICT foreign trade is in surplus and R&D investment in relation to GNP is the top position in the world. Because of Finnish good research abilities, Finland already is the pioneer and a famous research center of high-tech products. IBM, Siemens, HP and Lotus all have their Finnish research division. Naturally, those international companies also would have cooperation with Finnish companies and improve the development of those Finnish firms. Finnish small and medium-sized companies organize special networks with international and domestic giants for research, training and corporate cooperation.

Finland also has become the export-driven place for the international companies because Finland’s location is close to one of the most potential markets, Russia. Comparing the law systems, social and political factors, many companies would like to product or assemble their goods in Finland. So, by the advantage of Finland’s location, Finnish people still can have huge amount of investments from other countries and keep many factories stay at Finland although the market of Finland is small.

For Finland, the challenge of its economic policy in the future is to continue enhance Finnish ability of innovation and technology knowledge for reminding at the top position in the world. For a country with small market, it is the best choice for Finnish people to survive under the global competition.

Lessons Taiwan can learn from Finland:
On labors market in Taiwan, there is similar situation in Taiwan. Because mainland China and Vietnam have cheaper employees, many Taiwan’s companies move their factories there. It makes many labors in Taiwan lose jobs. A difference between Finland and Taiwan is that the main industry of Taiwan is manufacture. Taiwan’s companies don’t pay much money on long term R&D. So, there are several lessons Taiwan can learn from Finland.

First, Both corporate and government should invest more money to R&D. Taiwan already doesn’t have good competitiveness on manufacture for low-cost products. Second, Taiwan should use the advantage of her location. Because of political dispute, Taiwan’s government bans any boats and airplanes to operate between Taiwan and mainland China. However, in economic opinion, the ban is very bad for Taiwan’s economy because many international companies have business in both Taiwan and China and the ban makes inconvenience for businessmen. Third, Taiwan should grow up a industry giant like Nokia in Finland. Right now, Taiwan only has small and medium-sized companies. Unlike Nokia, those companies can’t have ability to be an engine of Taiwan’s economy.

How to remain the global competitiveness is a very serious issue for people in Taiwan. Because of the historically political problem with PRC’s government, the issue is more difficult to deal with for Taiwan’s people. But if we only consider economic factors, it is clearer and very obvious what Taiwan’s people should do for their economic competetiveness.

Reference:
[1] W.-B. Zheng, “A strategic approach of building national technology strength - Finland as case study,” master thesis of National Sun Yat-sen University, 2001.