EMCC European Monitoring Centre on Change

Perceptions of globalisation: attitudes and responses in the EU — Finland

  • Observatory: EMCC
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  • Published on: 02 March 2008



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Country:
Finland
Author:
Arto Miettinen
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This report explores the employment impact of globalisation and reviews the attitudes and responses of national governments and the European social partners to this phenomenon in Finland.

According to the Confederation of Finnish Industries (EK) and the Ministry of Finance (VM), adjustment to globalisation is the only way forward. According to the Prime Minister’s Office Publications (19/2006) and Etlatieto Oy, outsourced tasks have, contrary to the generally-held belief, usually not been off-shored but transferred to another company in Finland. However, some outsourcing and off-shoring activities have been directed at foreign countries.

The Confederation of Finnish Industries points out that domestic and foreign investments cannot be set against one another. According to survey results, enterprises that have gone international and outsourced to other countries have also had success in domestic markets. Foreign investments produce also indirect advantages; they increase the wealth and purchasing power of developing economies and create demand for new goods and services. However, the Confederation of Finnish Industries admits that globalisation may be a threat to a state’s capital base if the production of goods and services as well as employment is increasingly transferred out of the country. This may endanger the financing of public expenditure.

The only Finnish trade union with an official globalisation strategy is the Confederation of Unions for Academic Professionals in Finland (AKAVA). In its declaration “AKAVA ja globalisaatio” The Confederation sees globalisation as an expanding and deepening process whose social and political dimensions necessitate that the challenges it poses are met with well co-ordinated national measures.

While the Confederation of Finnish Industries focuses its activity on the ways to benefit from the opportunities offered by globalisation, the Confederation of Unions for Academic Professionals in Finland highlights the fact that managing globalisation requires the creation of legislation, agreements and shared values on a global level so as to correspond to the changes in the international operational environment.

Institutional responses to globalisation

Government action to prevent or reduce the extent of off shoring/relocation

Are there any recent examples in your country (i.e. over the past 3-4 years) of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?

Yes. The intervention was, however, not actually carried out by the Government, but by the Finnish Funding Agency for Technology and Innovation ( TEKES) which receives its funding from the Ministry of Trade and Industry ( KTM). The case concerned a telecommunications and electronics manufacturing company Perlos which decided to close down its mobile technology production in Ylöjärvi, Finland, in February 2006 while at the same time making investments in China, Hungary and Mexico. Some months later TEKES announced the cancellation of its earlier decision to fund a specific research and development project of Perlos. Tekes will collect the already paid amount of EUR 220,000 and cancel the remaining funding of MEUR 1.5 for the project. Tekes made its decision on the grounds that Perlos had decided to withdraw from manufacturing operations in Finland. This could be seen as a message to other companies operating in the same branch of industry.

There are also other key branches of industry, where the state wants to preserve its majority shareholder position to guarantee the security of supply on the national level, e.g. in the electricity company Fortum (51%), the national aviation company Finnair (55.8%) and the oil refiner Neste Oil (over 50 per cent).

Social partner attitudes towards off-shoring/relocation

Have there been cases over the past 3-4 years where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?

No. However, the Finnish Funding Agency for Technology and Innovation has indicated its policy when it comes to relocating or off-shoring production abroad. See the answer above.

Are there any cases over the past 3-4 years where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?

No.

If so, please indicate the cases concerned and outline their main features Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?

No. All the Finnish employee unions, SAK (the Central Organisation of Finnish Trade Unions), STTK (the Finnish Confederation of Salaried Employees) and AKAVA (the Confederation of Unions for Academic Professionals in Finland) have made it clear where they stand in questions of globalisation. According to some statements from employee unions, globalisation should not come out as exploitation of migrant workers (STTK – 20th congress) or as a weakening of workers’ fundamental rights (objectives of the Finnish Trade Unions), but should respect the long traditions of dialogue between trade unions and employers’ organisations and its contribution to steady labour conditions (industrial policy in enlarger Europe).

The Trade Union Solidarity Centre of Finland – SASK – takes the need to control globalisation even further (Strategy of SASK 2006-2008). According to SASK, the most dramatic effects of opening up markets to global competition and deregulation can be seen in the developing countries, where trade deregulation is used to compete for investments. One project of SASK is supporting the international trade union movement in the developing countries to strengthen their ability to represent and defend employee rights and interests.

Government policy on foreign-owned firms controlling significant sections of the economy

Does the Government in your country have an explicit policy on restricting the acquisition of domestic companies in certain sectors by foreign-owned firms?

No, but the state wants to remain the biggest stake-holder in some crucial branches of industry, e.g. electricity, aviation and oil refinery (see the first question).

Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?

No, there are no such restrictions.

Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed over the past 3-4 years?

Yes. Fortum and Finnair. See answer above.

Social partner responses to the take-over of domestic firms by foreign-owned ones

Have there been any recent cases (i.e. over the past 3-4 years) where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?

No, there have been no such cases. There has been some public discussion and some general critical commentary from the Finnish employee unions concerning foreign venture capitalists trying to take over some critical businesses, like Finnair, in the beginning of 2007, but according to Helsingin Sanomat: " The Finnish state is to retain control of three listed companies: the airline Finnair, the energy company Fortum, and the oil refiner Neste Oil".

Have there been any recent cases (i.e. over the past 3-4 years) where domestic companies have resisted acquisition by a foreign-owned firm on the grounds of its nationality?

Not to common knowledge.

Attitudes to globalisation

Have employers’ associations in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?

Yes. According to the Confederation of Finnish Industries and the Ministry of Finance, the key factor in globalisation is adjustment. According to the Prime Minister’s Office Publications (19/2006) and Etlatieto Oy, outsourced tasks have usually not been off-shored but transferred to another company in Finland (see Table 1.). However, some outsourcing and off-shoring has been directed at foreign countries (as mentioned in the Perlos case, see answer above).

Outsourcing has been most common in the wholesale and retail trade sector. Nearly three quarters of wholesale and retail trade companies have outsourced some of their tasks. Outsourcing is also common in the manufacturing and service sectors, although their share of outsourcing activities remains slightly smaller.

Table 1. Frequency of outsourcing in different sectors, % of companies.
 

To Finland

To other countries

Manufacturing

64

17

Whole and retail sale

71

2

Services

61

7

Source: Etlatieto Oy

According to the Confederation of Finnish Industries, domestic and foreign investments cannot be set against one another. According to survey results, enterprises that have gone international and outsourced to other countries have also had success in domestic markets. Foreign investments produce also indirect advantages; they increase the wealth and purchasing power of developing economies and create demand for new goods and services.

While the share of fixed investments of all investment has gone down, investments in research and product development have grown and focused increasingly to the home country. E.g. manufacturing invested MEUR 4.8 on R&D in 2004, of which 60 per cent was invested in Finland. A few years previously the corresponding input was MEUR 4.6, of which the share invested domestically stood at 56 per cent.

The Confederation of Finnish Industries admits that globalisation may be a threat to a state’s capital base if the production of goods and services as well as employment is increasingly transferred out of the country. This may endanger the financing of public expenditure.

However, according to the Prime Minister’s Office Publication 19/2006, most of outsourcing in manufacturing, R&D and service tasks is domestic (Table 2).

Table 2. Outsourced tasks and their location, percentages.
 

Outsourcing

Domestic

Offshore

   

outsourcing

outsourcing

Manufacturing and production a)

32.3%

30.8%

12.3%

R&D b)

22.6%

22.3%

6.6%

Services c)

60.2%

59.6%

2.7%

       

a) Share of industrial companies, b) Share of companies conducting R&D activity,

c) Share of all companies.

     

Note: The 'offshore outsourcing' column includes companies which have conducted

both domestic and offshore outsourcing of the relevant activity.

 

Source: Etlatieto Oy

As seen in Table 2, outsourcing by Finnish companies is not limited to manufacturing. Nearly a quarter of the companies conducting R&D have outsourced R&D related tasks. This share is quite large, but in practise all companies outsourcing R&D offshore have also outsourced some of it inside Finland.

Outsourcing has mainly concerned service tasks. Nearly 60 per cent of companies have outsourced at least one of their service tasks. This large share of outsourcing can be explained by the fact that service activities include a variety of tasks from accounting and property security services to the maintenance of machinery. Outsourcer companies have sought to surrender the parts of company’s business that are not part of their core operations.

Have trade unions in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?

Yes. Whereas the Ministry of Finance sees globalisation to go hand in hand with positive domestic economic trends, the Central Organisation of Finnish Trade Union has a less positive opinion on the issue. The latter sees globalisation as an excuse to relocate personnel or transfer companies abroad. However, according to Etlatieto Oy, most outsourcing from Finnish companies has been domestic. (See Table 1)

The only trade union with an official globalisation strategy is the Confederation of Unions for Academic Professionals in Finland (AKAVA). In its declaration “ AKAVA ja globalisaatio” the Confederations sees globalisation as an expanding and deepening process whose economic advantages are based on the opportunity of using domestic resources such as labour force, natural resources and capital to produce goods and services that have as high as possible a value in the global marketplace. Profit from exports can be used to purchase from global markets the goods and services whose production in Finland is, for some reason, relatively inefficient.

However, the advantages of globalisation and their distribution between both regions and population groups can be crucially influenced on the one hand by various national measures which distort international competition, and on the other hand by the lack of globally applicable rules on economic activities. In this situation (multinational) corporations strive, forced by mutual competition, to utilise differences in national operating environments. The result may be globally undesirable with regard to its economic, ethical, social or environmental effects. Globalisation has a very fundamental social and political dimension, whose challenges cannot be met with uncoordinated national measures.

The Confederation of Unions for Academic Professionals in Finland divides the development during the last decades from the viewpoint of the supervision of the interests of employees into three periods: the Finland with a closed economy, EU Finland and the globalising EU Finland. The change over into the EU Finland and further to globalising EU Finland in fact started simultaneously. The development towards a globalised Finland has, however, accelerated strongly during the past few years. The last wave in the internationalisation of Finland has been generally acknowledged only in the 2000s, e.g. in connection with the Perlos case.

The transition from EU Finland to a globalising EU Finland will presumably mean clearly more significant changes than before in the position of both labour market organisations and individual employees. The functioning of labour market organisations in the third world is small-scale and collective bargaining is rudimentary. Trade unions are not allowed in many countries. There is scant opportunity to speak of bargaining or negotiations on a global level. Labour market organisations are globally essentially less well networked than within the EU.

The power of strike, the most radical measure of employees in globalising Finland, is weakening. The establishments in different countries exist, in practice, in a situation of mutual competition and striking may blunt an establishments' edge in this competition. The financing of the public sector is ever more dependent on how well Finland manages the globalisation challenge. Thus, the management of globalisation requires the creation of legislation, agreements and shared values on a global level so as to correspond to the changes in the international operational environment.

Have there been any surveys of public opinion in your country over the past 3-4 years on attitudes towards globalisation or on the various dimensions of this (as listed above)?

No, there have been no such surveys. Between June and August 2006, Etlatieto Oy conducted a survey charting companies’ international activities and views on Finland as their geographic location. The survey was targeted at companies employing at least 10 staff in manufacturing, retail, transport, financial or insurance services or business services, but did not aim at eliciting public opinion towards globalisation. Some of the findings of this survey are displayed in Table 1 and Table 2.

Have these surveys made a distinction between the different dimensions of globalisation (as listed above) or have separate surveys been carried out on these dimensions?

No, please see question above.

Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by a non-EU companies?

No, please see question above.

Sources:

Etlatieto Oy, subsidiary of ETLA, The Research Institute of the Finnish Economy.

Finland’s response to the challenge of globalisation. Report by the Secretariat of the Economic Council – PART II. Prime Minister’s Office Publications. 19/2006

Osaava, avautuva ja uudistuva Suomi. Suomi maailmantaloudessa –selvityksen loppuraportti. Valtioneuvoston kanslian julkaisusarja. 19/2004. (Strenghtening competence and openness – Finland in the global economy Final report – only in Finnish).

Strenghtening competence and openness – Finland in the global economy. Interim report. Prime minister’s office 2004.

The Central Organisation of Finnish Trade Unions – SAK

The Finnish Confederation of Salaried Employees – STTK

The Finnish Funding Agency for Technology and Innovation – TEKES

The Confederation of Unions for Academic Professionals in Finland – AKAVA

The Confederation of Unions for Academic Professionals in Finland and globalisation. (AKAVA ja globalisaatio – only in finnish)

The Confederation of Finnish Industries – EK

The Ministry of Trade and Industry – KTM

The Trade Union Solidarity Centre – SASK

Arto Miettinen, Statistics Finland

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