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Poland and the EU Membership Now
or in the Future

Emilia J. Zawitkowski, American University of Paris, France, International Relations, Prof. Hall Gardner, December 10, 2002


Introduction

Current members of the European Union have to reconcile conflicts of interests and come to an agreement on the purpose of the EU, whether it should become a super-state, federation or free trading league. In 2004, the European Union plans on accepting ten, currently candidate countries into the union 1. Among those ten, Poland stands out as a majority and the largest and most populated nation, with 39 million people. Because of its size and self-spurred improvement of overall quality of life on the national level, leaving Poland out of the Union would be impractical and unrealistic. The other nine countries are either healthy enough to join on their own merits, or small enough not to have too hard of an impact on the European Union. Before her entrance, Poland still faces many problems, which are largely linked to the backwardness of the country, economically and politically. Realistically evaluating them, these problems are solvable with or without the entrance to the European Union. Upon analysis of the current situation of Poland, entrance is inevitable, however it should not take place in 2004, but rather in a decade.

Past Implications

As a post-communist nation, Poland suffers from many political problems, as well as instability because of the system 2. Poland is officially a democracy. However, democracy needs to be manifested in the procedures of the system and the participation of the citizens. That participation in Poland is limited, even though the procedures (which, like many new democracies, need modifications) have been implemented. Poland follows the proportional representation system, in which the seats in the Parliament are obtained by quota in multi-member constituencies. This system is not efficient in new democracies because parties are not well defined, and the elected parties "never fully keep their pre-election promises" (Mucha/Szczepanski) 3. While representation and the interests of the citizens play a crucial role in Western countries, Poland still needs the time to evolve into a functioning democracy. Furthermore, citizens do not have confidence in the elected politicians, a process that improves over time, during which the parties and the system become more consolidated, like in Germany or France. In Poland, "respect for political opposition is very low (…), but the level of conflicts and emotions which the politics stir is very high" (Mucha/Szczepanski). Very often, the political authorities and the employer are the same body. It means that the influential contributors of the political process still maintain political privileges because of their overlapping functions. In this sense, thus, the decision-making process is elitist and contradictory to "rule by the people," still displaying the remainders of communist rule (and socialist mentality), which need to be addressed and reformed in order that Poland becomes a country where rule by law is dominating.

Moreover, accountability loses validity because the group represents the decisions made, consequently inhibiting people from being able to accuse someone, resulting in loss of confidence and in illegitimate politicians in power. "Polish politics and Polish politicians are not regarded high by a majority of the population," (Mucha/Szczepanski) creating opinions about rampant corruption and incompetence of politicians. If one acknowledges that corruption exists in most countries, even like France or England, at least the people have information strategies and a cohesive legal system to account for and defend their interests. In a country, where the system is being shaped continuously, politicians should be elected based on their individual merit to be accountable for their actions. Thus, single-member districts would, in the long run, prove to be most efficient for positive and faster changes, as well as consolidation of a democratic system in Poland 4. As long as the democracy is shallow, Poland should not take on international responsibilities with rich, freer trade countries, where the systems have been functioning for more than half a century.

In addition to the often-considered "banana republic" notion, Poland has to increase efficiency of her bureaucracy. One of the main problems is that the "resources in the state sector of economy, particularly in the heavy industry (for instance in mining) are still wasted or insufficiently managed (…) Efficiency of labor is low and the ties between efficiency, skills and qualifications, on the one hand, and income on the other are still weak, particularly in the state sector of the economy" (Mucha/Szczepanski). Between 1993 and 1998, the number of employees in the administrative sector has increased by 25.3%, the second largest increase after the finance sector (De Broeck/Koen) 5. Bureaucracies are part of the economic sector that is not productive to the economy, therefore should be minimized in Poland, and restructured. As a principal remnant of communism, reforms and time can reduce the administrative sector, to move and encourage people to work in the productive force, instead of exerting government and taxpayers' money. In addition, implementation of rule of law would be more respected from a resulting decrease in corruption.

The Polish economy should not be compared to that of France, the Netherlands or Germany, rather - to the economies of Spain, Greece or Portugal as they were thirty years ago, when they faced many of the same problems Poland faces today. The Polish economy has entered the arena of trade, with the EU as the main market, however with agricultural problems, and a significant decline of the number of industries since the change 6.

Present Notions

Currently, the import/export structure is disadvantageous to the Polish economy, in that there exists a disequilibrium of the products Poland exports, usually unprocessed, raw materials and agricultural products, and the imported goods, mostly highly processed such as machinery, electronics and luxury goods (Mucha/Szczepanski). For the thirteen years of converting to a market economy, the annual Polish GNP has been steadily increasing by about 5%, until the last few years, and is currently $2,000 less than the Irish GNP per capita (Mucha/Szczepanski). Poland is still dependant on the most developed countries in terms of economy, capital and technology (Vaughan). In 2000, $900 million were invested by foreign, EU companies in Poland. These companies have the right to purchase formerly state-owned companies, and are "free to hire the cheap but disciplined and highly-skilled labor force" (Shevlin). In neighboring Slovakia however the cost of labor is 30% cheaper than in Poland, and it has become a convincing factor for the Toyota-Renault to award a smaller country to become the site of a new huge plant.

The growing dependency creates a similar situation as during the former half a century, only that "the EU is the new Warsaw Pact and Brussels is the new Moscow," says Martin Vana, a Czech lawyer (Shevlin). For that reason, "before, [Poland] was richer and more developed than [the] Soviet patron, whereas now [Poland] is poor and backward and the offer comes from the rich, developed and prosperous. Before, Poland was exploited, whereas now Poles are wishfully going to be subsidized and supported in all possible ways" (Przystawa). Currently, 70% of the banking industry is owned by foreign banks (Vaughan). Moreover, in 1998, nearly 30% of the commercial companies in Poland were owned by foreign capital (De Broeck/Koen), including some major companies that monopolize certain markets, like Hortex, Zielona Budka, Wedel, owned by Coca-Cola, Nestle and Danone respectively 7. With much of the profits going back to the owners, in a net outcome, Poland is even loosing liquid cash. Consequently, time may cure the economy to stabilize, along with the political system, to form a stronger, internal national economy, as well as national infrastructure. Likewise, the privatization of state-owned companies/industries will end, resulting in a previewed growth of new businesses again, or expansion of the economy.

Polish Catastrophe

Corresponding to the domination of foreign capital and newer technologies on the one hand, and the burden of state interventionism (in form of high taxation and bureaucratic overregulation), on the other hand, the Polish market has experienced a drastic decline in the diversity of domestic, undercapitalized industries rendered non-competitive, as well as shifts of employment in various sectors of the economy. To make the situation worse, various requirements imposed on Poland by the EU as a condition for joining the Union have called for limitations of certain productions. While the world's industrial increase in the sulfur and steel industries is a total of 19.6% from 1990 to 2000, these two industries, in Poland, have decreased in output by 100% cumulatively (Przystawa). Furthermore, Poland used to export radios, cars and televisions to North Africa, Soviet satellites and other countries around the Soviet empire; whereas, currently, foreign companies from such industries import raw materials into Poland, where, for cheap and highly-skilled labor, the parts are put together. Thus, Poland produces roughly the same amount of cars or televisions, but for German, Japanese or other foreign companies. (Przystawa) 8. Divestment of state interventionism in the economy promotes free trade and diversity of national economy, further building immunity to large economic busts, giving the population more employment opportunities and chances to invest in various industries as well as a steady, net economic growth. If Poland joins the EU, she expects to receive some compensation from the EU for the losses she suffered by fulfilling the preconditions to join the Union. Such compensation, generally called "subsidies" need to be used for the development of the country's infrastructure, especially - a good road system.

During the period that state-dominated industries were to be privatized, foreign companies took control of them, while the Polish elite, owning the factories shut them down and left skilled workers, engineers and other professional workers unemployed. The shipbuilding yard in Szczecin is experiencing a slowdown, with its workers waiting for their promised wages for six months 9. Competition, ever since the end of communism has led certain industries to collapse, also from necessity of modernization in technology and reorganization of the structure of industries and factories. Subsidies through the banking system to finance private enterprises might increase the output, however a proper reorganization would induce most of it, by decreasing the amount of administrative positions and putting more emphasis on the productive labor force of the industry.

One sector of the economy that has suffered enormously is agriculture. Currently, 18% of the Polish population works in the agricultural sector, with less than 4% contribution to the GNP (Kaslow). Of these 18%, "two million farms are family operations with less than 20 acres per farm," (Hattam) with a strong tradition of protection of food quality, biodiversity and small community lifestyle, where the consumers are connected to farmers. If, and when Poland enters the EU, not only will Polish farmers have to adopt more mechanized and chemically driven procedures of production, but an expected 1.2 million farmers will be forced to leave the agricultural sector in order for Poland to become more competitive on the international market (Hattam). The potential of the Polish agricultural sector is reflected in the amount of small farms, and small family, farm businesses, which equates to the most fundamental evidence of a competitive, free-market, where competition adjusts the price. This sector of Polish economy is exemplary even to the European Union because the strict rigidities of the EU policies limit the self-fluctuation of the market, immune to a large extent to booms and busts. Moreover, since Polish farmers' produce is natural, and chemical pesticides are not used, the soil is also ideal because the farmers alternate the crops every year not to tire or extract all its riches, minerals etc. Therefore, Polish food is considered healthy or organic food. Due to its high quality, it should be sold at its true value on the market. Unfortunately, the EU central planning policies might become a major obstacle to let such healthy food market to flourish.

The European Commission is mostly dissatisfied with the agricultural sector because of its lack of technology and modernized methods of production 10. Furthermore, eventually, all farms will be required to be registered in a database, with each field and type of crop produced on the field. After this process, all the animals are required to be registered. (Safuta) In addition to these reforms in collision with the free market principles, Poland faces agricultural France and Spain, who receive the majority of the subsidies from the budget of the Common Agricultural Policy (CAP). With a budget of 30 billion euros, the CAP grants French farmers 9 billion (33% of the budget), a sum, which French farmers are opposed to share (Helm/Broughton): here lies an explanation to the smallest support of 40% of the French for the Poland's membership in the EU - Poland being the fifth country the French want to accept (Mucha/Szczepanski).

Besides the unclear situation with the CAP, the European Commission also "demands from Polish farmers a further decrease in agricultural output" (Przystawa), thus rejecting the free market economy. This year's grain harvest was abundant, like usual, except the fact that the grain was not bought by consumers, because cheaper grain came from EU countries; the result of the grain crisis was that the government was obliged to purchase cheaper grains from Poland's "European benefactors" (Przystawa), and not even the idea of sending the abundance of grain to areas of developing Asia or Africa was supported by the European Union Parliament. (Przystawa) Therefore, Poland's agricultural sector is not maximizing its output, hence its ironic and technical inefficiency. According to the 2001 Concise Statistical Yearbook of Poland, between 1989 and 2000 the world agricultural output increase of meat is 21% and of potatoes 10.7%. Meanwhile, Poland has decreased its output in the meat industries by 15.5% and 21% in the farming of potatoes (De Broeck/Koen). Clearly, meeting the standards of the EU Commission has confused the politicians and EU enthusiasts between maximization of output, profit and resources and the necessity of subsidies, membership and processed food.

German Threat

One main issue that draws particular attention is that, on the one hand, the EU is dominated by Germany, and German interests, that historically have been in direct collision with Polish national interests, and, on the other hand, the extent of the present economic influence of Germany. Currently, Germany dominates 30% of the 70% foreign investment in Polish banks (Przystawa). In fact, Germany has replaced Russia in the scale of involvement in many Polish industries. In 1970, Russia dominated 35.3% of Poland's exports; but in 1995, Germany controlled 38.8% (Przystawa). Additionally, negotiations concerning land purchasing is a fragile issue in Poland because after the borders fall, Polish people fear Germans will want to get, for free, property they had lost in 1945 11. Nonetheless, German investment is currently huge and according to Kazimierz Poznanski 12, Germany is repeating its economic takeover of Poland as they did with East Germany (Przystawa).

Now or in the Future

The European Union needs Poland and Poland would need a pro free-market, European Union. Poland has internal problems, which some can be resolved with the help of the EU, while some do not. Under the Nice Treaty, once Poland has a secured membership, the Poles will have the same voting rights as Spaniards, which will allow participation in negotiating financial perspectives for Poland (Leonard). In Sweden, 68% of the population supports Polish entrance, with only 25% of Austrians 13. The European Union could serve as an example of market reforms for Poland.

While the EU offers Poland a significant market and political and economic experience, Poland, in turn, offers many assets that it has taken for granted, without realizing its potential. Firstly, Poland has a large internal market, with a major private sector. The labor force, in comparison to the EU is relatively cheap and provides many means of production. Poland participates in NATO and other security systems, as well as continental and global institutions like the OECD and OSCE. (Mucha/Szczepanski) The population is uniformly distributed by region, a perfect economic situation, in terms of labor force and employment. Considering the race, culture and education, the Polish population is very homogenous, which is directly related to the absence of any significant minority, ethnic or religious internal conflicts. Compared to other countries of the world, Poles are well-educated, with 8% holding masters degrees (Shelvin), highly-skilled and population - and land-wise will rank sixth in the EU after the accession (Kaslow). Furthermore, geographically, the center of Europe is a little southwest of Warsaw, marking Poland as the center of Europe (even though usually referred to as an Eastern country), which futuristically speaking is advantageous in communication and transportation among EU countries. Because the EU is a union, the communication and action through Poland is ideal, which will result in a fast development of a strong transportation infrastructure (by simply collecting fees). Even though most EU states would willingly accept Norway or Switzerland primarily, Poland is essential to the European Union, therefore, which will allow Europe to become more united. The European integration of ten new countries implies that Europeans are heading towards a mutually freer trade union. As long as Poland enters on fair terms, and reforms the proper areas that need restructuring, Poland will without a doubt largely contribute to the growth and power of the European Union. Let's expect however that it will not be so to the disadvantage of the Polish people, who, if once they agree that their country joins the EU, will practically have no recourse to get Poland out of it.

Emilia J. Zawitkowski

(Miss Zawitkowski is a 19-year old student from Southern California)

Notes
1 An article in Le Monde headed "Who will dare say no to enlargement?" suggested that neither the EU nor the candidate countries were well prepared for the move. It also stated that the enlargement would be a "victory for the British vision of the EU as a free-trade area rather than a true union of nations. (Shevlin)
2 Ironically, the winner of last September's elections is the Democratic Left Alliance (SLD) led by Leszek Miller, the reformer Communist Party. Their coalition partner is the Peasant Party. The Center of Public Opinion Analysis reports in the November poll that the SLD government has only 20% support. The new government has promised, for 2003, a referendum on joining or not joining the UE. Opinion polls show gradually declining support for EU membership, with a mere 55% majority in favor (Leonard). However, depending on the polling agency, popular support has varied from 30%-55%.
3 Janusz Mucha and Marek S. Szczepanski are professors at Warsaw School of Social Psychology. Their article is part of the introduction to a volume of their book on the Polish society in the perspective of its integration with the European Union, commissioned by the Committee on Sociology of the Polish Academy of Sciences.
4 The author of this paper participated in debates on this subject of which kind of representation is most efficient in new democracies in the PO 115 Politics and Governance course.
5 Mark De Broeck is affiliated with the IMF, and Vincent Koen with the OECD.
6 Chief Economist and vice-president of Deutsche Bank in London, Marco Annunziata states that if the ten candidate countries do not join the EU, "in 10 years or so they might be better places to do business than the European Union (…) If enlargement were called off, I would almost claim that the prospects for the central European courtiers would be better. The European Union is frankly not a model market economy, and you see this reflected in its performance - there are too many structural rigidities, too many things that make the economy much less dynamic than it could be. So the central European economies could reach a higher level of efficiency than we see in the European Union." These rigidities could limit the potential improvements. On a similar token, Mianne Kager, chief economist at Bank Austria "doesn't think these economies can grow faster outside the EU because the EU is already their major market (…) the right kind of partner the emerging markets need." (Shevlin)
7 Source: The three listed companies produce juice, ice cream and chocolate respectively; therefore, on every package of each good, the consumer sees the name of the owner of each company.
8 Professor at University of Wroclaw (in German Breslau). The quotes used in this paper are from his speech at the tenth "Mut Zur Ethik" Congress in Feldkirch, Austria on August 30, 2002. His speech is a direct response to the speech by the deputy to the Federal Congress's Association of the Economic Problems of the East, Alexander von Waldow, who basically proposed that Germany receive the territory it lost in 1945 and Poland can then proceed to ask for her territory lost to Lithuania and Belarus. To side track, Polish-German relations, with the exception of WWII have been exemplary, with very few stains, while French-German relations, for example have always been worse.
9 The author of this paper has obtained this information from an analyst at Deloitte and Touche, a multinational corporation, specializing in consulting and financial review. Working in Warsaw, as a senior market analyst, she is the source of general information because of the author's frequent contact and discussions with her.
10 The paragraph above proves the positive aspect of this lack of technology and modernized procedures of processing food. However, the following paragraph states the lack of technology in organizing the sector - a habitual problem.
11 One could suggest that the largest number of land buyers will be the Dutch farmers, who will be seeking farming land because of shortage of it in Holland (Leonard). In fact, when the German land became Polish, and the Polish eastern land Lithuanian/Belarusian/Ukrainian, five million Polish inhabitants were resettled to the new territory and 11 million Germans moved to West Germany- a consequence of the Potsdam Treaty, a decision of the Allies. Many Germans are already claiming rights to Western Polish land.
12 Kazimierz Poznanski, professor of Economics at University of Washington in Seattle, Washington.
13 On an interesting note, only Ireland had a direct voice of the people that stated their opinion on the admission of ten states into the Union. Referendums are one of the three principle proofs (the other recall and initiative) of democracy, in changing legislation. The rest of the 14 countries will not hold referendums - only the Parliaments will decide for the general opinion - citizens will not participate.

Works Cited
1. De Broeck, Mark, Koen, Vincent "The 'Soaring Eagle': Anatomy of the Polish take off in the 1990s" 2001
2. Hattam, Jennifer "Ripe for Corporate Picking" Sierra Vol. 87 Nr 5 September/October 2002 p. 16-17
3. Helm, Toby, Broughton "Chirac and Blair Trade Insults over Farm Reform" 29/10/2002 http://telegraph.co.uk
4. Kaslow, Amy "Slubice 2002" Europe (European Economic Community) Nr 417 June 2002 p. 23-24
5. Kaslow, Amy "Poland and European Union" Europe (European Economic Community) Nr 417 June 2002 p. 20-22
6. Leonard, Dick "Poland Membership Negotiations Move to Key Phase" Europe (European Economic Community) Number 414 March 2002 p.3
7. Mucha, Janusz, Szczepanski, Marek S. "Polish Society in the Perspective of its Integration with the European Union" East European Quarterly Vol. 35 Nr 4 January 2002 p. 483-98
8. Przystawa, Jerzy "Poland on the Road to Political and Social Catastrophe" "Mut zur Ethik" Congress in Austria, August/September 2002
9. Safuta, Jacek "Jeszcze Jeden Wysilek Polacy!" Polityka Nr 41 October 2002 p. 17
10. Shevlin, Chris "Eastern Europeans reflect on EU entry" Euromoney Nr 393 January 2002 p. 60-71 Vaughan, Dennis "Testing Times" World Link Vol. 15 Nr 1 Jan/Feb 2002 p. 164-6


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