Global responsibility and policy coherence 2017
A positive trend in the trade policy, but the funding of development cooperation is at a low level

14.6.2018 15.36
A positive trend in the trade policy, but the funding of development cooperation is at a low level

Global responsibility and policy coherence are central principles in the implementation of sustainable development. Decisions made in the different policy sections and administrative branches have a significant impact on how objectives are realised not only in Finland but also globally.

The key theme of the 2030 Agenda is that no-one is left behind in the pursuit of development. To meet its global responsibility, Finland must ensure that the others also have the opportunity to pursue sustainable development and promote this. The world's challenges are also Finland's challenges.

In the follow-up system, the indicators in the Global responsibility and policy coherence criteria are:1) Finland's development in terms of the trade policy component of the Commitment to Development Index; 2) Finland's imports and exports by tonne and by material category; 3) the development of Finland's development cooperation funds; and 4) Finland's participation in international crisis management. The other baskets also include indicators related to global responsibility, such as the consumption footprint, Finland's greenhouse gas emissions and removals, the number of quota refugees and persons granted asylum and the global social responsibility of Finnish large and medium-sized enterprises.

Finland can promote sustainable development, for example, by participating in international crisis management or by exporting environmental technology solutions to developing countries. Through trade policy, Finland can contribute to the realisation of gender equality and human rights and to the more sustainable use of natural resources. Trade policy can also be used to improve market access for products from developing countries by dismantling trade barriers.

Development policy is an important part of Finland's foreign and security policy. It reduces poverty in developing countries and supports their stability and ability to reach the Sustainable Development Goals. The countries that most need international support are the least developed, most fragile countries that suffer from conflicts or climate-related and natural disasters. The main responsibility for the development and its funding rests with the states themselves, but to achieve sustainable results in their development, they need funding through development cooperation as well as investments and private capital also from abroad.  

To be able to fulfil our global responsibility, we have to understand that the effects of our actions in Finland reach far beyond our national borders. Finland can also have a greater role in promoting sustainable development than its size would suggest by exporting related expertise and solutions to meet the world's needs. Unfortunately, as yet there are no unambiguous and transparent indicators for measuring the impacts of the global value chains or global material flows in trade.

A typical feature of the sustainable development work carried out by Finland is the wide participation by society. This has attracted attention internationally and provides an excellent opportunity to influence the international debate on the subject.

The improved consideration of developing countries is integral to Finland's trade policy

Trade policy is an important part of Finland’s foreign policy. Finland participates actively in the implementation of clauses on trade and sustainable development in the EU's free trade agreements, for example, by promoting exports of environmental products and by working actively to eliminate fossil fuel subsidies at the international level. Trade policy can also be used to improve market access to products from developing countries to enable these countries to better integrate into global value chains. As part of the EU's common  trade policy, Finland unilaterally grants tariff preferences to developing countries.

The Center for Global Development – a non-governmental organisation – uses the Commitment to Development Index (CDI) to rank 27 of the world's richest countries on their commitment to improving the status of people living in the poorest countries. Finland has done well in the assessment, which is carried out on a yearly basis. The part of the index that relates to trade policy was chosen as an indicator for the global responsibility criteria because it is of utmost importance that developing countries participate and benefit from international trade. Increasing the exports of developing countries and improving market access for them, especially for the least developed countries, has also been recorded in the UN's Sustainable Development Goals. 

Finland's development trend in the CDI's basket measuring trade policy is rising. Finland scored its highest value on the index, 5.29, in 2017. In the first years of the assessment (2003-2004), Finland's score was on average 4.55. The index consists of four areas 1) tariffs against imports from developing countries (weight 40%); 2) agricultural subsidies (weight 10%), 3) regulatory impediments to imports (weight 25%); 4) openness of trade in services (weight 25%).

As a result of the EU's common  trade policy, Finland's score on tariffs in goods trade is in line with the other EU member states. In agricultural subsidies, Finland's result is better than the median when agricultural subsidies are proportioned to the value of agricultural production. Finland's national agricultural subsidies are not included in the index. Taking into account the national subsidies would weaken the score slightly, but would improve the development trend as the amount of national subsidies has decreased significantly during the period under review.

The component measuring the regulations on imports assesses not only the required import documents but also the time and costs of transporting the freight containers. Here, Finland's score is better than the median.

When we look at trade in services, Finland's score is below the median. This is due to regulations and procedures concerning immigration and the requirements for the place of residence of persons in the senior management of companies. Opening up trade in services would improve Finland's score on the index. 

Finland imports a large amount of fossil fuel-based products

Finland's economy is based on foreign trade, which has grown fairly steadily in the long term. It is not only an increase in euros – trade has also grown when measured in tonnes. The amount of imports in tonnes has always been more than the amount of exports. In the past few years, service exports have grown considerably faster than the export of goods and the share of trade in services has grown in all trade. Like many other countries, Finland has outsourced some of the production of raw materials and manufacture of labour-intensive products to countries with a comparative advantage or to countries with natural resources that Finland does not have.

Finland imports especially a significant amount of fossil energy materials while it exports significant amounts of renewable wood and products processed from wood.  Because a rapid reduction in the use of fossil fuels is necessary to mitigate climate change, it can be expected that the imports of fossil materials will decline.

The material flows of many products include so-called hidden flows. The hidden flows associated with imports consist of those direct and indirect material and energy inputs made abroad in the extraction and manufacture of imports that are not visible in the weight of the raw materials and products. For example, land use and the greenhouse gas emissions created in the country to which the product is exported can be included in hidden flows. The hidden flows of imports may be manifold compared with the direct inputs.  The amount of hidden flows in tonnes does not, in itself reveal how sustainably the product or raw material has been manufactured as the production conditions may vary a lot between countries and within countries, even between individual factories.

It is important to be aware that with an increase in foreign trade, also a considerable part of the environmental effects caused by Finns are now created outside our national borders. On the other hand, many of the products imported to Finland are further processed into export products. Because production in Finland is on average ecologically more sustainable than in many other countries, no unambiguously negative or positive conclusions can be drawn by examining only the material flows.

Finland also exports environmental technology and services, such as energy-efficient and material-efficient solutions globally. Finland makes significant investments in innovations, for example, in the circular economy. Exporting these products and services benefits sustainable development also at the global level, but measuring it is challenging and requires further development.   

The target of 0.7 per cent of GNI for Finland's development cooperation appropriations is still remote – but it is what we aim at

The support Finland and other providers of assistance have given to developing countries has enhanced development. The percentage of the world population living in extreme poverty has halved since 1990. The vast majority of girls and boys can go to school. The mortality rate among mothers and children under five years of age has decreased significantly. The number of people living without water supply and sewerage has halved. The foundations of the economy have improved in the vast majority of developing countries, the share of development aid in their income has declined and there are also other ways for these countries to obtain funding to support their development. For example, the impact of private investments is usually manifold in the promotion of sustainable development in developing countries.

However, 767 million people continue to live on less than 1.90 dollars a day. The pace of reducing maternal mortality must be doubled to reach the development target set for 2030. More determined actions are required to promote sustainable energy production and additional investments in a sustainable infrastructure and education are needed. If all children in the poorest countries completed secondary school by 2030, the national income could grow by 75 per cent by 2050 according to an estimate made by the UN. Gender inequality still persists, too. More than two billion people live in countries with inadequate water resources. A total of 90 per cent of the global urban population lives in an environment in which air pollution constitutes a health risk. Global warming continues and contributes to the increase in extreme weather and to the detriment of living conditions.

Finland is committed longterm to increasing its development cooperation appropriations to 0.7 per cent of the gross national income. The target was close in 2014, when the figure was 0.59 per cent. The cuts made in 2016 as part of balancing the public economy significantly changed the situation and the amount of the development cooperation expenditure and its share of the gross national income fell in 2017. In 2017, Finland used EUR 935 million or 0.41 per cent of the gross national income for development cooperation. In terms of the GNI percentage, Finland was the ninth biggest provider of assistance within the EU.

Also, the costs of the reception of refugees that fall under development cooperation fell: in 2017, they were EUR 69 million, a decline of 42 per cent from the previous year. On the other hand, the financial investments that fall under development cooperation increased the total of the disbursements by EUR 68 million from the previous year. A total of EUR 94 million was allocated to humanitarian assistance in 2017.

In 2018, Finland's development cooperation appropriations represented 0.38 per cent of gross national income (ODA/GNI in the graph) and the figure is estimated to be 0.37 per cent for the period 2019-2021. Although the appropriations will increase slightly, the economy will grow proportionally faster and it is estimated that the GNI percentage will fall from its current level.

According to the target set by the UN, 0.15-0.2 per cent of national income should be directed to the poorest countries as aid. Finland's funding to the Least Developed Countries (LDC/GNI in the graph) represented 0.13 per cent of gross national income in 2017. In 2015, the share of the funding was 0.18 per cent, but it declined in the following years because of considerable cuts in appropriations. Finland is still committed to the target of 0.2 per cent and is striving to reach it.

Development cooperation appropriations account for about 70 per cent of the external funding received by the least developed countries. The OECD encourages its member countries to use their development cooperation appropriations more efficiently in the poorest countries to mobilise private investments and local tax revenues.

Like the other industrial countries, Finland has an obligation to support reporting related to the climate agreement in developing countries as well as supporting their actions to mitigate and adapt to climate change. All of Finland's development cooperation is aimed at mitigating climate change and at supporting adaptation to and preparation for climate change.

The main trend in Finland's climate funding has been rising in the 21st century. In 2009, an agreement on so-called short-term climate financing was concluded in connection with the Copenhagen climate summit. The developed countries together committed themselves to financing climate measures in developing countries to the total amount of USD 30 billion between 2010 and 2012. The EU pledged a total of EUR 7.2 billion, of which Finland committed to a share of EUR 110 million. Because it had not been possible to prepare for this commitment in advance, it is visible in the graph as a peak in 2012. The Paris climate conference in turn agreed that the funding mobilised by the developed countries would be increased to USD 100 billion a year by 2020.

Years 2014 and 2015 were record years, as the share of climate funding was about EUR 115 million per year (GNI percentage 0.05-0.06%) A dramatic drop occurred in 2016 and Finland's funding was only about EUR 43 million in total (GNI percentage 0.02%), which reflects the cuts made in the development cooperation appropriations. In 2013 and 2014, Finland allocated the revenue from the auction of emission allowances to development cooperation. It was used for purposes such as paying the support of the Green Climate Fund in 2015, which partly increased the level of support.

The additional support allocated to the Finnish Fund for Industrial Cooperation (Finnfund) from the new appropriation for financial investments in 2016 is not visible in the climate funding figure. Finnfund has a strong mandate to carry out climate projects, but the projects are technically speaking not reported until disbursements are made by Finnfund. The increase following the drop in funding is also supported by the climate fund founded jointly by Finland and the International Finance Corporation IFC in October 2017. The fund supports renewable and clean energy solutions and climate projects in developing countries. All in all, Finland channelled EUR 114 million to the fund for the duration of 25 years.

One of the important objectives in terms of climate policy is dividing the support equally between adaptation and mitigation. Finland's support has long been close to being equally distributed; however, the annual total of support for mitigation has been slightly more. The share of adaptation is anticipated to fall in the coming years as support provided in the form of investments is increasing. In climate funding, 2016 is the latest completed year of reporting. After the drop in 2016, the main trend is likely to be upwards, but there will probably be some variation from year to year.

Finnish participation in international crisis management continues to be strong

In July 2016, the Government approved the report on Finnish foreign and security policy, in which the promotion of sustainable development, including the promotion of peaceful societies and human rights, was made the objective of foreign and security policy. Active participation in international cooperation and solving international problems is in Finland's interests and one of the ways for Finland to fulfil its global responsibility.

Finland participates in the management or direct prevention of international conflicts or in post-conflict reconstruction by means of military and civilian crisis management. The aim is to promote peace and security, which in turn creates the preconditions for sustainable development. Sustainable development also enhances the overall security of society.

The above map shows the number of Finnish military personnel and civilian experts in different crisis management operations across the world. The participation numbers vary slightly from month to month, mainly because of the rotation arrangements in military crisis management operations. There have not been significant changes in the past few years.

Under the Government Programme, Finland continues its active participation in international crisis management. The aim is to maintain the current level of participation, which is about 500 military personnel and 130 civilian experts.  Finland strives to increase the share of women in civilian crisis management. Currently, about 40 per cent of Finnish experts in civilian crisis management are women. The number of participants Finland sends to civilian crisis management operations is the highest in the EU states in proportion to the size of the population.

The map of Finland's participation in crisis management, which now shows the military and civilian crisis management activities, could be made more comprehensive by also including the peace mediation activities supported by Finland and development cooperation and humanitarian assistance. This work is currently underway.

Reservations related to the indicators and their interpretation needs further research

Global responsibility and policy coherence are a complex entity that allows many interpretations, so choosing the appropriate indicators is also a challenge.  It will never be possible to reach absolute coherence because, fundamentally, it is a question of reconciling different interests and objectives. It is important to take steps forward and take advantage of the opportunities to improve  the  various national cooperation structures and mechanisms.

In its report on the implementation of the 2030 Agenda, the Government decided to draw up an overall assessment of the different ways in which Finland’s foreign policy contributes to the achievement of the sustainable development goals in different administrative branches and of ways in which the coherence of practices and procedures to drive sustainable development outside Finland could be developed.  The assessment should be completed in February 2019. The recommendations included in the assessment will play an important part in improving policy coherence.

As yet, there are no suitable follow-up indicators that would describe the impact that consumption and production in Finland resulting from imports has on the use of global resources. The need for such an indicator is obvious. The water footprint of companies, currently being developed with the help of the water stewardship commitment launched this year, is a good example of possible future indicators.

New resource-efficient technologies and methods to mitigate emissions are constantly being developed and introduced in Finland. The technological or social innovations promoting sustainable development that have been developed in Finland may provide solutions also to global challenges. It would be useful to look at how the spread of innovative and material-efficient circular economy solutions as part of Finland's exports affects different material flows. As yet, we do not have a suitable indicator for this kind of examination.

Finland's global responsibility is described also by the indicators in some of the other baskets.  The consumption footprint, greenhouse gas emissions control, the numbers of quota refugees and the global responsibility of working life are good examples. 


The interpretation text has been drawn up by Pasi Pöysäri from the Ministry for Foreign Affairs.