ESTONIAN FOREIGN TRADE IN THE FIRST NINE MONTHS OF 1995

Contents


Over the first nine months of 1995 a total of 15.1 billion kroons worth of goods was exported from Estonia. A total of 20.6 billion kroons worth of goods was imported (see Table 1). These figures, respectively, are 25.5 and 33.8% larger than the figures for January through September 1994. The foreign trade deficit amounted to 15.4% of the total turnover (11.3% in the nine months of 1994). Estonia's foreign trade balance quarter-by-quarter is given in Figure 1.

Structure of Foreign Trade Turnover

In the first nine months of 1995, Estonia's foreign trade turnover was almost one-third larger than the turnover in the same period last year (see Table 2). The biggest growth occurred in the turnover of machinery and equipment, timber and paper, and products of chemical industry; the smallest increase, in foodstuffs. The foreign trade structure by groups of goods underwent corresponding changes. While in the first nine months of 1994 foodstuffs were the goods with the biggest turnover, 1995 was the year for machinery and equipment. The share of products of chemical industry and timber, paper and products thereof also increased in the total turnover. Besides foodstuffs, the share of mineral products (mostly fuels) also decreased in the total turnover.

In seven groups of goods out of the total ten, the trade balance has become less favourable for Estonia. The 1994 nine-month trade surplus for foodstuffs, metals and metal products developed into a considerable deficit in 1995. In the nine months of 1995, export outstripped import in only two groups of goods - timber, paper and products thereof and furniture. The reduction of the large deficit in mineral products trade can also be noted as a positive aspect. Still, mineral products - along with machinery and equipment and products of chemical industry - were the biggest contributors to the trade deficit.

Processing of Goods on the Increase

As compared to the first nine months of 1994, the quantity of goods sent to Estonia from abroad for processing increased by nearly three-fourths, accounting for 17.9% of the total turnover (see Table 3). The increase was the biggest in the processing of mineral products and transport vehicles, but their share in the total turnover of processed goods is still small. Clothing, footwear and headgear and machinery and equipment accounted for more than one third of goods processed in the nine-month period. Processing played an important role in the total turnover of export and import of these two groups of goods: in the case of clothing, footwear and headgear goods processed accounted for nearly one-half of all clothing, footwear and headgear imported and exported.

Although several countries send goods to Estonia for processing, in the first nine months of 1995, 70% of the total came from Finland and Sweden. Finland further consolidated the leading position it held in 1994 (see Table 4). Germany and Russia also had a considerable, albeit much smaller, share in the processing sphere.

In the first nine months of 1995, the share of goods processed in Estonia in the total trade turnover was the largest in Estonia's trade with Sweden, Finland, Norway and Germany.

Structure of Export

The biggest increase - 75% more than in the first nine months of 1994 - was recorded in the export of machinery and equipment (see Table 5). This was first and foremost due to processing in Estonia. This is also confirmed by the fact that export of machinery and equipment increased most to Sweden and Finland.

The export of chemical products increased over 50% as did the export of timber, paper and products thereof. Products of chemical industry and plastics were exported mostly to the east (Russia, Latvia, Lithuania); plastic products were also exported to Finland. The export of timber, paper and products thereof was 90% made up of timber and timber products. Export of these goods increased mostly to the Nordic countries and Germany.

The only group of goods which export diminished was foodstuffs. The export of products of food industry diminished (mostly to Russia, but slightly also to Latvia and Lithuania) while the export of animal products increased by nearly one-third, mostly to Great Britain and the Netherlands.

The structure of export also changed as compared to the first nine months of 1994, with the biggest change concerning the share of foodstuffs. Despite of the decline, foodstuffs retained the leading position in the total volume of export; second place was taken by clothing, footwear and headgear; third, by timber.

Structure of Import

As compared to the first nine months of last year the import of no group of goods decreased this year (see Table 5). The increase was above average in such groups of goods as timber, paper and products thereof (approximately 70% of it paper), metals and metal products, various other manufactured goods and machinery and equipment.

The import of paper products increased mostly from Finland, and the import of timber and timber products from Finland and Russia. More metals and metal products were imported from Finland, Russia, Germany and Sweden, while import of machinery and equipment increased mostly from Finland.

The increase was the smallest for such groups of goods as mineral products and foodstuffs, and the share of these goods in the overall volume of import decreased. The share of machinery and equipment, products of chemical industry, metals and metal products, timber, paper and products thereof in total import increased slightly.

On the whole, the structure of import has been relatively more stable than the structure of export. As before, the most important import articles in the first nine months of 1995 were machinery and equipment and foodstuffs.

Foreign Trade Turnover and Balance with Major Trade Partners

Compared to the first nine months of 1994, Estonia's foreign trade turnover increased with all 15 major trade partners in the first nine months of 1995 (see Table 6). The increase was the biggest in trade with the 15th country in the list, Norway, which nearly doubled. Trade relations developed more rapidly than average also with the Netherlands, Italy, Great Britain and the USA. Development was also rapid in trade with Estonia's major partner Finland, with whom trade increased by nearly 45%. The increase in trade with Russia, the second most important partner, was slow and in comparison with trade partners the share of Finland continued to increase while the share of Russia decreased. Trade also increased slightly with Lithuania and the Ukraine. The order of importance of the five major trade partners, however, remained the same as it was in the first nine months of 1994.

Foreign trade balance became less favourable for Estonia in the case of eight partners and improved in the case of seven. The 2.4 billion kroon increase in the general trade deficit was caused by two major trade partners, Finland and Russia. Estonia's trade deficit with Finland increased, while the surplus with Russia turned into a deficit. There was also a considerable increase in the deficit in trade with Germany and Italy.

So far, Estonia's biggest trade surplus has been with Latvia, and this was also true of the first nine months of 1995. However, the surplus was considerably smaller than it was in the first nine months of 1994. Trade surpluses increased with Great Britain, Norway, Belarus and the Ukraine. 1994's deficit with the Netherlands and the USA became a surplus in the first nine months of this year.

Major Export Partners

Among the 15 countries analyzed, Estonia's export, over the first nine months of 1995, decreased only to Russia. This was mostly due to the decline in the export of products of food industry and transport vehicles. Export increased the most to Poland (due to timber, mineral products), the USA (products of chemical industry, textile products), Norway (timber) and Belarus (products of chemical industry, machinery and equipment, transport vehicles), but also to the Netherlands (animal products, mineral products, metals and metal products). Exports to Estonia's most important partner Finland rose 50%. This was mostly due to the increased sales of machinery and equipment, timber and various other manufactured goods. The increase in exports was more modest in the case of Lithuania, Belgium and Latvia.

The biggest change in the structure of Estonia's export partners as compared to the first nine months of 1994 was the decrease of Russia's share - by six percentage points. Finland replaced Russia as Estonia's biggest export partner, increasing its share by 3.5 percentage points. The Netherlands and Great Britain improved their positions, moving up several places in the overall list.

Table 7. Estonia's major export partners in the first 9 months of 1994 and of 1995 (million kroons)

Major Import Partners

Of Estonia's 15 major import partners, imports increased from 13 countries and decreased from two: the Ukraine and Lithuania. Imports from Latvia and Norway more than doubled. From Latvia, considerably more products of chemical industry and textile products were imported. The purchase of German-manufactured medical equipment from Latvia in July considerably contributed to the overall increase of imports from Latvia. From Norway, more animal products and textiles were imported.

Imports increased relatively rapidly from Italy (products of chemical industry and textile products), Finland (machinery and equipment, timber and paper), and Great Britain (paper and paper products, textiles and chemical products). The rate of increase of imports from Russia more or less matched the overall rate of increase.

The share of Finland as Estonia's most important import partner increased further from the 1994 level. Latvia and Italy moved up several places in Estonia's top 15 major import partners list, while Lithuania and the Ukraine moved down.

Table 8. Estonia's major import partners in the first 9 months of 1994 and of 1995 (million kroons)

Structure of Estonia's Foreign Trade Broken Down by the Major Trade Partners (*)

(*)The analysis is based on the trading country. (Author's note.)

1. Finland

Estonia's trade turnover with its most important trade partner, Finland, increased more than the average in the first nine months of 1995, with export increasing at a somewhat higher rate than import (see Table 9). Despite that, Estonia's trade deficit with Finland increased, amounting to 84.2% of Estonia's total foreign trade deficit in the first nine months of this year.

The variety of goods imported from Finland has apparently become stable, as we see that changes in the assortment of imports were smaller than changes in that of the exports. The most significant change both in export and import was the considerable increase in the share of machinery and equipment. This was first and foremost caused by the 160% increase in the quantity of machinery and equipment sent from Finland to Estonia for processing (see Table 10). In the total turnover of Finnish goods sent to Estonia for processing, machinery and equipment accounted for more than 50% and the share of processed machinery and equipment in the total turnover of this group of goods was similar in size.

Comparing export items, we see that the share of chemical products and timber increased. The export of foodstuffs, metals and metal products, and transport vehicles decreased while the increase of the export of clothing, footwear and headgear was smaller than the increase of total exports. Processed clothing, footwear and headgear accounted for 68.6% of sales of all clothing.

Import did not decrease in any of the groups of goods analyzed. In addition to machinery and equipment the import of paper and metal products was also on the increase and the share of these goods in total imports increased correspondingly. The share of all other groups of goods decreased slightly.

In the first nine months of 1995, the foreign trade balance was in deficit for all groups of goods, although the 0.5 million kroon deficit in the trade of timber and paper can be viewed as being practically in balance. In eight groups of goods out of ten the deficit increased, with a slight decrease recorded only in the groups of furniture and clothing, footwear and headgear.

2. Russia

Compared to the first nine months of 1994, we see that trade relations with Russia were rather unfavourable for Estonia in the first nine months of 1995: exports decreased 6.6% and imports increased 34%. As a result, the trade surplus with Russia in 1994 turned into a big deficit this year (see Table 11).

The discriminating customs tariffs applied by Russia on Estonian goods have borne bitter fruit for Estonia. Russia has for a long time been the main market for Estonian agricultural products and these products make up the largest portion of our exports at the moment. Due to high customs tariffs the export of foodstuffs to Russia decreased 25% over the first nine months of this year. The 13% reduction of the export of transport vehicles, the second most important export article, further contributed to the decline of total exports to Russia. At the same time, the export of mineral products and products of chemical industry increased at a relatively rapid rate.

While export is dominated by foodstuffs, import is dominated by mineral products. Since the import of mineral products increased slower than total imports, their share in total imports was somewhat reduced. The import of some other categories of goods from Russia Ä first and foremost transport vehicles and metals and metal products Ä increased rapidly.

Compared to the first nine months of 1994, the turnover of goods sent from Russia for processing in Estonia increased 170% this year, worth slightly more than 0.5 billion kroons which forms 8.6% of the total trade turnover between the two countries. Nearly one-third of the processed goods were transport vehicles and mineral products.

Those groups of goods in case of which exports outstripped imports (or vice versa) were the same in the first nine months of 1995 as in the respective period last year. The trade deficit was caused mostly by the deterioration of the trade balance of the majority of goods, that is, surpluses decreased and deficits increased. Until this year the big surplus of foodstuffs and transport vehicles outstripped the deficit caused by the import of mineral products. However, this has not been the case this year. The increasing deficit of metal and metal products has further contributed to turning the overall balance into deficit.

3. Sweden

In trade with Sweden, import and export increased at a similar rate in the first nine months of 1995 (see Table 12). The trade deficit increased, though, as compared to the nine months of 1994.

In export, the increase was most marked in machinery and equipment, which more than doubled the share of this group in total exports. The rapid increase resulted from more machinery and equipment being sent to Estonia for processing from Sweden (see Table 13). The most important export article was timber, with clothing, footwear and headgear following close by. In case of the latter, processing was again the key word: Swedish clothing processed in Estonia accounted for two-thirds of the total clothing turnover in Estonian-Swedish trade in the first nine months of 1995. The export of metals, which was an important export article in 1994, has decreased by more than 25%.

The most important change in the import in the first nine months of 1995 has been a considerable decrease in the import of foodstuffs from Sweden and a rapid increase in the import of transport vehicles, chemical and metal products. The most important import articles are still clothing, footwear and headgear, and machinery and equipment. As compared to the nine-month period of 1994, the share of transport vehicles and products of chemical industry has increased in total imports.

In case of Sweden, too, the trade balance has deteriorated for the majority of groups of goods. The positive aspect has been the decrease of trade deficit of foodstuffs, machinery and equipment, as well as the increase of the surplus of timber and paper.

4. Germany

Over the first nine months of 1995, import from Germany increased more than export to Germany (see Table 14). As a result, the trade deficit with this country increased 62.7% against the figure of the corresponding period the previous year.

Looking at the structure of export by groups of goods, we see that several significant changes took place, the biggest of which was the increase in the export of transport vehicles by a whopping 15 times. This can be attributed to the sharp increase in the turnover of transport vehicles sent from Germany to Estonia for processing (see Table 15). At the same time, the import of other transport vehicles decreased. Another major change was the nearly 20% drop in the export of metals, which reduced considerably the share of this group of goods. (Metals had been the most important export article in the first nine months of 1994.) The export of foodstuffs and products of chemical industry also decreased. At the same time, however, the export of timber and mineral products increased at above average rate.

As for Estonia's import from Germany, only the import of transport vehicles declined. The biggest increase was in the import of metals and products thereof, clothing, footwear and headgear, timber and paper products and products of chemical industry. The import of foodstuffs remained practically on the level of the first nine months of 1994. The above-mentioned changes led to a significant decrease in the share of foodstuffs and transport vehicles in total imports, while the share of clothing, footwear and headgear, products of chemical industry and metal products increased.

The turnover of goods sent from Germany to Estonia for processing increased more than 2.3 times over the first nine months of 1995. Slightly over half of this was clothing, footwear and headgear.

The overall trade deficit increased, first and foremost due to the considerable growth of the deficit in trade balance of machinery and equipment, but also due to the surplus in clothing-related trade turning into a deficit. At the same time, the deficit diminished in the trade of transport vehicles, timber and paper, mineral products and furniture.

5. Latvia

Trade relations with Latvia developed unfavourably for Estonia during the period under study: import from Latvia increased 7.4 times more than export to Latvia (see Table 16). Although Latvia remained Estonia's most favourable trade partner also in the first nine months of 1995, the trade surplus decreased to 25.5% of the total trade turnover between the two countries. The respective figure for the first nine months of 1994 was 54.2%.

The increase of export was slowed down by the drop of the export of such important goods as foodstuffs and mineral products (mostly electricity). However, the export of chemical products increased considerably so that this group of goods came to occupy the leading position in total export. The export of timber and paper products, metals and metal products, and other manufactured goods also increased manifold. Of the latter category, the increase of the export of building materials was most notable.

In the structure of imports, the biggest change was the huge increase of the import of other manufactured goods. This was due to a single large deal: in July more than 130 million kroons worth of German-made medical equipment was bought from Latvia. A considerable increase against the previous year also occurred in the import of clothing, footwear and headgear, products of chemical industry, and foodstuffs. Only the import of mineral products decreased.

In most cases Estonia's trade balance with Latvia has had a surplus across most groups of goods. However, due to the rapid increase of import the trade of clothing, footwear and headgear developed a deficit this year. The above-mentioned purchase of medical equipment led to a deficit in the trade of other manufactured goods. The surplus of the trade of foodstuffs decreased sharply.

6. The Netherlands

Trade with the Netherlands developed favourably for Estonia in the first nine months of 1995, with export increasing 3.6 times more rapidly than import (see Table 17). Thanks to this trend, the overall trade balance with the Netherlands had a surplus.

In export, sharp changes occurred in various groups of goods. The import of chemical products, machinery and equipment as well as transport vehicles decreased considerably. Export increased mostly due to the manifold increase in trade with metals and mineral products. Like in the first nine months of 1994, the biggest export article also this year was foodstuffs. However, the increase of food export was below the rate of increase of the total export.

In import, the biggest increase was recorded in foodstuffs, the most important group of imported goods. Increase was relatively rapid also for transport vehicles, clothing, footwear and headgear, furniture and mineral products.

Trade deficit with the Netherlands was liquidated by the improved trade balance of several groups of goods. First of all this concerns mineral products, metals, timber and paper, all of which increased their trade surplus. An important factor was also the decrease of the trade deficit of foodstuffs.

7. Lithuania

Lithuania was the only country out of the 15 with which Estonia's foreign trade turnover remained practically on the level of the corresponding period of 1994 (see Table 18). The trade surplus increased.

Compared to last year, the export of foodstuffs nearly halved in the first nine months of 1995, while the export of mineral products nearly tripled.

The situation was reversed in import: the import of mineral products fell over three times and the import of foodstuffs increased by a third.

The turnover of metals and metal products increased considerably.

Among the trade balances of various groups of goods the most important change concerned the earlier large deficit of mineral products turning into a surplus. In most other groups of goods trade with Lithuania also became more favourable for Estonia. A negative example, however, is the sharp decline of the trade surplus of foodstuffs.

8. Denmark

The increase of Estonia's export to Denmark was slightly smaller than the increase of import (see Table 19). The foreign trade deficit increased correspondingly, remaining, however, relatively small.

Regardless of the slight increase of total exports to Denmark, the export of machinery and equipment, metals and chemical products increased rapidly as compared to the first nine months of 1994. The general increase of export was slowed down by the falling export of foodstuffs and the export of mineral products remaining on the level of the last year.

The import of mineral products decreased markedly while the import of foodstuffs remained on practically the same level as last year. The import of machinery and equipment, metal products, timber and paper products, clothing, footwear and headgear, and products of chemical industry increased several times.

Estonia's trade deficit with Denmark was mostly caused by the deficit of the trade balance of foodstuffs as well as machinery and equipment.

9. Great Britain

In the first nine months of 1995 export to Great Britain increased at a more rapid rate than import. As a result, the trade surplus increased, amounting to one-fifth of the total trade turnover between the two countries (the respective figure for the first nine months of last year was 13%; see Table 20).

In export, the biggest change was the decrease in the share of timber and the increase in the share of foodstuffs. This was due to the fact that the export of timber increased by only 2.8% while the export of foodstuffs (mostly fish) increased tenfold. The export of chemical products and clothing, footwear and headgear as well as transport vehicles also increased considerably.

There were no sharp changes in the structure of imports. The biggest increases were recorded in the import of other manufactured goods, timber and paper products and products of chemical industry. The dominating groups of imported goods were chemical products, foodstuffs, machinery and equipment.

The big increase of the foreign trade surplus with Great Britain was mostly due to foodstuffs: in the first nine months of 1995 the previous year's large deficit has turned into a surplus. Similar changes occurred in such groups of goods as clothing, footwear and headgear, and transport vehicles.

10. The Ukraine

Estonia's trade surplus with the Ukraine increased considerably in the first nine months of 1995, since export to the Ukraine grew by more than a third and import fell by almost as much. While in the first nine months of 1994 Estonia's trade surplus with the Ukraine amounted to 13.7% of the foreign trade turnover, in the first nine months of this year the surplus had increased to 44.6% (see Table 21).

In export, the most important group of goods was foodstuffs. The export of foodstuffs increased by 43.9%. The biggest change in the structure of export, however, was the doubling of the export volume of mineral products and the diminishing of the export of machinery and equipment by a third. The export of metals, clothing, footwear and headgear, and timber also fell.

The import of most goods from the Ukraine decreased. The biggest change, however, was the more than 50% decrease in the import of metals, which turned foodstuffs into the Ukraine's most important export article to Estonia. The biggest increase occurred in the import of chemical products.

The trade balance remained in deficit for metals also this year, but the deficit was considerably smaller than it was last year. Trade balance in the other groups of goods had a surplus and the surpluses increased as a rule. The increase in the surplus of balances foodstuffs and mineral products was the main contributor to the increasing of Estonia's total trade surplus with the Ukraine.

11. The USA

Export to the USA doubled in the first nine months of 1995 while import from the USA increased by only one-sixth (see Table 22). This turned Estonia's last year's trade deficit with the USA into a surplus this year.

The structure of export was less than diverse, which is quite understandable considering the great distance between the two countries. A year ago, 68% of Estonia's export to the USA was clothing, footwear and headgear. Although in the first nine months of 1995 the export of clothing, footwear and headgear increased by nearly 80%, the growth in this group of goods was slower than the growth rate of total export and consequently the share of clothing in total exports to the USA decreased. The export of chemical products increased five times against the first nine months of 1994, amounting to nearly a quarter of total export.

In last year's imports machinery and equipment, foodstuffs and transport vehicles had an important place. This year, the import of the latter two decreased; at the same time, the import of clothing, footwear and headgear, and chemical products increased by several times.

Although in six out of the ten groups of goods analyzed, imports outstripped exports, the deficit was reduced considerably in most cases this year. The trade surplus first and foremost resulted from the export of chemical products and clothing, footwear and headgear.

12. Belgium

Estonia's foreign trade balance with Belgium has been persistently in strong deficit. In the first nine months of 1995, too, import from Belgium increased more rapidly than export (see Table 23). Thus, the trade deficit with Belgium increased still, amounting to 47% of the total turnover (36.4% in the first nine months of last year).

In the first nine months of this year, Estonia's export of foodstuffs to Belgium was reduced to minimum; the export of chemical products dropped by nearly one-fifth. At the same time the export of metals and mineral products increased leading to a corresponding increase in the share of these groups of goods in the structure of export.

Estonia's import from Belgium increased in almost every group of goods in the first nine months of 1995, with the exception of mineral products and metal products, which both have a small share in overall import. The import of clothing, footwear and headgear increased considerably.

The main cause of the trade deficit with Belgium was foodstuffs and transport vehicles in case of which import considerably exceeded export. The increase of the deficit was further contributed by the surplus of trade balances of a number of goods (products of chemical industry, clothing, footwear and headgear) turning into deficit this year.

13. Italy

Trade with Italy was similar to that with Belgium: the nine-month import increased 5.3 times more than export (see Table 24). The result was the doubling of the trade deficit which amounted to 59% of the total turnover with Italy.

In the nine-month period the export of the major group - clothing, footwear and headgear - decreased slightly while the export of furniture and sports requisites increased by nearly half. The increase was the most rapid in the export of metals; however, the share of timber in total exports increased most rapidly.

In import, the most important change was the increase of the import of chemical products.

The trade balance of most groups of goods was in deficit and in most cases the deficit increased. However, the biggest contribution to the increase of the overall trade deficit came from the fourfold increase of the deficit of chemical products.

14. Belarus

Trade with Belarus developed favourably for Estonia (see Table 25). Trade surplus nearly tripled, amounting to 47% of total foreign trade turnover.

The leading export article both in the first nine months of 1994 and 1995 was foodstuffs. The groups of goods exported to Belarus have remained relatively stable and the increase has been constant. However, an increase was recorded in the export of mineral products which also led to the increase of their share in the overall export.

The development of import was more uneven, however. The general decrease of import was caused by the fall in the import of such big groups of goods as transport vehicles and mineral products. The import of products of chemical industry, timber and paper products increased.

Across groups of goods the trade balances were dominatingly in surplus and the surpluses increased over the first nine months of 1995. Foodstuffs accounted for the biggest surplus while the biggest change concerned mineral products - their small deficit was turned into a considerable surplus.

15. Norway

The turnover of trade between Estonia and Norway was the smallest among Estonia's 15 major trade partners, but in the first nine months of 1995 it increased the most against the respective period last year: export was up 73.3% and import 112,9% (see Table 26). Regardless of the somewhat higher increase of import, trade surplus with Norway also increased.

Estonia exported mostly timber, clothing, footwear and headgear to Norway, with timber exports nearly doubling. The export of all other groups of goods increased as well.

The import of most goods increased. The most important import goods were clothing, footwear and headgear, foodstuffs, chemical products, machinery and equipment.

In several groups of goods the import-export balance was in deficit for Estonia but timber export kept the overall trade balance in surplus and even increased it.

Reet Kirt