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Finland (10/04)For the most current version of this Note, see Background Notes A-Z.
PROFILE OFFICIAL NAME: Geography People Government Economy (2003) HISTORICAL HIGHLIGHTS Finland's nearly 700-year association with the Kingdom of Sweden began in 1154 with the introduction of Christianity by Sweden's King Eric. During the ensuing centuries, Finland played an important role in the political life of the Swedish-Finnish realm, and Finnish soldiers often predominated in Swedish armies. Finns also formed a significant proportion of the first "Swedish" settlers in 17th-century America. Following Finland's incorporation into Sweden in the 12th century, Swedish became the dominant language, although Finnish recovered its predominance after a 19th-century resurgence of Finnish nationalism. Publication in 1835 of the Finnish national epic, The Kalevala--a collection of traditional myths and legends--first stirred the nationalism that later led to Finland's independence from Russia. In 1809, Finland was conquered by the armies of Czar Alexander I and thereafter remained an autonomous grand duchy connected with the Russian Empire until the end of 1917. On December 6, 1917, shortly after the Bolshevik Revolution in Russia, Finland declared its independence. In 1918, the country experienced a brief but bitter civil war that colored domestic politics for many years. During World War II, Finland fought the Soviet Union twice--in the Winter War of 1939-40 and again in the Continuation War of 1941-44. This was followed by the Lapland War of 1944-45, when Finland fought against the Germans as they withdrew their forces from northern Finland. Treaties signed in 1947 and 1948 with the Soviet Union included obligations and restraints on Finland vis-a-vis the U.S.S.R. as well as territorial concessions by Finland; both have been abrogated by Finland since the 1991 dissolution of the Soviet Union (see Foreign Relations). GOVERNMENT AND POLITICAL CONDITIONS Finns enjoy individual and political freedoms, and suffrage is universal at 18. The country's population is relatively ethnically homogeneous. Immigration to Finland has significantly increased over the past decade, although the foreign-born population, estimated at only 2% of the total population, is still much lower than in any other EU country. Few tensions exist between the Finnish-speaking majority and the Swedish-speaking minority. President and cabinet. Elected for a 6-year term, the president:
Parliament. Constitutionally, the 200-member, unicameral Eduskunta is the supreme authority in Finland. It may alter the constitution, bring about the resignation of the Council of State, and override presidential vetoes; its acts are not subject to judicial review. Legislation may be initiated by the president, the Council of State, or one of the Eduskunta members. The Eduskunta is elected on the basis of proportional representation. All persons 18 or older, except military personnel on active duty and a few high judicial officials, are eligible for election. The regular parliamentary term is 4 years; however, the president may dissolve the Eduskunta and order new elections at the request of the prime minister and after consulting the speaker of parliament. Judicial system. The judicial system is divided between courts with regular civil and criminal jurisdiction and special courts with responsibility for litigation between the public and the administrative organs of the state. Finnish law is codified. Although there is no writ of habeas corpus or bail, the maximum period of pretrial detention has been reduced to 4 days. The Finnish court system consists of local courts, regional appellate courts, and a Supreme Court. Administrative divisions. Finland has five provinces and the self-ruled province of the Aland Islands. Below the provincial level, the country is divided into cities, townships, and communes administered by municipal and communal councils elected by proportional representation once every 4 years. At the provincial level, the five mainland provinces are administered by provincial boards composed of civil servants, each headed by a governor. The boards are responsible to the Ministry of the Interior and play a supervisory and coordinating role within the provinces. The island province of Aland is located near the 60th parallel between Sweden and Finland. It enjoys local autonomy and demilitarized status by virtue of an international convention of 1921, implemented most recently by the Act on Aland Self-Government of 1951. The islands are further distinguished by the fact that they are entirely Swedish-speaking. Government is vested in the provincial council, which consists of 30 delegates elected directly by Aland's citizens. Military. Finland's defense forces consist of 35,000 persons in uniform (26,000 army; 5,000 navy; and 4,000 air force); the country's defense budget equals about 1.6% of GDP. There is universal male conscription under which all men serve from six to 12 months. As of 1995, women were permitted to serve as volunteers. A reserve force ensures that Finland can field 400,000 trained military personnel in case of need. Political parties. Finland's proportional representation system encourages a multitude of political parties and has resulted in many coalition governments. Political activity by communists was legalized in 1944, and although four major parties have dominated the postwar political arena, none now has a majority position. The Center Party (Keskusta), traditionally representing rural interests, gained a slight plurality in Finland's parliament in the general election of March 2003, narrowly defeating the ruling Social Democratic Party (SDP) by a 24.7% to 24.5% margin. The Center then formed a three-party governing coalition with the SDP and the Swedish People's Party. The Green Party, which had withdrawn from the government in spring 2002 in protest to the government decision to approve building a fifth nuclear reactor, remained in the opposition, as did the National Coalition Party (conservatives). The National Coalition leads the opposition in parliament. The Left Alliance, a combination of socialists left of the SDP and a number of former communists, maintains representation in parliament but is not a significant factor in most policy decisions. The Center Party's leader, Anneli Jäätteenmäki, became Finland's first female prime minister in April 2003. However, she resigned amid a scandal over the leak of classified materials 2 months after taking office. She was replaced as prime minister by the Center Party's new chairman, Matti Vanhanen. Principal Government Officials Finland's embassy in the United States is located at 3301 Massachusetts Avenue, NW, Washington, DC 20008; tel: 202-298-5800; fax: 202-298-6030. ECONOMY The Finnish economy has made enormous strides since the severe recession of the early 1990s. Finland successfully joined the euro zone and has outperformed euro-area partners in terms of economic growth and public finance. Even under the difficult circumstances of the last few years, the Finnish economy has performed reasonably well--though the pace of activity has slowed considerably and remains subject to volatility. Finnish GDP growth slowed sharply from 5.1% in 2000 to 1.2% in 2001, largely as a result of a collapse in exports. The economy picked up slightly in 2002, when GDP growth amounted to 2.2% and hovered around 2.0% in 2003. The first quarter of 2004 was marked by modest growth. Despite initially weak production, it is forecast that exports will expand due to increased international economic growth. Domestically, the government has cut taxes and tempered inflation in order to incite private consumption to prompt a growth in GDP. Growth is forecast at 2.5% in 2004 and 2.75% in 2005. Unemployment has decreased significantly since 1994; however, the 9.2% unemployment rate (2003) remains above the EU average. A relatively inflexible labor market and high employer-paid social security taxes hamper growth in employment. However, the government expects the unemployment to drop to 8.8% by the end of 2004 and 8.5% in 2005. Exports of goods and services contribute 33% of Finland's GDP. Metals and engineering (including electronics) and timber (including pulp and paper) are Finland's main industries. The United States is Finland's most important trading partner outside of Europe. With a 4.7% share of imports (2003), the United States is Finland's sixth-largest supplier after Germany, Russia, Sweden, the United Kingdom, and France. The total value of U.S. exports to Finland in 2003 was $2.1 billion. Major exports from the United States to Finland continue to be machinery, telecommunications equipment and parts, aircraft and aircraft parts, computers, peripherals and software, electronic components, chemicals, medical equipment, and some agricultural products. The primary competition for American companies comes from European suppliers, especially German, Swedish, and British. The main export items from Finland to the United States are ships and boats, paper and paperboard, refined petroleum products, telecommunications equipment and parts, and automobiles. In 2003, the United States was Finland's fourth-largest customer after Germany (11.8%) and Sweden (9.9%) with an export share of 8.1%, or $4.7 billion. However, trade is only part of the totality: the 10 biggest Finnish companies in the United States have a combined turnover that is three times the value of Finland's total exports to the United States. About 2% of the Finnish GDP comes from exports to the United States. Except for timber and several minerals, Finland depends on imported raw materials, energy, and some components for its manufactured products. Farms tend to be small, but farmers own sizable timber stands that are harvested for supplementary income in winter. The country's main agricultural products are dairy, meat, and grains. Finland's EU accession has accelerated the process of restructuring and downsizing of this sector. FOREIGN RELATIONS Relations With the Soviet Union and With Russia Finland and the U.S.S.R. signed a peace treaty at Paris in February 1947 limiting the size of Finland's defense forces and providing for the cession to the Soviet Union of the Petsamo area on the Arctic coast, the Karelian Isthmus in southeastern Finland, and other territory along the former eastern border. Another provision, terminated in 1956, leased the Porkkala area near Helsinki to the U.S.S.R. for use as a naval base and gave free access to this area across Finnish territory. The 1947 treaty also called for Finland to pay to the Soviet Union reparations of 300 million gold dollars (amounting to an estimated $570 million in 1952, the year the payments ended). Although an ally of the Soviet Union in World War II, the United States was not a signatory to this treaty because it had not been at war with Finland. In April 1948, Finland signed an Agreement of Friendship, Cooperation, and Mutual Assistance with the Soviet Union. Under this mutual assistance pact, Finland was obligated--with the aid of the Soviet Union, if necessary--to resist armed attacks by Germany or its allies against Finland or against the U.S.S.R. through Finland. At the same time, the agreement recognized Finland's desire to remain outside great-power conflicts. This agreement was renewed for 20 years in 1955, in 1970, and again in 1983 to the year 2003, although the subsequent dissolution of the Soviet Union led to the agreement's abrogation. The Finns responded cautiously in 1990-91 to the decline of Soviet power and the U.S.S.R.'s subsequent dissolution. They unilaterally abrogated restrictions imposed by the 1947 and 1948 treaties, joined in voicing Nordic concern over the coup against Soviet leader Mikhail Gorbachev, and gave increasing unofficial encouragement to Baltic independence. At the same time, by replacing the Soviet-Finnish mutual assistance pact with treaties on general cooperation and trade, Finns put themselves on an equal footing while retaining a friendly bilateral relationship. Finland now is boosting cross-border commercial ties and touting its potential as a commercial gateway to Russia. It has reassured Russia that it will not raise claims for Finnish territory seized by the U.S.S.R. and continues to reaffirm the importance of good bilateral relations. Multilateral Relations Finland is well represented in the UN civil service in proportion to its population and belongs to several of its specialized and related agencies. Finnish troops have participated in UN peacekeeping activities since 1956, and the Finns continue to be one of the largest per capita contributors of peacekeepers in the world. Finland is an active participant in the Organization for Security and Cooperation in Europe (OSCE) and in early 1995 assumed the co-chairmanship of the OSCE's Minsk Group on the Nagorno-Karabakh conflict. Cooperation with the other Scandinavian countries also is important to Finland, and it has been a member of the Nordic Council since 1955. Under the council's auspices, the Nordic countries have created a common labor market and have abolished immigration controls among themselves. The council also serves to coordinate social and cultural policies of the participating countries and has promoted increased cooperation in many fields. In addition to the organizations already mentioned, Finland became a member of the following organizations: Bank for International Settlements, 1930; International Monetary Fund, 1948; International Bank for Reconstruction and Development, 1948; General Agreement on Tariffs and Trade (GATT), 1950; International Finance Corporation, 1956; International Development Association, 1960; European Free Trade Association, 1961; Asian Development Bank, 1966; Organization for Economic Cooperation and Development, 1969; Inter-American Development Bank, 1977; African Development Bank, 1982; Multilateral Investment Guarantee Agency, 1988; the Council of Europe, 1989; European Bank for Reconstruction and Development in Central and Eastern Europe, 1991; World Trade Organization, 1995; and INTELSAT, 1999. Finland entered Stage Three of EMU (the European Monetary Union) in 1999. All the Nordic countries, including Finland, joined the Schengen area in March 2001. U.S.-FINLAND RELATIONS Finland is bordered on the east by Russia and, as one of the former Soviet Union's neighbors, has been of particular interest and importance to the United States both during the Cold War and in its aftermath. Before the U.S.S.R. dissolved in 1991, longstanding U.S. policy was to support Finnish neutrality while maintaining and reinforcing Finland's historic, cultural, and economic ties with the West. The United States has welcomed Finland's increased participation since 1991 in Western economic and political structures. Following the dissolution of the Soviet Union, Finland has moved steadily toward integration into Western institutions and abandoned its formal policy of neutrality, which has been recast as a policy of military nonalliance coupled with the maintenance of a credible, independent defense. Finland's 1994 decision to buy 64 F-18 fighter planes from the United States signaled the abandonment of the country's policy of balanced arms purchases from East and West. The final aircraft rolled off the assembly line in August 2000. In 1994, Finland joined NATO's Partnership for Peace; the country also is an observer in the North Atlantic Cooperation Council. Finland became a full member of the EU in January 1995, at the same time acquiring observer status in the Western European Union. Finland generally welcomes foreign investment. Areas of particular interest for U.S. investors are specialized high-tech companies and investments that take advantage of Finland's position as a gateway to Russia and the Baltic countries. Principal U.S. Embassy Officials The U.S. Embassy in Finland is at Itainen Puistotie 14, Helsinki 00140; tel: 358-9-616-250; fax: 358-9-174-681. For the most current version of this Note, see Background Notes A-Z. |
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