Brexit Roundup: Finland Focuses on Its Northern Partners

Juha Jokela | 16 April 2018

© 2017 SCER

One year on from the activation of Article 50 by the United Kingdom, the number one priority for Finland continues to be the unity and consolidation of the European Union. Relatedly, Helsinki is also adapting to the changing political dynamics of EU decision-making in the context of Brexit.

The initial Brexit agreement on the so-called divorce issues and the transition arrangements with the UK has been welcomed in Finland. Even though the remaining open questions such as the border issue between Ireland and Northern Ireland are taken seriously – not least due to political difficulties in London – Finland’s focus is now shifting to the future economic and political relations with the UK.

The closest possible economic relations between the EU and the UK after its withdrawal are still seen as an important objective for Helsinki. At the same time, the awareness of the negative economic implications of Brexit for the UK and the EU has risen. The challenges facing the UK economy due to Brexit have become clearer, and the populist arguments downplaying these have faded away. The UK’s aspiration for a clean Brexit is largely understood to mean a hard Brexit, and the ramifications of the UK leaving the single market and customs union are taken increasingly seriously.

Against this backdrop, Finns have understood that economic relations will not remain as frictionless as they are now, despite the goal of striking a deep and comprehensive free trade agreement. Finnish customs has recently published an assessment of the potential extra costs for Finnish businesses stemming from new administrative procedures after Brexit. At a minimum, the costs are estimated to be in the range of €12-23 million and, at maximum, between €60-115 million annually.

Smoothly-functioning trade flows with the UK are seen as important in Helsinki, however. In 2016, 5% of Finnish exports went to the UK, while the UK’s share of Finnish imports was 4%. The government has also flagged up the aviation sector as a special Finnish interest, and the EU’s chief negotiator Michel Barnier met the executive officers of the national carrier, Finnair, during his recent trip to Helsinki. International transfer traffic, to and from the UK, is crucial for state-owned Finnair and Helsinki airport. In recent years, the airline has considerably expanded its operations to Asia, and it is a member of the One World alliance led by British Airways.

In light of the worsening European security environment, Finland has called for deeper EU cooperation in the field of security and defence, not least because the country is not a member of NATO. In this regard, Brexit is seen as one of the background drivers for recent EU developments such as the launch of Permanent Structured Cooperation as part of EU security and defence policy. At the same time, Brexit has also been seen to enable the recent progress made in this field, due to the irrelevance of well-known UK reservations towards deeper EU defence cooperation. However, within the broader frame of security, Finland has sincerely welcomed the continuing UK commitment to European security, and also developed its bilateral defence ties with the UK. Finland, together with Sweden, joined the UK-led high-readiness force in summer 2017, for instance.

Helsinki sees continuing collaboration in the field of foreign, security and defence policy as an important feature of future EU-UK relations. Cooperation in internal security is also emphasised, given the increase in cross-border risks and threats, including terrorism and hybrid threats.

Yet, overall, the consolidation of the EU in light of the previous crisis and new challenges continues to be the number one priority for Finland. Recently, the focus of the national EU debate has shifted to eurozone reform and to the negotiations concerning the next multi-annual financial framework. The EU’s external trade policy is also seen as a crucial matter for Helsinki, due to the range of current, worrying global developments.

In terms of addressing the EU agenda, and as the UK’s departure date is closing in, Helsinki has increasingly shifted its attention towards other like-minded EU members. While Germany has remained a key interlocutor for Helsinki, somewhat novel developments have also followed.

Finland was one of the eight northern EU member states whose finance ministers’ published a joint paper on euro area reform in early March. The paper reflected their known opposition to proposals calling for a deeper fiscal union, and instead underlined market discipline and national responsibility. The inclusion of non-euro members such as Denmark and Sweden in this joint paper suggests that the interests of the non-euro members count in the north. Yet this move might also speak to a more general concern related to the relative power of the midsize and small northern members in the post-Brexit EU.

Already in late 2017, finance ministers from the Nordic and Baltic EU member states and Ireland met over dinner in Brussels to discuss eurozone reform, EU funding and high-level EU strategic positions related to the EU’s next institutional cycle. Interestingly, their Dutch and German colleagues were invited to join in for coffee. In the past, the UK often played a key role in informal meetings of the northerners known as the ‘Northern Lights’ gatherings. As the liberal free traders in the north are about to lose a powerful ally in the EU decision-making, more attention has been paid to intra-EU coalition building, as the prominence of the southern members and Franco-German cooperation are seen to be on the rise.

Against this backdrop, the emergence of the so-called Hanseatic League 2.0, including many of the northern capitals, has been embraced in Helsinki. And the negotiations concerning the future relations between the EU and the UK are predominately seen as one item among many on the EU’s extensive agenda.

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Finnish Institute of International Affairs

Dr Juha Jokela is Programme Director of the European Union Research Programme at the Finnish Institute of International Affairs. His areas of expertise include EU foreign and security policy, Economic and Monetary Union governance and Finland’s EU policy.