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US-Finland Trade Relations: More than Just Warm Friendship
The Beginning of an Alliance

Finland is considered as the sixth largest nation in Europe. In the past, its most important industry is that of wood processing. This included pulp and paper production. As the years went on, metal and engineering industries have found their way to boost local economy. Other than these things, textile, food and electro technical industries were also dependable.

About 10% of the land area of Finland was cultivated. Despite this very low percentage, the country was said to be agriculturally self-sufficient. The production of some basic commodities such as dairy products, meat, grain and eggs exceeds the volume consumed by the people. In this regard, the excess are being exported to other nations in world economy. Bread grains were mostly comprised of wheat and rye while other important crops include potato, oats, hay and barley. Since the country has a very favorable climate, dairy and livestock production were maximized. Machines and fertilizers are contributory to productivity increase in the area.

Finland also depends largely upon foreign trade. Its economy is highly industrialized and free trade is also evident. Its per capita income is comparable to those of other western nations like France, Sweden, Germany and the United Kingdom. Services play a vital role in its economy as it comprises 64.6% of the total while manufacturing and refining, and production ranks second and third respectively.

Despite the recession experienced by the Finnish in the 1990's, they were able to strive hard and regain their economic stature. They did not look at the circumstance as something that will leave them behind. Moreover, they took advantage of the situation to be in close ties with other non-European nations such as the US. In fact, Finland considered US as its third largest trading partner outside of the European continent. In the year 2007 alone, the US was the ninth-largest exporter on the Finnish grounds.

The warmth of their friendship was evidenced by the number of nationals who enter to and from each others' boundaries. Around 200,000 US citizens visit Finland yearly and 5,000 Americans reside in the said nation. The US also has an educational exchange program with Finland which is financed by a trust fund. The said fund was established after the Finnish had repaid their loans to the US due to the remnants of World War I.

Major Trade between Finland and US

The major markets and suppliers of Finland in international trade are the members of the European Union, Russia, US and China. Most of the goods supplied by Finland to other nations include meat, grain, dairy products, potatoes, metals, foodstuffs, textiles and forest and chemical products. Products taken from other markets are raw materials, energy and some vital components for manufacturing products in the country. For the period ending September 2008, its trade with the US was recorded as follows: US exports to Finland - $3.0 billion; and US imports from Finland - $4.75 billion. This was according to the US Census Bureau. The said agency had the following records of trade between the two nations for 2007:

  • Finnish Exports to US. For the year 2007, Finnish exports to US amounted to a total of $5.27 billion. Out of this total, $812.43 million which is equivalent to 15.43% of the $5.27 billion was devoted to the sales of other petroleum products. Joining the top of the charts were: paper and paper products; new and used passenger cars; other products such as notions, writing and art supplies; medicinal, dental and pharmaceutical preparations; other scientific, medical and hospital equipment; materials handling equipment; clocks, portable typewriters and other household goods; generators, transformers and accessories; and other industrial machinery. Other industrial machinery recorded sales of $158.09 million which is around 3% of 2007's total.
  • Finnish Imports from US. The goods imported from US to Finland recorded total sales of $31.13 billion for 2007. Of this amount, $916.75 million which is 29.29% of the total went to the sales of new and used passenger cars. Other remarkable products were: minimum value shipments; telecommunications equipment; steelmaking materials; computer accessories; manufactured mineral supplies; other nonferrous metals; medicinal equipment; toys, games and sporting goods; and civilian aircraft parts. The last item garnered total sales amounting to $60.13 million which is equivalent to 1.92% of 2007's total.
  • Fastest-Growing US Exports to Finland. Exported goods from US to Finland made their own share in the Finnish market. As evidence to this, amazing percentage increases on sales from 2006 were tracked. The most outstanding commodity in terms of sales is the bodies and chassis for passenger cars which earned $3.04 million or equivalent to an increase of 101,200%. Other remarkable goods were: raw cotton; engines and turbines for military aircraft; dairy products and eggs; and military apparel and footwear. The said military goods made an outstanding mark after sales of $387 thousand for 2007 which is 537.5% higher than in 2006.
  • Fastest-Growing US Imports from Finland. While US exports to Finland made its way to the top, the imports of the former from the latter were also making their own market share. Fruits and preparations including frozen juices were sold at an amount of $310 thousand which is 1,000% higher than what it made in 2006. Other commendable items were: movies, miscellaneous imports and specific transactions; other nonagricultural foods and food additives; military aircraft and parts; and marine engines and parts. The last commodity was sold for a hefty total of $21.08 million which is 331.56% higher than its sales in 2006.
Trade Agreements between the Two Nations

Every aspect of international trade should be guided by trade agreements. This could bear all the necessary provisions when it comes to friendship, commerce, economy, culture and taxation. Policies have to be followed accordingly to provide a better visual for the future of trade relations. Finland and US had the following trade agreements to their names:

  • Finland Friendship, Commerce and Consular Rights Treaty. Like any other treaty of the same nature, this was made to reiterate the importance of building a strong foundation for the friendship of the two nations. Economically, they focused on the vital aspects of trade including foreign investments of one country to the other. It furthermore provided that the nationals of both lands shall be given equal accord when it comes to professional, scientific, religious, philanthropic, manufacturing, commercial and mortuary purposes. It also made clear that there is a right to erect, own or acquire residence or buildings for their respective nationals within their territorial jurisdictions. Properties will not be taken unless paid just compensation and after undergoing due process.
  • Protocol to Income Tax Treaty. This was signed in order to eliminate barriers to trade in relation with tax provisions. This is with all due respect to the prevention and avoidance of double taxation as well as the prevention of fiscal evasion. Responsibilities on paying taxes were further elaborated within the constraints of this treaty. While free trade may exist between the two nations, the need to stress financial aspects of the business should be based on a stronger ground. This was in amendment of the bilateral income tax treaty of 1989.
Trade Barriers between the Two Nations

Obviously, there had been some sort of problems occurring between Finland and the US when it comes to taxation. Despite the 1989 bilateral income tax treaty placed into force, barriers were still seen to interfere along the way. Investment flaws were also one of the hindrances to the foreign trade of these two remarkable countries. Some of the vital aspects which needed discussion were:

  • Cross-border dividend payments. In reality, source countries still do withhold tax on dividends resulting from direct investment. This is same as through with US-Finland trade relations. Other related matters include cross-border royalty payments for marketing, commercials and industry intangibles.
  • Treaty shopping. This term is used to signify inappropriate use of tax treaty by third party residents. Third party residents along this line are individuals other than Finnish and Americans residing within the borders of the two nations.
What Lies Ahead Between the Two Nations

After exerting efforts on eliminating the conflicts on taxation and some other accounting rules, a conclusion could be made that the future has still a lot of things in store for US-Finland trade relations. Since their desire to come up with an equal stand when it comes to business has been evidenced by the Protocol on Income Tax Treaty, it is sufficient to say that no more wars could totally tear them apart. The generations to come will definitely reap the benefits of this warm alliance.

Finland has ably maintained its stand in global economy even after experiencing recession in the 1990's. Much with the help of the US, they have been able to extend the friendship up to these days. Their concern for each other had extended to a lot of things and the respect for each other's economy had been seen along the way. Both may have some differences in trade policies but due to their willingness to adapt standards to bring them to equal footage, everything else will be bright and clear for the near future.

US-Finland Trade References

  • http://www.census.gov/foreign-trade/balance/c4050.html
  • http://www.census.gov/foreign-trade/statistics/product/enduse/exports/c4050.html
  • http://www.state.gov/r/pa/ei/bgn/3238.htm#relations
  • http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005339.asp
  • http://www.us.kpmg.com/microsite/taxnewsflash/2006/May/06141.html
  • http://formin.finland.fi/public/default.aspx?nodeid=15262&contentlan=2&culture=en-US
  • http://www.nftc.org/default/trade/US%20&%20Global%20Trade%20Report.pdf
  • http://www.census.gov/foreign-trade/statistics/product/enduse/imports/c4050.html

  • Note: Trade statistics, industry links, economic projections and global business resources on this page have been compiled from hundreds of trade related websites, government guides and resources on the Internet. We provide this valuable information for industrial suppliers, manufacturers, exporters and importers seeking to enter or expland business opportunities in Finland.

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