Polish Ambassador in Bonn
A Market More Free than Constrained Interview with Andrzej Byrt
- Treaty of co-operation between Poland and European Union was and still is asymmetrical. It grants Poland some privileges in economic relationships with EU countries, however, apart from the first year Poland runs systematically worsening trade deficit with the European Union (for example figures show a deficit of DM 750 mln with Germany). At the same time the European Union insists on further and faster liberalization of our home market, which will increase our trade deficit. How do you find this situation and what are the acceptable solutions for both sides?
- The asymmetry that you have mentioned applied to only one thing, quick reduction of duties by the European Union rather than by Poland. The immediate effect of such liberalisation, that is a negative trade balance of Poland, points to the clear advantage of EU industries over Polish ones. However, on the other hand, it has its positive aspects: growing investments which help modernise our industry. Investors mainly import modern technologies and machines first and foremost from Western Europe?
- This is classical investment import.
- Yes - first investment lines, and after they have begun semi-finished products, which have not yet been manufactured in Poland and which are essential in turning out new products. It is expected that in the long run those companies will start exporting such products to European Union, but not because they are capable of manufacturing the same product as in the West, but because this product will be cheaper. Current market division suggests that these products will instead be sold outside the home market due to strong competition and will be directed to the eastern markets. It is already happening. However, when we become full European Union members and the borders are opened, high quality goods produced in Poland by foreign investors will reach any EU market, which in turn will reduce the above mentioned deficit.
What shall we do in order to decrease the deficit? There are obviously a lot of steps that we can make and they do not primarily concern duties. It is a matter of shaping demand on the home market - at the moment it means slowing down growth. We need to reduce budget deficit because this excess demand, which cannot be satisfied with products manufactured in our country, should not be allowed to increase imports. Second, it is important that high quality Polish products, which have been manufactured through foreign investments, should meet demand abroad. In this case, a continued policy of reducing duties for our products will be helpful.
- Germany has long supported our application to European Union membership. At the same time, we see that German companies are afraid of potential competition from Polish companies - this is true in the construction industry, for example. How will these problems be solved during the forthcoming negotiations concerning our full membership in European Union?
- This is going to be one of the most interesting aspects of Polish-German relations. In fact, politically they are perfect, economically - very good. However, we should keep in mind that as far as relations between any countries are concerned, this is often a good cause for arguments inside the European Union as each member defends its economic interests. Germany is a very experienced country in this matter. Their home market is extremely inelastic, and as a result, they fear any prospective threats from outside, especially from Eastern Europe. What sort of threats? First, they are afraid of the inflow of cheap products. Second, they are worried about the influx of cheap labour forces so well reflected in the construction industry. Third, they fear the transfer of production from Germany to other countries. Germans believe that, owing to significant differences in salaries in Germany and Poland, they will be exposed to either mass influx of Polish workers, with all the dangers that entails or a migration of German producers abroad resulting in the growth of unemployment in Germany. The history of admissions to the European Union shows us that similar fears of France were groundless. In the case of Spain and Portugal European Union introduced special temporary period which regulated free flow of workers. Even today, Germany has a number of restrictions requiring foreign workers not to accept salaries which are too low. Such excessive regulations and their negative impact on German economy have been observed by German politicians. The President and representatives of huge corporations point to the example of the USA where greater market elasticity helped to avoid large-scale unemployment of the kind in Germany. This example illustrates how important it is to have a set of very elastic economic rules. However, it is their own domestic problem which is so vital especially in an election year.
- For some time, Poland has been the most important economic partner in Eastern Europe for Germany - even more important than Russia. 1996 was a year of German investment in Poland. At the same time, large-scale German capital like from the Thyssen was practically absent (apart from Siemens). How can you explain this situation?
- German investors are second in terms of total capital investment in Poland but, they are first in terms of companies founded in Poland. There are more German firms than American, French or British. When we consider the total value of large single investments of over $ 1 mln, the Germans come in first again. Nevertheless, some of the biggest German companies have not appeared in Poland. Why? The most important reason was the lack of German banks in Poland?
- Well, at the moment there are 14 German banks in Poland.
- That information is correct, but at the beginning of the nineties there were not any German banks in our country. The debt-reduction negotiations were in progress, and German banks were not willing to start work here until the signing of the agreement with the London Club. After reaching this agreement, which in fact, was to some extent due to constructive action of German banks and in particular Dresdner Bank, the main negotiator on behalf of the private banks associated with the London Club, the aforementioned 14 banks appeared in Poland and began to attract important German companies. There are still a lot of companies which have not shown up in Poland, and that is probably why you mentioned Thyssen - the biggest German steel company. This is mainly due to the simple fact that Poland has not started privatizing industrial sectors of interest to a company such as Thyssen. However, if we look at the top 100 of the biggest German firms, we can observe that they have greatly increased their interest towards Poland - it is needless to mention the biggest German concern Daimler Benz or electrotechnological concern Veba. More firms will come very soon as they reveal more of their future plans.
- We are speaking about German presence in our country, but we are also aware that a number of Polish companies operate in Germany. What sort of actions should Poland do in order to help them develop on the German market and where are their biggest chances for success?
- Your question concerns the most basic issue between our two countries, namely differences in economic potential. Before I answer your question, let me remind you that a difference in the level of GNP per person in our two countries is the highest of all neighbouring countries in the world - higher than between the USA and Mexico, Hong Kong and South China, Malaysia and Singapore etc. Such differences are reflected in the prices or any costs in a given market. From this point of view it is easy for the German companies to enter Polish market and get settled. On the other hand, Polish companies find it very expensive to get a foothold in the German market, and I am just speaking about founding a company, employing people, and meeting demand. Then there are the enormous costs of running advertising campaigns. Let me give you an example to illustrate my point.
A leading Polish company from Wronki was offered for one symbolic German Mark to take over a very modern factory, which was once built to provide work for the former East Germans, who at that time constituted a cheap labour force. Unfortunately, the investor miscalculated its capabilities as it did not take into consideration the rapid growth of payments. Because the company could not escape its debts, they tried to attract Polish attention. They thought that if Polish workers could be employed in the factory for wages close to those in Poland or a little higher, they would save the company. However, the German authorities did not agree to that. I think this example perfectly illustrates the scale of difficulties awaiting Polish potential investors.
Which market sector can we enter? Services I think, as we can offer our know-how. We have very well educated people who are familiar with the market here. What can our country do? It can definitely convince its partners during negotiations with the European Union and in bilateral negotiations with Germany that is worth establishing rules which would allow our companies to function in the German market, just as easily as German companies operate in Poland.
- Almost seven years ago the Weimar Triangle was formed. However, in contrast to German-French relations which are often referred to as exemplary, the Weimar Triangle does not discuss economic issues. With this in mind, the then minister W. Kaczmarek in March 1997 suggested to Mr Rexrodt the German minister of economy that it would be reasonable to hold a tripartite meeting devoted to developing economic co-operation. This was not realized until now. Why?
- In economic issues, business is a driving force. In this matter, French and German companies often have different interests. That is why they do not always co-operate with each other. The main interest of the Weimar Triangle revolves around political issues which are evidently useful to all three parties and in a way similar. They are followed by interests of different sort - there are Weimar meetings between ministers of defence, especially important for Poland as far as joining NATO is concerned, meetings of ministers of justice, essential for Poland in getting Polish law to conform EC standards or meetings of various parliamentary groups, etc.
Where can we expect to see tripartite interest in economic matters? The arms industry is closely related to politics. The decision on Poland?s NATO membership is waiting for ratification and it has immediately drawn attention of the most important companies of this sector, primarily French and German. Both countries, France and Germany have formed a group called Euromissile, in which they own 50% of shares each. Why? These former rivals have established a common business based on parity. Considering our potential participation in NATO and the necessity of meeting European armament standards, we are inevitably being driven to engage in economic activity in this field with our European partners. We cannot be absent from this form of economic activity, and some Polish companies have already received offers to co-operate. Perhaps it will be the first sector of our economy where we will be able to see a break through and allowed to start real production aimed at transforming Polish army and meeting modern defensive requirements. The important Polish arms will join the well functioning French-German co-operation.
- You mentioned strong competition between French and German companies. Do you think that Polish companies have any chances of success in competing, for example, in the Third World markets? Which domains would be most profitable?
- Yes, such interests can be shared. I have just mentioned arms industry but think of the aviation industry - famous airbuses, which the European Union so strongly recommends and France with Germany, as main shareholders, encourage us to purchase. We produce doors for Boeings. Why shouldn?t we manufacture parts for Airbus. We have a very well developed industry, and Poland, as a shareholder in a multinational European concern, could participate in enterprises in the Third World markets. Another opportunity is construction industry: Polish companies could serve as back up partners of huge French and German companies. In the past, we used to co-operate with the French in Algeria and in Morocco and with Germany in the Near East. German and French companies still co-operate with each other, so we should join them. The third domain are these industries which have managed to develop successful co-operation with German companies, for example, car industry. A lot of Polish companies manufacture components for German cars. Expanding economic co-operation will bring profits to all parties interested.
- The summit meeting of the Weimar Triangle is scheduled for the end of February. What can we expect from this meeting of the heads of state?
- Without a doubt, this will be a very important meeting for both Poland and our partners: Germany and France. The meeting will introduce new elements of mutual co-operation, and prepare grounds for our negotiations concerning our membership in the European Union. Our negotiating partners will obviously be representatives of the European Union, but all members, including our partners from the Triangle formulate the European Union agenda. We would like to have the opportunity to build certain Polish interests with their interests. We would also like to present our ideas concerning the Polish presidency of the OSCE. We can count on French and German support, which will be very essential for us and for the success of this year?s mandate. I should also mention that our partners from the Triangle are interested in our political initiatives in Eastern Europe, especially towards the Ukraine and the Balkan countries.
- The policy of close ties is slowly becoming a fact for the political elite. How do common people perceive this transformation?
- This is a common dilemma. Any political elite functions as a sort of outpost. Common people are usually far removed from political events even though in our Polish-German relations we are witnessing a sort of evolution. This is happening due to a range of mutual contacts which are still minimal, especially in comparison with France. It can be well illustrated by figures for French-German exchange program. For example, last year Polish-German exchanges reached 80 thousand people, and French-German exchanges topped 400 thousand people. Last year, almost 50 thousand Germans came to Poland nearly as many German tourists who visit Spain. However, I should say that most of them come to Poland for shopping rather than for holidays. Of course, it is not a bad thing, but it may bring problems as well. That is why we need to develop close contacts showing how people live in each country. We should wish that what began with the signing Polish-German treaties in 1990 and 1991 will end in prospective friendships among our pupils, who in twenty years, will take over the government. This is probably the best investment that we could make.
- What in your opinion should be done in order to make these relations closer?
- Of course, the economic potential of both countries is different but in our relations we are partners. We have a lot of close ties, and there is no other country whose politicians would have so frequent meetings at different levels (including military, civil and cultural talks). They are very friendly as a rule and treated as consultations rather than binding decisions. Another example is when Polish politicians are invited by their German partners to participate in German national ceremonies or important meetings, in which Polish ministers, as the only representatives of Central Europe, witness vital decision making process shaping policy. Furthermore, they are often asked to express their opinions, something that must be looked upon as a kind of favour.
What else can be done? Germany is a federal country, and Poland is not and never will be. Nevertheless, after administrative reforms and the reduction of counties, Polish regional authorities will establish closer contacts with their German partners. At the moment there are 500 such agreements between counties, towns, and smaller units. The long awaited administrative reform will bring more ties binding our two countries.
- What are the most serious threats and biggest opportunities for successful co-operation within the Triangle?
- The threats for our three countries are of two kinds. First, some people are afraid that French-German co-operation as it exists so far will concentrate on Polish matters and focus on Central European issues. Yet, our presence in this formation provides the largest European powers with better understanding of our affairs. Our participation is not a threat to anybody but rather a very constructive contribution on the way to representing Central Europe. The second threat would be a failure to let common people see the forthcoming changes and fully participate in them. It is our highest priority to try to allow all the Poles to experience this European adventure and identify themselves with the new situation.
Besides, there is a chance for us to show our partners, especially the French, that apart from the Mediterranean civilization, which gave us political and cultural Europe, there is another kind of Central-European civilization grouped around the future mare nostrum of the European Union - the Baltic Sea. This civilization will very likely be accepted in the European Union. It is our challenge to prove to our partners that Central-European countries offer new opportunities.
- In closing I would like to ask you whether there are any other issues you would like to mention?
- By entering the European Union Poland and other Central-European countries will represent a more liberal understanding of social and economic life than most of the present members of the European Union. The European Union introduced several limitations which are frequently criticised (i.e. Common Agricultural Policy). Of course, it is difficult to criticise the European Union policies, but we are not afraid to express our opinions. And that is why Poland is perceived probably as the most unruly country outside the European Union.
Thus, we will have to decide whether we should assume a more liberal American philosophy or agree to rather bureaucratic European policy, which we have, as newcomers, accepted. However, I treat this dilemma as a positive challenge. On becoming a full member of the European Union Poland will be able to prove that its balanced, liberal economic policy has been successful: both politically and economically. Thus, Polish success will strengthen those countries which insist on less bureaucratic European structures and encourage free market economy not a constrained one.
Andrzej Byrt was interviewed by Ryszard Bobrowski