ESTONIA'S FOREIGN TRADE IN THE FIRST HALF OF 1997[1]

In the first half of 1997, Estonia exported 17.5 billion kroons worth and imported 26.6 billion kroons worth of merchandise. As compared to the second half of 1996, exports increased by 27.2%, and by 55.4% as compared to the first half of 1996. Imports increased by 21.5% and by 59.4%, respectively. Estonia's foreign trade deficit exceeded 9 billion kroons, being 3.7 billion kroons bigger than in the first half of 1996 (see Table 1 and Figure 1).

As we have already mentioned in previous surveys, one reason for the steep increase of the trade volume was the change in the customs regulations, under which transit goods in customs warehouses have to be recorded since 1 October 1996[2].

STRUCTURE OF EXPORTS AND IMPORTS BY CUSTOMS PROCEDURES

The requirement of recording transit goods stored in customs warehouses changed the structure of both exports and imports by customs procedures. The share of the so-called pure export and import decreased considerably, remaining under 60% in the first half of the year, although the volume of both increased. The share of import and re-export of merchandise stored in customs warehouses increased correspondingly and their volume grew as well (see Table 2).

Pure export was mainly made up of timber, clothing, footwear and headgear, foodstuffs and chemical products. For free circulation, mostly machinery, chemical goods, foodstuffs and transport vehicles were imported. Foodstuffs and chemical products, transport vehicles, machinery and mineral products were stored into customs warehouses and re-exported from there.

STRUCTURE OF EXPORTS AND IMPORTS BY GROUPS OF MERCHANDISE

Exports increased in all groups of merchandise. The biggest increases were recorded for mineral and chemical products and machinery. The near doubling of the exports in the latter put this group of merchandise to the top of the list of exports (see Table 3).

The re-export of machinery and equipment processed in Estonia accounted for 54% of the total export of machinery and equipment. Over half of it was taken to Finland and nearly one third to Sweden (various joints, components and accessories). Pure export accounted for 23% (components to Finland and Sweden, computers and their parts to Latvia) and re-export from customs warehouses for 22% (mainly Korean colour TVs to Lithuania, Russia and Finland).

Half of the clothing export was of Estonian origin and half was processed merchandise. Clothing, footwear and headgear were mainly exported to Finland and Sweden, clothing of Estonian origin was sent also to the USA and Germany.

Of foodstuffs, 42% was the so-called pure export and 42% was re-export from customs warehouses. Among Estonian-made food the dominating place belonged to fish and fish preserves which was taken to Russia, the Ukraine and the Netherlands; milk powder (to the Netherlands); various dairy products (to Russia); butter and mineral water (to Latvia). Re-export from customs warehouses consisted mainly of cocoa, poultry and sausages sold to Russia.

91% of exported timber was of Estonian origin and destined to Sweden, Finland, Great Britain and Germany.

Half of the exported chemical products was the so-called pure export (paints, varnishes and pharmaceutical to Latvia, Lithuania and Russia; putties to Poland; ammonia to Latvia) while 41% was re-export from customs warehouses. Of the latter category, over half was made up of Russian fertilizers taken to Switzerland. From customs warehouses also anti-corrosion substances were taken to Russia and chemical products to Korea.

In case of mineral products, the so-called pure export (electricity to Russia) accounted for half while the other half was made up of re-export from customs warehouses (motor fuel to Russia, Latvia and Finland).

60% of the transport vehicles export was re-export from customs warehouses (passenger cars of various origin to Russia, the Ukraine, Germany and Panama). To Russia, also Estonian-made car seat-belts were exported.

Various structures made of metal were exported to Denmark, Finland and Latvia, and scrap metal was sold to Germany.

Furniture was mainly exported to Germany, Finland and Sweden, while other manufactured goods were besides the above-mentioned countries taken also to Latvia, Lithuania and Russia.

The export of merchandise of Estonian origin[3] increased by 28.8% as compared to the first half of 1996 (see Table 4). If we adjust this indicator with the increase of the export price index, which stood at 7.5% at the period analyzed, we can see that at constant prices exports increased by over 21%.

The export of Estonian-made goods increased at a slower rate than total exports, with the exception of timber and metals. Foodstuffs were the only group of merchandise where exports decreased. The most important local export article was timber, the export of which increased by 60%. Timber was followed by foodstuffs, clothing, chemical products, furniture and mineral products.

Imports increased also in all groups of merchandise (see Table 5), with no major changes in its structure. The biggest change concerned transport vehicles the import of which increased 2.5 times, bringing this group to the fourth place on the overall list.

60% of the imported machinery was meant for free circulation. From Finland, telephone and telegraph equipment were imported, as well as computers, mobile phones and various parts; from Germany, computers and industrial equipment were bought; from Sweden, printing presses and mobile phones. From Finland and Sweden various components were imported for processing in Estonia, Korean colour TVs and video equipment was stored into customs warehouses.

Half of the foodstuffs imported to Estonia were for free circulation (margarine, alcohol, coffee and beer from Finland; butter and pet food from the Netherlands; various food products from Ireland) and half for storage into customs warehouses (cocoa from Ivory Coast, poultry from the USA, tobacco products from Switzerland).

Three fourths of the chemical products import was meant for free circulation. The main import articles were paints and varnishes from Finland and Sweden, plastic products from Finland, pharmaceutical from Germany and explosives from Russia. Merchandise were imported into customs warehouses mostly from Russia (mineral fertilizers, synthetic rubber and other chemical products), but also cosmetics from Poland and tires from Korea.

52% of the imported transport vehicles were meant for free circulation and 45% were stored into customs warehouses. Passenger cars and trucks were mainly imported from Finland, Germany, Sweden, Russia and Panama. From March to June, nearly 300 million kroons worth of mostly Russian-made cars were stored into customs warehouses.

Half of the clothing import was meant for free circulation. Various clothes were bought from Finland, Germany and Sweden, while footwear was mainly bought from Italy, cotton cloth from Russia and raw cotton of Uzbekistan, Tajikistan and Turkmenistan origin from Latvia. For processing, various clothing articles were imported from Finland and Sweden, yarn, cotton and cotton cloth were stored into customs warehouses.

Over half of the mineral products import was stored into customs warehouses (motor fuel from Finland and Russia). For free circulation fuel, natural gas and bitumen was imported mainly from Russia.

70% of the import of metal and metal products was meant for free circulation (from Finland and Russia), 16% for processing (from Sweden, Russia, Denmark and Finland) and 14% for customs warehousing (from Russia).

58% of the timber products imported to Estonia was meant for free circulation (packages, paper, wooden construction units from Finland, plywood from Russia) and 37% for customs warehousing (newsprint and plywood from Russia).

Furniture and other manufactured goods were mainly imported for the needs of the domestic market from Finland, Germany, Italy and Sweden.

Trade in timber and furniture had a surplus, which in both cases increased by more than 100 million kroons (see Table 6). In other groups of merchandise, trade deficit increased, with the biggest deficit recorded in trade with machinery and equipment which was up by 650 million kroons against the first half of 1996.

EXPORTS AND IMPORTS BY COUNTRIES

Due to changes in the customs regulations, Estonia's 15 major trade partners now include Switzerland and Korea, thanks to their transit trade through Estonian customs warehouses. On the other hand, Norway and Belarus are no longer included among the major trade partners.

In the first half of 1997 Estonia's exports increased to all major partner countries (see Table 7) and in most cases the growth was very rapid. The five major export partners were the same as in the first half of 1996. The only change concerned Latvia, which due to the rapid growth of the export volume outranked Germany. Estonia's exports to Lithuania doubled. Merchandise of Estonian origin were mainly exported to Finland, Latvia, Sweden, Russia and Germany, processed goods were exported to Finland and Sweden, and re-export from customs warehouses went to Russia, Latvia, Switzerland, Lithuania, the Ukraine, Finland and Korea.

Estonia's imports decreased only from the Ukraine (see Table 8). Imports from Finland increased slower than imports from other countries and its share in total imports decreased while the share of Russia was up. Merchandise for free circulation were mainly imported from Finland, Germany, Russia and Sweden. For processing, goods were imported from Finland and Sweden, and for customs warehousing, from Russia, Finland, Ivory Coast, Korea, the Netherlands, Germany and Panama. In the first half of 1997, 358 million kroons worth of merchandise was stored into customs warehouses, the bulk of it being passenger cars.

Estonia's trade surplus with Latvia, the Ukraine and Lithuania increased, and the trade deficit with Switzerland, Great Britain and Sweden turned into a surplus. Estonia's trade surplus with the USA turned into a deficit, and the deficit with the other trade partners increased considerably (see Table 9).

ESTONIA'S MAJOR TRADE PARTNERS[4]

1. Finland

Estonia's exports to Finland grew faster than imports from Finland but due to the greater volume of imports the trade deficit increased by more than one billion kroons as compared to the first half of 1996 (see Table 10).

Exports mainly consisted of machinery and clothing (both in the form of processed merchandise and as pure export), timber and furniture. From customs warehouses, fuel and machinery was re-exported to Finland.

Imports were also dominated by machinery and clothing, both for the local market and for processing. Transport vehicles were imported for the local market and for customs warehousing.

2. Russia

Imports from Russia grew much faster than exports to that country, and this increased the trade deficit by 775 million kroons as compared to the first half of 1996 (see Table 11).

Mainly foodstuffs and transport vehicles were exported to Russia both from customs warehouses and in the form of pure export, machinery and chemical products mainly came from customs warehouses and pure export consisted mainly of Estonian mineral products (electricity).

Estonia's imports from Russia were dominated by mineral and chemical products, timber products (for free circulation and customs warehousing) and transport vehicles (95% for customs warehousing).

3. Sweden

Estonia's exports to Sweden increased much faster than imports from there and the trade deficit of the first half of 1996 was turned into a surplus in 1997 (see Table 12).

Trade with Sweden has always been dominated by merchandise processed in Estonia, mainly machinery and clothing. Timber, too, is an important export article. Transport vehicles and chemical products were imported from Sweden for Estonia's local market.

4. Germany

Imports from Germany increased more rapidly than exports to there and Estonia's trade deficit with Germany increased (see Table 13).

Exports consisted mainly of Estonian timber and timber products (furniture, construction units), metal products and clothing.

For free circulation, mostly transport vehicles, machinery, chemical products and foodstuffs were imported, and transport vehicles were also stored into customs warehouses.

5. Latvia

Estonia's trade with Latvia developed favourably, with exports increasing faster than imports and the trade surplus more than doubled as compared to the first half of 1996 (see Table 14).

Exports to Latvia were dominated by chemical products and foodstuffs of Estonian origin, as well as machinery (computers and their parts). Fuel was re-exported from customs warehouses.

Clothing, chemical products and foodstuffs were imported for the local market, and a small quantity of clothing was stored into customs warehouses.

6. The Netherlands

Imports from the Netherlands increased somewhat faster than exports to that country, and the trade deficit increased as well (see Table 15).

Estonia's exports to the Netherlands consisted mainly of foodstuffs of Estonian origin as well as timber, while mineral products and metals were re-exported from customs warehouses.

Imports were mainly made up of foodstuffs (both for the local market and customs warehouses) and machinery (for the local market).

7. Lithuania

In trade with Lithuania both exports and imports nearly doubled. Estonia's trade surplus with Lithuania increased more than two times, thanks to the bigger volume of exports (see Table 16).

Mainly chemical products and foodstuffs of Estonian origin were exported to Lithuania, as well as machinery and foodstuffs from customs warehouses.

Imports for the Estonian local market included chemical products, foodstuffs and machinery, clothing was imported into customs warehouses.

8. Denmark

Estonia's imports from Denmark increased faster than exports to that country, and this contributed to the growth of the trade deficit (see Table 17).

Estonia's most important export article was processed metal structures. Pure export was dominated by timber, furniture and mineral products.

Imports from Denmark were dominated by foodstuffs (both for free circulation and storage into customs warehouses), machinery and chemical products (mainly for free circulation).

9. Great Britain

Trade with Great Britain was favourable for Estonia: exports increased much faster than imports, turning the trade deficit of the first half of 1996 into a surplus in the first half of 1997 (see Table 18).

The most important export article was timber, but important were also clothing manufactured and processed in Estonia, and chemical products of mainly Estonian origin.

Machinery and chemical products were imported to the Estonian local market and foodstuffs mainly were stored into customs warehouses.

10. The Ukraine

Estonia's exports to the Ukraine increased by 20% while imports fell by 17%. Thus, trade surplus with the Ukraine increased considerably (see Table 19).

Exports to the Ukraine were more or less equally divided between merchandise of Estonian origin (foodstuffs and chemical products) and re-export from customs warehouses (transport vehicles, foodstuffs, chemical products).

Imports were dominated by chemical products, metals and foodstuffs meant for free circulation.

11. Switzerland

Trade with Switzerland mostly took place through customs warehouses, meaning that Estonia acted as a mediator.

85% of exports was the re-export of Russian fertilizers (see Table 20).

Imports were mostly made up of tobacco products stored into customs warehouses; small quantities of chemical products and machinery were also meant for the local market.

12. The USA

Imports from the USA increased 50% faster than exports to the USA, turning the trade surplus of the first half of 1996 into a deficit in the first half of 1997 (see Table 21).

Exports to the USA consisted of clothing and chemical products of Estonian origin as well as machinery, while imports were made up of foodstuffs for both customs warehousing and the local market, and machinery for mainly free circulation.

13. Italy

In trade with Italy, exports and imports increased at more or less equal rate but due to the bigger volume of imports the trade deficit increased (see Table 22).

More than three fourths of the exports was of Estonian origin: clothing, timber and metal products.

Imports were dominated by clothing (footwear) and machinery for the local market, and machinery for customs warehousing.

14. Korea

Trade with Korea is based on Estonia's role as a mediator: 85% of exports and 97% of imports passed through customs warehouses (see Table 23).

Mostly colour TVs and video equipment were imported from Korea into customs warehouses and chemical products and clothing were re-exported to Korea.

15. Belgium

Imports from Belgium increased faster than Estonia's exports to that country and the trade deficit increased (see Table 24).

Exports consisted mainly of clothing of Estonian origin and local timber.

The bulk of the imports (transport vehicles, chemical products, machinery) was meant for the local market, while foodstuffs were imported both for customs warehousing and free circulation.

Ulvi Saks

[1] The author of the present survey, Ulvi Saks, is an expert of Eesti Pank Statistics Department (until 15 September 1997, Balance of Payments Department).
Imports has been given in cif prices and analyzed according to the trading country (the State Statistical Office gives data on imports by the country of origin). The 1997 data is provisional.
[2] See Estonian Foreign Trade in 1996, Eesti Pank Bulletin No 2 (29), 1997, pp 23-24.
[3] These goods have been manufactured in Estonia and all customs procedures indicating re-export have been eliminated.
[4] The countries are ranked according to the volume of the trade turnover. In order to diminish seasonal influences, the first half of 1997 is compared to that of 1996.