ESTONIAN FOREIGN TRADE IN THE FIRST NINE MONTHS OF 1996

In the first nine months of 1996 Estonia exported 17.1 billion kroons worth of merchandise and imported(*) 25.9 billion kroons worth, that is by 13.2 and 27.6% more, respectively, than in the nine months of 1995 (see Table 1).(**) As imports grew more rapidly than exports, Estonia's foreign trade deficit increased by 3.6 billion kroons. In the nine-month period, trade deficit amounted to 51.7% of exports (in the respective period of 1995 it had been 34.5%). The development of foreign trade over the past four years is characterised by Figure 1.

(*)Imports has been given in c.i.f. prices and analysed according to the trading country. The data of the Estonian Statistical Office on imports is based on the country of origin. (Editor's note.)
(**)In order to reduce the impact of seasonal factors, the nine-month results of 1996 have been compared to the nine-month results of 1995, in some tables also to the nine months of 1994.(Editor's note.)

STRUCTURE OF EXPORTS

Over the first nine months of 1996, the biggest increase occurred in the export of other manufactured goods (products made of stone, glass, etc., and various medical equipment); furniture and sports merchandise; clothing, footwear and headgear; and machinery and equipment (see Table 2). The export of other manufactured goods increased to Sweden, Finland, Russia and Latvia; more furniture and sports merchandise was exported to Germany and Denmark; more clothes, footwear and headgear, machinery and equipment to several countries, including Germany, Sweden and Denmark. The only group where exports declined was mineral products (mainly to Russia, the Netherlands, Denmark and Belarus).

Compared to the nine months of 1995, changes in the structure of exports this year were considerably smaller: only the decrease in the share of mineral products and the increase in the share of clothing, footwear and headgear are worth mentioning. The latter group of merchandise came to occupy the leading position in total exports.

Analyzing exports by customs procedures, we can notice a slight decline in the share of the so-called pure export,since its increase was by 3.4 percentage points smaller than the increase of total exports (see Table 3).

The rapid growth phase in the volume of merchandise sent from abroad to Estonia for processing is apparently over. In the first nine months of 1996 their share in total exports even decreased slightly. In absolute terms, the export of merchandise processed in Estonia increased by 8.2% as compared to the nine months of 1995. The overall increase rate of exports was considerably influenced by the re-export of merchandise previously imported into customs warehouses: the share of this kind of re-export increased by 3.7% in the first nine months of 1996. The volume of other customs procedures also increased rapidly (mainly, providing sea vessels and aircraft with fuel and provisions) although their share in total exports remained insignificant.

Among merchandise re-exported from customs warehouses, the biggest share was made up of transport vehicles (27%), foodstuffs (18%), mineral products (13%) and timber (11%). The bulk of merchandise from customs warehouses was taken to the former Soviet republics - to Russia (30%), the Ukraine, Latvia, Lithuania and Belarus, but also to Western countries, Germany in particular.

If we eliminate re-export from total exports, we can see a slow-down in the growth rate for seven groups of merchandise out of the total of ten (see Table 4). In the so-called pure export, the share of metals and metal products decreased as well, in addition to the export of mineral products. At the same time, the growth rate of the export of furniture and sports merchandise without re-export was higher than their growth rate in total export.

Approximately three fourths of merchandise processed for foreign companies in Estonia was still made up of clothing, footwear and headgear and machinery and equipment (see Table 5). Processing accounted for 41.9% of the total export of clothing, footwear and headgear and as much as 60% of the total export of machinery and equipment. In the nine-month period the processing of metals and metal products increased rapidly, and the share of processing increased to 22.2% of the total exports of this group of merchandise.

STRUCTURE OF IMPORTS

In imports, the increase was relatively even across all groups of merchandise (see Table 6). The growth rate was above average for metal and metal products (from Finland, Russia, Germany) and for foodstuffs (mainly animal products from the USA and Lithuania, food industry products from many countries, including the Ukraine and Great Britain). Although the import of mineral products had increased modestly for several consecutive years, this year a slight decline was recorded in the nine-month period. The above changes were also reflected in the structure of imports.

Of the total volume of imports, the merchandise brought to Estonia for free circulation accounted for 73.3%, or slightly less than in the nine months of 1995. The structure of imports by customs procedures underwent changes similar to those in exports - the share of processing declined and the share of customs warehousing increased (see Table 7).

FOREIGN TRADE BALANCE

Table 8 brings the balances of Estonia's foreign trade by different groups of merchandise. Out of the total of ten groups of merchandise eight had a negative trade balance, just like in the first nine months of 1995. Only timber and furniture displayed a surplus. In earlier years trade deficit has mainly resulted from trade in machinery and equipment, as well as mineral products. Over the first nine months of this year it still applied to machinery and equipment, however, in case of mineral products the negative balance was practically unchanged throughout the period. At the same time, trade deficit was considerably increased by foodstuffs, products of chemical industry and metal and metal products.

EXPORT PARTNERS

Although the total volume of exports increased by 12.8% over the past year, export with some countries increased much more rapidly (see Table 9). Of the 15 countries analyzed, exports increased the most to the Ukraine - by 77%. However, this was not due to the free trade agreement signed with the Ukraine in 1996 because most of the increase occurred in the second half of 1995. Nearly 40% of exports was foodstuffs, which nearly doubled. Exports increased by nearly 50% to Belgium (textile products), by a third to Italy (leather, textile products, furniture, sports merchandise) and Lithuania (foodstuffs, transport vehicles, metal products, machinery and equipment), by a quarter to Latvia (same goods that were sold to Lithuania and mineral and chemical products), and by 20% to Germany (timber, machinery and equipment, furniture and sports merchandise).

Exports to the Netherlands decreased by nearly one third (animal and mineral products). Less was exported also to Belarus (mineral products, transport vehicles, machinery and equipment), Norway (timber) and Finland.

The listing of Estonia's five major export partners was unchanged. The share of the Ukraine increased and the share of the Netherlands decreased.

IMPORT PARTNERS

Imports increased from 12 out of the 15 Estonia's most important trade partners (see Table 10). Like in case of exports, imports increased the most from the Ukraine - 2.2 times - mostly due to more foodstuffs being bought from there. Imports from Great Britain nearly doubled (foodstuffs), and it increased by 50% from Latvia (textile products), Norway (machinery and equipment, animal and textile products), and Italy (machinery and equipment, textiles). However, none of these countries dominates in Estonia's overall imports. Imports increased by nearly a quarter from Estonia's main trade partner Finland and by 20% from Germany. Imports from Russia decreased due to less mineral products, transport vehicles and metals being bought from there.

Out of the 15 major trade partners Estonia had a trade surplus with six, four of them former Soviet republics (see Table 11). Although trade balance with Russia continued negative, the deficit decreased by nearly three times. Finland and Germany contributed the most to the increase of Estonia's trade deficit, and the Netherlands and Great Britain also had a role. In case of the latter two countries, the nine-month trade surplus of 1995 turned into a big deficit in the respective period of 1996.

ESTONIA'S FOREIGN TRADE WITH THE MAJOR TRADE PARTNERS

1. Finland

Exports to Finland decreased by 3.4% as compared to the first nine months of 1995, while Finnish imports increased by nearly a quarter (see Table 12). This led to a 2 billion kroon increase of the trade deficit. The trade deficit with Finland was twice as large as Estonian exports to Finland, or in other words, three times more merchandise was imported from Finland than exported to that country.

In exports, the leading place belonged to clothing, footwear and headgear as well as machinery and equipment - the export of the first increased slightly and the export of the latter declined somewhat. The third place belonged to timber, the export of which decreased by 25%.

The structure of exports and imports was significantly influenced by the merchandise sent from Finland to Estonia for processing. In both 1995 and 1996, these goods accounted for nearly half of the total nine-month exports (see Table 13). It was mostly two groups of merchandise - clothing, footwear and headgear and machinery and equipment. The peak of processing of goods in Estonia for Finnish companies fell into the year 1995, and in 1996 the volume of clothing exported from Estonia after processing increased by only 4.2%, while the volume of processed machinery and equipment decreased by 6.9%. In exports to Finland processed merchandise accounted for nearly 70%, and the share of processing was over 80% in case of machinery and equipment.

If we eliminate processed merchandise from total exports, we get a completely different picture (see Table 14). Despite the considerable decline in the exports volume after such an elimination, we can see that the most important export article was timber, followed by clothing, footwear and headgear, metals and metal products as well as machinery and equipment.

There were no major changes in the structure of import. The biggest role played machinery and equipment (with and without processing).

In all ten groups of merchandise analyzed, imports surpassed exports (in 1995, there had been a surplus in trade with timber and paper). In 1996 trade deficit has increased.

2. Russia

Trade relations with Russia developed slowly but relatively favourably for Estonia: exports to Russia increased nearly by 10% as compared to the nine-month period of 1995, while imports from Russia decreased by nearly 5% (see Table 15). As a result, trade deficit with Russia decreased 2.6 times.

Exports increased on the account of foodstuffs, products of chemical industry, clothing, footwear and headgear, timber and paper, metals and metal products. The export of mineral products decreased by 25% over the year, and this decline was the most significant change in the structure of exports.

Imports from Russia decreased mainly due to considerably less mineral products being bought from Russia. The import of transport vehicles also fell sharply. But the import of chemical products, timber and metals and metal products increased significantly.

The diminishing of trade deficit with Russia was mainly caused by the increased surplus in trade with transport vehicles and foodstuffs, as well as the deficit in trade with clothing turning into a surplus.

3. Sweden

Estonia's exports to Sweden increased by 18.8% and imports from Sweden were up by 21% as compared to the first nine months of 1995 (see Table 16). Trade deficit with Sweden increased by 40%.

There were no big changes in the structure of neither exports nor imports. In exports, 20% more clothing, footwear and headgear was sold, and 50% more machinery and equipment. For both groups of merchandise, processing played a big role. The export of the third important group, timber, decreased as compared to the previous year.

In imports, the increase was above average in case of metals and metal products, chemical products and timber and paper; the import of transport vehicles was down.

The increase of the trade deficit was affected the most by the increased deficit in trade with chemical products and the balance of trade in metals turning negative.

4. Germany

Estonia's trade with Germany was lively during the nine-month period: exports increased by 21.3% and imports grew by 41% as compared to the first nine months of 1995 (see Table 17). As a result, trade deficit nearly doubled with Germany, for the first time crossing the one-billion-kroon line.

In the structure of exports, major changes concerned the share of metal and metal products which decreased sharply in total exports, while the share of furniture and sports merchandise increased markedly.

The structure of imports did not change much, and machinery and equipment, foodstuffs, chemical products and transport vehicles continued to dominate.

5. Latvia

The development of trade relations with Latvia followed the same pattern as with Germany, but the growth was even higher: exports increased by 25.4% and imports grew by 55.9% as compared to the first nine months of 1995 (see Table 18). As a result, Estonia's trade surplus with Latvia decreased slightly but was still the biggest.

In exports, the share of the main export article - products of chemical industry - decreased by 5%. A slight decrease was also recorded in the export of foodstuffs, while the export of mineral products increased.

Changes were more significant in the structure of imports. Namely, the import of clothing, footwear and headgear more than doubled and the share of this article increased sharply in total imports from Latvia. Due to the relatively slow increase in the import of food products their share in overall imports decreased.

Trade balances were positive for the majority of groups of merchandise, with the only exception being clothing, footwear and headgear which increased its deficit. The biggest profits came from trade in mineral and chemical products.

6. The Netherlands

Exports to the Netherlands decreased by 31% as compared to the first nine months of 1995, while imports from there increased by exactly the same amount (see Table 19). As a result, the small trade surplus Estonia had with the Netherlands last year turned into a deficit of more than 400 million kroons.

In both exports and imports the dominating group of merchandise was foodstuffs which accounted for nearly half of both. Estonia mainly exported animal products to the Netherlands while the bulk of imports from there was made up of products of the food industry and foodstuffs of the vegetable origin. In the first nine months of 1996 food export to the Netherlands decreased by a third while food import from the Netherlands increased, being the main reason for the trade deficit.

In exports, the share of mineral products and metals and metal products decreased sharply although in earlier periods they had played an important role. The export of timber increased by 41%, making it the second-most important export article after foodstuffs.

Imports was characterised by the slower than average increase in the import of foodstuffs and the quicker than average increase in the import of machinery and equipment.

7. The Ukraine

The development of Estonia's trade relations was the most turbulent with the Ukraine: exports increased by 76.8% and imports by 124.4% as compared to the nine-month period of 1995 (see Table 20). The increase of exports was particularly rapid in the second half of 1995 and thus not related to the Estonian-Ukrainian free trade agreement which was signed in March 1996. However, the agreement could have encouraged the increase of imports which grew significantly in the second quarter of 1996. In the first nine months of 1996, Estonia's exports to the Ukraine exceeded imports from there two times.

There were big changes in the structure of trade with the Ukraine. The bulk of exports was made up of foodstuffs, and their share swelled to nearly 40% of total exports to the Ukraine. The share of mineral products export declined sharply. At the same time, the share of chemical products, timber and metal and metal products has increased rapidly.

While in the first nine months of 1995 foodstuffs accounted for one third of the total volume of imports from the Ukraine, then in 1996 the share of foodstuffs was already 50%. In terms of volume, the import of food products increased 3.4 times, and the import of clothing, footwear and headgear was up nearly 18 times. A significant decrease was recorded in the import of metal and metal products, chemical products and machinery and equipment which all had played an important role in imports from the Ukraine in earlier periods.

Out of the total of ten groups of merchandise analyzed, only clothing and metals had a negative trade balance. Despite the rapid increase in the import of foodstuffs, it was still the group that earned the biggest profits for Estonia.

8. Lithuania

Both exports to and imports from Lithuania increased by approximately one third as compared to the nine-month period of 1995 (see Table 21). Trade surplus also increased.

There were no major changes in the exports pattern. The share of chemical products decreased slightly while the share of metals and transport vehicles increased.

Imports, on the other hand, underwent significant changes in the first nine months of 1996. The import of foodstuffs (mainly animal products) doubled, accounting for a quarter of total imports. The import of machinery and equipment tripled and their share increased to 20% of total import. At the same time the share of mineral products decreased by nearly 40% and the share of clothing, footwear and headgear was down by 30%.

The balance of exports and imports was negative only in case of machinery and equipment. The biggest profits came from products of chemical industry.

9. Denmark

The increase of imports from Denmark was much more rapid than exports to that country, which resulted in the increase of the trade deficit (see Table 22).

In exports, the biggest change was the decrease of the export of foodstuffs (mainly animal products) and mineral products, and the increase in the export of metals and metal products, furniture and sports merchandise.

The structure of imports was more stable. The increase in the imports of the biggest import article - foodstuffs - was relatively slow and this led to their share dropping in the overall volume of imports. In case of metals and metal products, the situation was the opposite. The rapid increase in this group of merchandise stemmed from the increase in the volume of metals and metal products sent to Estonia from Denmark for processing.

The increase in the trade deficit with Denmark was caused by a number of groups of merchandise, mainly foodstuffs and products of chemical industry.

10. Great Britain

While in the few previous years Estonia's exports to Great Britain had been constantly growing then in the first nine months of 1996 there was practically no increase (see Table 23). At the same time, imports doubled. As a result, the big trade surplus of nine months of 1995 turned into a considerable deficit.

The share of timber reached 46.3% in total exports over the nine-month period. The export of clothing, footwear and headgear increased 2.3 times and they accounted for a quarter of total exports to Great Britain. The export of chemical products was up as well. On the other hand, the 100-million-kroon food export (mainly animal products) of the first nine months of 1995 dropped the near zero in 1996.

In imports, the situation with foodstuffs was reversed: their import increased 3.2 times and their share in total imports was more than one third. Despite the considerable increase in the import of chemical products and clothing, footwear and headgear their share in total imports decreased because the growth rate of those groups was slower than the growth rate of total imports.

The balance of exports and imports deteriorated for the majority of groups of merchandise; however, the main reason for the trade deficit was the small surplus in trade with foodstuffs turning into a large deficit.

11. Italy

Exports to Italy increased by 34.8% and imports from there was up by 46.6% as compared to the nine months of 1995 (see Table 24). Trade deficit with Italy increased further this year.

The structure of exports was relatively one-sided, 60% of it being clothing, footwear and headgear. The export of furniture and sports merchandise increased rapidly.

In imports, by nearly 50% less products of chemical industry was bought from Italy in 1996. However, the import of machinery and equipment increased 2.3 times and these became the leading import article. The import of metals and metal products as well as clothing, footwear and headgear was also on the increase.

Out of the total of ten groups of merchandise analyzed, the majority had a negative trade balance, and the deficit increased. The biggest contributors to overall deficit were machinery and equipment.

12. The USA

Exports to the USA increased by 6% and imports from there by 17% as compared to the nine months of 1995 (see Table 25). Trade surplus decreased two times.

The bulk of exports was made up of two groups of merchandise: clothing, footwear and headgear and products of chemical industry. While a year ago clothing had accounted for 60% of exports then over the first nine months of 1996 its share had dropped to 50%. Exports increased manyfold for a number of minor groups of merchandise (timber, metals and metal products, machinery and equipment).

The import of clothing, footwear and headgear decreased nearly two times, while the import of foodstuffs from the USA doubled, now accounting for nearly 30% of total imports. The import of metals and metal products increased by nearly nine times.

The decrease of the trade surplus with the USA was mainly caused by the increased deficit of trade in foodstuffs.

13. Belgium

Belgium belongs among those trade partners with whom Estonia has a big trade deficit. In the first nine months of 1995, the deficit was larger than the total volume of exports; in 1996 the deficit was slightly smaller and amounted to nearly 90% of the exports. The diminishing of the deficit was caused by the 47% increase in exports at a time when imports was practically unchanged (see Table 26).

Thanks to the tripling of the export of clothing, footwear and headgear their share in total exports increased to 40%. The export of timber increased even more. In 1995 both chemical products and metals and metal products had accounted for nearly a quarter of total exports; in 1996, their export dropped over two times.

The total volume of imports did not change, but the import of chemical products increased by more than 40%, while the import of foodstuffs and clothing decreased.

Trade deficit was made smaller by the deficit of trade in clothing turning into a surplus and the decrease of the deficit in trade with foodstuffs.

14. Norway

With Norway, like with Great Britain, trade had been booming quite recently. However, over the nine months of 1996, exports to Norway decreased by 12.8% and imports from there increased 1.5 times (see Table 27). The earlier big trade surplus was replaced with a balanced situation, with exports and imports more or less equal.

In the first nine months of 1995, over half of exports had been timber. In 1996, the export of timber was two times smaller. In case of clothing, footwear and headgear the situation was the opposite: while a year ago clothing accounted for a quarter of exports then in the first nine months of 1996 their export nearly doubled and their share in total exports to Norway increased to 40%. The export of furniture increased also considerably.

The biggest change in imports was the near tripling of the import of machinery and equipment. The import of mineral products increased, too. The share of products of chemical industry and clothing, footwear and headgear in the structure of imports decreased.

The reduction of the trade surplus with Norway mainly resulted from the decrease of the surplus in trade with timber.

15. Belarus

Belarus was the only country among Estonia's major trade partners with whom both exports and imports decreased over the nine-month period of 1996 - exports was down by 15.3% and imports by 9.6% (see Table 28). The big trade surplus decreased slightly.

Foodstuffs have traditionally dominated in exports to Belarus. Despite a slight decrease of foodstuffs export, their share in total exports to Belarus amounted to more than a third. The export of the next-most important groups of merchandise - mineral products, transport vehicles and machinery and equipment - decreased considerably, while the export of metals and metal products tripled.

Regardless of the decrease of the total volume of imports,the import of transport vehicles and foodstuffs from Belarus was still on the increase. The import of clothing, footwear and headgear from Belarus dropped sharply.

In all ten groups of merchandise exports exceeded imports, with foodstuffs having the biggest surplus of all.

16. Other countries

Data on Estonia's trade with countries that were not among Estonia's top 15 trade partners in the first nine months of 1996 is provided in Table 29.

Reet Kirt