Daily Finland
The Nordic economies are heavily reliant on Europe, but their strategic vulnerabilities lie with the superpowers, namely the United States and China, according to a study published by the Research Institute of the Finnish Economy (ETLA) on Monday. The global economy is undergoing a shift towards geo-economics, which presents a challenge to the small open economies of the Nordic countries, said the study conducted jointly by ETLA, Statistics Denmark and the other Nordic statistical offices, entitled “The Value Chains of Nordics – Tracking Resilience and Vulnerabilities.”. Finlands vulnerabilities in terms of materials, components and other intermediate goods imports are particularly linked to China, said the study. Norway and Denmark are the most vulnerable to trade disruptions, while Sweden and Icelands international trade is more resilient. The global economy is rapidly moving towards a geo-economic era characterized by increased geopolitical tensions, reduced import dependency, and growing protectionism. This change poses a challenge to the small, open economies of Finland and the other Nordic countries, for which international trade is vital. All Nordic countries rely heavily on imports from Europe, but their most critical vulnerabilities are linked to countries outside Europe, namely China and the United States. Imports of intermediate goods, used in the manufacture of other goods, account for almost half of the Nordic countries imports of goods. The share of intermediate goods is particularly high in Finland (57%) and lowest in Denmark and Iceland (42%). Norway and Denmark are the most vulnerable to disruptions in international trade, while Sweden and Iceland are best prepared to respond to such disruptions. Geographically, the most critical vulnerabilities vary. The majority of Denmark and Swedens most vulnerable imports originate from the United States, whereas both Finland and Iceland are dependent on China. Norways vulnerabilities are spread across the widest area globally. “When imports from a single region or supplier to Finland are disrupted in a crisis situation, it is difficult to find new suppliers quickly. In the current global situation, heavy dependence on a single supplier or country is an obvious risk, which highlights the need for continuous monitoring of value chains”, said Jyrki Ali-Yrkkö, Research Director of Etla. The most important importers of intermediate goods in the Nordic countries are large companies, companies with at least 250 employees – and the same applies to exports. In Finland and Sweden, the role of large companies is particularly prominent, while in Iceland and Norway, smaller companies have greater weight in exports. “The threat of increasing trade barriers is a risk to Nordic export destinations on the other side of the Atlantic and beyond. In the new geo-economy, economic tools are also used to achieve foreign policy objectives. This challenges the traditional open economic model of the Nordic countries”, said Jyrki Ali-Yrkkö.
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