2020-11-19
FOR Communication 37/2020: Single Market and the rule of law more important for Poland’s development than the EU funds
Summary:
- Poland's membership in the European Union means not only the EU funds, but above all access to the Single Market, whose four freedoms (movement of goods, services, capital and people), competition policy and the prohibition of state subsidies, common product standards or mutual recognition in case of their absence are safeguarded by the EU Court of Justice. The primacy of EU law over national law ensures uniform application of rules throughout the Single Market.
- Poland's benefits from access to the Single Market are five times higher than from subsidies from the EU budget. In 2019 we received net transfers of EUR 11 billion from the EU budget. But, thanks to access to the European Single Market, Poland’s GDP was 56 billion euros higher. A larger market allows for a wider range of specialization and, consequently, higher productivity, which translates into higher wages and living standards.
- For foreign companies operating in Poland, our greatest asset is membership in the EU, subjecting us to common and predictable European rules and principles, which also include the rule of law. After the COVID-19 pandemic, international corporations can be expected to move their production closer to the target markets (nearshoring). However, in order for Poland to benefit from these changes, it is necessary to create transparent business conditions for investors to choose Polish market.
- Above all defending the rule of law is in the interest of Polish entrepreneurs. While foreign investors can count on the support of their governments, which was visible recently when the American Ambassador intervened in the case of US companies, for Polish companies the only protection against the government's arbitrariness remains the independence of courts. As a result, between 2015 and 2018, with the attack on the rule of law and crackdown on tax evasion by means of unclear new rules and high penalties, investments by Polish companies dropped by 4% and investments by foreign companies increased by 22%.
- In the long run, what matters for Poland’s development is to push for completing and strengthening the Single Market for services, including digital services and transport. The lowest level of private capital in the EU makes it difficult for Polish companies to compete in industry, but the average performance in terms of human capital, i.e. education and health of employees, shows a high potential in services. International Monetary Fund also estimates that we have an advantage in exporting professional and technical services, which require further liberalization in Europe. In their case, adherence to transparent rules may, due to the greater complexity of disputes concerning intangible goods, be even more important than for commodities.
The publication is supported by the Friedrich Naumann Foundation for Freedom. The Friedrich Naumann Foundation for Freedom is not responsible for the content of this publication, or for any use that may be made of it. The views expressed herein are those of the author(s) alone. These views do not necessarily reflect those of the Friedrich Naumann Foundation for Freedom.
Author:
Rafał Trzeciakowski, FOR economist
rafal.trzeciakowski@for.org.pl
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