Speech by Minister for Foreign Trade and Development Anne-Mari Virolainen, Annual Meeting of Finnish Heads of Mission, 27 August 2018
Dear Colleagues and Friends,
During the current year we have celebrated the centenary of the Ministry for Foreign Affairs. Numerous events and, in particular, everyday work with you at the Ministry and the diplomatic missions, dealing with burning issues of world politics, have filled the jubilee year. The international rules-based system is being challenged, our geopolitical operating environment is in transition and global development challenges have become increasingly visible. It is clear that the importance of the Ministry for Foreign Affairs will only increase further. All of us are needed.
When the ambassadors meet in Helsinki next autumn, three elections will have taken place and the Finnish Presidency of the European Union will be at hand. This challenges us to reflect on the state of the multilateral international system and, above all, the future, how we develop the European Union, and what role Finland should play in promoting these matters. Today, I want in particular to talk about Europe policy and international cooperation in trade policy. Finally, I will briefly address global development challenges.
We all remember the optimism that prevailed in Europe during the final decade of the last century and the first years of the 21st century. Walls gave way and cooperation expanded to new fields. The development path reached its peak in 2004, when a number of Central and Eastern European countries joined the Union. It seemed that there was no end to the advancement and deepening of integration. But in the autumn of 2008, a crash occurred on the other side of the Atlantic, and when the repercussions of the financial crisis reached Europe, the years of crisis meetings began in the EU.
A decade has passed since the outbreak of the financial crisis, and the EU has been hit harder than perhaps any of us could have imagined. I saw this at close range, first when I became a member of the Grand Committee and later as its chair.
The EU still has major challenges on the table. We are in a new situation where the international rules-based system is being challenged even by our close ally. Trends in the rule of law in some Member States undermine the value base serving as the foundation of the EU. Migration calls for political and economic solutions both within the Union and with countries of origin and transit countries. Agreement on a new relationship between the EU and Britain should be reached, and the Union must adapt to the post-Britain era, among other things when deciding on the future financial framework.
Against this background, it is surprising that the EU is in better shape than it may appear. Elections held in 2017 in various Member States did not yield surprises of the same calibre as Brexit. In the Brexit negotiations, the ranks of 27 countries have remained straight, nor has the outcome of the British referendum caused the feared domino effect.
In trade policy, my own field of responsibility, we have been a joint front supporting Trade Commissioner Cecilia Malmström and the entire Commission. Support for the Union has actually risen in the Member States — perhaps because of the unfortunate example of Brexit.
The European Union is needed now more than ever before. The issues at hand are so challenging, transcending borders and policy sectors, that no one can respond to them alone. Cooperation and common solutions are needed. In light of next year’s elections, we need courageous, honest and forward-looking debate on the future of the EU. We should identify and acknowledge people’s concerns relating to the integration process and present proposals for solutions.
Finland’s Presidency of the EU next year also falls at an interesting phase when, as the result of the European elections, the composition of both the European Parliament and the Commission will change. Our role as holder of the rotating Presidency may, in fact, be greater than normal owing to the Commission’s change. The themes being selected for our EU Presidency are ‘growth’ and ‘security’. The theme of ‘growth’ addresses the strengthening and further development of the internal market, and trade policy. It is natural for Finland to emphatically highlight the importance of research and education — know-how — as an enabler of growth.
The Presidency also gives us the opportunity to raise our visibility. We can tell the world the story of Finland as a skilled, innovative nation offering constructive solutions to topical challenges. That famous salesmanship can also be used in this connection to promote exports and attract investment.
In terms of influence, we also need to consider how coalitions form once Britain has exited the EU. In the field of trade policy, we have for many years looked beyond the traditional liberal countries of the North. Qualified majorities are built one issue at a time. While various import restrictions are mixing up markets, pressure for protective measures has increased in the European Union as well. This debate challenges the traditional liberal policy of the North. Also in the future, we small countries must take responsibility, together and separately, for the EU’s development, and must show leadership. By being initiators ourselves, our influence is the most effective.
Despite the change arising from the EU elections, there are big projects on the table. It is expected that effort to reach a final agreement on the future financial framework will be made during the Finnish Presidency. Compromises are required both because of the more meagre budget due to Brexit and because of new needs. In negotiations on a new relationship between Britain and the EU, trade policy interests will certainly rise to the centre. I hope for EU relations that are as close as possible, and for undisturbed trade in the future, although it is clear that rights and responsibilities must be in balance. We must also prepare for different scenarios. In this way, we safeguard the interests of the Finnish business community, and thus Finnish jobs and our wellbeing.
Ladies and Gentlemen,
Recently, we have spoken of a crisis in the international rules-based system that reflects on various policy areas, from climate policy to development issues and also to the whole UN system.
It truly feels as though we were living in some sort of period of transition. Nor does trade policy live in a vacuum; instead, it is a close component of a wider agenda.
Much is said about the threat of a trade war, or that we have already entered into an era of trade wars. Less than a month ago, Roberto Azevêdo, Director-General of the World Trade Organization, presented the organisation’s new trade monitoring report, which unfortunately shows a rise in trade-restrictive measures. The message on the whole was grim: world trade is going in the wrong direction, and at an accelerating pace. In particular, such development constitutes a major threat to economic growth and jobs.
Trade policy has hardly ever been as political as it is at present. Instead of a trade war, however, I would still speak of a crisis in the international rules system. The multilateral rules-based trade system that has been built during the last 70 years has been challenged in an unprecedented manner — and by our closest ally, the United States.
Then again, at the same time the EU’s trade policy agenda is advancing by means of bilateral and regional trade agreements. The European Union is seen — perhaps specifically because of other challenges — as a highly desired trading partner globally. It may well be that when one track is derailed, cooperation seeks new channels. I see this as a partial glimmer of hope, even though at the same time, global common rules are especially important for a small export-led country such as Finland.
The current United States Administration has taken a very sceptic view of multilateral agreements and calls for reform of the WTO. This has been visible for instance as withdrawal from the Trans-Pacific Partnership, renegotiation of the North American Free Trade Agreement and especially in the criticism of the WTO dispute settlement system. In spring, the United States imposed import duties on steel and aluminium, in the name of national security. These import duties came into force for the EU on 1 June.
The actions of the United States were, as such, directed against China, which is considered to bear the main responsibility for the overcapacity of steel on the market. China’s exports of steel to the United States, however, are slight enough that the import duties on steel and aluminium have little effect on them.
The rise of China gives cause for concern otherwise as well. In the background are the goals of the ‘Made in China 2025’ programme and concerns about respect for intellectual property rights. The United States has limited Chinese companies’ investments in the United States and has started new trade policy investigations. On the basis of the findings, the United States has imposed a good deal of additional tariffs on China, and China has responded in kind.
The Americans’ measures have caused WTO complaints and countermeasures. The balancing measures set by the EU have been in force since the beginning of July.
The greatest concern now is the motor vehicle investigation launched by the United States, which is expected to yield results early next year at the latest. President of the European Commission Juncker met with President Trump in July. The current understanding is that the United States will refrain from new trade measures against the EU for as long as both parties negotiate on the basis of the agreement reached at that time.
Despite this peace, it is clear that we must find solutions to the crisis of the international rules system. Uncertainty must not become the new normal.
This means reforms in the WTO. Its activities need to be more effective, but above all, we must find ways to tackle today’s ‘unfair trading practices’, such as intellectual property rights and the forced transfer of technology as well as market distortions by State-owned enterprises. Fortunately, the work is starting. It is positive that the commitment of the United States to this work was obtained in the declaration of the European Union and the United States in July. In addition, a solution to the most acute problem, which is the paralysis threatening the WTO dispute settlement system, should be found as soon as possible.
In this work, the EU must demonstrate leadership, as at present the processes have no other leaders. Despite the spirit of cooperation, the EU also has demands about which we cannot be flexible. It must be ensured that the reforms strengthen the WTO and its mandate, and do not undermine it.
Aside from the overhaul of the multilateral system, the EU must look after its global competitiveness, which means the opening of new markets mainly through bilateral and regional negotiations.
During the past year, the EU has completed, or at least almost completed, a number of bilateral agreements; negotiations with Chile are well underway and the Mercosur negotiations are also reaching their conclusion.
Negotiations with Australia and New Zealand started in summer. Negotiations on the liberalisation of investments are underway with Myanmar and China. Market access offers were exchanged with China during the EU-China Summit.
The ASEAN countries are in the queue for free trade partners, most likely in the next few years. The emphasis on Asia is logical, as most of the growth in international trade and economic growth will continue to take place in developing countries.
For a small open economy that is well integrated into global value chains, such as Finland, it is essential that the EU promotes an open, liberal and rules-based trade policy. We have been advocating that, in the future, EU trade agreements could be divided, on the one hand, into EU agreements and, on the other hand, into shared competence agreements. This is essential so that EU trade agreements would enter into force faster than at present and would be of genuine benefit to enterprises.
The Commission has, for a long time, called attention to the implementation of trade agreements and, in particular, to maximising their benefits. There is still much to be done here, but Finland has been one of the most active Member States in this regard.
In any case, the outlook is challenging. After everything that was said now, it would be great to assure that integration of the international economy and trade has advanced far and the interdependencies are strong, for which reason rules-based free trade will continue. This, however, is not self-evident. The actions of the United States may inspire others. If the United States does not want to comply with the rules, why should others? In your postings, you can follow this exchange of views. Reports both of protectionist actions and of market deregulation, including their economic impacts, are read carefully in the Ministry.
The rise of trade policy to centre stage influences export promotion work in many ways. Advice concerning trade barriers has increased in many diplomatic missions. This trend can be expected to continue next year. At the same time, it is positive that Finland’s export figures have risen and enterprises see opportunities on various markets. This positive note has also been reflected in the export promotion visits I have led. In the coming autumn, I will head at least to Denmark, Indonesia, China and India together with corporate delegations. As to Russia, cooperation will continue for instance with a meeting of the Finnish–Russian Intergovernmental Commission for Economic Cooperation in October.
The renovation of the Team Finland network, launched a year and a half ago, has, with good reason, focused on promoting the efficiency, effectiveness and impact of efforts. Although there is still work to be done, on the basis of the positive feedback from enterprises we can state that progress has been made. In addition, we must be able to measure effectiveness over a longer term. I know from experience that concluding deals can be a long process measurable even in years.
Together with public servants responsible for economic external relations, we made a round of calls to Heads of Missions during the summer. Thanks to all the Heads of Mission carrying out Team Finland work for the useful conversations! On the basis of those conversations, I can say that you have a firm grip on country management. My greatest concern at the moment relates to adequate resources. We need more doers out in the field, and I have discussed this with both my ministerial colleagues and the management of Business Finland.
We will continue to discuss export promotion in more depth during Team Finland Day this week, on Thursday.
Ladies and Gentlemen,
In recent years, global challenges have become increasingly visible in our daily lives. This summer, the Northern Hemisphere has endured record high temperatures. Now at the latest, all of us in Finland have also been awakened to the fact that climate change is here and now. And that there are no winners; some just suffer more than others.
Correspondingly, the migration crisis that broke out in 2015 awoke many to the challenges of the Middle East and Africa. With regard to the importance of Africa — challenges and potential — I refer to the message of the Minister for Foreign Affairs. As far as migration and refugees are concerned, we are sorely in need of common European solutions. At the same time, we should tackle the root causes more strongly than ever. Extreme poverty, inequality, repression, military crises and lack of prospects are driving people away from their home regions.
Economic inequality between countries has decreased, but within countries it has grown. Economic growth has raised hundreds of millions of people from extreme poverty, but despite this, more than 75% of the world’s population lives in societies where income distribution now is more uneven than in 1990. The goal of Agenda 2030 is to reduce poverty within counties so that the share of women, men and children living below (nationally defined) poverty thresholds within the population is cut by half.
In our work to implement Agenda 2030, I raise the following priorities of Finland: (1), first of all, women and girls and equality; (2) second, creating a foundation for a well-functioning economy and societies, including, among others, education, development of livelihoods and jobs; and (3) third, abatement of and adaptation to climate change, as well as sustainable utilisation of natural resources.
Our development policy has a long-range, stable content base. I believe that we will work on this basis also in this future. As themes, the rights of women and girls, climate, education and jobs are not disappearing, and I believe they will be clearly visible in the future regardless of the Government’s colour. For example, the evaluation report published last week gave strong support to Finland’s work for the benefit of women and girls globally as well as in our partner countries. Naturally, room for improvement was found: alongside political commitment, the hope for a clearer equality strategy was presented. There is thus equality work to be done in the future, too.
As the world is witnesses the greatest humanitarian crisis of our era, one must of course remember the importance of strengthening humanitarian aid and the carrying capacity of societies. We do not want a single fragile or broken state more in the world. Even now, far too many of the world’s people have to live in countries and conditions where prospects for the future are almost nonexistent.
When thinking about major development challenges, I’m very glad that, according to an opinion poll published in the summer, domestic support for development cooperation is at its highest in ten years. Almost 90 per cent consider development cooperation to be important, and support has been rising in a trending way for many years.
Despite these good figures, we must continually improve our activities. In fact, the results-based approach to development cooperation is being developed systematically. Over the last couple of years, special attention has been paid to the overall picture of development policy and to steering mechanisms. Data on results are aggregated, the findings are analysed and work is steered forward on the basis of the information obtained. The report on the results of development policy, to be published in the autumn, will highlight development of the results-based culture in a visible way. I believe that the report on results will be of great benefit when we justify the need for development policy. We will be better able to tell those who have paid for the work, the Finnish taxpayers, what is accomplished with the money — and what isn’t.
Modes of operation in development policy are also being reformed. The aim is to improve the quality of development cooperation and the efficiency of administration. During the next three years, procedures will be gone over thoroughly and simplified.
The strengthening public finances, it is hoped, will provide possibilities to catch up with the financing of development cooperation, which collapsed badly in the years of Finland’s economic maelstrom. For future electoral terms, we need a common commitment and a long-term programme for raising the share of GNI allocated to development cooperation so that we will reach our commitment of a 0.7 per cent share.
Along with the provision of grant-based development aid, there is reason to use development policy investments, adopted on a considerable scale during the present electoral term, as a development policy tool also in the future. Grant-based aid is by no means sufficient to respond to development challenges, and development financing helps to attract private capital.
As you know, trade and development go hand in hand in many respects: Finnish innovations can be used to solve obstacles to development and strengthen the preconditions for business in developing countries. I am delighted that in your diplomatic missions, you have invested strongly in both. Let us continue this work.
Distinguished Ambassadors, Dear Friends,
EU policy, trade policy and global development challenges; these three will have key roles in our work during the next 12 months. By actively advancing Finland’s views on these themes, we can have influence that is greater than our size. In this work, I have much confidence in you out there in the field and in the world.