Global responsibility and policy coherence 2021
Finland's development cooperation disbursements have increased

13.1.2022 13.37 | Published in English on 28.3.2022 at 12.46
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Finland's actual development cooperation disbursements accounted for 0.47 per cent of the GNI target in 2020. This share raised Finland above the DAC average (0.3%). Domestic consumption of materials grew by almost 5 per cent in 2020, even though three million tonnes less foreign direct inputs were imported than in 2019. Finland's exports in goods, on the other hand, fell from 50 million tonnes to 46 million tonnes.

Finnish trade policy takes developing countries into account well

Finland's ranking in the Commitment to Development Index measuring trade policy (Source: Center for Global Development)

Every year, the Center for Global Development ranks 40 countries in the world using the Commitment to Development Index (CDI), which assesses their dedication to improving the status of people living in the poorest nations. The CDI scores countries relative to their size and economic weight to measure countries according to their potential to help. The part of the index that relates to trade policy was chosen as an indicator for the global responsibility basket because it is of utmost importance that developing countries participate in international trade and benefit from it. The index consists of four area:

  1. tariffs for developing countries (weight factor 40%)

  2. agricultural subsidies (weight factor 20%)

  3. regulations on imports and logistics (weight factor 20%)

  4. transparency of trade in services (weight factor 20%).

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 score and ranking in the Commitment to Development index measuring trade policy and its sub-indices. (Source: Center for Global Development)

Finland’s current situation

Finland ranked seventh in the 2020 CDI measuring trade policy, after ranking sixth in 2019. Even after falling by one notch, Finland's ranking is still excellent. The countries that placed ahead of Finland were other EU Member States (the Netherlands being first) as well as Australia, New Zealand and the United Kingdom. The higher ranking of the countries ahead of Finland in the index is explained by their more open trade in services policies, better foreign trade logistics and, for some countries, lower agricultural subsidies.

Finland’s recent development

Trade policy is an important part of Finland’s foreign policy. Finland participates actively in the implementation of the 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 for products from developing countries to enable these countries to better integrate into global value chains. As part of the EU's common commercial policy, Finland unilaterally grants tariff preferences to developing countries.

Finland's development trend in the index has been moderately rising over several years. Finland’s ranking in 2020 is the second best so far. A year earlier, the ranking was one place higher. In the earlier years (2003–2018), Finland's ranking altered between 8th and 12th.

As a result of the EU's common commercial policy, in terms of tariffs in goods trade, Finland 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. With regard to agricultural subsidies, the Netherlands is the only EU country with a higher score than Finland.

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

When looking at the trade in services, Finland's score is almost the same as the median, but poorer than in all reference countries. This is because of issues such as the 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.

Other observations related to the indicator

As the index is periodically changed, the indicator is only suitable for describing the development of different countries on the timeline to a limited extent. It rather provides a situation picture at a specific time. The indicator can also be used for comparisons between countries in individual years.

(Source: Center for Global Development)

Export and import of goods decreased – nevertheless, domestic consumption of materials increased in 2020

In Finland, domestic consumption of materials grew by almost 5 per cent in 2020, even though three million tonnes less foreign direct inputs were imported than in 2019. This is mainly due to the increase in the use of domestic direct inputs but also to reduced export of goods.

Finland exports environmental technology and services in a global scale and invests significantly in innovations in areas such as the circular economy. The export of these goods and services brings benefits from the perspective of sustainable development at the global level.

Imports and exports in tonnes in Finland. (Source: Statistics Finland)

In addition to value, foreign trade can be measured in quantity. Imports and exports in tonnes indicate changes in the material dependencies of the national economy. Information on import and export volumes is used to calculate domestic material consumption. 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’s current situation

In 2020, 54 million tonnes of foreign direct inputs were imported to Finland, which was three million tonnes less than in 2019. Finland's exports in goods, on the other hand, fell from 50 million tonnes to 46 million tonnes. The reduction in export and import in tonnes is due to the coronavirus pandemic, the economic impacts of which were also visible in Finland's foreign trade.

Although direct comparisons of country-specific material flows are challenging due to the varying nature of national economies, it can generally be said that the material flows resulting from Finland's foreign trade are significant for a small country. Overall, Finland's specialisation in sectors such as oil refining and the forest industry is reflected in extensive material flows. These material flows are further boosted by the mining industry, which has experienced strong growth in Finland in recent years and in which large material masses are mobilised. Like many other countries, Finland has outsourced raw materials production and the manufacture of labour-intensive products to countries with a relative advantage or to countries with natural resources that Finland does not have.

Finland imports particularly fossil energy materials as well as metals and minerals while it exports a significant amount of renewable wood, wood processed products and biomass and biomass products. Of imported fossil energy materials, especially coal and crude oil are emphasised. A significant share of these are processed into refined products. Because a rapid reduction in the use of fossil fuels is necessary to mitigate climate change, the imports of fossil materials can be expected to decline.

Finland’s recent development

Foreign direct inputs imported by Finland, i.e., quantitative imports of processed and raw materials and exports of goods, grew considerably in the 1990s and early 2000s. The tonnage of foreign direct contributions has traditionally been higher than the tonnage of goods exported. In other words, Finland imports a significant amount of materials from abroad. Over the past ten years, imports of foreign direct inputs have been around 60 million tonnes, depending on the year. The 54 million tonnes recorded in 2020 was the lowest volume of imports since 2015, when the imports of foreign direct inputs amounted to 53 million tonnes. The volume of export of goods in tonnes grew slightly in the early part of the last decade but started to grow in the last few years. Last year, however, export of goods decreased due to the coronavirus.

The circular economy is based on a comprehensive view of sustainability, from energy and material efficiency through the entire product life cycle to the reuse/elimination of waste. According to the principles of the circular economy, we are in the middle of a transition in which the focus is, instead of products, on services such as sharing services and platforms, maintenance, repair (including proactive industrial maintenance), and the benefits brought by digitalisation for improving the efficiency of global production chains. The ultimate goal is a carbon-neutral circular economy.

At the concrete level, 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 globally benefits sustainable development also at the global level, but measuring it is challenging and requires further development. 

Other observations related to the indicator

The material flows of many products include so-called hidden flows. The hidden flows associated with imports consist of such direct and indirect material and energy inputs made abroad in the purchasing and manufacture of imports that are not visible in the weight of the raw materials and products. Hidden flows can include, for example, land use and the greenhouse gas emissions created in the country from which a product has been exported. The hidden flows of imports may be manifold compared with the direct inputs.  The amount of hidden flows in tonnes does not, however, as such 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.

In 2020, Finland's development cooperation funding was above the DAC average

Development of Finland’s development cooperation funding and support provided to the least developed countries (LDC) included in the development funding, and climate funding. (Source: Statistics Finland)

Finland has committed to the UN and EU-set goal of appropriating 0.7 per cent of its gross national income (GNI) to development assistance as well as directing 0.2 per cent to the least developed countries. The amount of official development assistance (ODA) is then compared with the country’s GNI.

The Report on Development Policy across Parliamentary Terms (2021) sets the target for reaching the 0.7 per cent level of GNI for 2030 and for reaching the 0.2 per cent target for the least developed countries as soon as possible. Finland has lagged behind the other Nordic countries in terms of development funding.

The share of development assistance of the gross domestic product in the DAC countries in 2020

The Development Assistance Committee (DAC) is a committee of the Organisation for Economic Cooperation and Development (OECD), to which countries report on their development assistance internationally. The members of the Development Assistance Committee, i.e., the DAC Member States, have set the target of 0.7 per cent of GNI.

Finland’s current situation and recent development 

In 2020, Finland's actual development cooperation disbursements accounted for 0.47 per cent of GNI. With this share, Finland was above the DAC average (0.3 per cent), at the same level with France and Belgium.

Finland's development cooperation disbursements have been increasing in recent years, and their share of GNI was at the highest level since 2015.

Finnish participation in international crisis management has decreased

Finland’s involvement in international military and civilian crisis management. (Source: Ministry for Foreign Affairs) 

Finland provides security and bears responsibility for maintaining international peace and security by participating in international crisis management.

Finland’s current situation and recent development  

Finland currently has some 340 soldiers in crisis management operations, and some 130 Finnish experts work in civilian crisis management tasks.

Finnish participation in international military crisis management has decreased since 2020 due to the end of the crisis management operation in Afghanistan. Finland currently has some 340 soldiers in military operations. Participation in civilian crisis management has remained at the same level as in 2020, with some 130 Finnish experts working in civilian crisis management tasks.

(Source: Ministry for Foreign Affairs, Link to interactive map)

Conclusion

The global basket indicators show how Finland contributes to the implementation of the Sustainable Development Goals in the world. Finland is working on a very broad scale to promote sustainable development at the global level. The most recent SDG-specific report on Finland's actions is included in Finland's Voluntary National Review (VNR) on the implementation of the 2030 Agenda for Sustainable Development in 2016–2020. Finland’s report can be found on the UN website.

The indicators included in the global basket have not been changed since the previous review.