Poland Summary
Last updated November 2004
Successful transition to a free market
Since 1989, Poland has been regarded as one of the most successful former Soviet republics to transition from a heavily state-controlled, regulated economy towards a free market. It has succeeded at productively deregulating and privatizing industry, increasing foreign investment, and liberalizing trade, and has seen per capita GDP rise by 25% since undertaking liberalization. Since the opening of the economy, Poland’s share in world imports and exports has risen significantly to its current rank of 25th in world importers and 34th rank in world exporters. [1] Its May 2004 entry into the European Union (EU) will undoubtedly advance its objectives of overall development, particularly in rural areas. Fleshing out its role within the EU is now Poland’s key political and economic objective.
Restrictions on Trade
Poland’s weighted average tariff rate in 2000 was a relatively high 7.4%, although this average was then lowered by the government in order to meet the requirement of the EU’s Common External Tariff (CET) of 1.8%. Poland’s tariff liberalization movement has been on schedule with its WTO commitments, with a strong preference towards its regional European trade partners, which account for three quarters of Poland’s external trade. [1] Poland was the EU 7th largest trading partner before it became a member state. The concentration of Poland’s international trade in European markets does not show signs of diversifying, although the government has recently reached out to China and promised to re-develop economic ties with its former ally. [4]
Agriculture
Agriculture has been Poland’s biggest issue during its EU accession process. The EU does provide substantial subsidies through the Common Agricultural Policy (CAP), however, Poland's low labor and land costs, as well as its extremely large agricultural population of small family farms, present challenges to economic development of industry and have provoked demands from the EU that Poland restructure and reduce its agricultural sector. Poland has responded to the protest of many of its farmers by doubling agricultural assistance from 12% in 1991 to 23% in 1999. [1] As part of its EU accession deal, Poland agreed that it would receive increasing amounts of farm aid over the next ten years in order to reach the same level as older member states by 2014. Though Poland was slated to receive only 25% of current EU farm aid levels starting in December 2004, it negotiated an earlier October start date. [2]
Implications of EU membership
Though joining the EU was widely regarded as a beneficial move for the Polish economy at large, and particularly farmers who have already began to see some of the benefits of increased European agricultural support, some Polish industries stand to suffer from reforms the EU has been proposing in response to international criticism for these very agricultural programs. Brazil and Thailand have both brought WTO cases against the EU for its sugar support policies in the past, and in June 2004 EU trade commissioners proposed liberalizing this industry. Poland is the key opponent of reform within the European community, and is reaching out to other sugar producers like Italy, Spain, and Finland for support in opposing reform. Polish farmers produce more sugar than any other European economy except France and Germany, but its productivity is only half of these counterparts. Liberalization in the sugar market, which would create a 40% decrease in the selling price of sugar, would thus have an especially harmful effect on farmers in Poland. [3]
Future
As privatization and restructuring of the public and agricultural sectors progresses, Poland will possibly be more willing to consider international competition even in such uncompetitive sectors as sugar, however it seems more likely that its position on liberalization of the agricultural sector will develop similarly to that of Switzerland, Norway and Japan, which call for greater concern for non-trade factors such as biodiversity, steady food provision and preservation of the countryside and certain social values.
Poland is also serving as an liaison to former Communist allies in the attempt to bring more countries into the sphere of free global trade; it promised to assist China in developing ties to the EU in June 2004 when Chinese President Jintao visited Poland, and it has led the way for fellow Eastern European countries like the Ukraine, Latvia, Lithuania, and Hungary as they integrate into both the EU and the system of global trade. [4]
[1] WTO Trade Policy Report on Poland, July 2000. http://www.wto.org/english/tratop_e/tpr_e/tp136_e.htm.
[2] “EU considering earlier start to farm aid for new members,” AFX.com 23 August 2004.
[3] “Sugar Poland Sharply Opposed to Brussels' Market Reform Proposals” Polish News Bulletin, 29 June 2004.
[4] “Poland promises China to help its ties with EU,” AFX European Focus, 10 June 2004.
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