Abstract: Small States, Big Risks: Nordic Diplomacy and the European Timber Cartel in the 1930s

Elina Kuorelahti

Abstract

This paper discusses the League of Nations and the project of building European commodity agreement on sawn timber in the 1930s. European timber market met many overwhelming problems at the turn of the 1930s; depression, Soviet dumping trade, freefall of prices, low demand, excess supply, and British protectionism. Timber sector, however, was not one of those high-capital, modern, big-scale industries in which firms were good at creating international cartels to address economic problems. It sector consisted of hundreds, even thousands, of mostly small and mid-sized firms—but also a handful of big corporations—which were spread broadly in the North and South-East Europe, and the Soviet Union..

The League of Nations took active part in the early 1930s in helping the European timber trade to survive through the difficult years of depression, dumping, and protectionism. As a solution, it offered governmentally controlled European timber regulation scheme which included all the three major timber exporting countries Finland, Sweden, and the Soviet, as well as the South-East European timber countries. The League’s solution had been on the Soviet’s agenda also in 1931, except that it did not include the South-East European timber countries.

Soviet’s cartel proposals in 1931, and the “helping hand” of the League of Nations in bringing about cartelisation, put Finland and Sweden in an awkward situation. According to the polls, many timber firms in the two countries did not really want to create a mutual cartel with the Soviets or with the Europeans.  However, the diplomatic balance of Nordic countries in the early 1930s vis-à-vis the Soviet Union, the League of Nations, and broadly speaking Europe, insisted that particularly Finland could not reject economic collaboration. The diplomatic need to attend to international timber cartel negotiations eventually had massive implications in the firm level and in national trade policies.