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Would life be better if we had stayed out of the single market?

Tomi Lounema Published Date 9.5.2019 1.00 Blog

Tomi Lounema“Things are in a bad way.” “The EU is again regulating on trivialities.” It is easy to throw such jibes, accusing the EU of one thing or another. Yet there are also matters in which the EU has no say. So let us go beyond mere jibes and take a closer look at the issue. How would trade and the economy work if the present-day EU with its single market of half a billion people did not exist?

The interdependencies between states, companies and systems have increased considerably over the past few decades. In practice, you have to be part of networks – be it in the field of payment transmission systems or telecommunications. Networks have been a motor for much of recent development.

A small and closed country cannot make its voice heard

Interdependencies and the globalisation of trade make it quite clear that some degree of integration in the market is inevitable. If the EU did not exist, there might be some sort of Hanseatic League within which the state with the area’s biggest economy would assume the role of a lead state, while the others would have to harmonise their practices to comply with those of that country.

Finland would no longer be able to survive as the kind of closed economy it still was back in the 1970s, for the simple reason that all the countries around us are networked and therefore benefit from the advantages of a free and open economy.

In the western world with its market economy, there are no longer countries whose trade would be based on import and export licences, price regulation and protection of domestic production. At first glance, those tools of the olden world may seem attractive. Yet when giving it a second thought, one sees why an open market economy and the single market are beneficial for the small open economy that Finland is.

The production of a closed country would be contained within its own borders

If we in Finland still stuck to our national laws and standards on product requirements the way we did back in the 1980s, they would no longer have any practical significance. Unlike in the 1980s, products are today manufactured in far-off countries and the same products enter all markets regardless of national borders. Without harmonised product requirements at EU level, products would be manufactured according to the requirements of the biggest market in the region, i.e. Germany. And we would just have to live with that. Of course, we could either make our own laws and standards conform to German requirements or maintain our own “paper tiger” requirements and be content with what we get, without being able to exert any influence.

Another thing is that the manufacturing industry for Finnish investment products (heavy machinery and equipment) must make the products conform to the buyers' requirements. The manufacturing process involves several intermediate stages. Raw materials and semi-finished products move from one country to another. The harmonised product requirements of a wider market area facilitate production and trade considerably and cut down costs for all parties. Not so bad for companies and in terms of employment!

Non-EU countries also hungry for internal market benefits

It cannot be argued that if Finland had stayed outside the EU we would be free to do anything we deem appropriate on a national basis. A case in point is our neighbouring country Norway, which often is cited as an example of a country that has not handed its decision-making power to the EU.

While Norway has not joined the EU, it still wishes to enjoy the benefits brought by the single market. Therefore it participates in the single market through the EEA agreement. Norway is paying the EU for market access, and it also has harmonised its legislation to conform to the EU single market – just as if it were a member state. Whenever new EU legislation is enacted, Norway will have to amend its own laws accordingly. The only difference is that Norway cannot participate in drafting joint rules.

It has no influence on contents and no right to vote on legislative acts at the end of the preparatory phase.

In practical terms, Norway behaves like an EU member state. Yet it has no other choice than to apply rules imposed by others, while contributing funds to the EU like a true member state. Does this sound like a good deal? The fact that Norway stays out of the EU is not insignificant for Finland, because we think along similar lines with the Norwegians in many issues. If Norway joined the EU, we could carry more weight by presenting Nordic perspectives together.

Europe represents a home for Finland, and the EU is our best mate

Free movement of people, goods, services and capital links us with the rest of Europe, creating interdependencies, and this strengthens Finland's position internationally. Membership in the European Union and being part of the single market brings us stability and security and shows clearly which community of values we adhere to.

Do we actually take this improvement and the benefits of the single market as granted? We never miss an opportunity to point loudly to the slightest problems and inconveniences encountered. Yet we should remember that the EU and the single market come in a package, and no cherry-picking is allowed. The world around us has changed over time in many ways, and there is no returning to “the good old days”. We should not not forget that the past was not always that rosy either.

All of us Finns, who are lucky enough to enjoy the benefits of the single market: let's celebrate Europe Day!

Tomi Lounema, Commercial Counsellor, Ministry of Employment and the Economy

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