Free Trade Agreement With Poland

The lower share of the private sector in exports relative to imports most likely reflects the significant growth in net uncovered exports, the large share of industrial products in exports – produced by state-owned enterprises – and the existence of state-owned commercial enterprises that are still important for small private enterprises that do not know export markets. In addition to the more conventional heterodox stabilization program, which included the use of the nominal exchange rate and a tax-based income policy as a nominal anchor, the Polish strategy provided for the exemption of virtually all remaining prices, the liberalization of the trade and payment system, the dismantling of state monopolies (especially in the retail trade, food processing and trade) to expose companies to financial discipline by: Subsidies are removed and bankruptcies are allowed. Reform of the tax system, far-reaching reforms of the financial system, transition to competitive labour markets and privatization of many state-owned enterprises. The programme has also put in place social safety nets (mainly through the form of unemployment benefits and social assistance programmes). The Republic of Poland is successfully pursuing its rapid transformation into a market economy. The Polish economy has developed strongly, led by major trade and other major economic reforms, and on the basis of strong private sector development. Impressive growth rates since the early 1990s have brought real GDP a quarter higher than before the transition. GDP per capita averaged $4,000 in 1999. Social indicators have also improved significantly. Nevertheless, rural poverty and regional development remain key issues. Out of 18,000 Polish standards in 1999, about 75% complied with EU standards; 15% with international standards that have not been adopted by the EU; and 10% were Polish. Poland`s objective is to harmonise at least 80% of standards with EU standards by 2002 and to adopt EU requirements different from international standards. Foreign trade is key to the transformation of the Polish economy, the report says.

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