Foreign trade

The Estonian economy is an open one – in addition to active trading, lots of foreign entrepreneurs are operating here; Estonian enterprises are among the most active foreign investors in transitional economies.

Being a small state, Estonia has to import quite a lot of goods, which means that something has to be exported as well. That is why much emphasis is laid on the increase of export. Estonia's multifaceted economy provides a wide range of both goods and services for export. The structure of Estonia's economy is in fact largely influenced by export.

The import into Estonia exceeds export. This is possible because foreign investors have invested in Estonia. Up to now they have been earning a decent profitl and therefore the inflow of money into Estonia has continued.

Export
One third of the export is in the form of services. The main export includes various transport and tourism services. An important role in transport belongs to marine shipping, or both the transport of goods (including transit) as well as passengers (tourists). In addition Estonia exports numerous other services – construction works, telecommunication services (Estonia hosts the international or regional call centres of many companies), financial services etc.

The range of exported goods is wide – from food products to electronic products and pecision instruments. A notable share of the goods exported from Estonia are manufactured locally in the form of subcontracting, a process which was initially quite simple but has now become more complex. As a result, for instance, mobile phones and other electronic products are made in Estonia. Primarily due to various forms of subcontracting, engineering products and machinery play the most important role in Estonian export, next come timber and various products made of timber (including paper, furniture, log houses). Estonia also exports metal products, chemical products and different light industry products (clothing, footwear). Food products and building materials are slightly less significant.

As Estonia gained independence and the economic system of the Soviet Union collapsed, Estonia had to quickly redirect its economic contacts from the East to the West. The first new contacts were with Swedish and Finnish companies, at the same time the contacts with Russia remained in force. Trade relations with Latvia and Lithuania were not too active as the structure of the three economies was quite similar as a result of the Soviet economic system and there was not much to trade with. In due course Estonia formed closer contacts with the companies in Western Europe and elsewhere. The financial crisis in Russia in 1998 had a severe effect on Estonian-Russian trade and the impact of Russia diminished considerably.

Nordic countries – Finland and Sweden - hold a prominent position among Estonia's export partners. A notable share of Estonia's export goes to the so-called old EU countries – especially to Germany, Great Britain, Denmark and Holland. Almost one fifth of Estonian export goes to the new EU member states, although the majority of goods ends up on the markets of the closest neighbours Latvia and Lithuania, respectively 8% and 5%. Latvia and Lithuania receive Estonian food products (ready-made food, drinks), various products of chemical industry (including drugs), metals and metal goods (especially to Latvia), machinery and equioment, clothes (Lithuania) and electricity (Latvia). Joining the EU caused a rapid increase in the trade between the three Baltic countries. One reason is the swift development of logistic and trade centres all over the Baltic area that service all three countries (occasionally also Finland and closer areas of Russia). It can be concluded that the goods transported to the EU countries are just as diverse as the entire Estonian export.

Engineering products and machinery constitute the principal part of the goods exported to Finland, Sweden and Germany, they make up almost a half of the goods exported to Finland. Other more important goods include various light industry products, goods of the timber and paper industry and furniture.

When Estonian joined the EU, the share of Russia in Estonian export grew from 4% to 6.5%, as the customs restrictions set by Russia disappeared. In addition, various changes occurred in the export structure because Estonia became mediator of several goods for Russia. One fourth of the export consists of machinery and equipment. The share of food products rose to one fifth. Estonia also exports a large quantity of products of light industry (including subcontracting in Russia for Estonian producers) and vehicles (mostly cars bought in Estonia) to Russia. Among other CIS countries, Ukraine is the most important with 1.5% of Estonian export.

Export

Country

Main export articles

Finland

Machinery and equipment (47%), Timber, paper and furniture (18%), light industry products (11%)

Sweden

Machinery and equipment (36%),Timber, paper and furniture (21%), light industry products (13%), vehicles (11%)
Germany Machinery and equipment (38%), Timber, paper and furniture (30%), food products(8%)
Latvia

Vehicles, products of chemical industry, food products, electricity, metal products, machinery and equipment

Lithuania

 

Food products, vehicles, products of chemical industry, metal products, machinery and equipment, products of light industry

 

Russia

Machinery and equipment, food products, cars, light industry products, products of chemical industry

During the recent years exports have increased to the Central and Eastern European countries, primarily to Hungary and Poland. About 4% of Estonia's exports go to the USA. The exports to Asia which were rapidly increasing a couple of years ago have now slightly decreased.

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