SPEECH BY THE PRESIDENT OF THE REPUBLIC OF FINLAND,
MR. MARTTI AHTISAARI AT A MEXICAN-FINNISH BUSINESS CONFERENCE
IN MEXICO CITY ON 23.2.1999

To begin I thank the organisers for the opportunity to attend this important function, which has attracted so many and such distinguished representatives of Mexican industry and business. This meeting is tangible proof of good cooperation between the Confederation of Finnish Industry and Employers and its Mexican counterpart CEMAI. We had an earlier example when a similar meeting took place in Helsinki in summer 1997.

Relations between Finland and Mexico go back many decades. In November of this year, in fact, we shall be celebrating the 50^th anniversary of the establishment of diplomatic relations between us. Even before that, in 1936, our governments had signed a treaty of friendship. In those days, geographical distance was a natural obstacle to closer contacts, but the explosive development of air transport and telecommunication has nowadays, fortunately, rendered it insignificant. The globe has shrunk into a single village, where no corner is marginal.

With her colourful history, powerful cultural heritage and richly-varied scenery, Mexico has always fascinated the Finns. Today, your country is a rapidly-developing industrial power and a fully-fledged member of the OECD, APEC and NAFTA. Foreign trade is the engine of your economic growth and the development that you are enjoying is the result of your far-sightedness in exposing your economy to foreign competition.

My visit to Mexico is historic, because I am the first President of Finland to come here on an state visit. Yesterday I had an interesting and fruitful discussion with President Zedillo on international, regional and bilateral themes. We were in complete agreement that our relations are excellent and active. We agreed to work jointly with the special goals of increasing and diversifying trade between us. However, governments do not trade; that, distinguished representatives of industry and business, is your task.

The duty of governments, on the other hand, is to provide the best-possible framework for trade and economic cooperation. With that in mind, our governments yesterday signed an agreement providing for the promotion and protection of investments. Together with the agreement preventing double taxation that we signed in 1997, this will provide a solid legal foundation for companies to establish and invest in either country. The main task of the Finnish Embassy and our export centre here is to support companies in their efforts to penetrate the market.

The opening up of the Mexican economy in the 1990s, the structural reforms that you have instituted and the rapidly advancing privatisation of the state-owned sector have not gone unnoticed in Finnish industrial circles. A good demonstration of our increased interest in your growing market is the high-level delegation accompanying me. It represents the strongest parts of our industrial and commercial sectors: electronics and telecommunications, papermaking, energy generation and distribution, mining technology, mechanical engineering and the distributive trades.

Our positive experiences to date of close cooperation between the state authorities and the private sector justify confidence that our efforts will create new business contacts in Mexico and strengthen existing ones. I urge all of you to avail yourselves of the opportunities that this conference is giving you.

Our bilateral trade doubled in both directions last year and totalled about $140 million. As encouraging as that trend is, it is still modest when we consider the economic and technological potential of both countries. On the other hand, trade statistics do not nowadays accurately reflect the volume of trade and investment, because products are often manufactured in a third country and exported from there. We estimate that at least twice as many Finnish products are exported to Mexico from North American and European countries than directly from Finland.

Finland’s accession to membership of the European Union four years ago has added a new dimension to our relations with Latin American countries. This region is a clear priority for the EU and its members. A good indication of this importance is the first summit between the EU and Latin American and Caribbean countries, which will take place in Rio de Janeiro next June. Finland and Mexico are both helping to draft the agenda for this historic gathering. It will be a search, on the highest level, for solutions to regional and global problems and for ways of ensuring that principles of democracy, human rights and good administration are implemented in our countries.

In my view, we now have a unique opportunity for closer and broader relations between the EU and Mexico. President Zedillo and the Mexican Government have made this one of their political priorities. The member states of the Union, in turn, want to arrest the negative trend that has cut their market share in Mexico almost in half, to only 6 per cent, in the past five years. The agreement on economic association, political coordination and cooperation signed in December 1997 created a solid foundation for an ever-closer dialogue and growing cooperation between us. I am proud to be able to say that Finland was the first country to ratify this important agreement. As a follow on, a free-trade agreement that will facilitate exchange of a broad range of goods and services is now being negotiated.

The Finnish Government would very much like to see a comprehensive and balanced agreement being reached as soon as possible. It may well be that the talks will have reached the final straight in the latter half of this year, when Finland holds the Presidency of the European Union. Nothing would please me more than to be able to witness the signing of the agreement before the end of the year. It would be a good omen as we cross the threshold to the new millennium.

The international environment in which companies do business has been changing fundamentally throughout this decade. A central feature of this development has been globalisation, with all the international flows of capital, technology and other factors of production that it entails. More and more companies now examine their operations in a world-wide context. The force driving globalisation is the revolutionary development in information technology and telecommunications that has shrunk our planet.

Globalisation is not, however, merely a product of technical development. It has also facilitated profound liberalisation of trade and capital flows in many parts of the world. This, in turn, has brought tougher competition and increased efficiency, and thereby stimulated growth. Liberalisation of trade has been achieved through multilateral and bilateral agreements, which collectively form an important frame of reference for a global system of economic endeavour. Mexico’s extensive network of free-trade agreements is a good demonstration of your country’s timely response to the challenges of globalisation.

In the past decade, investments have become a central manifestation of globalisation. Indeed, they have even surpassed trade in importance. It is estimated that every dollar invested in an OECD country generates trade worth nearly twice as much. About four-fifths of cash flows into developing countries is now investment rather than development aid. Your Government has created an investment-friendly climate in this country and as a result Mexico is now one of the developing countries’ biggest recipients of foreign direct investment.

Because globalisation is a process in which companies are the driving force, it has eroded the ability of states to guide economic endeavour: companies operate globally, but most countries only nationally or regionally. The public authorities can still to a certain extent influence the course that globalisation follows as it evolves, but can not escape involvement merely through political decisions. What is involved is a much more profound economic and technological process, and remaining aloof from it amounts to marginalising oneself. I find it encouraging that the recent upheavals in the world economy have not halted liberalisation of trade, capital flows and investments.

As the influence of individual nation-states wanes, regional integration gives them a better opportunity to relate to and manage economic change. The constantly deepening integration in Europe - for example our Economic and Monetary Union and the new currency unit the Euro - are the clearest example of this. For Finland, EU membership is an opportunity to have a real influence on the decisions that this economic power - one of the most important in the world - arrives at, thereby considerably improving our ability to look after our national interests.

In a world of companies with global operations, the concept of "national interest" needs to be redefined. Promoting internationalisation is becoming a central national goal, and global competitiveness is the most important force creating new jobs. Also we in Finland have realised this and shifted the emphasis in our policy onto encouraging our companies and the economy as a whole to internationalise.

The task of the public authorities in Finland has been defined as being to create favourable conditions for global business operations. We have not embarked on the road of subsidies, which violate the basic rules of competition and distort production structures. Instead, we have channelled a lot of resources into infrastructure, education and training and ensuring that high-quality labour is readily available. In addition to that, we have revised our tax system and legislation to bring them more into line with changed circumstances and needs. Last year, the public and private sectors between them invested the equivalent of 3.1 per cent of gross domestic product in research and development. That put Finland among the countries at the very top of the world league. The indicators reflecting quality of life likewise paint a positive image of Finland.

A high standard of education and training is a significant competitive advantage for companies based in Finland. Cooperation between our universities, the corporate sector and the authorities is effective and flexible.

For the whole of this decade, growth in our economy has largely drawn its strength from globalisation. The electronics sector has come up rapidly to overtake forest products. Today, electronic products account for a quarter of our total exports, which in turn have doubled their value in less than ten years. The share of advanced technology products in our exports has grown faster than in any other industrial country. Finnish investments abroad have grown strongly, which is natural as companies seek new markets and merge in response to the challenges of internationalisation.

As an economy with only five million inhabitants, Finland has tried to specialise in certain key sectors where we believe we have international-class know-how and high technology. The majority of the Finnish industries that have enjoyed most success already base their operations on specialisation and exports: more than half of our industrial output is destined for international markets. Thanks to the right economic policies, we have been able to create strong competitiveness in several key sectors and in that way respond to the challenges of globalisation.

Specialisation makes companies and whole economies more interdependent. As a consequence, both impulses for growth and disturbances are instantly reflected throughout the international trade and economic system - and in the case of the latter, unfortunately, often with undue severity. We can all recall quite recent examples of this. On the whole, nevertheless, the benefits of globalisation indisputably outweigh its drawbacks.

Looking at the matter in general, Europe has not managed particularly well to respond to the challenges of globalisation. A comparatively low savings rate, the public sector’s large share of the economy, high unemployment and a very expensive welfare state have all contributed to weakening Europe’s relative competitiveness. A successful changeover to a common currency, the Euro, will give us a unique opportunity to make our continent more competitive. However, it is mainly in global markets that growth will have to be sought.

Finland and Mexico are irreversibly part of the new global economy. Both of us have foreseen the challenges and problems that it would bring and implemented the necessary structural changes in our economies. We have supported the market economy and free trade, and exposed our industry to tough international competition. Mexico’s membership of NAFTA and Finland’s membership of the European Union have integrated both of us into a pattern of broader and more solid cooperation, something that has had clear positive effects on the development of our economies.

Thus our prospects of developing our mutual commercial and economic cooperation on a basis of equality are excellent. The Government and economic sector of Finland will work effectively and smoothly together to ensure that this opportunity is availed of.

Many thanks.