Barriers to Trade Encountered by Finnish Businesses in 2009
and Means to Address them
MINISTRY FOR FOREIGN
AFFAIRS OF FINLAND
Barriers to Trade Encountered by Finnish Businesses in 2009
and Means to Address them
Editors:
Aaron Vuola
Selina Kangas
Ari Sormunen
Leila Vilhunen
Table of contents:
ABBREVIATIONS AND ACRONYMS ........................................................................................................................... 3
FOREWORD .................................................................................................................................................................... 5
EXECUTIVE SUMMARY ............................................................................................................................................... 7
1. SURVEY ON BARRIERS TO TRADE 2008 - 2009..................................................................................................... 9
2. FINLAND'S MOST IMPORTANT EXPORT AND IMPORT MARKETS IN 2008 ................................................ 11
2.1 EXPORT MARKETS - RUSSIA IN LEAD POSITION, FOLLOWED BY SWEDEN AND GERMANY ............................................. 11
2.1 IMPORT MARKETS - THE SAME COUNTRIES HOLD LEAD POSITION ALSO IN IMPORTS ..................................................... 13
3. BARRIERS TO TRADE ENCOUNTERED BY BUSINESSES................................................................................. 15
3.1 TRADE BARRIERS BY TYPE OF BARRIER ..................................................................................................................... 15
3.1.1 External markets - customs procedures, high customs tariffs and TBTs dominate .............................................. 15
3.1.2 Internal market - Technical barriers to trade and competition environment as a nuisance ................................. 22
3.2 BARRIERS TO TRADE BY SECTOR ............................................................................................................................... 27
3.2.1 The most frequent barriers in the external markets - ICT and machines and equipment sectors .......................... 27
3.2.2 Internal market - Barriers most common in the service sector ........................................................................... 32
3.3 BARRIERS TO TRADE BY COUNTRY ............................................................................................................................ 35
3.3.1 External markets - over 40% of all identified problems encountered in Russia................................................... 35
3.3.2 Internal market - most barriers in Finland and in the Baltic States and Poland ................................................. 40
4. MEANS TO ADDRESS BARRIERS TO TRADE ..................................................................................................... 43
4.1 BARRIERS TO TRADE IN THIRD COUNTRY MARKETS ................................................................................................... 43
4.1.1 Bilateral instruments ........................................................................................................................................ 44
4.2 COMMON COMMERCIAL POLICY OF THE EC .............................................................................................................. 45
4.2.1 Multilateral cooperation................................................................................................................................... 46
4.2.2 Bilateral agreements between the EC and Third Countries................................................................................ 49
4.3 MEANS TO ADDRESS BARRIERS ENCOUNTERED IN THE INTERNAL MARKET .................................................................. 51
4.4 OTHER MEANS ......................................................................................................................................................... 52
5. IN CONCLUSION ...................................................................................................................................................... 53
2
Abbreviations and acronyms
ACP = African, Caribbean and Pacific Group of States
ASEAN = Association of Southeast Asian Nations, established in 1967. Member countries:
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand
and Vietnam.
BASREC = Baltic Sea Region Energy Co-operation
BEE = Black Economic Empowerment, South African Government's policy to
improve the position of its black citizens.
CEFACT = United Nations Centre for Trade Facilitation and Electronic Business
CIS = Commonwealth of Independent States, formed by several former Soviet republics.
Membership: Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan,
Uzbekistan, Belarus and Russia as well as Associate Member Turkmenistan.
DDA = Doha Development Agenda
EC = European Community
EEA = European Economic Area; EFTA and the EU together (excluding Switzerland)
EFTA = European Free Trade Association, an intergovernmental organisation set up to
promote free trade and economic integration of its four Member States: Iceland,
Liechtenstein, Norway and Switzerland.
EK = Confederation of Finnish Industries
EPA = Economic Partnership Agreement
EU = European Union
FDA = Food and Drug Administration, USA
GATS = General Agreement on Trade in Services
GATT = General Agreement on Tariffs and Trade
GCC = Gulf Cooperation Council
GPA = General Agreement on Government Procurement, international agreement
negotiated in the WTO, applying to public procurement
ICT = Information and Communication Technology
IPR = Intellectual Property Rights
ITA = Information Technology Agreement
MFA = Ministry for Foreign Affairs
NTB = Non-Tariff Barriers, trade issues such as technical, bureaucratic or legal questions,
which can result in impediments to trade
OECD = Organization for Economic Cooperation and Development, established in 1961
PCA = Partnership and Cooperation Agreement
SASO = Saudi Arabian Standards Organization
SFS = Finnish Standards Association
SPS = Sanitary and Phytosanitary Measures, regulations aimed at protecting human, animal
and plant life and health, and helping to ensure that food is safe for consumption
TBT = Technical Barriers to Trade (WTO)
TEKES = Finnish Funding Agency for Technology and Innovation
TRIPS Agreement = An Agreement on Trade-Related Aspects of Intellectual Property
Rights, which covers copyright and related rights, trademarks, including service marks,
geographical indications, industrial designs, patents, layout designs (topographies) of
integrated circuits, and undisclosed information.
UN = United Nations
UNECE = United Nations Economic Commission for Europe
VAT = value added tax
VKE = Promotion of export and internationalisation
WCO = World Customs Organization
WTO = World Trade Organization
3
Foreword
Dear readers,
The promotion of the competitiveness of Finnish enterprises is one of the key goals of the
Government and the main task of those responsible for trade policy. Companies' production
structure and interests related to internationalisation benefit from open markets. Our
companies' unrestricted and equitable access to export markets and an open and effective
import system are critical aspects from the point of view of maintaining the competitive
capacity.
The removal of barriers to trade is an area in which the public authorities can provide
concrete assets to companies and thus foster Finnish welfare and employment. The present
survey on the barriers to trade that Finnish businesses encounter has been prepared with this
goal in mind. By means of cooperation between the private sector and the public authorities,
we want to keep closely abreast of the goals set by Finnish businesses in their foreign trade
and of problems met by them in order to be able to address any questions as effectively as
possible and to pursue our trade policy goals on different trade policy forums. Such forums
are, for example, the World Trade Organization WTO negotiations, the EU's free trade
negotiations with third countries, and our bilateral contacts with different countries. During
my export promotion visits, I have actively sought to resolve many trade barriers.
When the survey was started in early autumn 2008, the global economic situation looked
somewhat different from what it is today. The full effects of the economic crisis started to
show at the turn of 2009 and, consequently, companies' external operating environment has
changed markedly on account of substantial reduction in international trade. In many export
markets that are important for us, protectionist measures have been resorted to in an effort to
protect the countries' own economies and businesses and to safeguard their domestic
production capacities. If, as a result of an economic downturn, protectionism started to gain
ground in a large scale, our situation would be very complicated. To date, protectionist
measures have not been as extensive as was feared at first. However, the adverse effects on
individual businesses can be considerable. The current world situation characterised by the
economic crisis highlights the importance of the promotion of export and
internationalisation and especially work aiming at the removal of trade barriers. Therefore,
the results obtained from this survey will contribute particularly valuable elements to the
preparation of Finland's trade policy and the practical export promotion measures.
I want to thank all those who have been involved in the preparation of this report for
excellent cooperation. It is important that we continue the dialogue, and that companies and
other actors are active and contact us whenever they encounter barriers to trade or
investment in their foreign trade.
Paavo Väyrynen
Minister for Trade and Development
5
6
Executive summary
The purpose of this report is to give an overview of the kind of problems Finnish companies
encounter in their export and import trade. The report also sheds light on the available
means to remove trade barriers. The material used in the report is based on trade barriers
that have in general been brought to the attention of the Ministry for Foreign Affairs and on
the replies to the survey on trade barriers conducted in 2008. The goal is thus to form an
idea of what kind of barriers companies face and a general picture of their current operating
environment.
In the external markets, the majority of the problems concern customs clearance, customs
tariffs, and technical barriers to trade (TBTs). Russia features most prominently in nearly all
sectors and in almost all barrier categories. Russia is Finland's most important trading
partner and, for example in 2008, it was the largest single export and import market area in
terms of euro.
As far as the internal market of the EU is concerned, the problems are shared by a large
number of countries. Considering barriers to export, above an average number of internal
export disturbances are encountered in Poland, the Baltic states and Germany. The most
prominent barrier types are technical barriers to trade, competition conditions, and issues
related to taxation. As regards technical barriers to trade, the results of the survey confirm
the view that as a result of the progress in the harmonisation of technical provisions at EU
level, they have become less frequent. The great number of TBTs reported in Finland can be
explained by the fact that, in general, problems encountered in the domestic markets are
better known than problems confronted in the export markets. As far as import is concerned,
the anti-dumping measures applied by the EU attracted criticism.
In the report, trade barriers encountered by companies are divided by sector, type of barrier
and country. All of them are discussed from the point of view of both the external and
internal markets. The intention is to help readers study the report in light of own interests.
The end of the report is devoted to removal of barriers to trade.
The content of the report is based on information obtained from companies and does not,
therefore, necessarily represent the views of the Ministry for Foreign Affairs and the
Ministry for Employment and the Economy, which are the public authorities in Finland
responsible for barriers to trade.
7
8
1. Survey on barriers to trade 2008 - 2009
In autumn 2008, the Ministry for Foreign Affairs, jointly with the Ministry of Employment
and the Economy, the Confederation of Finnish Industries, the Central Chamber of
Commerce, the Federation of Finnish Enterprises and Finpro, carried out a survey
concerning barriers to export, import and investment. The survey was conducted in the form
of a questionnaire, sent to about 2500 Finnish businesses engaged in foreign trade. The
questionnaire could be filled out also on the Ministry's website. A commendable number of
replies was received, some 360 in all, reporting about more than 700 barriers to trade. Of the
reported barriers, less than a fifth concerned problems in the internal market. A similar
survey was conducted previously in 2005.
The results of this survey largely coincide with the outcome of the previous survey of 2005
and show that Finnish companies face by far the most barriers to trade in their foreign
operations in Russia followed by the China, USA and India. The first three are Finland's
most important trading partners outside the EU, but this alone cannot explain the large
number of reported trade barriers in Russia.
As regards different types of barriers, the majority of reports concerned customs tariffs and
customs procedures. Technical barriers to trade also became topical again. In Russia, in
particular, the burdensome certification procedures and documentation requirements are
considered to hinder trade. Furthermore, problems in the business environment, such as
cumbersome bureaucracy and corruption in the country of operation complicate Finnish
companies' foreign trade activities. Problems related to, among other things, movement of
persons were reported as well.
The majority of the reports received concerned machines and equipment, electronics, forest
and metal industries.
Problems were also encountered in the internal market, especially in the Baltic States,
Poland and Germany. Barriers were distributed evenly across the range of barrier types. The
greatest number of reports concerned technical barriers to trade, taxation and taxation
practices, and problems in the competition environment, business environment and public
procurement. In terms of different sectors the most reports of problems concerned building
and interior design, machines and equipment, and the ICT sectors. When the internal market
is discussed, reference is made not only to the EU Member States but also Iceland,
Liechtenstein and Norway, which are non-EU countries belonging to the European
Economic Area (EEA).
The next step in the clarification process is to seek solutions to problems reported by
companies. The clarification starts, if required, by contacting the company that has reported
a barrier to trade in order to get further information. Which procedure or means of
intervention is chosen is conditional upon the nature of the problem or barrier and the
country where it is encountered. The Ministry for Foreign Affairs has various channels at its
disposal to resolve barriers to trade, the most important ones being direct bilateral contacts
with the authorities of the country of operation, contacts to the European Commission and
the WTO mechanisms, which are open to Finland through the EC's common trade policy.
For questions related to the internal market, the Ministry of Employment and the Economy
can use the services of the on-line problem solving network SOLVIT. In handling trade
barriers, the Ministries also maintain effective relations with different organisations of the
business community.
9
The reported barriers to trade and investment have been addressed and work on them is well
under way. Progress has been reached in many cases already and individual barriers have
been eliminated. All reported cases are kept in absolute confidence and measures to remove
a trade barrier are taken only after the company concerned has given its consent to the
procedure.
The Ministry for Foreign Affairs encourages companies to report barriers to trade and
investment whenever encountered in their foreign trade also in the future. Barriers to trade
can be reported to the Ministry via a link to a questionnaire at
http://formin.finland.fi/public/default.aspx?nodeid=15278&contentlan=2&culture=en-US)
or directly by email or phone to the Market Access Unit.
Head of Unit Ilkka Saarinen +358 9 1605 6327
Commercial Secretary Selina Kangas +358 9 1605 5543
Ministry for Foreign Affairs
Department for External Economic Relations
Unit for Market Access
PO Box 413, 00023 Government
Finland
E-mail: [email protected]
10
2. Finland's most important export and import markets in 20081
2.1 Export markets - Russia in lead position, followed by Sweden and Germany
The value of Finland's export in 2008 was 65.5 billion euro, which corresponds almost
exactly to the level of the previous year. The boom of the first half of the year ended in a
tumble in November-December, when export was clearly down as compared with 2007.
The poor performance in late 2008 was caused, in particular, by a decline in the export of
mobile phone accessories and metal and forestry products. Export of chemical industry
products, machinery and motors, on the other hand, was on the increase.
The trade surplus remained at 3.4 billion euro as compared with nearly 6.1 billion euro a
year before. The surplus has been smaller than the previous year last in 1992.
Non-EU countries' share of Finland's foreign trade grew mainly thanks to trade with Russia
and Russia became Finland's most important trading partner in both export and import.
Russia's share of the total value of Finland's exports in 2008 was 11.6 %. Sweden and
Germany were next with a share of precisely 10 % both. Of the big export countries, also
Ukraine, Brazil and Australia were up. As regards non-EU countries other than Russia, the
biggest export destinations were the USA with a share of 6.3 % and China with 3.1 % of the
total value of Finland's exports.
The EU's share of Finland's exports shrank slightly. As recently as in 2007, the EU
accounted for 56.8 % of Finland's total exports but because of the favourable development
in the external trade the union's share fell to 55.9 % in 2008. Of the EU Member States that
are Finland's big trading partners, Poland increased its share considerably in both export and
import. Exports to Italy and Denmark developed well while exports to Germany, Sweden
and Great Britain remained below the previous year by several percentage points.
Finland's main trading partners 2008
Exports
Target country
Accumulated
value 1000€
Share %
Change
07/08
(%)
Russia
Sweden
Germany
USA
United Kingdom
Netherlands
France
Italy
Poland
7
6
6
4
3
3
2
2
2
11,6
10
10
6,3
5,5
5,1
3,5
3,3
3,2
13
-7
-8
-1
-6
-8
-2
17
36
1
612
578
557
146
595
368
288
161
105
000
000
000
000
000
000
000
000
000
Source: National Board of Customs
11
Main Trading Partners 2008
Exports
Russia
Sweden
Germany
USA
12 %
UK
10 %
38 %
Netherlands
France
10 %
Poland
China
6%
3 3%%
3 %4 %
Italy
Others
6%
5%
The value of exports of metal, mechanical and vehicle industries grew almost throughout
the first months of last year, but in November exports declined by more than a quarter, and
in December by almost a fifth as compared with the previous year. The change was largely
due to falling prices in the basic metal industry.
Export in the shipbuilding sector remained below the previous year's figures, too. On the
other hand, the export of machinery and equipment grew throughout the year except for a
few months and was up by 7 % on 2007 at the end of the year. In the export of cars, there
was a clear dent in October-November, but at the annual level the sector was still slightly up
on the previous year.
In the export of electro-technical products, there were marked fluctuations. The growth rate
was at its highest in April, with a quarter up on the year before. The value of exports fell by
one decimal point in July, increased again in September-October, but took a dive again in
November-December and was finally clearly down from the previous year. Considering the
whole year, the outcome was growth by 2 %.
The value of mobile phone exports was 6.5 billion euro, showing a 5 % decline on the year
before. The biggest countries of export were Great Britain, Italy, which has grown its share
markedly, and Russia.
Forest industry exports were slightly increasing in January-February as a result of paper
exports, but have been on a marked decline since then. In November-December, exports fell
both in mechanical forest industry and in pulp and paper industry, dropping by a fifth on
2007. In the year 2008 as a whole, paper exports came down by 7 % and pulp exports by 13
%. Mechanical forest industry exports plunged a fifth in the year under review. Exports of
plywood and other wood products dropped by only 12 %, but sawn wood exports dwindled
by a fourth.
In the chemical industry, export grew by 14 % in 2008. The sector experienced a boom in
export from January through October with only a minor drop in April. In November, export
12
turned down by 5 % and, in December, the sector showed a decline by a fifth. Even though
the value of exports in all the main chemical industry product groups fell during the last
months of the year under review, the annual value of oil products rose by a fourth on the
previous year and the value of basic chemical industry grew by 12 %. The export of plastic
industry products also remained at the level of exports in 2007 despite a fall towards the end
of the year.
2.1 Import markets - The same countries hold lead position also in imports2
Imports too fell towards the end of the year under review, but its value was nevertheless 4 %
up on the year before, totalling 62.1 billion euro. The growth of Finland's imports slowed
down because of, for example, the fall in metal and ore concentrate prices.
The lead country in imports was Russia with a share of 16.3 %, up by more than 20 %.
Germany was the second largest source of imports with a share of 14 %, followed by
Sweden with a share of 9.9 %. Imports from Sweden grew by about five per cent on the
previous year. The other main import countries were Poland, South Korea and Norway;
imports from South Korea grew as much as 43 % and its share of Finland's total imports
rose to 2.5 %. Imports from Great Britain and Italy clearly decreased. As for the external
markets, China continued to remain an important source of imports, showing a 7 % share of
Finland's total imports. The EU's share of Finland's imports fell from 56.1 % in 2007 to 54.8
% in 2008.
Finland's main trading partners 2008, Imports
Country of origin
Russia
Germany
Sweden
China
Netherlands
United Kingdom
France
Italy
USA
Norway
South-Korea
Japan
Poland
2
Accumulated
value 1000€
10
8
6
4
2
2
2
1
1
1
1
1
1
140
707
168
365
604
570
109
866
853
677
553
253
099
000
000
000
000
000
000
000
000
000
000
000
000
000
Share %
Change
07/08 (%)
16,3
14
9,9
7
4,2
4,1
3,4
3
3
2,7
2,5
2
1,8
21
3
5
-2
-4
-11
-1
-10
-8
29
43
-22
38
Source: National Board of Customs
13
Main Trading Partners 2008
Imports
Russia
Germany
16 %
Sweden
China
Netherlands
UK
28 %
14 %
2%
3%
3%
3%
3%
3%
10 %
4% 4%
France
Italy
USA
Norway
South Korea
Poland
Others
7%
In the majority of the main industrial groupings (MIG), imports grew last year. The value of
energy products grew by a third and imports in MIG energy was up in January-September
on the corresponding months in the year before by 30 to 50 %. In October, the growth fell to
5 % and its value turned to a downward trend in November-December. The changes in the
value of imports were caused by the development in crude oil prices; the price of oil was
clearly higher than in the year before, except in October-December, while its volume
remained below the level of imports in 2007 throughout the year under review.
Raw material and intermediate goods import dropped last year by 6 %. The value of imports
fell in nearly every month. In November-December, there was a sharper plunge and imports
remained about a fifth below the figures of the year before. The dive in the grouping was
caused mainly by a fall of basic metal industry product prices and the drop by 40 % in the
imports of electronics components.
On the other hand, import of basic chemical industry products grew by 7 %. The import of
capital goods continued to increase January through September, but started to decline by a
few percentage points in October-November and in December capital goods imports
remained a fourth lower than in December 2007. As a result of the positive trend in the early
months of the year, capital goods imports in 2008 surpassed the corresponding figure of
2007 by 3 %. Automobile imports kept consumer durable imports up in the first half of the
year even though the import of radios, television sets and other entertainment electronics
started to decrease. In November-December, car imports plummeted about 40 % below the
previous year but because of imports earlier in the year, the annual imports of consumer
durables remained at the 2007 levels.
14
3. Barriers to trade encountered by businesses
3.1 Trade barriers by type of barrier
3.1.1 External markets - customs procedures, high customs tariffs and technical barriers
to trade dominate
By far the most common problems encountered by companies in their foreign trade are
related to customs procedures and technical barriers to trade. The problems in the crossborder movement of goods concern both the actual customs procedures and high customs
tariffs. Not only the high tariffs and other fees but also their variability and poor
predictability complicate trade. Technical barriers to trade include, for example, different
technical regulations, standards and certification, which are discriminatory or unduly
complex. Customs procedures, customs tariffs and technical barriers to trade constitute
nearly half of all the identified barriers to trade. The next biggest barrier category is the
business environment in the country of operation.
Barriers by type outside the EU and the EEA
250
203
200
188
171
150
124
100
89
86
80
67
51
51
50
51
37
33
20
0
Customs proceedings, 16%
Technical barriers to trade, 15%
Customs tariffs, 14%
Business environment of the target country, 10%
Taxation, fiscal legislation and other additional fees, 7%
Other problems and barriers, 7%
Movement of persons, 6%
Quantitative restrictions and licensing, 5%
Competition environment , 4%
Industrial property rights and copyrights, 4%
Capital movements and current transactions, 4%
Public procurement, 3%
Questions concerning the company's judicial position, 3%
Anti-dumping duties, countervailing duties and safeguard measures, 2%
15
Customs procedures on export and import of goods
Customs procedures refer to all the phases that are linked with the cross-border movement
of goods in export and import trade. Issues that are closely related to the procedure include
code of conduct, customs categories, required documentation and other special measures.
Out of all identified technical barriers to trade, 16 % are linked with customs procedures.
Over a half of all identified problems concerning customs procedures are encountered in the
export to and import from Russia. Considerable difficulty has been caused by burdensome
documentation requirements, heavy bureaucracy, and slow customs clearance. Recently,
problems have also been encountered in temporary customs clearance of equipment in
which there are inconvenient procedures and complicated customs and documentation
requirements. In the forest sector, the new classification requirements of timber in Russia
are causing problems in the import sector.
Inconsistencies related to customs procedures have been reported not only in Russia but also
in nearly all other external markets. In Ukraine, in particular, customs procedures are
considered to be cumbersome and slow. The procedure is complicated because of, for
example, constant changes in practice and in documentation requirements. Customs
procedure problems have been noted also in Brazil, China and the USA.
Trade facilitation, that is, simplification and harmonisation of international trade procedures,
has been long on the agenda of, for example, the United Nations Centre for Trade
Facilitation and Electronic Business (CEFACT), a UN body under the administration of the
United Nations Economic Commission for Europe (UNECE), and the World Customs
Organization (WCO). The World Trade Organization (WTO) included trade facilitation in
its agenda in 1996 with a view to supplementing relevant regulations. The objective of the
negotiations is to clarify and develop the existing WTO obligations in order to expedite the
movement, release and clearance of goods. Another objective is to enhance the capacity for
technical assistance and support and to create standards that would enable effective
cooperation between customs authorities and other relevant public authorities.
Customs tariffs on export and import of goods
High customs tariffs cause considerable trade barriers to companies in different parts of the
world. Problems are encountered mainly in Russia, but high tariffs are faced also in, for
example, India, the USA and South America, where high customs tariffs upheld especially
by Brazil and Argentina hamper trade enormously in the forest, metal and machines and
equipment sectors. In India, high customs tariffs are particularly common in the ICT, metal
and forest sectors. In the USA, high tariffs are met, among other things, in the medical
devices sector, even though the general level of the customs duties on industrial products is
fairly low.
Rising customs tariffs have been detected recently in different sectors, especially in Russia
in, for example, metal, forest and foodstuff industry products. Of the identified trade
barriers, 14 % are export and import tariffs or other similar charges. Customs tariffs are high
in several sectors but, above all in the metal and forest industries.
16
Reports from companies clearly indicate that there is uncertainty concerning import tariffs
and their increases imposed by Russia. Nearly all forest industry companies in Finland have
in one way or another had to deal with customs tariff increases and the related uncertainties.
In the metal industries, too, problems related to various import and export charges are
common.
Customs tariffs as such are an acceptable means of restricting trade. WTO member
countries have bound their customs tariff rates at a certain maximum level which the applied
rate must not exceed. However, some countries have not bound all their tariff headings or
they have bound them to a level clearly higher than the applied rate. Customs tariffs agreed
within the WTO may be reduced by both multilateral WTO negotiations and bilateral
agreements. One of the objectives in the WTO negotiations is that member countries would
bind their tariff headings as comprehensively as possibly.
Technical Barriers to Trade (TBTs)
Technical barriers to trade refer to the differences between technical regulations, standards
and conformity assessments, which hinder trade. Examples of typical TBTs include various
product specifications, compulsory certificates and documents, such as hygiene certificates,
conformity certificates, and compliance certificates. Technical regulations are laid down to
ensure that products are safe, they are made for a certain use and are compatible with other
products, but in some cases the regulations can also effectively protect domestic production
and markets.
Based on information gathered from companies, technical barriers to trade are nearly as
common a problem as customs barriers and account for about 15 % of all trade barriers. The
majority of TBTs, over half of them, have been encountered in Russia; however, they have
become a factor that disrupts trade also in, for example, the USA and China. In Russia,
problems occur especially in relation to the GOST R certification requirements. The Russian
GOST R conformity certification is a compulsory certification system, which enables
products' access to the Russian market and their sale in Russia. Products that are subject to
compulsory certification have been specifically defined. The list of such products fluctuates
and, therefore, in unclear situations the need for a certificate should always be clarified in
advance.
The US Lacey Act, which dates from 1900, prohibits trade in fish, game and endangered
plants obtained by violating the protection laws. The US Lacey Act was amended in
summer 2008 to apply to trees and all plants, the objective is to ensure that they are of legal
origin and have not been harvested illegally outside the USA. The amendment imposes a
wide duty to present a declaration for products made of wood and plants imported to the
USA. Unlike US manufacturers, foreign importers must file an import declaration at the
customs.
The import declaration requirement, linked with the implementation of the Lacey Act,
entails the risk of turning into a trade barrier because of the cumbersome bureaucracy. The
requirement to file a declaration also discriminates against importers, because a similar
declaration is not required from US manufacturers who sell timber or plant products on their
domestic market.
17
The basic principles of the WTO Agreement on Technical Barriers to Trade and the
Agreement on the Application of Sanitary and Phytosanitary Measures include nondiscrimination, use of least trade-restrictive means and international standards, and
transparency of procedures. According to these basic principles, all relevant provisions have
to be drawn up so that they do not discriminate against a product on the basis of origin, their
trade-restrictive effect is minimised and they are essentially based on international
standards. Moreover, transparency has to be ensured by publishing all provisions in good
time before bringing them into force and by giving separate notifications in an appropriate
manner in cases where such notifications are required.
Business environment in the countries of operation
Of all reported trade barriers, about 10 % are related to the business environment in the
country of operation. This category includes, among other things, such often systemic
problems as corruption and bureaucracy and problems arising from deficiencies in
infrastructure and political and economic uncertainty. Problems linked with the business
environment in a country of operation occur most often in the least-developed countries.
However, about two thirds of these problems are encountered in Russia. Furthermore,
Finnish companies that have established business operations in the CIS countries and India
have reported a host of problems linked with the business environment, the majority of
which are encountered in the service sector. The business environment is in fact an element
that plays a role in all sectors.
By far the most reports concern corruption and adverse effects to trade caused by it. Other
problems are defects in infrastructure, such as the road and communications network, and
shortcomings in the legislation. Problems in the business environment are often attributable
to an unstable economic and political situation.
Taxation, fiscal legislation and other surcharges
Out of the identified trade barriers, about 17 % are linked with taxation and fiscal legislation
and most of the problems are related to value added taxation (VAT) and VAT refunds. In
many cases, getting the VAT refunds takes so long that it becomes a trade barrier. In some
cases recipients have failed to obtain the refunds altogether. VAT refund problems are also
raised from time to time bilaterally. Ambiguities related to taxation occur not only in Russia
and Ukraine but also, for instance, in India, China and Brazil and mainly in such sectors as
the ICT, forest and metal industries.
WTO rules do not restrict member countries' internal taxation. However, according to
Articles I and III of the GATT Agreement, internal taxes and other payments shall not
discriminate against foreign products or companies in favour of domestic ones, or favour
imports from certain countries.
Movement of persons
About 6 % of the trade barriers, dealing with external markets, concern movement of
persons and related elements that restrict trade. Well over a half of the reported barriers are
linked with movement of persons between Finland and Russia. In nearly all cases,
18
respondents reported about very slow, complicated and bureaucratic visa and work permit
processes. As for work permits, the requirements have increased and changed.
In some cases, obtaining a work permit to the USA, India and China has been regarded as
causing friction in trade. Problems related to visas and work permits do not depend on the
field of business and they occur in all sectors.
Quantitative restrictions and licensing
Different quantitative restrictions, such as export and import quotas or monopolies and
exclusive rights, can, together with customs duties and taxes, also restrict international
trade. The licensing and control document requirements belong to this category; the
identified barriers in this category account for about 5 % of the reported barriers to trade.
A more than average share of barriers is encountered in India and Russia but similar
problems are also encountered in China and South America. South American countries
require licences that slow trade and cause additional expenses. Furthermore, applying and
obtaining a licence for export of certain products to Ukraine is cumbersome. There is not a
single field of business that encounters more barriers to trade than another, but barriers are
encountered relatively evenly across the different categories; in trade in services, problems
also occur in terms of licences.
In principle, the WTO system prohibits quantitative restrictions. However, restrictions are
permitted in exceptional cases, for example to complement trade policy instruments used
pursuant to WTO rules. Licensing may also be used for such purposes as supervision of
compliance with technical regulations. The measures have to be then applied in a manner
that restricts and discriminates against trade as little as possible with an equitable impact on
all those that it concerns. Articles XI and XIII of the GATT Agreement and the WTO
Agreement on Import Licensing regulate provisions on quantitative restrictions and import
licensing. Article XVII of the GATT Agreement, on the other hand, lays down the
constraints for state-owned enterprises and monopolies' activities and regulates their
procurement related to foreign trade.
Competition environment
The competition environment refers to defective legal regulations, monopolies, cartels,
practices that discriminate against foreign actors and support for domestic companies.
About 4 % of all trade barriers fit into this category. Roughly a half of them are detected in
Russia, where such problems as subsidies and discrimination against foreign actors are
encountered. Individual cases related to the competition environment, equally in the form of
discrimination against foreign actors, have also been reported in India and China.
The WTO Agreements contain rules that concern competition indirectly but there are no
actual competition rules or a separate competition agreement in the WTO system. The
Working Group on Trade and Competition has examined trade and competition policy
issues and the elements of a possible multilateral framework agreement. The Working
Group has addressed, in particular, the basic principles related to transparency, nondiscrimination and prohibition of cartels. Other important subject matters are modalities for
voluntary cooperation and support for a gradual development of institutions responsible for
19
competition policy in developing countries. The goal has been to establish a general
framework agreement on the core principles related to competition rules. A possible
multilateral agreement would not exclude the elaboration of bilateral cooperation
agreements in use today. The EU has concluded such agreements with the USA, Canada and
Japan.
Intellectual property rights
Intellectual property rights are the biggest problem in China. The problems relate to copying
products and other material. These and especially problems concerning registration are
common also in Russia. IPR barriers to trade account for about 4 % of all trade barriers in
external markets. The majority of reported IPR barriers occur in the machines and
equipment sector.
International rules on the protection of intellectual property rights are laid down in the
WTO's TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property
Rights). The TRIPS Agreement covers copyright and related rights, trademarks,
geographical indications, industrial designs, patents, layout-designs of integrated circuits
and protection of undisclosed information. The TRIPS Agreement strives to protect
intellectual property rights in order to enable holders of these rights to benefit from their
inventions and to prevent abuse of the inventions.
Free movement of capital
Problems related to the movement of capital arise from slow and insecure transfer of
payments, under-developed banking systems and internal payment transfers, such as
repatriation of profits. Disruptions in the aforementioned areas have been reported in
Russia, Eastern Europe, India and, to a minor extent, also in Latin America. From
Venezuela, in particular, reports have been received about restrictions and bureaucracy
imposed by the currency administration (Cadivi, Comisíon de Administracíon de Divisas).
About 4% of the identified trade barriers concern free movement of capital. Machines and
equipment, and the ICT, especially IT and consumer electronics, are sectors where problems
of free movement of capital are encountered.
Public procurement
Public procurement refers to procurement by government authorities and by regional and
local administrations, such as federal states, provinces and municipalities as well as by
procurement units of special fields (among other things, drinking water, electricity, traffic,
ports and airports). About 3 % of trade barriers encountered in the external markets are
related to public procurement. Finnish companies face problems in Russia, Ukraine, the
USA, China and India. Most often, requirements, which result in the exclusion of foreign
companies, are added to competitive tendering. Machines and equipment, and ICT are the
sectors with the greatest number of barriers related to public procurement, but barriers are
encountered also in the service trade.
20
Public procurement is regulated internationally by the WTO GPA Agreement 3 (General
Agreement on Government Procurement). The GPA Agreement covers procurement of both
goods and services. The negotiating parties' commitments may vary markedly. To a certain
extent, the principle of reciprocity is observed by the parties and, for example, the
commitments of regional and local administrations are applied only to countries which have
included the relevant entities or services in their commitments. As a rule, agreements on
public procurement are essentially based on the principle of non-discrimination and
legislative and procedural transparency. Domestic and foreign suppliers must be treated
equitably in all procurement conducted in accordance with the Agreement and invitation to
tender must be announced.
Problems related to the legal status of companies
In this report, issues that concern company form, status of ownership and, for example,
restrictions to foreign ownership are included among questions related to a company's legal
status. Trade barriers of this type account for about 3 % of all identified barriers to trade.
Problems occur in India, Russia and South America more than in other countries and the
problems usually concern restrictions to foreign ownership. Individual barriers have been
encountered in several different sectors.
Anti-dumping duties, countervailing duties and safeguard measures on export and
import of goods
Anti-dumping duties, countervailing duties and safeguard measures are trade policy
instruments used against trade-distorting measures which are applied temporarily to raise
import duties on certain products. Out of all identified trade barriers, 2 % are related to these
instruments. Companies reported on trade defence measures related to India, Ukraine,
Indonesia, Brazil and the USA. At their highest, anti-dumping duties may rise even to 70 %,
which means that they form a significant trade barrier. The metal and forest industries, in
particular, have reported about anti-dumping duties.
The use of anti-dumping duties, countervailing duties and safeguard measures is subject to
WTO rules. In the EU, anti-dumping duties are used in situations where import from nonEU countries is based on dumping and where it has had an adverse effect on industries in
the EU Member States. Countervailing duties may be imposed when import gains
disproportionate competitive advantage from government support and it causes damage to
producers in EU Member States. Safeguard measures may be taken to protect industries in
the EU against sudden and unexpected import. The measures must not be more
comprehensive than necessary to eliminate artificially obtained competitive advantage.
3
The following countries, for example, have acceded to the GPA Agreement: EU Member States, Canada, Hong Kong,
Israel, Japan, Korea, Liechtenstein, Norway, Iceland, Singapore, Switzerland and the USA.
21
Other barriers and problems
'Other barriers' is a category which comprises all other problems, which have not been
mentioned yet. Examples of these include obligations to use domestic raw materials and
inputs and export obligations imposed in order to get certain investment or import benefits;
very different types of barriers that are not classified in other categories have been listed in
this category. However, barriers in this category overlap with other types of barriers.
Other problems linked with business activities in this term of reference are, for example,
access to credits, insurance or guarantees; access to services - such as transport services -;
bookkeeping and audit requirements; problems related to agents', business partners' and
distribution networks' operation; and access to information about markets and trading
practices.
Of all barriers to trade, 7 % fall in this category and the majority of known problems
concern Russia, India, China and the USA. Barriers are found in all lines of business.
3.1.2 Internal market - Technical barriers to trade and competition environment as a
nuisance
Approximately 80 of the companies that responded to the trade barrier survey had
encountered barriers or problems in the internal market, and 130 cases were reported.
Barriers in the internal market account for about 17 % of all replies to the survey.
In the EU's internal market, the most common problems are those that are related to
technical barriers to trade and competition environment, followed by problems concerning
interpretation of taxation and national fiscal legislation. The chart below illustrates
individual companies' reports of different barriers or problems in the survey. It is worth
noting that only one entry per barrier type for a company has been made in the chart even
though a company may have encountered the same problem in one or several countries.
22
Technical barriers to trade
Barriers by type in the EU and the EEA
Taxation, fiscal legislation and
other additional fees
Other problems and barriers
25
22
20
15
Public procurement
21
Business environment of the target
country
Movement of persons
18
13
Capital movements and current
transactions
Questions concerning the
company's judicial position
Customs proceedings in export
and import
Quantitative restrictions and
licensing
Industrial property rights and
copyrights
Customs tariffs related to export
and import
1111
10
77
55
5
Competition environment
4 3
2
0
Technical barriers to trade
Technical barriers to trade form the largest category of trade barriers in the internal market.
They occur rather evenly in different countries and lines of business. Technical barriers are
the most frequent in the sectors of machines and equipment, metal, steel and extractive
industries, and building and interior design. Technical barriers to trade encountered in the
domestic market complicate business operations in some cases in export and in import, for
example, the Finnish bottle return system causes difficulties. Finnish companies have
encountered typical technical barriers to trade in the internal market mainly in the EU
Member States in general, and more specifically in the Baltic States, Poland, Great Britain,
Italy and Germany.
Generally speaking progress in the technical harmonisation of the regulation of the internal
market and, among other things, the improved status of the CE Marking can be considered
to reduce technical barriers to trade. The outcome should be compared with the number of
the businesses that replied to the survey. The most marked difference between this survey
and the corresponding survey conducted in early 2005 can be found in technical barriers to
trade. 31 % of the barriers and problems reported in 2005 concerned technical barriers as
opposed to 17 % in 2008.
The EC Court of Justice has issued significant decisions in the 21st century, which have
improved especially the free movement of products with a CE Marking. The CE Marking is
meant to enable free movement of products in the internal market of the European Union.
The CE Marking is the manufacturer's declaration that the product complies with the
essential requirements of the relevant European health, safety, environmental and consumer
23
protection legislation. The CE Marking can be affixed to a variety of products, such as toys,
building materials, machines, pharmaceutical equipment, personal protective equipment and
low voltage equipment. Further information: http://eur-lex.europa.eu/fi/index.htm Examples
of EC Court of Justice case-law: C-14/02 ATRAL (2003) ECR I-4431, C-40/04 Yonemoto
(2005) ECR I-7755, C-470/03 AGM.COS-MET (2007) ECR I-2749 and C-6/05 Medipac
(2007) ECR I-4557.
Member States can continue to issue national regulations in areas where the EC does not
have harmonised legislation. Barriers to free movement occur usually especially in these
situations, if the principle of mutual recognition is applied defectively. In accordance with
the principle of mutual recognition, Member States are, as a rule, obliged to accept market
entry of a product which has been manufactured or lawfully marketed in another EU or EEA
Member State. Efforts are made to enhance the practical application of the principle of
mutual recognition by means of a new decree (EC) No 764/2008. Further information can
be accessed at http://ec.europa.eu/enterprise/regulation/goods/mutrec_en.htm. There is also
a list of "Product Contact Points", from which information can be obtained about the
national product legislation of each Member State.
Competition environment
Based on companies' reports, competition environment, which accounted for 16 % of trade
barriers, is the second biggest group of barriers. Problems concerning the competition
environment were the most frequent in Finland. A few reports of a general character were
received about similar problems in the EU Member States in general, Germany, the Baltic
States, Poland, Slovakia, Denmark and Portugal. The problems mainly related to trade in
services, machines and equipment, and building and interior design. Companies also
informed about cases in the foodstuff, forest, metal and clothing and textile industries,
where the competition environment caused problems to their business operations. Different
forms of subsidies and monopolies were mentioned most frequently as problems
competition environment.
Public support can be admitted under certain preconditions. The European Commission is
responsible for reviewing the legality of state aid. Companies can submit complaints
concerning alleged unlawful state aid to the Commission. Alternatively, the matter can be
referred to a national court of law. Further information:
http://ec.europa.eu/competition/forms/intro_fi.html.
Taxation, fiscal legislation and surcharges
Taxation, fiscal legislation and other surcharges with a share of 14 % formed the third
biggest entity of problems in the internal market. This barrier category caused problems at
home also, mainly due to the preferential tax scheme of the Åland Islands. Poland and the
EU Member States were mentioned several times, too. Individual findings of trade barriers
of this type were made in several countries. The ICT and service sectors suffered from these
problems the most. Reported cases usually concern VAT or authorised national practices
that are under the Member State's own jurisdiction.
24
Businesses registered in Finland as VAT-liable may apply for a refund of the VAT included
in the price of goods and services purchased in another EC or EEA member state. The
decision for a refund should be done within one month from the application. However, this
is not often the case in practise and the refund process may take several months or even
longer. More information about the VAT refund in the EU as well as in Iceland, Switzerland
and Norway, please see the guidance document by the Tax Administration (only in Finnish):
http://www.vero.fi/nc/doc/download.asp?id=2304;208516.
The publication also contains the contact details of competent tax authorities in each
member state.
Public procurement
Public procurement barriers related to different sectors rather evenly, but the ICT, machines
and equipment, and building and interior design are mentioned the most often. Problems
concerning public procurement occur mainly in countries situated near Finland, such as
Sweden and the Baltic States, also Poland and Hungary. Based on the replies to the survey,
public procurement is also often linked with technical barriers to trade and competition
environment.
In the Community law, provisions on public procurement are based on the principles of
transparency and effectiveness, and equitable and non-discriminatory treatment of tenderers.
In case public procurement procedures have been misapplied, a decision may be referred to
the local court of law. More information on public procurement legislation, procedures and
possible legal remedies for companies is available on the Internet at:
http://www.tem.fi/index.phtml?s=102.
Business environment in the countries of operation
The business environment in countries of operation is often considered to pose a problem
especially in the Baltic States and Poland but reports were also received concerning
Bulgaria, Romania and Hungary. Finnish companies do not find the business environment
in their countries of operation particularly problematic in the older EU Member States. A
poor business environment in a country of operation causes problems the most in the service
and building and interior design sectors.
Free movement of persons and capital
A few reports relating to free movement of persons concerned Finland and Norway and the
different sectors were affected evenly. Problems of free movement of persons are indirectly
caused by other barriers and problems rather than trade barriers that would directly restrict
persons' free movement. Reports relating to free movement of capital often concerned long
terms of payment and slow action. More cases were reported in the building and interior
design sector.
25
Other barriers
According to the reports, intellectual property rights were not found to be a problematic
area. Also, factors relating to quantitative restrictions and licensing or various elements on
export and import of goods were not reported a problem in the internal market. Companies
reported problems in these areas seldom and the problems were caused by different
practices in different Member States. The same applies to issues concerning a company's
legal status. The 10 percentage point share of actual other barriers and problems was
regionally related to Finland and some other countries; in terms of sectors, mainly to
services.
26
3.2 Barriers to trade by sector
3.2.1 The most frequent barriers in the external markets - ICT and machines and
equipment sectors
A sectoral survey of Finnish export and import companies shows that the majority of
disturbances in foreign trade are encountered in trade in machines and equipment and the
ICT sector. The ICT sector includes also consumer electronics.
Barriers by sector outside the EU and the EEA
4 %2 %
ICT (incl. consumer
electronics)
Construction and Interior
Design
Metall, steel and extractive
industry
Forest industry
2%
16 %
6%
Machines and appliances
7%
Other
16 %
7%
9%
10 %
10 %
Food industry (incl.
agriculture)
Services
Chemical industry (incl.
cosmetic and plastic)
Textile and clothing industry
Retail trade
10 %
Pharmaceutical industry
Machines and equipment
Of different sectors, machines and equipment together with the ICT sector are the lines of
business that report about barriers to trade the most. These sectors are partly overlapping
because it is difficult to find an explicit category for some electronic appliances. Machines
and equipment as a sector faces many kinds of barriers but customs procedures and
problems in fiscal legislation stand out slightly in relation to other sectors, followed by
technical barriers to trade and high customs tariffs.
While customs problems are encountered mainly in Russia and Brazil, taxation practices act
as trade barriers in, amongst others, Australia and the USA. Brazil is mentioned also for its
high customs tariffs. Technical barriers to trade bother companies also in Russia, the USA
and China. In Russia, the GOST R and other certificates are very often brought up as
technical barriers to trade. The GOST R certificate confirms that a product meets the
Russian security requirements; see Chapter 3.1, Technical Barriers to Trade.
In China and India, problems related to intellectual property rights occur as well. It is
difficult to protect products against piracy, and replication of machines and equipment takes
27
place galore. In China, in particular, legislation is much more advanced than its
implementation.
ICT, including consumer electronics
ICT sector (Information and Communications Technology) - which in this survey also
includes consumer electronics - in practice reports trade barriers as frequently as the
machines and equipment sector. About 16 % of all identified trade barriers are linked with
the ICT sector. Compared to Finland's sectoral export statistics, the figure is not surprising.
The combined share of exports of electronics and electrical products accounted for nearly 20
% of Finland's total exports in 2008, while the share of imports of this sector was about 10
%.
Problems encountered by ICT companies most often relate to customs procedures and high
customs tariffs. In addition, technical barriers to trade and the business environment in the
country of operation hinder trade. India, Russia, Latin American countries, especially Brazil
and Venezuela, and China top the list when countries are compared. Barriers are
encountered also in the USA.
In the electronics industries, technical barriers to trade arise, among other things, from
technical regulations, national marking requirements and approvals. For example, the China
Compulsory Certification, CCC certification, and GOST R in Russia and the CIS countries,
which differ from international standards, constitute significant barriers to trade.
Furthermore, the reports received bring up the unclarity stemming from China not defining
the requirements of the standard and that there is uncertainty about the places that perform
approval procedures. In Japan on the one hand and in the USA, on the other, certain
measurements are made in a manner that differs from practices in other countries and values
obtained by different means are not accepted.
Complicated customs procedures in the ICT sector are frustrating especially in Latin
America and Asia. Changing customs tariffs, slow customs procedures, and documentary
requirements in connection with customs clearance cause problems.
Building and interior design
Problems in the building and interior design sector account for about 10 % of barriers
encountered in all sectors. This figure is small considering the fact that, in the trade barrier
survey of 2005, the sector was the biggest with a share of over 20 %.
Finnish companies in the building and interior design sector have reported many types of
barriers, but the main problems are high customs tariffs, cumbersome customs procedures,
technical barriers to trade, and unfriendly business environment in the country of operation.
A marked share of reported trade barriers concern Russia again. In the number of reported
barriers Russia is followed by China and Ukraine. Some reports concern also Venezuela, the
USA and Japan. In Russia, the main barriers relate to the most common problems, such as
customs procedures, high customs tariffs and business environment while, for example, in
Japan the main source of problems is technical barriers to trade.
In the USA in the past few years, there have been problems related to the customs
classification of building products, meaning that Finnish export companies need to pay
higher import duties.
28
Metal, steel and extractive industries
Problems in the metal industry account for about 10 % of identified trade barriers, and
Russia tops the list in this sector, too, with nearly 50 % share of the reported barriers. The
bulk of trade barriers encountered by metal, steel and extractive industry companies stem
from customs procedures and customs tariffs. Inconsistencies in customs clearance,
changing requirements, bureaucracy and numerous, confusing customs tariff headings
hamper Finnish companies’ trade to and from Russia. Also such systemic problems as
corruption and obtaining visas impair the smooth flow of foreign trade.
India has recently started to raise customs duties on different metal industry products to
protect local production. Anti-dumping investigations have also been initiated that concern
products originating in Finland. Trade barriers have been reported also for instance in
Saudi-Arabia and China.
Metal processing and production are important export commodities. The metal industry and
processed metal products are important for Finland's export, accounting for about 12 % of
Finland's total exports in 2008.
Forest industry
A third of the barriers to trade in the forest industry are encountered in Russia. The reported
barriers in the forest industry account for 10% of the identified barriers. Customs tariffs and
customs clearance procedures cause problems the most.
In particular export duties on wood, sorting requirements and certificates are seen as
cumbersome and markedly hamper foreign trade in the Russian market. In other countries,
high customs duties on forest industry products in Latin America were reported and the glue
requirements on laminated wood in Japan according to the reports in practice prevent export
to Japan altogether. Also in the USA, India and China, barriers to trade in forest industry are
encountered. The US Lacey Act causes problems for exporters to the USA as well as high
customs tariffs in India. Anti-dumping duties and investigations concerning paper of Finnish
origin also cause problems to forest industry companies.
Forest industry products (sawn timber, wood products, pulp and paper) accounted for about
17.7 % of Finland's total exports in 2008, which corresponds to EUR 11.2 billion, and thus
continues to play an important role in Finland's national economy.
Foodstuff industries, including agriculture
Based on food industries' replies to the trade barrier survey of 2008 and on the number of
identified trade barriers, about 7 % of all trade barriers are encountered in the foodstuff
industries. In this survey, agricultural products are included in foodstuff industries. The
biggest group of barriers are customs procedures and high customs tariffs, but technical
barriers to trade also pose problems. They are most common in Russia, but reports mention
also, for example, China where rigid import restrictions hamper trade in meat and animal
products.
29
Russia has also raised its requirements and customs tariffs on foodstuffs recently, and the
new requirements risk several large Finnish foodstuff companies' export operations. Russia
tightened its requirements concerning, for example, milk, meat and baby food.
Services
Trade barriers in the service sector account for about 7 % of the barriers to trade in external
markets. As many as over half of all problems in trade in services are encountered in Russia.
Barriers have also emerged in India and some problems occur in many other countries. The
majority of the problems relate to the business environment in the country of operation,
customs procedures applied to products used in service supply or as a part of a service, and
free movement of capital. Service companies encounter problems related to free movement
of persons especially in Russia. For example hiring a Finnish/foreign employee to work in a
subsidiary established in Russia has been difficult because of complicated work permit and
visa arrangements.
Trade in services is regulated internationally by means of the GATS Agreement (WTO
General Agreement on Trade in Services). The Agreement covers all sectors on
international service trade, excluding services offered by the public authorities or traffic
rights concerning air traffic. Each WTO member can decide in which sector and how much
and under what terms it wants to free its service trade. WTO member countries also retain
their right to regulate service supply nationally.
Chemical industries, including rubber, plastics and cosmetics
Problems in the chemical industries account for 6 % of the reported barriers. Technical
barriers to trade, customs tariffs and customs procedures are the main problems arising in
the chemical industry. A major part of the identified problems are encountered in Russia,
Ukraine and Belarus. What bothers exporters the most is the various certificates and written
evidence required in the export of cosmetics industry products in particular.
In Russia and Ukraine, companies have encountered problems concerning the customs
classification of chemical industry products. As a consequence of incorrect classification,
companies must pay higher duties than otherwise.
Textile and clothing industries, including shoes
In the textile and clothing industries, different types of barriers occur relatively evenly. In
addition to Russia and China, Pakistan and Turkey are countries where trade barriers are
encountered in the textile and clothing sector. About 4 % of all trade barriers are
encountered in the textile sector.
In the textile industry, problems are encountered by small enterprises, in particular, because
they do not always have established knowledge about the markets and practices in the
countries of operation. Companies have also reported that in Russia, for example, subsidies
to local actors distort competition and Finnish export companies often suffer from this. In
China again, high import duties on fur products, for example, form a lucid barrier to trade.
30
Retail trade, including wholesale trade
Barriers to trade in the retail and wholesale sectors account for a small, about 4 % share of
all export and import barriers. The biggest problems concern customs procedures and
technical barriers to trade and, apart from a few exceptions, the problems occur in Russia.
Pharmaceutical industry
In this review, the pharmaceutical industry is dealt with separately, although problems
encountered in the industry account for only about 2 % of all the trade barriers in the
external markets. Companies face problems the most in Ukraine and India where different
import requirements, high customs tariffs and import licences and permits cause trouble.
The problems encountered by the pharmaceutical industry represent nearly all types of
barriers.
Other industries
Barriers reported concerning lines of industries that do not fall into any of the sectors
mentioned above account for about 9 % of all reports. They include, amongst others,
transport equipment, real estate trade, energy, alcoholic beverages, food supplements and
jewellery. The majority of problems stem from high customs tariffs and cumbersome
customs procedures.
31
3.2.2 Internal market - Barriers most common in the service sector
In the internal market, problems are encountered most frequently in the services and
building and interior design sectors, followed by machines and equipment and the ICT.
According to the reports, the least problems in the internal market occur in the
pharmaceutical, textile and clothing and chemical industries. Reports about barriers and
problems in the internal market and in the EEA countries are illustrated in the pie chart
below, which shows the percentage for each sector.
Barriers by sector in the EU and the EEA
Services
Machines and appliances
10 %
Construction and Interior Design
20 %
3%
ICT (incl. consumer electronics)
4%
Metall, steel and extractive
industry
Retail trade
4%
4%
13 %
5%
Forest industry
Chemical industry (incl. cosmetic
and plastic)
Food industry (incl. agriculture)
6%
13 %
8%
10 %
Textile and clothing industry
Pharmaceutical industry
Other
Service sector
Companies report problems the most in the service sector, which covers one fourth of all the
fields of business that the respondents are engaged in. Retail and wholesale trade and traffic
and transport were mentioned most frequently in the reports. A few reports concerned
different maintenance and planning services. A roughly equal number of problems are
encountered in the various countries, which means that only occasional reports are received
at country level. Finland was regarded as problematic from the point of view of services.
The barriers that occur in the service sector mainly concern the competition environment,
technical barriers to trade, taxation, or business environment in the country of operation, but
other types of problems are also encountered.
A competitive service market is of critical importance for the promotion of the EU's
economic growth and for the creation of jobs. The European Parliament and the Council
issued a Service Directive (2006/123/EY) in December 2006, which aims to ensure the
materialisation of services in the internal market. Member States have to complete the
32
transposition of the Directive by 28 December 2009. In the internal market, there is still a
host of barriers, which prevent many service businesses' expansion beyond their national
borders and hamper their opportunities of making full use of the internal market. The
Directive means, in the first place, that service providers and service recipients can more
effectively make use of the fundamental freedoms provided for in Articles 43 and 49 of the
Treaty Establishing the European Community: freedom of establishment and freedom to
provide cross-border services. The Directive also consolidates service recipients' rights as
users of services. In addition, the Directive contributes to the quality of services and creates
an effective system of administrative cooperation between the Member States.
Building and interior design
In the number of barriers, the service sector was followed by the building and interior
design sector together with the machines and equipment sector. Based on companies'
reports, building products encountered often technical barriers to trade. Furthermore,
problems occurred in public procurement and relating to the competition environment and
the business environment in the country of operation. In terms of regions, problems were
encountered rather evenly, though more in Poland and in the Baltic States and fewer in
Sweden and Finland.
Machines and equipment
As for machines and equipment, the reported cases related to different countries rather
evenly, but Finland and Germany were mentioned more frequently than other countries. The
principal types of problems were technical barriers to trade and competition environment.
ICT (including consumer electronics)
In this sector, problems occurred mainly in public procurement and in matters related to
taxation practice. Problems were encountered everywhere, but slightly more in Hungary and
Sweden.
Other sectors
In this review, other sectors -category refers to individual industries. Companies operating
in these sectors reported about many problems in Finland.
The other sectors that were identified were mentioned in companies' reports occasionally. It
is worth noting that as few as three representatives of one line of business account for 4 %
of the share of all companies that had encountered problems in the internal market.
Furthermore, all three sectoral actors in the foodstuff industries mentioned Finland in their
reports. The metal, steel and excavating industries reported technical trade barriers. In the
forest and textiles and clothing industries, a few problems were mentioned focusing on the
competition environment.
33
34
3.3 Barriers to trade by country
3.3.1 External markets - over 40% of all identified problems encountered in Russia
The review of different sectors and types of barriers above clearly shows that the majority of
all trade barriers that Finnish companies encounter in the external markets occur in the trade
between Finland and Russia. This chapter deals with trade barriers in different countries and
examines structural and systemic problems typical of different countries.
Barriers by country outside the EU and the EEA
575
600
400
160
200
104 103
89
79
68
64
30
22
18
54
0
Russia, 42 %
South America, 8%
China, 11,5%
India 7,5%
Other Asia and Oceania, 7%
Ukraine, 5%
Untited States of America, 6%
Middle East and North Africa, 4,5 %
CIS, 2%
Africa, 1%
Japan, 1,5%
Others, 4%
Russia
Russia is Finland's most important trading partner in both export and import. Exports to
Russia in 2008 accounted for 11.6 % and imports 16.3 % of Finland's trade. Growth was
very strong in both export and import, up 13 % and as much as 21 % respectively on the
previous year. Russia's significance as a trading partner shows also in country-specific trade
barrier statistics, because based on companies reports about 42% of all barriers to trade are
encountered in Russia.
In Russia, The main source of problems is customs procedures, because they are
inconsistent, unpredictable and slow. The next biggest group of barriers is high customs
tariffs and technical barriers to trade. Russia has recently raised its customs duties on several
products, such as milk products and transport equipment. Technical barriers to trade occur
in the form of different documentary and certification requirements, of which GOST R
certification causes problems the most. In Russia, problems are encountered in all sectors,
but the building and interior design, machines and equipment, and metal and forest industry
are sectors where problems are encountered the most.
Companies have complained especially about constant changes in the customs procedures
and about arbitrary and slow action. Examples of problems related to customs procedures
35
include unpredictable changes in document requirements, demand of extra documents, and
ambiguities in customs classification.
In Russia, problems encountered concern, for example, the business environment and
freedom of movement of persons. Problems related to business environment cover such
matters corruption and bureaucracy, which are frequent in Russia. Problems related to the
free movement of persons concern all visa and work permit problems, of which companies
have also reported numerous cases. Long processing periods is of particular concern for
those applying for a visa or work permit.
China
China's share of Finland's exports dropped by 5 % on the previous year and was about 3 %
of our total exports. As for imports, China's share was slightly higher, 7 %, but even this
figure had fallen by a couple of percentage points on 2007.
China is second after Russia when it comes to the frequency of barriers to trade. Close to 11
% of the identified barriers to trade concern trade with China. The majority of trade barriers
encountered are technical barriers to trade or concern intellectual property rights. Trade
barriers are encountered most often in the ICT and machines and equipment sectors.
Intellectual property rights and copying of products, in particular, has been a frequent
problem. Many companies have reported cases of direct copying and the difficulty of
preventing this. According to companies, it is difficult in China to get protection for one's
products.
Furthermore, technical barriers to trade significantly hamper companies' activities in China.
Issues, such as, the national certification requirements, especially the CCC requirement
(China Compulsory Certificate) are highlighted. Submitting products to acceptance calls for
complicated and expensive testing.
Problems arise also from the fact that the Chinese do not necessarily have established
standards and acceptance specifications. Companies report that Chinese standardisation
organisations are developing technical standards in fields where there are already
international open standards. A further complication stems from the fact that international
companies cannot take full part in the Chinese standardisation process, because Chinese
standardisation organisations classify companies into ”domestic” and ”foreign” ones.
India
There has been a steady upward trend in trade between Finland and India since 2002. In
2008, imports grew by 15 % and exports by 17 % on the year before. India's share of
Finland's total imports and exports has grown in the past years but still accounts for less
than one per cent.
Slightly less than 8 % of all identified trade barriers are concern India. Reports relating to
India concern different types of barriers relatively evenly, but the majority of reports are
related to high customs tariffs and time-consuming and inconsistent customs procedures.
Other matters that clearly hamper trade include difficult business environment, especially
with reference to bureaucracy and deficient infrastructure, and issues related to taxation and
36
fiscal legislation, such as complicated and ambiguous fiscal legislation. Inadequate
protection of intellectual property rights and free movement of persons are also mentioned
in companies' reports.
Examining the different sectors, trade barriers are the most common in the machines and
equipment, service and ICT sectors.
The USA
The USA is Finland's second biggest trading partner after Russia in exports to the external
markets. In 2008, export to the USA was worth over 4 billion euro and the US’ share of
Finland's total exports was over 6 %. Trade barriers concerning the USA also account for
about 6 % of all identified barriers to trade. The largest barrier type in the US market is
technical barriers to trade. Machines and equipment is the sector where the majority of
problems are encountered. Reports have been received about more stringent requirements
on foreign actors than are set on domestic actors in the USA.
In addition to the Lacey Act (see Chapter 3.1, Technical Barriers to Trade), the regulations
of the FDA (Food and Drug Administration) are still tougher in essential respect than
requirements in Europe and, thus, external importers are in an adverse position on the US
market.
The Jones Act of 1920 bans the use, sale or leasing of vessels, which have been built
abroad, for commercial use in traffic between places in inland or regional waters of the
USA. The law, which is problematic from the point of view of WTO rules, has been
explained to be of importance for the national security. Even though the import of foreign
vessels is not expressly forbidden, the de facto effect is equal to a ban. On account of its
wide range of application, it also covers, for example, dredgers.
American shipbuilders that comply with the domestic content requirement get both direct
support and tax relief by virtue of the Jones Act. On account of resistance from the part of
the US Congress, the country has not acceded to the OECD Shipbuilding Agreement
(Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding
and Repair Industry) of 1994, which aims at elimination of direct and indirect support in the
shipbuilding industry.
Ukraine
Ukraine became a WTO member in May 2008 and all WTO rules will be binding on the
country after a period of transition. Ukraine has to amend its national standards to meet the
criteria of international standards by 30 December 2011.
Finnish companies' interest in the Ukrainian market has grown recently, which also shows
in a slight increase in the number of reported trade barriers. Of the reported barriers 5 %
concern Ukraine. The majority of the trade barriers are related to customs procedures, but
companies have also reported technical barriers to trade and problems relating to the
business environment. The most serious identified problems concern VAT refunds. Several
Finnish businesses that have established operations in Ukraine have encountered difficulties
in obtaining their VATs in Ukraine. The issue has been actively on the agenda of Finnish
37
and Ukrainian public authorities and it is hoped that a solution will be reached in the near
future.
As regards technical barriers to trade, Ukraine applies different certificates of conformity,
hygiene certificates and other documents, which effectively protect local production. The
negotiations about Ukraine's WTO membership and the current free trade negotiations
between the EU and Ukraine are expected to bring relief to the technical trade barriers.
Japan
Less than 2 % of all barriers to trade are encountered in Japan; this figure is clearly small in
relation to the country's share of our total foreign trade. Companies' greatest challenges
continue to arise from technical regulations and standards that differ from the European
ones and from taxation and fiscal legislation. The reported problems concern mainly
electronic and forest industry products. The tests and certificates required for these products
are often lengthy and complex.
In many cases, the barriers do not make trade impracticable but raise operating costs.
Deviating standards are meant to partly protect Japanese actors, but they often also reflect
customers' preferences, which may be very demanding particularly as concerns product
safety. Food safety issues have gained publicity in the recent past especially as a result of
mislabelling of ingredients and expiry dates.
As a rule, the regulations pertaining to trade in goods in Japan have developed to a
favourable direction.
Latin America
In this report, Latin America covers all countries in South America, although the majority of
reported trade barriers concern Brazil, Venezuela and Argentine.
Problems encountered in South America account for about 8 % of all trade barriers. The
reported barriers fall into several categories, the biggest of which is high customs tariffs; the
others include customs procedures, free movement of capital and taxation and fiscal
legislation. Customs tariffs are high especially in Brazil. In Venezuela, the problems are
related to the free movement of capital. Problems stem from the regulations set by Cadivi,
the Venezuelan Foreign Exchange Administration Commission, on the withdrawal and use
of foreign currency. This compels foreign actors to use the local currency, which is much
more sensitive to, for example, devaluation and other disturbances.
Reports relating to Argentina concern different types of barriers evenly. Problems are the
most frequent in the ICT and forest sectors.
Other countries in Asia and Oceania
In this report, this category comprises Australia, Bangladesh, South Korea, the Philippines,
Hong Kong, Indonesia, Malaysia, Pakistan, Taiwan, New Zealand and Vietnam. About 7 %
of the reported barriers to trade fall into this group of countries.
38
In Australia, diverging taxation and fiscal legislation is considered to pose problems at
times. In addition, public procurement in the different states of the country has been
problematic, because local actors are often given preferential treatment even though the
local content requirement in percentage terms was not applicable.
In Indonesia, individual difficulties are encountered in several different sectors and barrier
categories. Customs tariffs, diverging fiscal legislation and corruption, for example, hamper
Finnish companies' activities in Indonesia. Technical regulations pertaining to the
electronics industry also cause problems.
Reports of trade barriers in Pakistan are mainly related to the business environment in the
country. Widely spread corruption, poor infrastructure, and banking are areas in which the
most problems are encountered in Pakistan.
As for Vietnam and Malaysia, high customs duties in the forest industry pose barriers to
trade.
Middle East and North Africa
In this report, the Middle East and North Africa comprises the United Arab Emirates, Egypt,
Jordan, Kuwait, Morocco, Libya, Saudi Arabia, Syria, Turkey, Tunisia, Algeria and Sudan.
Saudi Arabia and Algeria top the list in terms of the most identified trade barriers, totalling
about 5 % of all barriers. The most common sources of concern are customs procedures and
high customs tariffs. Some problems related to movement of persons were also reported.
Reports concerning Saudi Arabia are related to different types of barriers. One problem,
concerning free movement of capital, is letters of credit, which are often used as a means of
payment in Saudi Arabia. The problem is that Saudi Arabian letters of credit do not seem
logical and they are very hard to understand. Furthermore, Saudi Arabia maintains technical
regulations and requires certificates, such as the SASO certificate, which are essential at
least for functional foods and chemicals and can be complicated.
In Algeria, problems arise from slow customs procedures and the business environment.
CIS countries, excluding Russia
The CIS countries are: Russia, Kazakhstan, Uzbekistan, Belarus, Armenia, Azerbaijan,
Kyrgyzstan, Moldova and Tajikistan (Turkmenistan is an associate country). Relatively few
barriers to trade are encountered in the CIS countries, excluding Russia; the percentage is
only some 2 %, of which the majority concern Belarus.
The majority of the barriers to trade are linked with the business environment, customs
procedures, or technical requirements. Corruption and unusual practices in many areas are
considered to pose problems in the CIS countries. In Kazakhstan, temporary export bans are
a problem; Belarus, on the other hand, requires different certificates and documents which
form technical barriers to trade for export companies.
39
Africa
Identified trade barriers in other African countries account for only one per cent of all trade
barriers. Problems concerning a number of countries have been reported, but they are often
of systemic nature and linked with the local operational business environment. One example
is slow and troublesome delivery of goods in Tanzania, where according to the companies
competent actors in the different phases of production are few and infrastructure is poor.
Similar problems are encountered in Kenya.
In South Africa, the Black Economic Empowerment (BEE) legislation, which aims to speed
up transfer of economic power from the white minority to the black majority, is one source
of problems for companies. Despite the legitimate goals laid down in legislation, Finnish
companies find the laws problematic and regard it as a barrier to trade. For companies that
do not meet the BEE requirements, the chances of operation in South Africa are limited in
the long-term.
In the machines and equipment sector, high customs tariffs and cumbersome customs
procedures are also encountered in the African countries.
According to Customs of Finland statistics, the group of other African countries accounts
for about 1.3 % of Finland's total exports, totalling some 879 million euro, of which South
Africa's share is about a half.
Other countries
Countries, which are not included in any of the above categories but from where reports
were received, are classified under other countries. Examples of these countries are the
Mediterranean countries, Iran, Serbia, Israel, Mongolia, Cuba, North Korea, Yemen and
Bangladesh. They account for about 4 % of all trade barriers. Reports concern individual
barriers from different sectors across the range of barrier types.
3.3.2 Internal market - most barriers in Finland and in the Baltic States and Poland
Companies' reports of encountered barriers or problems are visualised in the following
chart. The Baltic States and the EU Member States are mentioned as groups of their own
and individual countries are not listed. In case a company has encountered two different
types of barriers in one country, two mentions have been recorded in respect of the country.
Equally, if a company has encountered the same barrier in several countries, the case is
marked for each country. However, if one company has faced the same barrier type in one
country more than once, only one mention has been made. This is to avoid branding a
country more problematic than it really is based on reports by one single company.
40
Barriers by country in the EU and the EEA
50
45
40
30
20
10
13 12
10 9
5
5
5
5
4
4
4
3
3
3
3
3
3
3
3
2
2
1
1
1
1
0
Finland
Poland
EU countries
Germany
Baltic countries
Latvia
Estonia
Sweden
UK
Spain
Portugal
Denmark
Norway
Lithuania
Italy
Romania
Netherlands
France
Bulgaria
Hungary
Greece
Ireland
Czech Republic
Belgium
Slovakia
Nordic countries
The Nordic countries
Companies did not report many barriers to trade in the Nordic countries except in Finland.
Barriers and problems were encountered in the domestic market concerning, among other
things, technical barriers to trade, competition environment and taxation, in particular. The
majority of problems concerned actors in the retail and wholesale trade, machines and
equipment, and foodstuff industries. Nearly a third of all reports related to the internal
market dealt with Finland.
The Baltic States and Poland
Finnish companies find the Baltic States and Poland problematic regions. Together these
countries account for nearly a fourth of all reported problem areas. In Estonia, Latvia,
Lithuania and Poland, barriers to trade were mainly related to the business environment,
taxation, competition environment, public procurement and technical barriers to trade. The
building and interior design and service sectors suffered from problems the most.
The EU Member States in general and Germany
The reported barriers encountered in Germany are spread evenly among sectors.
Approximately half of the reports in Germany concerned technical barriers to trade.
Less than a tenth of the reported barriers and problems relate to the EU Member States in
general. The reports are spread rather evenly across the different types of barriers and
sectors.
The survey revealed that barriers are not encountered in all EU/EEA countries. Finnish
companies did not report barriers to trade in Austria, Cyprus, Luxemburg, Malta and
Slovenia and in two EEA countries, Iceland and Liechtenstein.
41
42
4. Means to address barriers to trade
4.1 Barriers to trade in Third Country markets
The promotion of Finnish companies' export and internationalisation is one of the most
important tasks of the Finnish Foreign Service. The Foreign Service has started to
consistently intensify these activities, grouping them in the following three pillars in
accordance with the new Foreign Service Strategy for Promoting Exports and
Internationalisation (Foreign Service EPI):
1. Pillar I: influencing the business environment of Finnish enterprises and rapid
action to deal with the problems they face;
2. Pillar II: promotional activities;
3. Pillar III: information services, production of information to support the foreign
business activities of enterprises.
Pillar I focuses on the removal of barriers to trade encountered by Finnish companies on the
export markets. This involves influencing the business environment so that the conditions in
third countries would become more favourable to Finnish business. In practice this means
concluding WTO and bilateral trade agreements with the countries of operation.
Furthermore, individual, concrete cases are clarified and companies are provided with
assistance.
Activities in pillar I of the EPI include analysing the development of the internal regulatory
environment in the country of operation and influencing it in a manner that facilitates and
promotes Finnish companies' business and trade, establishment and production. In the
following, a more detailed presentation is given of the sphere of operation of pillar I,
including a description of the instruments available to the Foreign Service in its efforts to
remove barriers to trade and to influence the external working environment in general.
Even though pillar I covers the actual clearing of barriers to trade, pillars II and III can also
play a role in the removal of trade barriers. The impact is more indirect but still important.
Among other things the following means of influence can be used: export promotion visits,
different seminars and events, information services, such as printed publications and online
services on the Internet. This report is part of the information services. The two latter pillars
are preventative, focusing often on action at home. An important element of the promotional
activities is ministerial export promotion visits together with country-specific information
services.
The Foreign Ministry's role in import policy and especially in the facilitation of imports
from developing countries is based on the Government's Development Policy Programme
and Trade Policy Programme. According to the programmes, facilitation of imports from
developing countries is one means to reach the following goals:
developing countries' integration into the international trade system and meeting the
development goals
improved access to and variety of import products
acquisition of competitive production inputs for entrepreneurial activities.
43
Development and trade policy goals are thus interlinked in activities related to import
policy. The following link directs the reader to the import policy guideline of the Ministry
for Foreign Affairs.
http://formin.finland.fi/public/default.aspx?contentId=159164&nodeId=15457
The Ministry of Employment and the Economy also supports the export and
internationalisation of companies' and develops the preconditions of operation in many
different ways, such as provision of grants for internationalisation and maintenance of a
network of overseas service points. Networks abroad include Finpro's export centres and the
network of technology specialists of the Finnish Funding Agency for Technology and
Innovation, Tekes. Finpro currently maintains over 50 and Tekes has six service points
abroad.
4.1.1 Bilateral instruments
Direct contacts
Bilateral means of influence in trade policy include, first of all, direct contacts with the
authorities of the country concerned. When a concrete trade barrier has been brought to the
attention of the Foreign Service, the authorities of the country in question are often
contacted directly and inquired to present grounds for the action taken. In some cases, a
solution is found at this stage and trade may continue smoothly soon after the problem has
been reported to the Foreign Service. In direct bilateral contacts, the Foreign Service can
make effective use of its extensive network of missions abroad and cooperate with other EPI
actors, such as Finpro. Bilateral contacts and contacts with third parties are always taken
only after permission has been obtained from the company that has reported the trade
barrier.
Consultations, Finnish-Russian Economic Commission, high level visits and bilateral
agreements
Other channels that can be used to remove trade barriers are bilateral trade consultations,
bilateral agreements, commissions established by virtue of bilateral cooperation agreements
and high-level visits. Finland and many of its trading partners are parties to treaties which
provide for the establishment of certain cooperation bodies. Within these bodies the parties
can, depending on the treaty, also deal with trade issues.
One important bilateral instrument is the Finnish-Russian Inter-governmental Commission
on Economic Cooperation, which is very active. The Agreement on Trade and Economic
Cooperation with Russia was concluded in 1992 and the Commission convenes once a year.
Under the authority of the Commission, there are several working groups4 dealing with
practical trade problems. At the practical level, other cooperation arrangements are also
utilised. Matters concerning energy cooperation between Finland and Russia are discussed
not only in the Energy Working Group and during ministerial visits but also in the Joint
4
Trade Working Group, Forest Working Group, Timber Trade Working Group, Sub-Working Group on Sustainable
Forestry, Sub-Working Group on Investment, Transports Working Group, Customs Working Group, Standardisation and
Certification Working Group, Energy Working Group, Investment Working Group, Financing Working Group, SubWorking Group on Settlement of Pending Soviet Era Debts, Working Group on SMEs, Working Group on Shipbuilding and
Repair, Continental Shelf Working Group, and Working Group on Agriculture and Food Industries.
44
Working Group on Energy of the Barents Euro-Arctic Council, in the Baltic Sea Region
Energy Cooperation (BASREC), and in the energy cooperation bodies between the Nordic
countries and Russia.
Cooperation bodies have been set up also, for example, with Japan, China, India, Indonesia,
Ukraine and many other trading partners.
Bilateral agreements on the promotion and protection of investment aim at decreasing
arbitrary treatment of business investments and improving investment environment forecasts
in the country of operation. In case of a dispute between an investor and a contracting party,
the provisions of the Agreement on judicial proceedings and international arbitration
procedure are applied. Disputes concerning interpretation and application of an agreement
between the parties shall be solved in an ad hoc international arbitration court. Finland has
effective agreements with 62 countries.
4.2 Common Commercial Policy of the EC
In multilateral cooperation, Finland exerts influence through the European Commission,
which coordinates the common trade policy of the EC. Because the EC has exclusive
competence in nearly all sectors of trade policy, the European Commission represents all
EU Member States in trade policy negotiations. Thus Finland's trade policy objectives are
integrated into the common EC trade policy in cooperation with the Commission.
The EC also has a number of bilateral or regional agreements related to trade and economic
cooperation with third countries. These agreements are binding on all EU Member States
and the third countries concerned in relation to all EU Member States. Bilateral and regional
agreements are of primary importance also for Finnish industries, because they offer more
comprehensive rights than the multilateral system, and the instruments created by these
agreements may also otherwise provide more effective remedies for individual problems.
The Commission is an important cooperation partner also when efforts are made to solve
certain trade barriers; the Commission can provide not only its expertise but also assist at
the practical level.
Companies can also make use of the Commission's market access database, which contains
reports of trade barriers in third countries, submitted by companies, and is also a source of
information about customs tariffs applied in different countries (http://mkaccdb.eu.int/).
Moreover, the Commission has introduced a help desk service to provide information about
facilitating import to the EU Member States of products originating in developing countries
(http://export-help.cec.eu.int).
EC Trade Barriers Regulation
The EC Trade Barrier Regulation (Council Regulation [ECY] 3286/94) of 1 January 1995 is
a trade policy instrument, which is mainly intended to eliminate trade barriers encountered
by EU industries and businesses in third country markets. The Trade Barrier Regulation can
be applied, if a third country's practices conflict with international trade rules, especially the
WTO rules or bilateral free trade agreements. The Regulation is applicable to barriers to
trade in goods and services. Intellectual property rights also fall into the sphere of
application of the Regulation, in the case that a violation of international rules impacts trade
between the EU and a third country. Any company, association of companies or an EU
45
Member State can file a complaint to open an investigation about an alleged obstacle to
trade. The complaint has to provide sufficient evidence of the existence of the trade barrier
and the injury or adverse effects to trade caused by it. The EU Commission is responsible
for the conduct of the investigation and Member States are also consulted.
If the Commission finds that the third country's practices are contrary to the rules of
international trade and that the practices have caused injury or adverse trade effects on EU
industry or a certain company, the Commission will initiate negotiations with the third
country in order to eliminate the trade barrier. If the parties fail to reach a solution that is
satisfactory to both of them, the dispute may, at the Commission's proposal and with the
consent of the EU Member States, be referred to the WTO dispute settlement system.
Further information: Commercial Secretary Selina Kangas tel. +358 9 160 55543, email:
[email protected] or [email protected]
4.2.1 Multilateral cooperation
The WTO's primary goal is to regulate and liberalise international trade by means of
removing obstacles to trade set by states and individual actors. The WTO acts as a forum for
multilateral trade negotiations and its dispute settlement system monitors compliance with
trade agreements. At the same time, the organisation develops rules that are based on the
following basic principles:
removal of quantitative import and export restrictions
non-discrimination
use of least trade-restrictive measures
compliance with international standards
predictability and transparency of provisions.
In addition to the WTO, the OECD (Organisation for Economic Cooperation and
Development), which is a developed economies' cooperation organisation, deals with
barriers to trade and investment. The OECD's members have, for example, made a legal
pledge to gradually liberalise their mutual capital movements. The OECD instruments do
not include a dispute settlement mechanism, but obligations can, however, be invoked at
bilateral level.
WTO rounds of talks
The WTO system and agreements were preceded by the GATT agreement, during which the
negotiation mechanism based on rounds was established. The WTO Doha round, which was
launched in 2001, aims at continuing the liberalisation of trade and development of the rules
system. Furthermore, the purpose is to agree on how certain topics on the WTO agenda will
be incorporated into the organisation's work. Development issues are high on the agenda,
which is why the agenda of the negotiations is called the Doha Development Agenda, DDA.
Tariffs on industrial products have traditionally played a leading role in the GATT/WTO
negotiation rounds. During the previous round (Uruguay Round) the coverage was,
however, extended to cover agriculture and services. During the Doha Round, market access
specifically refers to companies' opportunities to access other countries' markets - via either
industrial, agricultural or service export. Negotiations on new rules concern simplification of
46
trade procedures, which aims at facilitating cross-border trade procedures and developing
transparency in international trade.
The multilateral market access negotiations during the Doha round focus on lowering
customs tariffs so that tariff reductions would apply to all WTO members (excluding the
least developed countries). In the past negotiations, a non-linear formula approach has been
applied, which would cut the highest customs levels the most. The overall tariff reductions
to be accordingly achieved can possibly be supplemented by sectoral solutions, which mean
larger tariff reductions than the average to certain groups of products5. Negotiations
concerning industrial products' market access are the negotiation topic where Finland, on
account of the structure of our foreign trade, has the most to achieve during the Doha round.
Finland seeks to reach a negotiation result that would give better market access to the
industrialised and the so-called emerging economies' markets.
In addition to tariffs, the multilateral market access negotiations deal with non-tariff barriers
to trade (Non-Tariff Barriers, NTBs). Developing countries, in particular, support efforts to
find solutions to the NTB problems, which significantly hamper their market access. Finnish
exporters encounter NTBs also on other markets, which has become evident from the
outcome of this report.
The WTO GATS negotiations (General Agreement on Trade in Services) are conducted in
the Special Session of the Council for Trade in Services. All WTO members take part in the
multilateral work to create rules and regulations for Trade in Services (state subsidies,
public procurement, the issue of emergency safeguard mechanisms, rules pertaining to
domestic regulation). Market access negotiations, on the other hand, are carried out both
bilaterally and multilaterally in groups formed of interested countries. Independent of the
form of negotiations, all outcomes benefit the whole membership; that is the concessions are
granted using the most favoured nation (MFN) principle of preferential market access.
Among the essential characteristics of the GATS Agreement are flexibility and freedom by
all parties to determine the content of commitments concerning market access. The
negotiations are thus conducted based on individual requests and offers, which makes the
process and evaluation of outcomes cumbersome and time-consuming.
Further information: Head of Unit Ilkka Saarinen, tel. +358 9 160 56327, email:
[email protected] (non-agricultural market access); Counsellor Pirjo Välinoro, tel.
+358 9 160 55538, email: [email protected] (agriculture); and Commercial
Secretaries
Kristiina
Kauppinen,
tel.
+358
9
160
55533,
email:
[email protected], or Saara Kalin, tel. +358 9 160 55528, email:
[email protected] (trade in services).
Accession of new member countries to the WTO
Accession to the WTO comprises both multilateral and bilateral phases of negotiation, at the
end of which the WTO members and the acceding country agree that the terms and
conditions of entry have been met. At the initial phase of the process, the applicant
government has to present a memorandum, covering all aspects of its trade and economic
policies with a bearing on its accession, to the Working Party established to examine the
accession request. This is followed by bilateral negotiations on market access of goods and
5
So far, the earlier WTO negotiation rounds have produced the following sectoral customs tariff reductions: information
technology (ITA), agricultural equipment, beer, construction equipment, distilled alcoholic beverages, furniture, medical
devices, paper, steel, toys, and pharmaceuticals.
47
services with interested WTO members. Even though the negotiations are conducted
bilaterally, the agreed terms of market access will apply to all WTO members based on the
MFN principle. In parallel with the bilateral negotiations, the Working Party examines the
applicant government's legal regime which must be harmonised with the WTO obligations.
The final "accession package" consists of a Protocol of Accession, a Report of the Working
Party and Schedules of market access commitments. The principle is that the new member is
able to apply the WTO rules upon accession. In certain cases, however, transitional periods
may be granted.
The WTO has currently 153 members and 29 observer governments negotiating on
accession. From Finland's point of view, the most important applicant government is Russia,
whose accession process may help solve problems that Finnish companies encounter in their
trade with Russia. To date, some areas of significance for Finland have been negotiated
during the accession process, such as customs tariffs and their revision to WTO bound tariff
levels.
WTO committees and working groups
The WTO has set a number of bodies to deal with problems in international trade. Examples
of committees include the Committee on Technical Barriers to Trade, TBT, and the
Committee on Sanitary and Phytosanitary Measures, SPS. They work to eliminate elements
from WTO member governments' legislation and official practices that may discriminate
against and disproportionately limit trade.
Closely linked to this is the TBT and SPS notification system, which gives WTO members
an opportunity to comment on each others' plans. The system functions so that member
governments report about such draft technical regulations to the WTO that might have a
major effect on world trade. The draft regulation should be given a 60-day waiting period
during which it must not be put into force. The WTO distributes copies of the draft
regulations for information to the member governments.
The private sector can request the draft text for comments from the national WTO Enquiry
Point. The national contact persons in each EU Member State present the request to the
Commission, which prepares any possible comments and/or requests negotiations on the
matter. Written comments and the outcome of negotiations must be taken into account in the
drafting of the regulation, as far as possible. In Finland, The Finnish Standards Association,
SFS, serves as the WTO Enquiry Point, which distributes sectoral draft regulations. Draft
regulations can be ordered free of charge from the following address:
WTO Enquiry Point
PO Box 116
00241 HELSINKI
Tel: +358 9 149 9331
Fax: +358 9 146 4914
E-mail: [email protected]
Comments related to draft regulations can be sent to Commercial Secretary Selina Kangas,
Ministry for Foreign Affairs, e-mail: [email protected] or [email protected]; or
Senior Adviser Leila Vilhunen, Ministry of Employment and the Economy, e-mail:
[email protected].
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WTO dispute settlement
All trade disputes cannot be settled through multilateral or bilateral negotiations. Therefore,
the WTO has created a last-resort settlement system for international trade disputes. The
purpose of dispute settlement is to monitor compliance with obligations by settling judicial
disagreements between members concerning the interpretation and application of trade rules
under WTO agreements. The dispute settlement process consists of the following stages:
negotiations or consultations, a panel ruling, a Dispute Settlement Body (DSB) decision,
possible appeal to the appellate body and enforcement.
The consultation stage lasts 60 days, after which either party may request that a panel be
appointed. The panel has 6-9 months for preparing a report, and thereafter both parties may
refer the matter to the Dispute Settlement Body. The DSB must process the matter within
three months, and it can only uphold, amend or reject the panel's conclusions. If the losing
party does not enforce the decisions of the panel or the DSB, the other party may request
permission for counter-measures. Having obtained permission for counter-measures from
the WTO, the party concerned may impose penal duties. Although there are strict time
limits for dispute settlement, practice has shown that agreements are also flexible, when
necessary. At its shortest, a dispute process including appeals takes one year and three
months, but in practice the settlement of disputes, the enforcement stage included, may take
several years
The DSB, consisting of all WTO members, is responsible for implementing and monitoring
the dispute settlement agreement. This body appoints a panel to investigate an alleged case,
and approves or rejects by consensus the panel's report and the recommendations of the
Appellate Body. It also supervises the implementation of the recommendations and may
order that concessions be suspended (counter-measures), if the losing party does not follow
the decision of the panel or the Appellate Body.
Further information can be requested from the Unit for the EU's Trade Policy and Economic
Relations, Ministry for Foreign Affairs, e-mail: [email protected]
4.2.2 Bilateral agreements between the EC and Third Countries
Negotiation and consultation mechanisms as instruments against trade barriers
In addition to the multilateral WTO cooperation, the EC has concluded bilateral trade
agreements with different countries and areas. Negotiations are under way also now.
Regional and bilateral trade arrangements may support and supplement the multilateral
mechanism in a beneficial way. These bilateral agreements contain important negotiation
and consultation mechanisms, under which it is possible to address trade barriers
encountered by EU industries in the contracting partner's markets.
Trade cooperation agreements between the EC and Third Countries
Contractual arrangements with the EEA/EFTA countries and Central and Eastern European
countries are based on free trade and ultimately lead to membership of the EU, or they are
intended to replace EU membership. The EU's key instruments in its trade with the Balkan
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countries are the Stabilisation and Association Agreements. The EU endeavours to expand
the network of agreements with these countries with a view to gradually creating a free trade
area with them.
The EU's relations with Russia and other CIS countries are mainly based on Partnership and
Cooperation Agreements (PCA). The key objectives of these agreements include promotion
of trade and investments and development of balanced economic cooperation between the
partners. The EU and Russia are currently negotiating a new basic agreement to replace the
PCA. With regard to Russia, co-operation also takes place through the so-called four
Common Spaces, one of which is a common economic area. The PCAs contain an option
for the possible establishment of a free trade agreement.
An important process for the EU is the gradual deepening of economic and commercial
relations between the EU and the Eastern Partnership countries; Armenia, Azerbaijan,
Georgia, Moldova, Ukraine and Belarus. The aim is to conclude free trade agreements with
the aforementioned states when they have established the required degree of readiness to do
so. The EU and Ukraine began negotiations for a free trade agreement in February 2008. In
addition to the Eastern Partnership, the importance of the Central Asian states (Kazakhstan,
Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan) in strategic and commercial terms,
has become more pronounced in recent years. In light of this, the EU has developed a
partnership strategy that entails developing economic and commercial cooperation between
the EU and the Central Asian states.
The EU has concluded association agreements with many Mediterranean countries. In
addition to political and cooperative components, these agreements deal also with trade
issues. The EU aims to expand the network of Euro-Mediterranean association agreements
and to create an interregional free trade area by the year 2010.
The EC has had a customs union agreement with Turkey since 1996. According to the
agreement, the parties shall abolish all quantitative restrictions, and Turkey shall transpose
the Community legislation on the elimination of technical barriers to trade into its national
legal system. Trade between the EU and Turkey within the customs union is thus free trade
with certain exceptions. The customs union agreement covers currently all industrial
products and processed agricultural products, but the parties are negotiating to extend the
customs union to include also public procurement, services and all agricultural products.
The Community has also concluded free trade agreements with the Republic of South
Africa, Chile and Mexico, and is negotiating with Mercosur (Argentina, Brazil, Paraguay
and Uruguay) and the Gulf Cooperation Council, GCC (the United Arab Emirates, Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia). Trade and cooperation between the European Union,
on the one hand, and the African, Caribbean and Pacific (ACP) countries, on the other, are
regulated by an extensive ACP–EC partnership agreement. Negotiations on Economic
Partnership Agreements (EPA) are under way between the EU and the ACP countries.
The EU started free trade negotiations in 2007 with South Korea, India and the ASEAN
countries. Negotiations with South Korea have proceeded well while the process has been
slower with India and the ASEAN countries. Furthermore, as a part of a wider association
agreement, the EU started trade negotiation also with the countries of Central America and
some Andean countries in 2007.
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4.3 Means to address barriers encountered in the internal market
It is important that companies operating in the EU's internal market are familiar with the
opportunities open to them and that they recognise situations where their preconditions of
operation in other Member States may be limited contrary to the operating principles of the
internal market.
In the European Union, many different means are available to address trade barriers in the
internal market. Furthermore, efforts are made proactively to prevent the creation of barriers
to free movement of goods and services between the Member States. The following is a
brief description of the means that are available for companies when encountering
unfounded obstacles in their trade between the Member States.
SOLVIT online problem-solving network
SOLVIT is an unofficial problem-solving service between Member States' public
authorities. The network seeks to find answers to practical problems which companies and
citizens face in other Member States caused by misinterpretation or misapplication of the
Internal Market law by public authorities. SOLVIT functions in all the four basic freedom
areas of the EU (goods, services, persons and capital). Processing a case takes ten weeks on
average and in about 70% of the cases a satisfactory solution is reached for the client. The
service is free of charge. In Finland the national SOLVIT Centre functions in the Ministry
of Employment and the Economy. Further information about SOLVIT is available at
http://ec.europa.eu/solvit/ and on the web site of the Ministry of Employment and the
Economy at http://www.tem .fi/index.phtml?s=953.
Information on technical regulations in the European Union
It is of utmost importance for companies operating in the Internal Market to be familiar with
the different technical specifications of products and the market access requirements in
general that are applied in the Member States. Companies can follow product legislation in
their own sector in the Member States through the information procedure on technical
regulations.
Directive 98/34/EC, which lays down a procedure for the provision of information in the
field of technical standards and regulations, aims at enhancing transparency of legislative
preparation and thus preventing the creation of possible barriers to trade and services
between the Member States. The procedure requires that Member States inform about all
national technical regulations and standards applying to products and regulations concerning
information society services that are under preparation.
The procedure makes it possible for other Member States to comment on these draft
regulations and the comments must be taken into account, as far as possible, in the further
preparation of regulations. The views and expertise of companies active in the markets are
of primary importance and the objective is to work in close cooperation with the business
community when the impacts of the draft regulations on trade in the Internal Market are
assessed.
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The Ministry of Employment and the Economy is responsible for management of
notifications of technical regulations. Registrations on the distribution list concerning a
certain sector can be made on [email protected]. Further information about the
procedure: http://ec.europa.eu/enterprise/tris/.
4.4 Other means
A petition to the European Parliament and a complaint to the Commission
A company with its headquarters in a European Union Member State can submit a petition
to the European Parliament. The subject of the petition can concern, for example, problems
related to the implementation of EU law. Further information about petitions:
http://www.europarl.europa.eu/parliament/public/staticDisplay.do?id=49&language=FI.
A complaint regarding a practice or regulation in a Member State, which is considered to be
incompatible with Community law, may be lodged with the European Commission. A
complaint can lead to the opening of an infringement procedure against the Member State in
question. It is in the interest of the complainant to use the legal remedies in its national
administrative and judiciary proceedings prior to submitting a complaint with the
Commission. Further information about complaints:
http://ec.europa.eu/community_law/your_rights/your_rights_forms_en.htm.
The EC Court of Justice, action and preliminary rulings
Matters related to the EU law jurisdiction belong to the national courts or tribunals and
decisions taken in a national court or tribunal cannot be appealed to the EC Court of Justice.
A matter linked with the EU that is pending in a national court may be referred to the EC
Court of Justice by virtue of the provisions on preliminary ruling, laid down in Article 234
of the Treaty establishing the European Community. A Member State's court or tribunal is
entitled to and the highest national courts of justice are obligated, under certain
preconditions, to request a preliminary ruling from the EC Court of Justice concerning
either interpretation of EU law or the validity of regulations or decisions taken by EU
institutions. The EC Court of Justice does not only issue a statement but a judgement or a
reasoned order. Its ruling is binding on the national court or tribunal when it gives its
jurisdiction on a pending matter. The ruling is equally binding on other national courts
dealing with the same problem. In practice, the preliminary ruling procedure provides
private legal persons a general mechanism to refer a legal case to be investigated in the EC
Court of Justice.
In accordance with Article 226 and 227 of the Treaty Establishing the European Union, the
Commission or another Member State may bring an action against a Member State. It is
worth noting that action brought by the Commission may be based on "a complaint" filed by
a private actor with the Commission concerning a Member State's failure to fulfil an
obligation under the Treaty. A typical example of a violation of membership obligations is a
situation where a Member State has fully or partly failed in transposing a directive within
the prescribed time limits.
Further information about the EC Court of Justice and the Court of First Instance and
different types of action and preliminary rulings: http://curia.europa.eu/.
52
5. In conclusion
How to identify a trade barrier and who to contact in case a barrier is encountered?
Trade barriers include all measures taken by the public authorities and private sector actors
that restrict the market access of products. The best prospects for eliminating such barriers
exist when they involve infringement of some international obligation, such as WTO
provisions or rules agreed in bilateral free trade agreements. In the case of investments, the
problem can be addressed through existing obligations in agreements on investment
promotion and protection. The following questions, based on the basic principles
determined in international trade policy agreements, can be used for identifying such
measures.
1. Non-discrimination:
Does the measure concerned treat foreign and domestic products, investments and actors in
a non-discriminatory manner?
2. Proportionality:
Is the measure implemented by using the least trade-restrictive means, considering the
underlying policy objective? Could the objective be achieved by less trade-restrictive
means?
3. Compliance with international practices:
Do the basic principles and the implementation of the measure comply with the practice
generally followed in international trade? Does it essentially differ from possibly existing
international standards?
4. Prohibition of quantitative restrictions:
Are quantitative restrictions or export/import bans applied on the import or export of goods?
5. The free transfer of funds:
Can investments and investment-related funds be freely transferred from country to
country?
6. Transparency:
Have the details of and instructions concerning the measure been published clearly and
sufficiently early, so that the private sector has had time to adapt itself to them?
We seek to offer companies access to services that would help eliminate trade barriers. We
consider that continuing dialogue with companies is of primary importance for us to be able
to work as efficiently and effectively as possible in this field. In Finland, the public
authorities responsible for trade barrier issues are the Ministry for Foreign Affairs and the
Ministry of Employment and the Economy. The Ministry for Foreign Affairs is responsible
for the overall coordination of the work related to trade barriers and trade with non-EU/EEA
countries. The Ministry of Employment and the Economy is responsible for internal market
issues and, thus, trade with EU Member States. We hope that companies facing problems in
53
foreign trade will be active and contact the Market Access Unit of the Department for
External Economic Relations at the Ministry for Foreign Affairs, or, concerning barriers in
the internal market, the Internal Market Division of the Ministry of Employment and the
Economy, also in future.
Reports may be submitted to both Ministries; the information will be forwarded to the
relevant responsible authorities. Companies operating abroad may contact Finnish
diplomatic and consular missions and submit reports to them. Reports may be given either
using
the
enclosed
form
or
via
the
Internet
at
http://formin.finland.fi/tradepolicy/tradebarriers.
Persons responsible for trade barrier issues:
Ministry for Foreign Affairs:
Head of Unit Ilkka Saarinen, tel. +358 9 1605 6327
Commercial Secretary Selina Kangas, tel. +358 9 1605 5543
Ministry for Foreign Affairs
Department for External Economic Affairs
Unit for Market Access
P O Box 413, 00023 Government
E-mail: [email protected]
Ministry of Employment and the Economy:
Senior Adviser Leila Vilhunen
Ministry of Employment and the Economy
E-mail: [email protected]
54
Ministry for Foreign Affairs
Department for External Economic Relations
Unit for Market Access
P.O. Box 413
00023 Government
ISBN: 978-951-724-792-4