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Speeches, 9/15/2014

Minister Tuomioja's speech at the University of Turku as part of the lecture series "History and Politics of European Integration"

FINNISH INTEGRATION POLICY – FROM THE COLD WAR TO THE PRESENT

Dr. Erkki Tuomioja at the University of Turku 15 September 2014

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Dear students, academic colleagues,

Ladies and Gentlemen,

It is a great pleasure to speak at the University of Turku. I highly appreciate being invited to speak. These rare occasions where academic research and politics meet directly are valuable. Practice benefits from academic insights, and theory has to stand the test of reality. Dr. Henry Kissinger once said that the difference between an academic and a statesman is that while academics can revisit their subject at will, the statesman has only one shot at the issue (Henry Kissinger – ‘On Diplomacy’). 

My subject today is Finnish integration policy – from the cold war to the present. My aim is to provide a historical overview and present a few analytical reflections, but also to provide some personal insights as a political practitioner personally involved in all phases of Finland’s integration history. So today, I have some difficulty in deciding whether I am addressing you as foreign minister or academic colleague. That judgment I gladly leave to the audience.

(integration)

Any history needs to start with context. Finnish integration policy is part of a broader post-war fabric with Western Europe re-building its political institutions and economies after a devastating world war and Eastern Europe falling under a totalitarian Soviet tutelage.

Dealing with the challenges of post-war Europe soon became a struggle with the factual limits of the nation-state: reconstruction placed immense expectations on governments and a growing number of public functions were hard – if not impossible – to deliver without an unprecedented degree of cooperation between individual states.

The post-war realization that a war between Western European nations needed to be permanently removed from the picture, provided the natural ideological narrative for the founding fathers of European integration, but the real driver behind European integration was the fact that integration was also a practical necessity for the nation states to be able to live up to the expectations of their electorates. This process is well documented in ‘The European Rescue of the Nation State’ by Alan S. Milward (1992).

Integration and interdependence are two branches of the same tree. The degree of interdependence has been constantly deepening – there are very few domains, where public policy can act without acknowledging cross-border effects. Environmental policies are good examples – pollution does not respect national boundaries. And we have to remember that international solutions to transnational problems are abundant – who remembers acid rain anymore, but it still plagued most of Europe just a few decades ago.

Integration is a more developed and systematic way in dealing with the issue of transnational governance. Instead of doing it case-by-case, you go for a more comprehensive approach, and instead of relying on unanimity countries even agree to majority decisions for the common good. Integration is a European innovation in governance - working closer together, but without resorting to full-blown federalism.

A basic element of integration is still valid today – when the economy becomes transnational, so should its management.

(Finnish integration policy during the Cold War)

The basic elements of Finnish integration policy during the cold war were very directly linked to the division of Europe into two competing political spheres – western and eastern. Finland has always stood at the borderland between what could be described in very broad strokes as the western and eastern civilizations in Europe, but its long and historic association with Sweden anchored Finland firmly to Western Europe. This basic orientation meant that even as a Cold War neutral state and immediate neighbor of the Soviet Union, economic ties, values, culture, governance and a tried and tested commitment to democracy tied Finland deeply to Western Europe, even though the necessity for a political arrangement with Soviet Russia was a dominant feature of Finnish foreign policy during the cold war.

In practice this situation meant that Finland had its main markets in the west but its policy to Western European integration had to take Soviet interests to account by reassuring Moscow that deepening western economic ties would not disturb friendly neighborly relations with the Soviet Union or bring Finland into a military alliance seen as hostile or threatening to the Soviet Union.

This basic – perhaps self-evident – feature of Finnish integration policy was conceptualized by professor Klaus Törnudd (1969) as a policy that was torn between economic and political imperatives, namely western economic attraction and eastern political impediments. Like being in suspension between two opposing gravitational forces.

The practical steps that Finland took with European integration – and during the Cold War European integration was predominantly economic – well demonstrate this state of affairs.

The main Finnish export was forestry products – pulp and paper – where the printing presses of western European markets were crucial for Finnish export industries. At that time our major export competitor was Sweden – another big pulp and paper producer – and it was an economic imperative to secure equal access to markets.

For a detailed dissection of Finnish foreign trade, the history of Finnish trade policy – ‘Vapaakaupan tiellä’ by Professor Juhana Aunesluoma (2011) is recommended reading.

In the 1960s Western Europe was divided into two – roughly equal - trading areas. The European Economic Community (EEC) and the European Free Trade Association (EFTA), with EFTA being the outfit with more modest trade-related ambitions. Most Northern European partners became EFTA members – and from the Finnish point of view crucially its major destination for paper – the United Kingdom – and its major competitor, Sweden.

Being a part of EFTA was an economic necessity, but the well-known political impediment meant that this would not take the form of straightforward membership, but a special arrangement – the FINNEFTA in 1961 – where Finland became an associate member refraining from – with today’s perspective minuscule – elements of supranational decision-making that could in theory have led to decisions that may have posed an issue in terms of Finland’s neutrality, i.e. relations with the Soviet Union.  Another important feature of our EFTA relationship was, that other EFTA countries refrained from objecting to the granting of Most Favoured Nation treatment by Finland to the Soviet Union which both for economic and political reasons was our requirement for the Association agreement.

Finland only became a full EFTA member in 1986, when European integration had already taken major steps and EFTA was about to become a waiting room for the European Economic Area.

Nordic countries are forerunners in many areas that today are seen as higher forms of integration – common labor markets, passport free travel, political rights were already a Nordic reality in the 1960s. But despite serious attempts in the 1950s and late 1960s a Nordic economic community never came about. Perhaps it would have been too small for adequate critical mass, but it remains a chapter in integration history that was never really opened, to the regret of many at the time.

A new fork in the road of Finnish integration policy came with Britain’s, Denmark’s and Ireland's membership of the EEC in 1973. A major part of EFTA was jumping ship and the issue of market access had to be resolved again. The same celestial mechanics were put in motion – economic interests warranted a free trade treaty with the EEC, but only after further political loops were made towards the Soviet Union, reassuring Moscow that closer economic ties to the EEC would not jeopardize good Finnish-Soviet relations. It can be questioned whether the Soviet leadership of that time had ever really read their Marx – they should have known that in the long run economic forces would trump political promises.

Another Finnish academic – Professor Harto Hakovirta – has described Finnish integration policy as ‘wait-and-see’ (1975). In practice meaning that since the economic attraction of Western Europe was great, Finland would always take further steps towards European economic integration, but only as far as its Soviet ties would allow. The gravitational poles were not equal after all, and the western economic attraction would prevail over the eastern political one. Supporting this view is the fact that it took only some three months after the collapse of the Soviet Union in December 1991 for Finland to apply for EU membership in March 1992.

A further theoretical insight to Finnish Cold War integration policy could be added by making the point that big economic changes in the 1980s signified a step-change to the economic pressures of integration policy, namely the unguarded liberalization of capital markets that had an indirect but profound impact on Finnish integration policy, but which was never publicly debated or explicitly agreed to in Parliament.

An eminent American academic Albert O. Hirschman said that the dynamics of any organization – large or small – can be analyzed in terms of Exit and Voice (1970). If you cannot exit the system, then your only option is to use your voice – shorthand for any political action – for influence. But once exit becomes a possibility, the threat of exit becomes a powerful tool for exercising influence. Professor Raimo Väyrynen used Hirschman’s theory of ‘Exit and Voice’ to demonstrate how the free movement of capital – in practice Finnish companies outsourcing their production abroad - became a consideration for integration policy (1993). If Finland lost ground to European integration as a place to do business, then companies would simply head for the exit and move abroad. This meant that the economic stake with European integration was no longer just about market access, but where companies would go, capital be invested and jobs created.

The economic and political landscape of European integration was changing fast in the late 1980s. I cannot say that any firm prediction of Soviet collapse would have played a role in Finnish decision-making at that time as no serious predictions were made, but the perspective of a further deepening economic integration of the EEC by means of the Single Market project had to be addressed by EFTA-partners. The answer was the European Economic Area, where EFTA-countries would apply the EECs single market rules and gain access to the internal market. Finland applied for membership in the European Economic Area (and became a member in 1994), but with the Cold War over, the foundations of Finnish integration policy were to change for good and the application for full EU membership was made in March 1992 and membership was a reality by 1995.

(Finnish EU-membership)

A comprehensive account of Finland’s accession negotiations can be found in ‘Finland’s Journey to the European Union’ by Ambassador Antti Kuosmanen (2001).

A lively debate about EU membership preceded accession and the decision was put to a referendum in October 1994 (only the second referendum in Finnish history, the first about ending prohibition in the 1930s didn’t need much campaigning for a yes vote). Many angles – for and against – were discussed, but very little public attention was given to the fact that EU membership was a monumental decision for Finnish foreign and security policy as well. This fact was not lost on the political leadership, where EU membership was seen as anchoring Finland firmly in the Western political sphere, where close political ties would act as a de facto deterrent and boost Finnish security.

One thing was clear - neutrality became a thing of the past with EU membership as membership in a political union cannot be reconciled with political neutrality. This aspect was actually seen in some official statements as a firm obstacle to EU membership as late as 1990 (Prime Minister Holkeri). Some thought and public deliberation was given to the fact that EU membership could in theory put Finland on a collision course with Russian interests and break with Cold War practice where Finland wanted to avoid antagonizing its big neighbor, but the prevailing assumption at the time was that Russia would converge with European values.

Finland had a Treaty of friendship, cooperation and Mutual Assistance with the Soviet Union, committing Finland to remain outside hostile alliances to Russia. This treaty was swept under the carpet when successive agreements where negotiated with Russia in 1992. Having the old FCMA Treaty in place would probably not have stopped Finnish EU membership, but would have kept Finnish diplomacy busy in explaining how the two are to be reconciled. As it happened the FCMA treaty was invoked by Stalinists as a hindrance for Finland signing the Free Trade Treaty with the EC in 1973, but at the end of the day the Soviet Union did not espouse this argument.

EU membership was promoted as a better alternative for Finland than membership in the European Economic Area. The EEA provides major economic benefits – access to the single market and many collateral policies – but it has a major defect. It is 100% about adaptation. EEA members have made the commitment to apply EU legislation without having a real say in its drafting and decision-making. A recent Norwegian survey estimated that EEA membership means the adoption of ¾ of EU legislation compared to full membership (‘Outside and Inside’ 2012). A seat at the table is preferable if you want to influence EU policy.

And a seat at the table is also important for parliamentary democracy. We can be proud of the Finnish parliamentary scrutiny of EU affairs, which is among the EU’s best. I have the conviction that many policy mistakes would have been avoided if at least a majority of member states had a similar robust parliamentary control of their EU policy.

(Finland as a member)

Finland has soon been an EU member for 20 years. This has been a period of nearly constant treaty change, followed by the euro area crisis. The Union has evolved, taken huge leaps, even taken some missteps, but there can be no denying of the fact that the European Union of 2014 is a very different union from the one we joined in 1995.

Enlargement is a major change. We were 15 and now we are 28. This is one single policy where the EU has been on the right side of history. If the EU can be described as perhaps the most successful peace project in world history putting an end to the long and disastrous history of wars between its founding member states, the continued enlargement of the Union has also enlarged the zone of peace and stability on our continent. This makes the EU worthy of the Nobel Peace Prize accorded to it.

EU enlargement has also been designed to heal the Cold War division of the Europe. Imagine, if the EU had stagnated at 15. We could not talk for Europe, but only its Western appendix. Only the latest stage of EU neighborhood policies, which never aimed at creating an exclusive sphere of EU influence at the cost of others and notably Russia, has not been the success we hoped for. Mistakes the EU may have made with its Eastern Partnership do not justify any of the violations of international law and use of force resorted to by Russia, but they need to be analyzed so as to avoid repeating them in the future.

Being a member is about carrying your weight and making an impact. Enlargement is an EU policy where Finland has made a major contribution.

What are other Finnish achievements as a member. I could single out many policies - large and small – but let me mention crisis management. It is easy to forget that the EU that Finland joined was not in the business of crisis management. Finland and Sweden took an active role in promoting a crisis management capacity for the union – both civilian and military – that is now a European success story.

The old joke is about how much Finns obsess about what others think of us. As all good jokes, there is a ring of truth in travesty. At the beginning of our membership there was much not entirely unfounded talk about Finland being a model pupil in the union. I think that a former Swedish Prime Minister (Göran Persson) remarked in his memoirs that Finland had the habit of agreeing to EU policies before even knowing what their contents were.

Later on there was much talk about Finland belonging to the core of the EU – or mainstream in later parlance – this being of course a fact that Finland has opted-in with all major policies like Economic and Monetary Union. But tactical positioning should not be confused with substance. We have a natural inclination to participate in EU integration, but we also need to have our voice heard. If Finnish cold war integration history was about adapting to constraints, then the era of Finnish EU membership offers a totally different perspective of freedom of action.

Finland participated to Economic and Monetary Union from the start. The major motivation for this, which was allowed to override any doubts about the economic wisdom of the project, was a political desire to be part of the EU core. Some also saw it also as a chance for bringing more discipline to the Finnish budgetary and economic policies.

The challenges of forming a monetary union were clear from the outset. The euro did not form a natural currency area, but was as such prone to asymmetric shocks (Paul de Grauwe, ‘The economics of monetary integration’, 1994). Academics remarked that the functioning of economic and monetary union would either need large monetary transfers within the area or have large enough national reserves to cushion economic downturns with a fixed exchange rate. But in the end we had neither. The rest is history, as Americans usually say. 

Whatever the pros and cons of the EMU its creation was not a shining showcase for democracy in action. In Finland I recall all the presidential candidates in the 1994 election answering with an unequivocal NO to the question should Finland give up its own currency. That was of course, only less than a year before the referendum on EU membership where it can be doubted that a majority for joining would have materialized had it been made clear that this also meant joining the EMU. Citizens were, of course, not consulted on this because they could have given the “wrong answer”. The only EU country where the Euro has been put to a referendum is Sweden, where it was duly turned down by the voters.

If the creation of the Euro has shown a clear democracy deficit this also applies to how it has been run.

(What does the future hold)

When you look at history, everything seems clear with perfect hindsight vision. The train of history seems to go forward with certainty and speed. Reality is different – at all times, we have alternatives and make choices that impact on the future.

A recent book about the inception of the first world (‘Sleepwalkers’ by Christopher Clark) remarked how events shape a sense of their own necessity. This was in the context of 1914, where the start of the First World War was the result of unintended and many times accidental incidents leading to a highly improbable and undesirable end result. Nevertheless much of later history has become expert in finding clues and evidence that makes the outbreak of the war seem nearly self-evident.

There are always alternatives, and political decision-making is about shaping events, not just letting history take its course.    

We can speculate how history will judge European integration – what are the choices we make today that will have a great impact on the future. Are there doors that we should have opened, but we left shut. Or are there doors that should have never been opened in the first place. I can only attempt to give some thoughts about what really matters with the choices we make.

One test will be how Europe deals with sustainable development. We may have at best only a few decades time to adapt our humanity of 7 billion people to the constraints of our finite planet and bring all our activities to correspond to the needs of ecologically, socially and economically sustainable development. Will the European Union be a leader with climate change policies and development?

Another test is how we manage peace and security. We thought that military conflict was a thing of the past in Europe, but the events in Ukraine have shown otherwise. Our immediate neighborhood poses great challenges – the list of stable neighbors is getting shorter every year. A big test will be whether the EU will get its act together in foreign policy and do a better job with joint action and unity of purpose.

A third major test is how we manage our economies. How do we restore European growth and prosperity. I do not wish future history books to say that our time was a lost decade containing a great paradox – a time when very little was invested while interest rates were close to nothing.

Dear friends,

I thank you for your attention and look forward to a lively debate.

This document

Updated 9/15/2014

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