Position of the Union of Entrepreneurs and Employers on the draft Polish Export Policy

Warsaw, 26^th July 2021

Position of the Union of Entrepreneurs and Employers on the draft Polish Export Policy

In the opinion of the Union of Entrepreneurs and Employers, the draft Polish Export Policy (hereinafter referred to as “PEP”) presented for pre-consultation is a document of strategic importance, aiming to shape an orderly system of support and promotion of exports, addressed to, among others, domestic companies from the SME sector. In our view, the consistent increase in the strength of Polish exports is an essential activity in the context of contributing to the wealth of the country and its citizens. As a rule, the increase in exports also causes an acceleration of economic growth and a decrease in unemployment, therefore a positive trade balance is one of the most important economic indicators.

The Union of Entrepreneurs and Employers generally agrees with the Ministry of Development, Labour and Technology as to the direction of the proposed solutions in the field of supporting domestic exports, however, we would like to present a number of postulates, the inclusion of which will significantly improve the effectiveness of the proposed strategy.

1. Diversifying the geographic structure of exports

First and foremost, the Union would like to indicate the fact that exports largely focus on markets within the EU. According to the information provided in the PEP, exports to EU member states currently account for approximately 76% of all Polish exports. Moreover, according to the data of the Polish Economic Institute, Germany is the market of highest significance for Polish goods, as it accounts for 27.5% of all Polish exports.[1] Strong focus on trade with Germany has made us globally the fourth largest supplier of goods to our western neighbour and the second largest in Europe. Only the Netherlands exported more to Germany, while only China and the USA did so from outside of Europe.

It is natural that neighbouring countries or those located nearby are responsible for the largest volume of exports and imports. The above-mentioned concentration also results from the single European market, and as a consequence, follows a significantly lower number of barriers to the movement of goods within the European Union. However, one should not disregard the negative aspects of such high concentration of exports solely to European markets.

First of all, one must mention the vulnerability of domestic exports to economic fluctuations in European countries. As things stand, Poland remains largely dependent on local economic conditions, which in the event of a recession in EU member states will have negative consequences for the Polish economy.

Therefore, in our view, the PEP should pay particular attention to the above-mentioned aspect, and as part of measures counteracting dependence on the economic situation in the EU, a greater emphasis should be placed on supporting exports to countries Poland has marginal trade with, as well as destinations oof significant export potential.

We believe that, while searching for new markets, Poland should look to, for instance, Asian countries whose significance on the international area has been steadily growing and thus also play an increasingly important role in the context of global trade. Currently, Poland’s largest trade partner from the Far East is the People’s Republic of China which only receives as much as 1.1% of all Polish exports.

It is our opinion that the geographical diversification of exports will help maintain the business security of domestic companies, as due to a de-concentration of exports, they will be less dependent on local economic conditions.

2. Public authorities reacting to protectionist measures in other countries

In the SWOT analysis presented in the PEP, the authors of the draft defined protectionist actions by other countries as a barrier to the internationalisation of enterprises. However, no instruments were introduced to prevent or respond to such behaviour by third countries.

In the report prepared by the Union of Entrepreneurs and Employers “Problems of Polish entrepreneurs in France”, we identified a number of measures undertaken by the French public administration against Polish entrepreneurs. These should clearly be classified as restricting the rights and freedoms embedded in the single market. Basing on examples cited in that report, one could argue that French authorities allow their local companies to build their position in violation of European law, to the detriment of consumer safety, and against the interests of entrepreneurs from other member states.

Therefore, in our opinion, it is important to strengthen the role of economic diplomacy, as its importance presently seems to be underestimated by bodies of the public administration. We call for a proactive diplomatic stance supporting Polish entrepreneurs in the context of overcoming protectionist barriers imposed by individual states. Both public administration, embassies, consulates, as well as Foreign Trade Offices of the Polish Investment and Trade Agency should be involved in any and all cases regarding Polish entrepreneurs experiencing difficulties in running a business abroad, providing them with all the necessary legal and diplomatic assistance.

In our view, an equally important element missing in the PEP project is an educational campaign and other activities addressed to exporters, aimed at increasing their awareness of legal instruments at their disposal in disputes with authorities in other EU member states. In this place, the SOLVIT system should be mentioned as the first instance when a government agency of another EU country does not respect the rights of individuals or companies under EU law. Unfortunately, due to the low awareness of entrepreneurs, SOLVIT is of marginal use when it comes to out-of-court dispute resolution with the administration of another EU country.

3. Necessity to complete the catalogue of industries covered by Sectoral Promotion Programmes

As part of the Sectoral Promotion Programmes (pp. 13 and 14), support is to be provided for various sectors of the economy relevant to exports, but – as is usually the case with closed catalogues covering a list of specific industries – it seems that this list too should be re-analysed and supplemented accordingly. One could point out, for example, that support for producers of household chemicals was not included in the Sectoral Promotion Programmes. It is noteworthy that the importance of the domestic detergent sector has grown as a result of the COVID-19 pandemic, resulting in increased demand for biocidal products. Meanwhile, worldwide demand for detergents remains increased due to sanitary requirements and restrictions still in force – it seems that this could be the right moment to boost the position of Polish producers on the global market. Bearing in mind such a shortcoming as this one, the list of industries covered by promotion programmes should be re-examined and supplemented considering the export potential of individual sectors.

4. No link between the strategic goals of PEP and the assumptions of the Polish Hydrogen Strategy

According to the contents of the presented document, the Polish Export Policy aims to create forms of support for industries that are most prospective in terms of export and, at the same time, have the greatest potential to build a positive image of the Polish economy. The current wording of the export strategy does not mention the opportunity resulting from the emerging global megatrend: the use of hydrogen as an energy source. The PEP refers to the Polish Industrial Policy numerous times, indicating that both strategies are correlated with each other. However, no actions are foreseen to consolidate the Polish Hydrogen Strategy with the Polish Export Policy.

Due to an adequate promotional support, hydrogen technologies or public transport vehicles that are being developed in Poland stand a great opportunity to enter foreign markets. We are aware of the fact that the Sectoral Promotion Programmes provide support for sectors such as the automotive sector or the rail transport sector, however, in our opinion, there is concern that, under these programmes, the export potential of hydrogen-related goods will not be fully utilised whereas the aid will be allocated to, for example, the promotion of vehicles using traditional fuels. Therefore, we recommend distinguishing the hydrogen sector as a separate category for which additional promotional support would be provided.

5. Significance of e-commerce

We share the diagnosis made by the Ministry, according to which there is a chance to increase the share of Polish exporters in the dynamically growing global e-commerce market. The development of on-line sales through export to foreign markets is a real opportunity for Polish companies from the SME sector. Owing to the relatively low employment and production costs, they have the possibility of competing with Western companies in terms of price, and additionally – thanks to the highly developed digital competences of Polish employees – they also have a chance to compete in terms of the quality of customer services, no matter where the customer is from.

However, according to the results of the study commissioned by the Union of Entrepreneurs and Employers about e-commerce in Poland[2], a significant number of companies trading via the Internet are not present on foreign markets. According to the results of the survey, from all the surveyed companies that sell online 53% are exclusively or only present on foreign markets. This percentage is higher among manufacturing companies, larger ones, and those that have longer been on the market.

The arguments above indicate an enormous potential that lies dormant in Polish enterprises that have not yet decided to expand abroad. Indeed, one of the barriers to entering foreign markets is the lack of knowledge how to develop sales outside the Polish jurisdiction, especially among representatives of companies from the SME sector. Therefore, in our opinion, the PEP should provide support in the field of increasing competences in the use of the e-commerce channel.

Moreover, we suggest analysing the major barriers to digital internationalization of Polish SMEs – that are largely of a technical and organisational nature, as well as focusing on defining tools and methods for their removal. One of the barriers that we observe are, among others, the lengthy and complicated customs and tax processes in exports, and thus – the need to devote the limited resources of companies from the SME sector to administrative activities, instead of focusing on effective foreign expansion.

At the same time, we call for the processes of exporting goods to non-EU markets to be simplified and digitised. One possible solution would be to create a national platform facilitating formalities regarding exports, which would enable a completely new approach to international trade, while giving the National Revenue Administration full control over this process. We would definitely see the development of the concept of such a tool and its implementation as an element of the Polish Export Policy. Perhaps more detailed solutions could be developed within working groups composed of representatives of business and administration.

6. Summary

Impacted by the global COVID-19 pandemic, the world finds itself in the midst of major economic changes. Broken supply chains in the era of the greatest sanitary restrictions or problems with transporting goods to Europe have caused companies to look for alternatives to products and raw materials from Asia. Polish producers, who are able to compete with producers from Asian countries in terms of prices, can take over some of that production and orders that have so far been sent to the East. To do this, however, it is necessary to quickly enforce the solutions provided for in the Polish Export Policy in order to take advantage of the moment at hand, while supply chains are still being redefined.

To sum up, we call for the introduction of solutions and instruments that will simplify export processes. Without a doubt, complex and bureaucratic procedures affect smaller companies, whose human and financial resources are significantly limited, the most.

The cornerstone of the strategy under construction should be the pro-entrepreneurial approach of the authorities and institutions aiding exports. Their effectiveness largely determines whether entrepreneurs will more often and more willingly decide to export goods to other countries, instead of focusing only on the local market.

We also point to the need to diversify the sales markets, as this will limit the impact of a potential economic crash in individual countries on the situation of Polish exporters. A strong focus on trade relations with only one partner may generate significant business risks for companies, also due to the protectionist measures undertaken by some countries.

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[1] “The transformation of Polish exports – 30 years of growth and what next?” („Transformacja polskiego eksportu – 30 lat wzrostu i co dalej?”), Polish Economic Institute, December 2020

[2] “Survey on companies selling online” („Badanie firm dot. sprzedaży on-line”), Maison & Partners commission by the Union of Entrepreneurs and Employers, April 2021

See more: 26.07.2021 Position of the Union of Entrepreneurs and Employers on the draft Polish Export Policy