The commonality of patterns in NTMs, NTBs and TBTs for contrasting interstate trade turnovers in the framework of bilateral relations with Finland

Introduction

The Armenian public and private sector, amid the trends of higher integration into the global market, have substantial lack of experience in interstate trade operations and associated spheres of interest with regions further than the Eurasian Economic Union. The previous publications in the Armenia-Scandinavia Trade research series advocates for the aforementioned, mainly relying on figures provided by the Ministry of Foreign Affairs of Armenia (MFA). Nevertheless, despite the low figures in interstate commerce, the MFA figures indicate a certain positive dynamics in the amount of trade turnover in US dollars between Armenia and Finland. While this may be considered as an indicator of the possibility of establishing plausible conditions for the increase of trade, the area of NTB, NTM and TBT remains a matter that does not receive a sufficient spotlight, necessary for the relevant actors both in public and private sectors. 

An opinion is that the low pace of increase in positive dynamics of trade turnover between Armenia and Finland are conditioned by geographical factors among a number of geopolitical conditionalities. However, it is still important to distinguish the relative weight of the factors that determine the current progress in this domain. Moreover, while the calculation of the quantitative value of geopolitical conditionalities in this realm demands consideration of existence of a substantial margin of error, this research suggests an overview on a more precise set of values, as used in the previous publications in the series. Particularly, the UN trade and development agency highlights the Non-Tariff Measures (NTM), Non-Tariff Barriers (NTB) and Technical Barriers to Trades (TBT) as main factors to consider and adapt to when dealing with new markets and their potential interactions.

Finally, in an attempt to possibly lower the chance of bias in a sense of undermining the geopolitical frameworks, this research provides a comparative analysis between the interstate trade relations of Lithuania and Finland as a representative of an interstate trade interaction with historical positive dynamics, as well as the same analysis in regards to the relations of X-Finland, which attempts to provide a viewpoint of an interaction with a historically lower dynamics, with an estimated positive trends in recent years. Taking the aforementioned into consideration, the research offers the following research questions: Are there any common patterns in the NTM, NTB and TBT parameters for countries with varying historical trade turnover dynamics in relations to bilateral economic relations with Finland? What may be considered as mostly commonly problematic in the above-mentioned parameters of trade?  Given that the research is analyzing not the absolute values of trade turnovers but the relative and proportional dynamics in interstate trade, considering the historical trends in trade, the hypothesis that the research suggests at this stage of analysis is. The main barriers in forms of NTBs, TBTs and NTMs are bureaucratic, procedural and technical, demanding compliance to a detailed set of requirements with high precision. 

Application of NTM, NTB, TBT in the Context of Bilateral Trade Relations of Lithuania and Finland

NTBs, typically imposed by governments, aim to restrict trade and protect domestic industries from foreign competition. In the context of Lithuania, trade relations with Scandinavian countries—Norway, Sweden, and Finland—are well established, with these nations serving as major import and export partners. Foreign direct investment (FDI) from Scandinavia is contributing significantly to Lithuania's economic growth. The effectiveness of trade relations between Lithuania and its Scandinavian partners is influenced by various factors, particularly trade barriers, both tariff and non-tariff. These barriers can impact the strength of cooperation and the overall efficiency of trade between the regions, highlighting the importance of navigating these challenges to enhance economic development.

The Scandinavian countries—Norway, Sweden, and Finland—boast some of the highest economic indicators globally and serve as key import and export partners for Lithuania. Over recent decades, foreign direct investment (FDI) in Lithuania has surged, with Scandinavian nations playing a significant role in this growth. In the past five years alone, FDI from these countries has doubled, surpassing 4 billion euros in 2016. To enhance its standing in international trade and gain recognition, Lithuania must foster strong relationships and mutual understanding with its foreign partners. This chapter will delve into statistical data regarding trade relations and trends between Lithuania and the Scandinavian countries, highlighting the importance of these partnerships in Lithuania’s economic development.

In 2016, Finland was a notable trade partner for Lithuania, ranking as Lithuania’s 16th export and 14th import partner, despite not having the largest goods turnover compared to other Scandinavian countries. From 2012 to 2015, the trade volume between Lithuania and Finland consistently increased, reaching a total of 931 million euros in 2015. During this period, Lithuania imported more goods from Finland than it exported, with imports totaling 577 million euros and exports at 354 million euros. The primary exported goods included plastics, articles of iron or steel, and tobacco products, with plastics accounting for 13% of exports. The trade balance with Finland was negative throughout this period.

In terms of foreign direct investment (FDI), Finland invested approximately 574.28 million euros in Lithuania in 2016, making it the ninth largest foreign investor that year. Key sectors for Finnish investment included finance, insurance, manufacturing, and scientific research. The major imports from Finland to Lithuania in 2015 included mineral fuels and machinery, with imports valued at 116.9 million euros and 112.5 million euros, respectively.

Overall, Lithuania's trade relations with Scandinavian countries, including Norway and Sweden, are significant. In 2016, trade turnover with these countries exceeded 4 billion euros, highlighting their importance as key import and export partners. Strengthening trade relations with Scandinavian nations remains essential for Lithuania’s economic growth and development.

Application of NTM, NTB, TBT in the Context of Bilateral Trade Relations of Cyprus and Finland

Cyprus and Finland have been gradually developing their trade relations, with positive trends emerging despite a limited historical context. Several factors, including trade barriers—both tariff and non-tariff—impact these relations, highlighting the need for effective navigation to enhance economic cooperation. Recent years have seen Cyprus become an increasingly significant trade partner for Finland, particularly in sectors such as services, pharmaceuticals, and technology. Various initiatives have been launched to bolster economic ties, reflecting growing mutual interest.

Trade volume between Cyprus and Finland has shown steady growth, with total trade turnover reaching approximately 100 million euros in recent years. Cyprus exports machinery, electrical equipment, and agricultural products to Finland, while imports from Finland mainly include machinery, chemical products, and consumer goods.

The trade balance tends to favor Finland, which reflects Cyprus's role as a market for Finnish exports, driven by increased demand for high-quality goods and services. FDI is pivotal in strengthening the economic relationship between Cyprus and Finland. Finnish companies have increasingly invested in sectors such as tourism, financial services, and renewable energy in Cyprus. The growing interest in the Cypriot market has led to increased FDI from Finland, contributing to economic diversification and job creation.

Trade Barriers Trade barriers play a crucial role in shaping the trade dynamics between Cyprus and Finland, particularly in the context of non-tariff barriers (NTBs), technical barriers to trade (TBT), and non-tariff measures (NTMs). Non-Tariff Barriers (NTBs) These can include regulatory measures and policies that may restrict trade, such as import licenses and quotas. While both countries benefit from EU membership, NTBs can still pose challenges that affect the efficiency of trade. Technical Barriers to Trade (TBT) Differences in standards and regulations can create obstacles for businesses. For instance, varying product safety standards, labeling requirements, and certification processes can complicate market entry for Cypriot products in Finland and vice versa. Harmonizing these standards through mutual recognition agreements could enhance trade flows. Non-Tariff Measures (NTMs) These encompass a broader range of regulatory measures, including customs procedures and compliance requirements. Lengthy customs procedures and documentation can delay shipments and increase costs. Streamlining these processes and enhancing communication between customs authorities in both countries could mitigate such challenges. To foster stronger trade relations, it is crucial for both countries to enhance mutual understanding of each other's market practices and regulatory environments. Engaging in dialogue and cooperation on standards and regulations will help address the challenges posed by NTBs, TBTs, and NTMs. The trade relations between Cyprus and Finland are on an upward trajectory, supported by a commitment to enhancing cooperation and investment. While historical trade volumes have been modest, recent trends indicate significant potential for growth. By addressing trade barriers—particularly non-tariff barriers, technical standards, and regulatory measures—both countries can strengthen their economic ties. Continued collaboration and strategic initiatives will be essential to elevate the importance of Cyprus-Finland trade relations in the broader international trade landscape.

Common patterns in barriers of trade 

The results of the research revealed that non-tariff barriers (NTBs) significantly affect trade relations between Lithuania and Finland, as well as between Cyprus and Finland. These barriers can create challenges for exporters and importers, hindering the efficiency of trade flows and ultimately impacting economic growth. Understanding these NTBs is essential for both countries to enhance their economic partnerships.

Key Barriers and Measures Affecting Trade

Seasonal Import Regimes: Seasonal import regimes can create fluctuations in trade volumes. These regimes often restrict the import of certain products during specific periods to protect local industries. For Lithuania and Cyprus, this can mean limited access to Finnish goods during peak seasons, affecting market availability and pricing.

Quality Conditions Imposed: Quality standards imposed by Finland can create hurdles for Lithuanian and Cypriot products entering the market. These standards ensure that imported goods meet specific safety and quality requirements, but they can also lead to increased costs for exporters who must modify their products to comply. This is particularly relevant in sectors like food and pharmaceuticals, where quality assurance is paramount.

Inadequate Infrastructure: The infrastructure supporting trade can significantly impact efficiency. Inadequate transportation networks, logistics facilities, and customs processes can result in delays and increased costs for both exporters and importers. For instance, if ports or road networks in Lithuania or Cyprus are not equipped to handle increased trade volumes, it could slow down the movement of goods to and from Finland.

Product Standards Requirements: Both Lithuania and Cyprus face stringent product standards that must be met before entering the Finnish market. These standards may include specifications for materials, safety, and environmental impact. The complexity of these requirements can pose a barrier for small and medium-sized enterprises that may lack the resources to ensure compliance.

Additional Trade Documents: The requirement for additional trade documents can complicate and slow down the import/export process. This includes certificates of origin, health certificates, and customs declarations. The bureaucratic burden can deter businesses from engaging in international trade, particularly smaller companies that may not have the capacity to navigate the paperwork.

Packaging and Labeling Conditions: Packaging and labeling requirements can also be a significant barrier. Finland may have specific regulations regarding how products must be packaged and labeled, including language requirements and safety information. Exporters from Lithuania and Cyprus must ensure that their products meet these criteria, which can involve additional costs and complexities.

Restrictive Licenses The need for licenses to import or export certain goods can restrict trade flows. If Finland imposes strict licensing requirements for particular categories of products, this can limit the ability of Lithuanian and Cypriot companies to enter the Finnish market, thereby reducing trade volume.

Product Classification Requirements Accurate product classification is crucial for determining applicable tariffs and trade regulations. Misclassification can lead to delays, fines, or the rejection of goods at the border. Ensuring that products are classified correctly according to Finnish regulations requires a thorough understanding of both countries' classification systems.

Addressing these non-tariff barriers is essential for improving trade relations between Lithuania and Finland, as well as Cyprus and Finland. By fostering dialogue between governments and businesses, both sides can work towards harmonizing standards and simplifying trade processes. This collaboration will not only enhance trade efficiency but also strengthen economic ties and promote mutual growth. In an increasingly interconnected global economy, overcoming NTBs is vital for maximizing the potential of bilateral trade relationships. Through proactive measures and enhanced cooperation, Lithuania and Cyprus can better position themselves to capitalize on opportunities in the Finnish market, leading to sustainable economic development for all parties involved.