Exporters worry about EU bid

Estonian exporters have tempered expectations about the growth of exports to the European Union after Estonia's accession, according to a recent survey.

Russia, some of them say, may be more lucrative.

According to a survey recently released by the Estonian Trade Promotion Agency, 23 percent of companies polled predict an increase in exports when Estonia joins the EU. Half believe EU membership will do little to change exports and 6 percent predict a decrease after joining.

Lea Kroonmann, director of the agency, said she was surprised that 18 percent of the 340 exporters polled had no idea what impact EU accession would have on their exports.

Several company officials told The Baltic Times that they thought their exports would decrease because of what they called restrictive EU regulations and Estonia's lack of name recognition.

Reigo Tonsberg, manager of the small chemical producer ER Chemicals, said that Estonia should negotiate better conditions with the EU and not let the chemical industry here disappear due to high taxes.

EU guidelines could put his company out of business, he added.

"Officials are translating EU legislation without examining the real world," said Tonsberg. "It is a political marathon."

Siiri Tamm, manager of the furniture factory Harviker, said Estonian furniture is currently priced close to foreign competitors and it would be difficult for small- and medium-sized companies to increase costs and still compete. European and American firms have already looked to countries like Indonesia, China and Malaysia, which are major export producers with low labor costs.

"Our advantages are flexibility and a location near the EU border," she added.

Janek Kalvi, marketing director at the distillery Liviko, predicts an increase in exports to the EU market, but admits that it will take years for it to have a significant impact.

"As we move toward the EU there is a presumption that there will be more exports there," he said. "We have to work hard before we get inside there. It's like moving from an elementary school to a university and we'll have to start with subcontracting instead of original production."

Between 1998 and 2000 only 44 percent of the respondents, mostly larger enterprises, presented new product lines, according to the survey. Companies spent an average of 161,000 kroons ($9,470) per year on research and development. Metal and food producers were the most innovative, while wood processors focused the least on research and development among exporters.

Kalvi said he was more optimistic about the large Russian market, which is recovering.

"In the EU we have to prove ourselves for years," Kalvi said. "Estonian products have a good image in Russia."

According to Tonsberg from ER Chemicals, export opportunities to Russia exist but are hindered by tariff arrangements and double taxation.

Companies cited Estonia's customs regulations and tough competition abroad as the two main obstacles for Estonian exports. Other deterrents include the lack of a qualified work force and risks related to new product development.

"Estonia is an unknown producer country, " said Kalvi. "It is difficult to get any information on foreign markets. This scares the small- and medium-sized Estonian producers."

According to the survey, more than half of Estonia's companies that export have no detailed strategy on how they will deal with EU accession.

There are currently 250 companies in Estonia that have been awarded ISO production certificates. Most of them are foreign-owned.

About 43 percent of Estonian exporters polled list low prices as their main advantage when approaching markets abroad. About a third named product quality as their strongest selling point.

"However about two-thirds of Estonian companies do not use any quality control systems," said Kroonmann.