The Foreign Minister of Finland, Dr. Paavo Väyrynen at the Conference on "Nordic Trade and Investment: Building Bridges to the New Europe" Stockholm 18.11.1991

FINLAND AND THE NORDIC COUNTRIES IN THE CHANGING EUROPE

Ladies and Gentlemen,

It gives me great pleasure to address this distinguished audience. The theme of our conference is concrete and timely. Our continent has undergone profound changes and the cold war division has vanished. Let me share with you some of the ideas I have on the political and economic perspectives of the Nordic countries in the new Europe.

Two very different processes are currently under way in Europe: the integration process of the Western Europe on one hand, and the disintegration process of the former Soviet empire on the other. For the time being these processes have left only one big player on the European
field: the European Community. Russia remains a geopolitical power, but its political and economic structures remain open. It is impossible to predict the exact outcome of the processes going on. However, the trend towards democracy and market economy seems
irreversible. A new Europe without political, military or economic divisions can be built on the basis of these positive developments.

The dramatic changes open up many promising opportunities for the Nordic countries. They also present us a tremendous challenge: instead of passively following the events, the Nordic countries must be active participants in the process leading toward a new, politically and economically secure and stable Europe.

The future of Finland and the other Nordic countries is largely shaped by the following five elements:

- the formation of the new European architecture
- the European integration process
- developments in the Eastern Europe
- co-operation in the Baltic Sea area, and especially with the newly independent Baltic States
- the ability of the Nordic countries to cooperate and coordinate their policies among themselves.

In order to respond to the new challenges, it is our urgent task to create a new comprehensive European architecture. It should meet the economic and security needs of all European countries. This could be done by utilizing and where necessary strengthening the existing European organs, in particular the CSCE. Also intensive regional cooperation would form a vital part of this architecture.

Europe is the key area for the Nordic economies. In Finland it accounts for some 80 per cent of our total imports and exports. The share of the EC alone is roughly 50 per cent and that of EFTA 20 per cent. I need not say more to illustrate how vital it is for us to participate fully in the European integration process.

The European Community and the EFTA members have finalized an agreement to create the European Economic Area covering 19 countries and close to 400 million people. The impact of the EEA agreement on the Finnish society is profound. More profound than, I dare say, many even realize. We are no more talking about foreign trade relations in the traditional sense. The integration goes deep into the decision-making structures, legislation, economy, administration and every-day life of the citizens.

We in Finland consider the EEA Agreement to be quite satisfactory. Through the EEA four Nordic countries become part of the integration process in Western Europe and secure their essential economic interests. Such a deep integration does not proceed without serious challenges and problems to our society. We are, however, prepared to meet them.

It is evident that integration is a process, not a stable state of affairs. Therefore it is necessary to prepare ourselves also for the future. A possible step, which two Nordic EFTA-countries have until now taken, is the application for full membership in the European Community.

Before the Finnish government will make its final decisions on the matter, a thorough consideration will be carried out. We are currently working hard to analyze the impact of full membership on the economy and other fields of life in our society, on the political decision-making structures as well as on the foreign and defence policy. The results of this analysis will be at the disposal of the government quite soon.

The debate on integration is taking place in Finland under somewhat dramatic circumstances. Our current recession is part of a wider phenomenon affecting many economies - also those of our Nordic neighbours. The collapse of our trade with the Soviet Union is a factor, however, which aggravates our economic problems: the fall of this trade from some 25 per cent of our total trade in the first half of eighties to 5 per cent or below as of today cannot be without significance. It requires a considerable adjustment in our industry. Also some mental adaptation is called for: now western companies have to do business on the Soviet market by visiting several cities and regions instead of visiting a central government office in Moscow.

Stability and prosperity in the neighbouring areas are of utmost importance for the whole Nordic region. The problems in the Eastern Europe and especially in the Soviet Union are of such a magnitude that we can only make a small contribution towards their elimination. Of course there is universal interest in finding ways to prevent economic, social and environmental catastrophies. Emergency aid can only provide temporary alleviation. New economic and political structures have to be rapidly set up to allow effective economic recovery. Expertise is urgently needed in all areas, particularly in transport and communication systems, energy sector, trade infrastructure and agriculture.

The present economic uncertainty is likely to prevail for some time. The figures on economic development give raise to many concerns. The Central and Eastern European economies have been in rapid decline. The Soviet Union will face probably the most critical phases of its economic reforms next year. The Baltic countries need a lot of support in their efforts to form economies of their own.

As we all know, building a market economy on the ruins of a centralized command system has never before been experimented. Many unforeseen problems have been encountered. At the present pace the privatization process would in some countries take about one hundred years. Even in those countries where legal reforms are advanced, the real life may still look very different. It has been estimated that in order to reach the average standard of living prevailing in the EC countries in ten years the Eastern European countries would need at least 70 billion dollars of fresh money annually. But foreign direct investments remain sluggish. Nordic and other Western investors hestitate: too many risks seem to persist, and
the necessary infrastructure is missing. However, in order to build healthy economies, heavy investments in modern technology is precisely what the Eastern European countries badly need.

Finland and the other Nordic countries participate in all the main multilateral undertakings to assist the countries in transition. We are indeed trying to do our share. A new Finnish Government Action Programme for Central and Eastern Europe will be finalized in these days. The program focuses on the Baltic states and on our neighbouring areas in the Soviet Union: St. Petersburg, Carelia and Kola Peninsula regions. Estonia continues to be of special concern to us. One of our objectives in the Eastern Europe is that a homogenous European free trade area will be established in a not too distant future through the agreements between the Eastern European countries, EFTA and the EC.

I would also like to share with you an idea based on our own geographical position. It has become obvious that the economic transition in the Soviet Union is much more difficult than has been expected. The areas close to the Finnish and Norwegian border are the only ones in the Soviet Union and Russia situated next to the territory of a Western country. These regions are among our own priorities in providing assistance and expertise. Some other countries might as well focus their efforts on these areas, where it is relatively easy to act and wherefrom experiences could then be spread elsewhere. They could serve as a kind of "transition laboratory" from a command system to a market economy.

In the aftermath of the dramatic political changes we must now intensify our efforts to create lively political, economic and cultural cooperation around the shores of the Baltic Sea. Here the experiences of the past open up very promising visions for the future. Finland has already
made some proposals of her own on this matter. We look forward to the meeting of the foreign ministers of the Baltic Sea countries to be held next year in Denmark. The Nordic countries should prepare themselves well for such a meeting. I cannot exaggerate the importance of this cooperation for the future of the Nordic countries and the whole area.

We have already some experience on the Baltic Sea cooperation in the environmental field. Now it is time to extend this cooperation to other areas as well. They shouldn't be limited at this point, but the most important fields could include economic, transportation, communication, environment and cultural issues. The participants could be all the Baltic Sea countries as well as interested constituent republics and states like the northern parts of Germany and Russia.

In my view time has come to consider the creation of a special Baltic Sea Council. Thought should also be given to the strengthening of the links between the Nordic Council and the three Baltic states. The Finnish Government is ready to contribute to a comprehensive and lively cooperation network around the Baltic Sea.

And last but far from least, let me touch the cooperation perspectives within the Nordic area itself. In the midst of European changes also the Nordic cooperation has arrived at a crossroads. Some doubts have been expressed about the significance of Nordic cooperation in today's Europe. I do not share these doubts. In my view the new Europe provides interesting new opportunities for our cooperation. We should make sure that common Nordic viewpoints would be heard not only at home, but also in the European and other international fora.

The Nordic prime ministers have just given a crucial impulse for the future of our cooperation. In their meeting in Mariehamn, they pointed out especially three questions, which have to be clarified: the link between European integration and Nordic cooperation, our cooperation with the areas close to us, as well as the institutional requirements, including modification of the Helsinki Agreement.

Let me conclude by pointing out some of the most essential facts for our common economic and political future. Security and stability of Europe is our main concern. In this question the whole Europe is indivisible: security means security for all. This cannot be achieved without reasonable economic prosperity. European economic integration on one hand, and efficient, pragmatic and rapid support to the transition in the East on the other, are pre-conditions for improved security and stability - and for the well-being of the Nordic societies themselves. The present cooperation structures of Europe have to be fully utilized, and when needed, new forms of cooperation have to be created. I also wish to stress one more issue here: the necessity to integrate the Soviet Union and Russia to the rest of Europe.

The work before us is tremendous. The Nordic countries have to stick together in this work. We are going to need a good deal of idealism along the way. But we also have to keep our feet very firmly on the solid Nordic ground.