FINNISH AGRICULTURE IN EUROPEAN INTEGRATION - A FIRM LEVEL APPROACH

European integration and the possible application of the Common Agricultural Policy, CAP, will substantially affect Finnish agriculture. Although the major principles and means of the CAP and the Finnish agricultural policy are quite similar, Finnish agriculture would face fundamental adjustment needs primarily due to the high level of domestic prices and costs. The key factor in the adaptation process would be the overall structural adjustment in terms of production costs, development of farm size, internal and external comparative advantage, and regional reallocation of resources. The length of run analysis, especially w.r.t. to capital requirements, is decisive. Major disadvantages of the Finnish agriculture are unfavourable climate and farm structure. The study indicates that cereal production in particular suffers from the disadvantages through high unit costs of production. Milk production has better capabilities to adjust in European integration, but not without problems, either.