Historical background of the agreement

Poland has firmly pursued a policy of liberalizing the economy and today becomes one of the most successful and open transitional economies. The Polish government launched the dramatic economic reforms in 1990. The "shock therapy" economic reform program included price liberalization, currency stabilization, and the elimination of most subsidies. To match the reforms, the Polish authority attempted to strengthen economic cooperation with European countries, including EFTA states.

It is the EFTA objective to contribute to the reconstruction of the former command economies and support their transition towards a market based economy and democracy with the overall aim of consolidating prosperity and stability throughout the continent. As a result, EFTA established an extensive network of contractual relations in Central and Eastern Europe in 1990s. Poland, a country undergoing economic transition, is one of the EFTA target countries to build up economic relations.

On the other hand, Poland is an important trading partner for the EFTA States in Central and Eastern Europe and an important market for its exports, with significant growth potential. It is expected to receive great benefits for both parties by strengthening cooperation.

Both parties signed declarations on cooperation in Gothenburg in June 1990 and opened free trade negotiations a few months later. They reached consensus and signed the free trade agreement on 10 December 1992.

Indeed, Poland is one of the countries of transitional economies in Central and Eastern Europe signing free trade agreement with EFTA.

Objectives of the agreement

(a) To develop economic relations between two parties via the expansion of reciprocal trade, so as to pursue the improvement of macroeconomic performance such as living and employment conditions;

(b) To provide fair conditions of competition for trade between two parties;

(c) To contribute to the development and expansion of world trade by removing trade barriers

A brief description of the agreement

The agreement consists of a total of 40 articles, 1 record of understandings, 9 annexes, 4 protocols, and 1 declaration.

The EFTA states and Poland, considering the need of Poland to ensure the accelerated development of its economy, agreed to build up a free trade area during a transitional period ending on 31 December 2001 in accordance with the provisions of the agreement.

The agreement covers industrial products as well as fish and marine products. Trade in agricultural products is covered in bilateral agricultural agreements negotiated between the respective EFTA states and Poland. According to Article 13, both parties expressed willingness to foster harmonious development of trade in agricultural products, taking into account its high importance for Poland's economy.

The treaty provides for some favourable treatment to Poland in the elimination of customs duties and quantitative restrictions between two parties. EFTA states should remove customs duties and quantitative restrictions on imports originating in Poland on the date of entry into force of the agreement, except for products specified in Annex III and Annex VII. On the other hand, Poland is allowed to abolish custom duties progressively on products originating from EFTA states in 5 equal annual steps starting on 1 January 1995, except for products specified in Annex IV and Annex V.

As the agreement came into force, EFTA countries abolished customs duty on imports of some 80% of Polish industrial products, whilst Poland eliminated it for 27% of products from EFTA countries. Customs duty on other goods was reduced gradually: in the case of Poland by the end of 1999 (with the exception of cars, for which the process was extended to 2001), whereas the EFTA countries reduced their customs duties by the end of 1997.

The rules of origin and methods of administrative co-operation can be found on protocol B of the pact.

Apart from the elimination of custom duties, the pact covers a wide range of areas regarding trade disciplines such as rules of competition, protection of intellectual property, public procurement, state monopolies, state aid, dumping and payments and transfers.

With respect to state aid, the contracting parties should abandon any aids granted by the public authorities to private entities which threaten to distort competition by favouring certain enterprises or the production of certain goods. Poland, however, may grant aid with a higher intensity until 31 December 1996, in accordance with the criteria set out in Annex XIII, with a view to promote its economic reform and development.

The pact allows an EFTA state or Poland to impose trade restrictive measures when the country is under serious balance of payment (BOP) difficulties. The adoption of the measures should be in compliance of the conditions under the General Agreement on Tariffs and Trade (now WTO). When the BOP conditions improve, the restrictions should be gradually removed.

General exceptions

This agreement shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of

(a) Public morality, public policy or public security;

(b) The protection of health and life of humans, animals or plants and the environment;

(c) The protection of national treasures processing artistic, historic archaeological value;

(d) The protection of intellectual property;

(e) Rules relating to gold or silver

Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between EFTA countries and Poland.

Economic relationship between EFTA countries and Poland

Poland plays an important role on the EFTA’s trade in Central and Eastern Europe. In particular, Poland is the major export market for EFTA countries.

In 2001, the trade turnover between EFTA states and Poland amounted to U.S.$ 2,077 million. (EFTA states’ exports to Poland amounted to U.S.$ 1,182.7million, whereas Poland's exports to the EFTA states represented U.S.$ 894.3 million). Persistent deficits have been recorded in Polish trade with EFTA countries.

The EFTA’s share in Polish foreign trade is rather small, slightly surpassing 2% in recent years. Indeed, EU countries, say Germany, France, Italy and Great Britain, accounted for over 50% of Polish foreign trade in 2001. Former USSR countries are the other Polish major trading partners.

The main Polish trading partners within the EFTA group are Switzerland and Norway. They accounted for 77% of exports and 97% of imports. Iceland and Liechtenstein, the other member counties of EFTA, hold an insignificant position in Polish foreign trade.

The electromechanical products dominated the EFTA-Poland trade in the year 2000 — 46.9% of Polish export and 37.5% of import. Base metals, furniture and lighting articles and chemical industry products articles are the main Polish commodities exported to EFTA countries. Products of the chemical industry, especially drugs and rubber products, were also the major items of Polish imports from EFTA states; together with food and agricultural products, especially fish and processed fish from Norway and Iceland.

Although Poland suffered trade deficits with EFTA states, its trade with Iceland recorded surplus instead, amounting to U.S.$ 73.5 million and U.S.$ 9.6 million respectively in 2001 and 2000. Switzerland and Norway, on the other hand, earned trade surpluses with Poland. In 2001, Polish trade deficits with Switzerland and Norway amounted to U.S.$ 374.3 million and U.S. $ 83.9 million respectively, whilst the deficits with EFTA states totaled U.S.$ 288.4 million in that year.

Switzerland and Norway play an important role on foreign investments in Poland. They invested totally U.S.$ 1,249.2 million in 2000. Switzerland and Norway ranked no. 13 and no. 17 in Polish foreign investment respectively in the same year.

In the period 1992 – 2000, the trade turnover between Poland and EFTA states was reduced two times. This led to a reduction of deficit in Poland. The decline are due mainly to the reduction of the number of member countries of EFTA.