Poland WT/TPR/S/71
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IV. TRADE POLICIES BY SECTOR
(1) OVERVIEW
1. Since the economic transformation of the Polish economy began, in the late 1980s, the overall
structure of production and employment has changed substantially, away from agriculture, mining and
manufacturing, towards services.  Services accounted for about 75% of GDP in 1998, compared with
70% in 1995.  The share of agricultural production in GDP fell from 6% to 4% over the same period.
2. The pace and depth of reform has varied substantially across sectors.  Reform of certain
manufacturing industries, such as coal, chemicals, and steel, are less advanced.  Moreover, trade and
other economic reforms in agriculture would seem to have slipped during part of the 1990s, and
increasing levels of assistance, averaging a PSE of 25% in 1999, are approaching pre-transformation
levels.  Agricultural assistance levels are likely to  increase further following EU accession.  The Euro-
centred stance of Poland’s trade and sectoral policies is also highlighted by its efforts to harmonize
manufacturing and services policies with EU norms and to meet accession requirements.
3. Some sectors, such as certain food processing industries and motor vehicles, continue to
receive relatively high assistance from tariffs and other arrangements, including state aid and other
trade contingency protection, such as anti-dumping measures.
4. Privatization and foreign participation remain ke y objectives of Poland’s reform policies. The
private sector now accounts for three quarters of output and value added, compared with just over half
in 1995.  Without market disciplines, many segments of Polish industry had become heavily
fragmented and dependent on loss-making state-owned enterprises.  Renewed privatization efforts
since 1998 in major sectors of manufacturing and services, such as banking, telecommunications and
insurance, are positive signs.  Nevertheless, completing the Government’s privatization targets by
2001 will be a major challenge.
(2) AGRICULTURAL AND OTHER PRIMARY PRODUCTS
5. The share of agriculture (including hunting and forestry) in GDP declined substantially during
the 1990s, from 11.8% in 1988 to 4.2% in 1998 (6% in 1995).  Just over a quarter of the labour force
is employed in agriculture.  Some 30% of the popula tion are involved in farming, which provides the
main source of income for 11% of Poland’s inhabitants.  Two thirds of its people live in rural areas.
6. Commercial agriculture accounts for around 60% of agricultural output.  Farms vary in size,
from less than one hectare to over 1,000 hectares, but are mainly small, averaging some seven
hectares.  Well over half of Poland’s farms are below 15 hectares.  Private ownership of farmland,
which was always high, increased further from 80% in 1990 to 92% in 1998 (including leased land),
largely due to the activities of the Agricultural Property Agency of the State Treasury.1  S t r i c t
restrictions apply to foreign ownership of agricultural land.2  Agricultural investment is relatively low,
and farms tend to be poorly mechanized.  Many farms are located on infertile soils.3
                                                     
1 The Agency acquired 4.6 million hectares of land in 1991, mainly from liquidated state-owned farms.
Some 0.6 million hectares remains to be allocated.  Of the land already disposed, only about 20% was sold;
most has been leased.
2 Foreign purchases of farmland exceeding one hectar e are restricted: a permit is required from the
Ministry of Agriculture and Rural Development.  In July 1999, Poland requested from the EU an 18-yeartransitional waiver to maintain such restrictions following EU accession.
3 High quality soils cover only 3% of land area, while soils of low fertility cover about one third.WT/TPR/S/71 Trade Policy Review
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7. Mixed farming predominates, although limited specialization is occurring among the larger
farms.  About 70% of land is under crops.  Crops currently represent about two thirds of farm output,
by value, with livestock production having been more affected by the transformation process.4  The
main products, by value, are cereals especially wheat, rye, and maize; pigs; milk; potatoes; eggs and
poultry; vegetables; fruit; and beef.  Poland is a major European meat producer.
8. Foodstuffs accounted for 13% of total exports and 9% of total imports in 1997.  Exports have
tended to become more processed, and comprise mainly beef, processed meats, milk powder, sugar,
confectionery, and fresh and processed fruit and vegetables.  In 1997, the Russian Federation became
the main export market for food products, surpassing  the EU.  However, due mainly to the collapse in
exports to Russia in 1998, especially affecting sugar and confectionery, chocolate products, meat
products, including sausages, and powdered milk, the EU regained its position as Poland’s leadingexport market for foodstuffs, accounting for 43% of exports in 1998, compared with 37% for Russia.
Nevertheless, the relative importance of the EU market for Polish foodstuffs has declined during the
1990s, its share falling from 60% in 1989.
9. Imports of foodstuffs mainly consist of coffee, soybean oil-cakes, unprocessed tobacco, citrus
fruit, bananas, fish products, and animal feeding products.  Between 1996 and 1998, the share of foodimports from sources other than EU, CEFTA and EFTA members fell from 43% to 40%.
(i) Policy and assistance trends
(a) Policy developments
10. Polish agricultural and trade-related policies are almost exclusively directed towards
European harmonization necessary for achieving EU accession.  The main policy document for
agriculture is the Government’s Medium-term Strategy for Agriculture and Rural Areas Development,
adopted by Parliament in April 1998.  The implementation of these policies and objectives werefurther developed by the Ministry of Agriculture in its Coherent Structural Policy for Rural Areas and
Agricultural Development, released in September 1998.  Agricultural policy is seen as the principal
means of fostering rural development, particularly in the poorer regions, which was listed in 1994 as
one of the ten key objectives in the Government’s "Strategy for Poland".  The main policy objectives
for agriculture are to improve farm incomes; enhance agricultural competitiveness; promote betterliving and working conditions in rural areas; and to prepare for Poland’s integration with the EU.
5
Particular emphasis is placed on implementation of the EU’s Common Agriculture Policy (CAP) andStructural and Regional Policy, including adaptation and expansion of the role and operations of the
Agricultural Market Agency (AMA) to comply with the EU requirements for administering the CAP.
11. Although the final terms for integration of Poli sh agriculture into the EU are still being
negotiated, Poland believes that upon accession its farmers should be entitled to receive the same
budgetary and market support as existing EU Members.
6  Any transitional period could imply, in its
view, "second class" membership of the EU.  Acco rding to the Polish Government, EU membership
with full CAP integration would be nefit the country’s agriculture.  It would increase financial support
                                                     
4 Many state farms moved out of livestock into crops, and meat consumption fell particularly following
the elimination of consumption subsidies along with declining incomes.
5 Rural development and implementation of agricultural policies to conform with EU requirements is
being assisted by the EU under the Special Assistance Programme for Agriculture and Rural Development,which is scheduled to run until 2006.
6 EU officials have suggested publicly that this may not be possible given the enormous budgetary
costs of fully extending the CAP arrangements to new Members.Poland WT/TPR/S/71
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for agricultural and rural development; improve market access to EU Member States;  and raise farm
incomes due to the EU’s higher agricultural product prices and direct payments to farmers.
12. Farmers continue to benefit from income tax exemptions, unless growing specialized crops,
such as mushrooms and vegetables.  Farmers are instead levied a land tax, which is equivalent to the
price of 250 kg. of rye per hectare.  Reform of agricultural taxation is currently under consideration.
13. An important feature of Poland’s agricultural policy has been the imposition of tariff quotas
across a wide range of foodstuffs (Chapter III (2)(vi)).   It maintains bilateral tariff quotas with the EU
and other trading partners under its regional trading agreements.  Poland also maintains multilaterally
applied global tariff quotas as part of its WTO commitments on agriculture.  Such quotas were
intended to ensure that Poland provided minimum market access levels while tariffying non-tariff
measures at high levels.  Products to be subject to tariff quotas, together with volume levels, werenotified in 1996 to the WTO by Poland in its list of concessions.  Quota levels for many products have
not been filled; utilization rates for most of them are very low.
7
(b) Assistance levels
14. Self-sufficiency in major foodstuffs has been the underlying objective of Poland’s agricultural
trade policies.  Although Poland has achieved a high degree of self-sufficiency in major agricultural
products, with the main exception of oilseeds, such policies increasingly relied on government
assistance during the 1990s.  While Poland’s period of economic transformation saw early trade
liberalization and other agricultural policy reforms, with support initially falling to very low levels,
policies have since become more protectionist in response to domestic competitive pressures.  From
1991-93 to 1997-99, average agricultural assistance almost doubled, from 12% to 23%, as measured
by the OECD's Producer Support Estimate (PSE) (C hart IV.1).  Poland’s PSE of 25% in 1999 was
approaching pre-transformation (1986-88) levels of  29% (OECD 2000).  Poland was one of only two
OECD members to have increased agricultural assistance over this period.8  Promoting food self-
sufficiency based on rising protection may undermine Poland’s economic efficiency and prevent the
economy from realizing the full benefits from trade liberalization.
                                                     
7 In some cases, there were no in-quota imports during 1998 and 1999 (WTO documents
G/AG/N/POL/30 and 32, 2 March 2000).
8 OECD (1999).WT/TPR/S/71 Trade Policy Review
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0.40.60.81.01.21.41.6
1986-88 1991-93 1997-99 1994 1995 1996 1997 1998 1999-30.0-20.0-10.00.010.020.030.0Chart IV.1
Agricultural support, 1986-99
Per cent
Producer NAC 
(left-hand scale)Consumer NAC 
(left-hand scale)
 CSE (right-hand scale) PSE (right-hand scale)
Note:
a
Source : The percentage Producer Support Estimate (PSE) measures the annual monetary value of gross transfers from 
consumers and taxpayers to agricultural producers, resulting from policies that support agriculture, regardless 
of their nature or objectives, expressed as a proportion of the value of gross farm receipts valued at farm-gateprices, including budgetary support.The percentage Consumer Support Estimate (CSE) measures the annual value of gross transfers between consumers of agricultural commodities and producers, arising from policies that support agriculture, regardless of their nature or objectives, expressed as a proportion of the amount of consumption expenditure valued at farm-gate prices, including any budgetary support to consumers.  A negative measure indicates that the transfers have been from consumers to producers.The Producer Nominal Assistance Coefficient (NAC) is the ratio of the monetary value of the PSE to the value of gross farm receipts valued at world market prices, without budgetary support.  It therefore is an indication of
the extent to which agricultural producers’ gross returns have been increased by measures of support.  For 
example, a Producer NAC of 1.40 indicates that the support measures have increased farmers’ gross returns by 40%.The Consumer Nominal Assistance Coefficient (NAC) is the ratio of the monetary value of the CSE to the value of consumption expenditure valued at world market prices, without budgetary support to consumers.  For example, a Consumer NAC of 1.40 indicates that domestic prices paid by consumers were 40% above world levels.Provisional
OECD (1997, 1998 and 1999),  Agricultural Policies in OECD Countries: Monitoring and Evaluation, Paris .a
15. Agricultural support continues to be a high policy priority in Poland and protection levels
have continued to increase in recent years. 9  In 1999, the rise in PSE from 24% to 25% was due
mainly to increased budgetary payments for extension services and other agricultural services, and a
new deficiency payment scheme on wheat, which cost Zl 274 million.  The total value of assistance to
farmers in 1999 was Zl 14.4 billion, equivalent to 2.4% of GDP.  This increased farmers’ gross
                                                     
9 According to the Ministry of Agriculture, it "… becomes inevitable to implement a system of
quotation of production and compensating subsidies added to the market prices, in cases when these prices are
too low.  This action is of particular importance in case of regulation of [the] grain market, which is interrelatedwith many other markets for agricultural products."  Moreover, while Poland meets its international agreementslike the WTO, it "must not forget protection of [its] own markets against excess imports, which endangersdomestic producers."  (Ministry of Agriculture and Food Economy, 1999).Poland WT/TPR/S/71
Page 77
returns by 34% above what they would have been with no assistance.  There is a range of measures
that assist farmers, including tariffs, price support, supply control measures, credit and other input
subsidies, as well as direct outlays, including export subsidies and deficiency payments (Chart IV.2).
Market price 
support
75.7Output payments
2.1
Input payments
13.2
General service 
support measures
9.0Research and development 1.4
2.1
2.1
1.4
1.4
0.7Agricultural schools
Inspection servicesInfrastructure
Marketing and promotion
Public stockholdingChart IV.2
Components of agricultural assistance, 1999a
Preliminary figures.
OECD (2000 ), Economic Survey of Poland 1999, Paris.Per cent
Total agricultural assistance: Zl 14.4 billion
a
Source : C
16. Most of this assistance is provided by Polish consumers paying higher food prices as a result
of mainly market price support schemes.  In 1999, consumers transferred additional income to
producers of Zl 10.6 billion, equivalent to some three quarters of total assistance afforded Polish
farmers.  Additional assistance, equivalent to a net budgetary transfer of Zl 3.9 billion, was funded by
taxpayers.  Domestic consumers of foodstuffs were implicitly taxed by these arrangements by having
to pay prices that were, on average, 27% above world levels in 1999, up from 25% in 1998 (seeconsumer NAC estimates in Chart IV.1).  The Agricultural Market Agency (AMA) intervenes in the
markets to support administered minimum prices for mainly wheat, rye, and milk, but also at times for
meat, sugar, potato starch, honey, hops, and wool.
17. Commodities receiving the highest levels of support in 1999 were pigmeat, eggs, sugar,
poultry, other cereals (excluding maize), oilseeds, and wheat (Chart IV.3).  Polish prices exceeded
world levels in 1999 by, on average, almost double for eggs; 76% for sugar; 66% for pigmeat; 39%
for poultry; 25% for oilseeds; 10% for milk; 21% for sheepmeat; and 18% for wheat.WT/TPR/S/71 Trade Policy Review
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-10010203040506070
-4.0-3.0-2.0-1.00.01.02.03.04.0Producer Support Estimate (left scale)
Producer Nominal Assistant Coefficient (right scale)1986-88
1997
1998
1999Chart IV.3
Agricultural support, by commodity, 1986-99
Source : OECD (2000 ), Economic Surve y of Poland 1999, Paris.Per cent
18. Rising protection levels for agriculture, which have benefited Polish farmers at the expense of
consumers, undermine the international competitiveness of the country’s food processing industry.10
Poland has, at least partly, justified recent increase in assistance as necessary to counter rising importsof subsidized foodstuffs from the EU.
11  Although Poland will not have to contend with subsidized
EU exports following accession, its agricultural sect or will be subject to greater competition from EU
producers.  Polish farmers have largely been sheltered from EU competition because of the
asymmetrical treatment of agricultural liberalization under the Europe Agreement.  On the other hand,
following EU accession, Poland’s agricultural produ ction may be eligible for increased EU export
subsidies. This could transfer the burden onto third-country markets and world exporters through the
depressed effects of such policies on world commodity prices.12
19. The extent to which EU accession may increase Poland’s agricultural protection, which is
already rising in line with increasing harmonization of its agricultural policies with those of the EU,
may be substantial.13  OECD measures of agricultural support show that EU levels are well above
                                                     
10 These measures also reduce economic efficiency by attracting resources into agriculture that would
otherwise be more productively used in other sectors, including manufacturing and services.
11 For example, substantial tariff rises on butter, pork, and sugar in late 1999 were reportedly instigated
as a result of increased competitive pressures indu ced by rising subsidized EU exports to Poland.
12 The extent of these effects will depend upon the size of Poland’s production surpluses generated
from increased agricultural assistance following EU accession.  Given the high levels of self-sufficiency in key
commodities already achieved in Poland, the surpluses are likely to be significant, thereby adding substantiallyto the EU’s surpluses in many key commodities.
13 According to the EC, agricultural support in the EU has been "more stable and higher" than in
Poland (EC, 1998).Poland WT/TPR/S/71
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Polish levels (Chart IV.4).  In 1998, for example, the average percentage PSE for the EU was almost
twice that of Poland, and the producer NAC was 41% higher.  EU assistance is substantially higher
for many of Poland’s main foodstuffs, especially beef; cereals, including wheat; milk; and oilseeds.
Polish support levels were substantially higher than the EU's mainly on eggs, poultry and pigmeat.
Increasing agricultural protection may be detrimental to the Polish economy, especially since
protection levels to other sectors, including manufacturing, are likely to continue falling.  Wideningsectoral disparities of protection induce potential economic costs.  Increased MFN protection for
agricultural products following EU accession may al so have the potential to divert Poland’s imports
of foodstuffs away from general sources, which in 1998 accounted for just over half of Poland’s food
imports (including Russia).
-1000100200300400500Chart IV.4
Levels of agricultural assistance relative to the EU, by commodity, 1998
Per cent a
a
Source:Percentage by which EU levels exceed Polish levels. A positive number indicates that the EU level 
exceeds the Polish level.
OECD (2000 ), Economic Surve y of Poland 1999, Paris.6,100%Producer Support Estimate
Producer NAC
(ii) Sectoral policies and trade developments14
20. The main animals raised in Poland are pigs, poultry and beef cattle.  In 1998, 1.4 million
tonnes of pigs were slaughtered, 0.6 million t onnes of poultry, and 0.5 million tonnes of cattle.
Animal production in 1998 was valued at US$7.5 billion.
21. Crop production in 1998 was valued at US$8.2 billion.  Cereals, especially wheat, rye, barley,
triticale, oats, and maize, are the main crops grown in Poland.  Total cereal production in 1998 was
almost 19 million tonnes, of whic h over 40% was wheat and almost 30% was rye.  Poland is also a
significant producer of potatoes (above 20 million tonnes annually), beet sugar (around 16 million
                                                     
14 An important source of information for this section is EC (1998).WT/TPR/S/71 Trade Policy Review
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tonnes annually), oilseeds, mainly rape (0.6 million tonnes); fruit (2.8 million tonnes); and vegetables
(5.1 million tonnes).
22. MFN tariffs on agricultural imports averaged 17% in 1999, with rates ranging from zero to
56% (Table AIV.1).  However, these averages are likely to significantly under-estimate the level of
tariff protection because they exclude specific duties due to the non-availability of their ad valorem
equivalents.15  Some 13% of agricultural tariff lines had specific duties in 1999.16
(a) Livestock (ISIC 111)
23. Meat exports, except for a subsidy on pig carcasses in 1999, have not been directly
subsidized.  Poland, however, has room to extend such subsidies to meat and meat products within its
WTO commitments on agriculture.  In 1998, Poland’s bound levels on export subsidies for these
products was US$158.3 million.
Pigs
24. Pig production in 1998 was valued at Zl 10.1 billion, and Poland is a major European
producer of pigmeat.  However, farms are small (average herd size of 16 animals) and production is
erratic.  Droughts in 1992 and 1994 adversely affect ed pig production, as did high feed-grain prices in
1996-97.  Poland is self-sufficient in pigmeat, and exports mainly carcasses and processed pigmeatprimarily to the Russian Federation.
25. Pig prices declined during 1999 due mainly to the collapse of the Russian export market.
This resulted in the AMA establishing and supporting minimum administered prices  through market
intervention.  In 1999, the AMA purchased 120,000 tonnes of pig carcasses to support the minimum
procurement price introduced for live pigs of Zl 320 per tonne.
17  To dispose of stocks, the AMA
exported 128,000 tonnes of pigmeat in 1999 at prices substantially below domestic levels.  Pigmeat
producers also benefited in 1999 from the suspension of preferential tariff rates from CEFTAcountries, and later by the increase in MFN tariffs from 25% to the WTO bound level of 83.3%.
Pigmeat is also monitored for safeguard action, and from October to December 1998 an additional
levy of 20% was imposed as imports exceeded the threshold level of 39,000 tonnes.  Price-based
safeguard measures also commenced in June 1999 on a wide range of imported fresh, chilled or
frozen pigmeat.
26. Tariff quotas of 42,770 tonnes in 1999 applied to imported fresh, chilled or frozen pigmeat.
The in-quota tariff in 1999 was 20.8% (reduced from 30% in 1995) and the above-quota rate was an
alternate duty of 83.3% or if lower ECU 0.98 per kg. net.  In 1999, 69% of the quota level was
utilized.
27. Imports of live pigs were subject to tariffs ranging from 20% to 35% in 1999.  Poland
scheduled a tariff quota on imports of live pigs in its WTO Schedule LXV; however this quota has not
operated.
                                                     
15 For composite and alternate duties, only the ad valorem  component was used.
16 Alternate tariffs take two forms:  for example, the rate "83.3% max ECU 0.98 per kg. net" means a
duty of 83.3% if it is lower than ECU 0.98 per kg. net.;  "60% min ECU 0.6 per kg. net" means a duty of 60% ifit is higher than ECU 0.6 per kg. net.
17 The AMA has actively intervened in the pig market since 1993.  The AMA purchases pig carcasses
from suppliers that pay farmers at least the minimum prices set for live pigs.Poland WT/TPR/S/71
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Poultry and eggs
28. Poultry and egg production declined sharply in the early 1990s.  However, the industry has
rebounded following substantial investment, and privatization of the poultry and feed industries.
Poland is self-sufficient in poultry and eggs.  In 1998, poultry meat production was valued at
Zl 1.8 billion.
29. Producers of poultry meat benefited from the suspension of preferential tariffs on imports
from CEFTA countries in early 1999.  Poultry meat and egg imports are monitored for special
safeguard action.  Price-based safeguard action co mmenced in June 1999 on fresh, chilled or frozen
imports of poultry meat and edible offal.
30. Certain live poultry were subject to a tariff quota of 5 million pieces in 1999.  The above-
quota rate was an alternate duty of 80% or if lo wer ECU 0.21 per unit.  In 1999, 58% of the quota was
utilized.  Other live poultry not subject to the tariff quota were importable at tariffs of either 10%,
20% or 50%.  Fresh, chilled or frozen poultry meat, including offal, was also subject to a tariff quota
of 43,512 tonnes in 1999.18  The above-quota rate was 60% or if higher ECU 0.6 per kg. net; 30% of
the quota was utilized.
31. Tariff quotas apply to imports of eggs and egg derivatives.  In 1999, above-quota rates were
either 25% or if higher ECU 0.03  per unit, or 97.5% or if higher ECU 0.56 per kg. net.  In 1999, quota
levels totaled 116.3 tonnes, of which 27% was utilized.  No imports were recorded in 1999 under
three of the four tariff quotas applied to eggs.
Beef
32. Beef is produced in Poland mainly as a by-product to milk production.  In line with the
declining dairy industry, beef production fell substantially in the 1990s.  Declining levels of beef
consumption, by about half, have also contributed to this performance.  Poland is self-sufficient inbeef production.
33. A long-term programme began in 1994 to develop specialized beef production based on
crossing local breeds with imported breeds.  The plan was to improve national herd quality by raising
numbers to 5,000 pure breed cattle and 1 million crossbreed animals.  Farmers and breeders receive
breeding subsidies and preferential credit to assist them in these activities.
34. The AMA periodically intervenes in the beef market to stabilize prices.  It 1997, for example,
it purchased some 6% of beef supplies by buying carcasses from abattoirs at a price of Zl 5.0 per kg.
provided farmers were paid at least Zl 2.90 per kg.
35. Imported live cattle is not subject to tariff quota, although Poland indicated in its WTO
commitments that such quotas would apply.  Imports are dutiable at a tariff rate of mainly 13.3% plusECU 1.02 per kg. net.  Imported fresh, chilled and frozen beef are subject to tariff quotas.  On frozen
beef, the quota level in 1999 was 16,148 tonnes.  The quota on fresh or chilled beef was 5,200 tonnes.
The above-quota rate for both quotas was 20.8% plus ECU 3.32 per kg. net.  In 1999, none of the
fresh or chilled quota was utilized, while less than 1% of the frozen quota was used.
                                                     
18 A separate tariff quota applies to imported poultry stomachs.  In 1999, the above-quota duty was
20.8%.  In 1999, the quota level was 308 tonnes, of which only 2% was utilized.WT/TPR/S/71 Trade Policy Review
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Dairy products
36. Dairy production is important in Poland, although milk production declined substantially
during the 1990s, and has only recently shown signs of recovery.  About half of production is
consumed as liquid milk.  Poland is self-sufficient in milk and dairy products.
37. Annual milk production is currently around 12.5 billion litres, and was valued at Zl 8.1 billion
in 1998.  Poland’s dairy industry comprises many small farms with herd sizes of below ten cattle.The Government’s Programme of Restructuring the Da iry Sector is aimed at rationalizing the industry
to remove smaller inefficient farmers from commercial milk production.  In an attempt to improve the
quality of milk production, new quality standards, introduced in January 2000, eliminated third-
quality milk from commercial production.  The Dairy Programme is aimed at reducing the number of
specialized dairy farms to 275,000 by 2010.  Farms with more than five cows and annual productionof below 18,000 litres receive preferential credit to help finance farm restructuring and modernization.
38. From 1992, price stabilization measures have operated for dairy products; they set minimum
milk prices and intervention prices for butter and skim-milk powder (SMP).  Minimum milk prices
are established by the AMA from May to April.  These increased by 8% from Zl 0.61 per litre in 1998
to Zl 0.66 per litre in 1999.  To support these prices, the AMA intervened in the market to purchase4,000 tonnes of butter.
19  Although no powdered milk was purchased, export subsidies were
introduced in 1999 for skim-milk powder.  Some 46,000 tonnes of SMP was exported, at an average
subsidy ranging from Zl 1,220 to Zl 1,760 per tonne.
39. Import tariffs on flavoured yoghurt were increased in 1999 from 9% to 35%, but later lowered
to 29%.  In late 1999, MFN tariffs on butter were increased from 40% to Poland’s WTO bound level
of 111.7%.  Butter and other dairy products are subject to import monitoring under special safeguard
procedures, although no such measures have yet been applied.  Exports of dairy products have notbeen directly subsidized.  However, Poland may apply export subsidies on casein and powdered milk
to a value of US$16.3 million (for 1998).
40. Imports of concentrated milk and cream products are subject to tariff quotas, totalling
4,620 tonnes in 1999.  The above-quota rate was mainly 70% or 80%.  In 1999, 7% of the quota was
utilized.  Imports of non-concentrated milk products were dutiable at a tariff of 40% in 1999.
41. Various tariff quotas were applied on butter and other milk fats in 1999, totalling 15,100
tonnes.  Quota usage in 1999 was 9%, and no imports occurred in six out of the ten quota categories.
Butter imports were dutiable at an above-quota rate of 40%.  The tariff quota scheduled in the WTO
(Schedule LXV) on cheese imports has not operated.  Cheese was dutiable at a tariff rate of 35% in
1999.
                                                     
19 The AMA purchases butter and SMP at the intervention prices from only dairies that pay the
minimum milk price to farmers for first-class milk with 3.5% fat content.  The AMA tenders out to private firms
the intervention transactions, including storage.Poland WT/TPR/S/71
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(b) Crops (ISIC 111)
Cereals
42. Cereal production was valued at almost Zl 9 billion in 1998.  Of this, well over half was
wheat; the other main cereals grown were rye, oats, barley, triticale, and maize.  About a quarter of
cereal production is used domestically by millers and breweries; the rest is used as animal feed mainly
for pigs and poultry.  Poland is about 90% self-sufficient in cereals, with the exception of maize.
43. The AMA continued to buy wheat and rye in 1999.  Some 2.7 million tonnes of wheat (one
third of production) and 0.5 million tonnes of rye, equivalent to 10% of production, were purchased in
1999.  Minimum support prices, increased by over 10% in 1998, were reduced in 1999 by around
11%, from Zl 510 per tonne to Zl 450 per tonne for wheat, and from Zl 360 per tonne to Zl 320 per
tonne for rye.  Reduced assistance from market support was, however, partly compensated for by theintroduction of deficiency payments, costing Zl 274 million in 1999.  Payments varied over time to
encourage private storage, from Zl 60 to Zl 90 per tonne for wheat and from Zl 40 to Zl 70 per tonne
for rye, paid to farmers for grain delivered to AMA contractors.
44. Since 1998, the intervention scheme for wheat has been based on the AMA tendering out the
storage and purchase of wheat and rye at not lower than the minimum support prices.
20  A M A
payments for these purchases, including storage, amounted Zl 120 million in 1998.
45. In early 1999, the preferential tariff on imported wheat from CEFTA members was
suspended, and later increased from 3% to Poland’s WTO bound level of 27.5%.  Previously, in
January 1998, preferential duty-free imports from Hungary were temporarily suspended and made
subject to a tariff quota of 1,300 tonnes with an above-quota duty of 20%.  Additional import levies
were also imposed on wheat in 1998 as a special safeguard action based on a trigger threshold price of
Zl 569 per tonne.  Price-based safeguard action also commenced from November 1999 on importeddurum and other types of wheat.
46. A tariff quota of 388,000 tonnes applied to imports of wheat and meslin in 1999.  Quota usage
in 1999 was 13%.  Tariffs on cereals were at 20% in 1999, except for maize (mainly dutiable at 10%
but also at 14% plus ECU 0.11 per kg. net); rice (10%); sorghum (8.3%); and other cereals, including
triticale (14% plus ECU 0.1 per kg. net).
47. In 1996, temporary export prohibitions were applied to wheat and meslin, rye, barley, and
oats due to domestic shortages.
Sugar
48. In 1999, sugar production in Poland, based on beet, was valued at Zl 1.6 billion.  Poland is
self-sufficient in sugar.  Production and marketing is regulated by the 1994 Act on Sugar Market andOwnership for the Transformation of the Sugar Industry.
49. The administered minimum price set by the AMA on sugar was unchanged in 1999, at
Zl 1,710 per tonne, following a 14% increase in 1998.
21  Production quotas are also set annually to
                                                     
20 Under the previous system, the AMA intervened by directly purchasing and storing cereals as well as
providing preferential cred it and loan guarantees to enable purchases by authorized warehouses.  By
October 1997, the value of these credit guarantees amounted to Zl 101.4 million.  The AMA also provided loanguarantees to businesses for purchasing and storing grain.  Although the level of intervention purchases variesover time, in some years it can be as high as 20% of production.WT/TPR/S/71 Trade Policy Review
Page 84
control supply:  the A quota covering domestic sales of sugar was lowered from 1.65 to 1.63 million
tonnes, while the B quota, covering subsidized exports, remained at 109,100 tonnes.22  These quotas
are to be reduced by 7% and 4%, respectively, in 2000.  Sugar producers may sell their quota
entitlements provided the Ministry of Agriculture is informed.  The Ministry is obligated to transfer
any unfilled quota to other producers exceeding their quota.  The AMA, with the approval of the
Minister of Agriculture, may purchase non-A sugar to supplement state reserves, and can sell suchsupplies domestically without penalty.
23
50. The sugar industry has benefited from increased tariff protection in recent years.  In 1999,
tariffs on imported sugar were raised from ECU 170 per tonne to Poland’s WTO bound rate of
ECU 450 per tonne.  Before then, the preferential tariff on imports from the Czech Republic had been
increased from 40% to an alternate duty of 40% or  if higher ECU 170 per tonne.  Special price-based
safeguard provisions also applied in December 1997 to sugar imported above a trigger price of
Zl 1,465 per tonne.  Price-based safeguard measures also commenced in November 1999 on imported
white cane and beet sugar as well as certain other sugars.
51. Tariff quotas of 60,000 tonnes applied to imports of cane or beet sugar in 1999.  However,
none of this quota was utilized.  The above-quota ra tes were either 40% or if higher ECU 0.17 per kg.
net, or 40% or if higher ECU 0.48 per kg. net.  This later rate also applied to imported maple and
some other sugars.  Imports of certain other sugars were subject to a tariff quota of 292 tonnes, of
which over 99% was used.
52. Sugar exports received a direct subsidy of US$13.2 million and US$8.8 million in 1998 and
1997, respectively, paid for by domestic sugar consumers through higher prices.24  The subsidy is paid
on sugar or processed products having a sugar content above 20%.  Although well below Poland’s
WTO bound export subsidy values, meeting annual volume commitments for sugar in recent years hasrequired the use of carry-over quantities from 1995 (Chapter III(3)(iii)).  Poland also bound export
subsidies on molasses, as yet unused, to a value of US$12.1 million (in 1998) under the Uruguay
Round.
Oilseeds
53. Oilseed production in Poland comprises almost exclusively rapeseed.  In 1999, production
was valued at Zl 1 billion.  Rapeseed is suitable for food and animal feed.  Poland is self-sufficient in
rapeseed, but does import rapeseed and soya meal for use in high-quality animal feed proteins.
54. Tariffs on certain oilseeds were increased in 1999.  Imports of oilseeds and related products
are also monitored for special safeguard action, but no measures have been taken.  Although exports
                                                                                                                                                                    
21 The minimum domestic sugar price for the following year is set annually by 1 August.  Sugar plants
then set minimum procurement beet prices by 31 August in consultation with farmers’ unions andrepresentatives.
22 Quota limits are set annually by the Council of Ministers on advice from the Minister of Agriculture
and Rural Economy.  Sugar produced above A and B quota limits is designated as C quota sugar.  This can onlybe exported, including as processed products with more than 20% sugar content, without subsidy.  There is littleC quota production.
23 The sugar marketing arrangements are enforced by penalties equal to 100% of the value of the excess
amount if sugar producers sell sugar domestically exceeding their quota levels or at below the set minimum
price.
24 Sugar subsidies are funded by a 7% levy charged by sugar plants on the value of domestic sugar
sales.  Because the levy is paid only on domestic sales, sugar processors can pass on the full amount of the levyto consumers via higher prices.  The Agency for Restructuring and Modernizing of Agriculture uses these levyreceipts to refund subsidies to exporters of B sugar.Poland WT/TPR/S/71
Page 85
of oilseeds are not directly subsidized, Poland could provide such subsidies on rape and rape oil to a
value of US$32.3 million (in 1998) within its WTO commitments.
55. Imports of rape or colza seeds and related processed vegetable oils were subject to tariff
quotas in 1999.  Quota levels were 26,890 tonnes and 8,000 tonnes, respectively, of which none was
utilized for seeds, and 37% was used for oils.  The above-quota rate of 94.2% applied to imports of
seeds and oils.
56. Imports of other vegetable oils, such as soya and sunflower oil, were dutiable at tariff rates
ranging from mainly 10% to 40% in 1999.  Tariff quotas scheduled in the WTO have not operated for
these products.  Imports of vegetable seeds were dutiable in 1999 at 15%, except for sunflower seeds,
which had a tariff rate of 10%.  Poland has not applied its WTO scheduled tariff quota on linseed oil.
Cut flowers57. Imports of fresh roses, carnations and chrysanthemums are subject to seasonal tariffs and
tariff quotas.  Above-quota tariff rates of up to 49. 2% apply during the harvesting season.  Although
lower in-quota rates apply throughout the year, quota levels are largely underutilized.  In 1999, for
example, 7% of total quota levels of 667 tonnes were filled.
58. Poland’s cut flower industry has received added assistance from special safeguard action.
From August to December 1998, for example, additional levies were imposed on imports of cut roses
and chrysanthemums exceeding set trigger prices that varied over the period.  Higher trigger prices
were set from 1 November to 31 May to correspond to the domestic growing season.  Similar price-
based safeguard action also commenced in June 1999.
Fruit and vegetables
59. The fruit and vegetable industry is well developed but is in need of further rationalization to
increase farm sizes and improve efficiency.  Orchards, most below one hectare, grow mainly apples,pears, cherries, currants, gooseberries, raspberries, tomatoes, and strawberries.  About half of fruit
production is processed into fruit juices, and frozen and canned products.  Poland is a significant
exporter of fresh and processed fruit products, including condensed apple juice.
60. The main vegetable grown is the potato, the main staple crop in Poland.  About one quarter of
potato production is consumed unprocessed: the rest is processed into starch and alcohol.  Poland isself-sufficient in potatoes.  Other vegetables include cabbages, cauliflowers, onions, peas,
mushrooms, cucumbers, and carrots.
61. Fruit and vegetable producers benefit from import monitoring measures associated with the
special safeguards available to agricultural products.  In December 1997 this resulted in additional
levies being imposed on imported prepared tomatoes exceeding the trigger level of 18,147 tonnes.
62. Poland's 1998 subsidy limits were set at US$76.3 million on fresh fruit and vegetables;
US$125.2 million on processed fruit and vegetables; and US$16.8 million on potatoes.
Fruits and nuts
63. Imports of nuts were dutiable in 1999 at tariffs of 17.5%, 20% or 25%, except for coconuts,
which had a tariff of 11.7%.  Poland has not operated the tariff quota on imported hazelnuts andwalnuts scheduled in the WTO.WT/TPR/S/71 Trade Policy Review
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64. Ad valorem  duties ranging mainly from 10% to 30% applied to fresh fruit imports in 1999.
Higher tariffs of 50% applied on pears imported during the high season and of 40% on strawberries
imported in season.  However, specific and composite rates also applied on a range of imported fresh
fruit, including oranges and some other citrus fruit (167% plus ECU 0.27 per kg. net); and seasonal
tariffs, of up to ECU 0.33 per kg. net during the high season, on apples.  Cider apples imported in bulk
were dutiable at ECU 0.30 per kg. net in 1999.  Imports of dried fruit were dutiable at 25%.
65. Tariff quotas totaling 32,038 tonnes operated on imports of fresh apples, including cider
apples, and pears in 1999.  Overall, only 3% of these quotas were utilized.  There were no imports in
six of the ten quota categories.  Imports of other fresh fruit, including strawberries, were subject to a
tariff quota of 17 tonnes in 1999, of which none was utilized.
Vegetables66. Tariffs assist the production of vegetables.  Most vegetables were dutiable at 20% or 25% in
1999, except for potatoes, which were dutiable at a rate of up to 50% when imported during the high
season.  Some vegetables were dutiable at specific and composite rates.  These were seasonal tariffs
on tomatoes of up to ECU 0.45 per kg. net during the high season; on cauliflower and broccoli of 35%
or if higher ECU 16.67 per tonne during the high season; on cucumbers of up to 50% plus ECU 0.54ECU per kg. net during the high season; and on gherkins of ECU 0.40 per kg. net.
67. Tariff quotas totalling 5,308 tonnes applied for fresh or chilled imports of cucumbers and
gherkins in 1999.  However, only 2% of the quota was utilized.  No imports were recorded in three
out of the four quota categories.  The tariff quota that also applied in 1997 to fresh tomatoes, of which
49% was utilized, has been discontinued.  Tariff quotas scheduled on several other fresh or chilled
vegetables, including potatoes, onions, cabbages, cauliflowers, lettuces, and carrots, have not
operated.  Import quotas applied to certain preserved tomatoes in 1999.  The quota level was3,183 tonnes, of which 98% was utilized.  A similar tariff quota that operated in 1997 on preserved
potatoes, of which none was utilized, has since been discontinued.
Other crops
68. These comprise mainly tobacco, hops, and spices.  Imports of tobacco leaf in 1999 were
dutiable at a rate of 30% or if higher ECU 1.13 per kg. net, except for "sun-cured" oriental-type
tobacco, which was dutiable at a rate of 30% or  if higher ECU 0.75 per kg. net.  Poland has not
applied the tariff quota scheduled in the WTO.
69. Hop cone imports were subject to a tariff rate of 55.8 % in 1999, and a tariff quota of
38 tonnes.  Overall, 34% of the quota was utilized in 1999, with no imports in one of the two quota
categories.  Special volume-based safeguard action was implemented from November 1999 onimports of hop cones.  Tariffs on imported hops were increased in January 1998.
70. Imports of spices were dutiable in 1999 at rates of mainly 5.8%, 10%, 20% or 20.8%.  Spices
that compete with domestic production, mainly ginger, saffron, turmeric, thyme, bay leaves, curry,
and certain other spices, were dutiable at the higher two rates.  Separate tariff rate quotas apply to
these spices.  In 1999 the overall quota was 79.5 tonnes, of which 65% was utilized.  No imports wererecorded in two of the five quota categories.
(c) Fisheries (ISIC 130)
71. Although accounting for below 0.5% of GDP, the fish processing industry has important
regional significance to Poland.  The fishing industry is offshore, mainly in the Baltic Sea, but also inPoland WT/TPR/S/71
Page 87
the open seas such as the Bering Sea.  The annual catch is currently around 320,000 tonnes and valued
at US$300 million, about a third of 1990 levels.  Sea fishing currently represents less than half of
Poland’s total fish catch.  Freshwater fishing comprises mainly the farming of carp and trout.
72. The ocean fleet has declined significantly in recent years.  Most of the offshore catch is from
high-seas trawlers that operate mainly in the Bering Sea under fishing rights with Russia; the catch is
mainly Pollack, which is processed on board and exported directly. The Baltic and coastal fleets catchmainly cod, sprat, and herring.
73. Fishermen receive access to preferential credit.  Moreover, imported fish is subject to
relatively high tariffs.  In 1999, MFN tariffs on imported fresh, chilled or frozen fish averaged 15.9%,
and ranged from 1% to 40%.  Higher tariffs apply to preserved fish products, such as 45% on salmon
and 55% on caviar.
(d) Forestry (ISIC 12)
74. Around 28% of Poland’s land area is covered by forests, representing 8.8 million hectares.
Over three quarters of Poland’s forests are managed by the state-owned State Forests Company.
Forests are mainly coniferous trees, especially pine.  Forestry accounts for about 0.4% of GDP.
75. A National Forestry Programme, which began in 1995, is aimed at expanding forests to 30%
of land area by 2020 and to 33% by 2050.  The Government is also encouraging farmers to develop
forests.  Assistance is provided by way of tax relief, grants, and access to concessional loans.
76. The Ministry of Environmental Protection, Natural Resources and Forestry is responsible for
developing and implementing forest policies.  Forestry management in Poland falls under the Forest
Act of 1991 and the recent Polish Policy of Sustainable Forest Development.  As part of the
sustainable management of forests, seven Forest Promotional Complexes have been established.
These cover about 5% in total of state forests, and will be used to develop and implement soundsustainable forest management.  Another key feature of the programme is to survey the stock of
forests and to expand public research to better understand the value of forests.
77. Timber production is increasing in Poland, and consists mainly of sawn timber and panel
products.  The average MFN tariff in 1999 for forestry and logging was 9.5%, with rates ranging from
zero to 94%.
(3) M
INING AND QUARRYING
78. Mining and quarrying accounts for 3% of GDP, down from 4% in the early 1990s.  Petroleum
and gas production accounts for around 8% of GDP.  Exploitation and development of mineral and
petroleum deposits is regulated by the Geological  and Mining Law of 1994, administered by the
Ministry of Environmental Protection, Natural Resources and Forestry.
79. Royalty rates vary between resource:  the maximum is 10%, and the rate for oil and gas is
6%.  In addition, a mining usufruct fee is payable over the first five to ten years of production based
on a percentage of the market value of recoverable reserves.  The fee ranges from 0.1% to 2%, and is
0.5% for oil and gas.  Exploration permits are granted for six years.  The production period is 30
years, but may be extended.  There is no mandatory domestic or government ownership in miningprojects.  MFN tariffs on mining and quarrying averaged 2.1% in 1999, and ranged from free to 20%.WT/TPR/S/71 Trade Policy Review
Page 88
(i) Minerals (ISIC 23)
80. The main minerals mined in Poland are coal, copper, silver, zinc, and lead.  By European
standards Poland is a large producer of good quality hard coal and lignite.  In 1998, it produced
116 million tonnes of hard coal, of which about a quarter was exported, and 62.8 million tonnes of
lignite.
(a) Coal81. The Polish coal industry suffers from excess capacity and has been highly subsidized through
state ownership and aid.  Most coal is for power generation purposes, which consumes about a third of
domestically sold coal.  Coal has traditionally supplied a captive domestic market of state-owned
power and other enterprises.  Industry restructuring was needed to restore mine productivity.  Forty-
one mines are being liquidated, of which nine were completed in 1998.  Investment in coal minesamounted to Zl 937 million in 1998, compared with Zl 976 million in 1997.  Almost all of the
investment financing (93%) in 1998 was self-financed by the mines.  However, two investment
projects for de-sulphurizing and enriching power coal, costing Zl 15.8 million, were funded by the
State.
82. A major restructuring programme to reform the coal industry – Reform of the Hard Coal
Mining Industry in Poland in the Years 1998-2002 – commenced in early 1999.
 25  Its main aim is to
restructure the industry to work effectively in the market economy.  Integral to the programme was a
phased reduction in output (from 116 million tonnes in 1998 to 100 million tonnes in 2002, and to
80 million tonnes in 2020); employment cuts by about one quarter by 2002; and privatization of
profitable ventures.  State coal mines are expected to be profitable from 2000; and two profitable pilot
mines, Bogdanka and Budryk, are to be privatized.  A number of inefficient coal mines are to be
closed and liquidated and debt repayments made, at a cost of Zl 1.3 billion and Zl 7.9 billion,respectively.  The total cost of the restructurin g programme, including financing special redundancy
payments to retrenched coal miners, is estimated at US$4 billion.
26
83. Responsibility for the reform programme rests with the Ministry of Economy, aided by the
Controlling Committee.  Management of coal mines has been made subject to competition, and placed
on contractual arrangements.  However, coal restructuring and privatization remains a majorchallenge.  The financial position of the industry deteriorated in 1998, largely due to falling coal
prices.  Its net financial loss in 1998 was Zl 4.3 billion, and total liabilities rose to Zl 16 billion.  Other
subsidies to the coal industry in 1998 amounted to Zl 217.9 million.  These deteriorating conditions
prompted the Government to devise a new rest ructuring plan in October 1999, aimed at achieving
overall profitability by 2002, based on mine closures, privatization and rationalization, includingreducing the workforce by half.  Budgetary support details are still being finalized.  The
Government’s proposal to vertically integrate power plants and coal mines in single privatization
packages may lead to cross-subsidization of mining and to financially weak electricity suppliers.
27
84. Brown coal is used domestically for electricity generation only, and accounts for about one
third of Poland’s power output.  Brown coal is no t marketed commercially, but delivered directly to
power plants at contracted prices based on costs and profitability.  Brown coal is the cheapest source
of electricity, at about a third lower than black coal.  There are five mines, with one undergoing
                                                     
25 This was supported by the Law on Adjustment of the Hard Coal Mining Industry to Operations in a
Market Economy and the Powers and Tasks of Mining Communities.
26 The World Bank has conditionally agreed to provide up to US$1 billion in loans over three years to
help finance coal restructuring.
27 OECD (2000).Poland WT/TPR/S/71
Page 89
liquidation.  All were run as state-owned enterprises in 1998.  Total investment outlays in 1998 were
Zl 273 million, 32% higher than in 1997.  Brown coal reserves are expensive to mine;  the mines are
unprofitable and equipment is outdated.  An exploitation fee of 4% is charged for extraction of brown
coal compared with 2% for black coal.
(b) Other minerals
85. Poland’s copper mining and smelting complex run by the privatized firm, KGHM Polska
Miedz, is the world’s sixth largest producer.  Almo st all of production is exported, mainly to Asia,
where sales slumped in 1998 due to the financial crisis.  Following privatization in 1997, and further
rationalization, the firm has lowered the production cost of copper from US$2,000 to US$1,600 per
tonne.  The company operates three mines (Lubin, Polkowice-Sieroszowice, and Rudna), three plants
(each capable of smelting and refining), and a copper rolling mill.28  Output of copper ore was 26.2
million tonnes in 1997.
86. Zinc and lead are also produced in Poland, and the Government is committed to restructuring
the non-ferrous metal sector.  Zinc and lead  ore production in 1997 was 4.9 million tonnes.
(ii) Energy
(a) Hydrocarbons and gas (ISIC 2200 and ISIC 3540)
87. Poland’s petroleum and gas reserves were estimated in 1998 to be 124.37 million barrels
(mm bbls) of oil and 148.94 billion-cubic metres (bcm ) of gas, plus offshore reserves of 56 mm bbl of
oil and 9 bcm of gas.  Poland is also thought to have substantial potential for new discoveries as major
areas have yet to be widely exploited.  In the 1980s, the Polish Oil and Gas Company (POGC) was
formed.  It is the only on-shore oil producer and has a monopoly over the production, importation,
storage, and distribution of gas.  It imports ga s mainly by pipeline from Russia under a long-term
contract.
88. Oil and gas production requires a licence.  The Government has designated the petroleum
industry as having strategic importance.  Appr oximately 20% of Poland’s refined petroleum
requirements are imported.  Most crude oil is imported and refined locally, mainly from Russia and
Kazakhstan.  Imports of refined products are subject to non-automatic licensing and in 1999 were
mainly dutiable at MFN rates of 15%, 20% or 25%.  However, some refined products, includingaviation fuel, were subject to specific rates of either 25% or if higher ECU 25 per tonne, or 35% or if
higher ECU 33 per tonne.
29
89. The petroleum sector requires substantial restructuring and investment to improve efficiency.
There are seven petroleum refineries, all state-owned.  The Government’s plans for the sector,
including privatization, are contained in the 1995 Law on Restructuring and Privatization of thePetroleum Sector.  They are to be implemented by  Nafta Polska SA, created in 1996 as a state-owned
joint-stock company, which holds minority interests in the sector, including in refineries.  The
country’s two largest refineries, at Plock and Gdansk, are being privatized first.  The Polish Oil
Concern, created in 1999, operates the Plock refinery, and controls some 70% of the oil market and
40-50% of the retail market.  In October 1999, 30% of it was privatized, with just over half sold to
                                                     
28 The privatization was worth US$410 million; 51% was sold.  The Government sold a further 35% in
1999 with the sale of two subsidiaries.
29 Lower preferential rates apply to imports of refined products from the EU, EFTA, CEFTA and other
regional trading partners.  For example, imports of diesel oil from the EU, EFTA and several CEFTA partners
were dutiable in 1999 at 11%, and 17% if imported from Bulgaria or Romania.WT/TPR/S/71 Trade Policy Review
Page 90
foreign investors, and in November it was listed on the Warsaw Stock Exchange.30  Privatization of
the Gdansk refinery is continuing.
90. Privatization of the industry has been facilitated by splitting the state sector and separating the
refinery process from storage (handled by Naftobaza)  and pipeline distribution of oil and gas (PERN).
PERN was commercialized and made a joint-stock company at end-1998.  Full privatization is also
planned for a limited number of enterprises.  The monopoly on distribution and retailing of gasolinehas been terminated.
91. Non-tariff barriers, such as the differentiated implementation of regulations, may still be
hampering competition in the domestic petroleum market.
31  Recent concerns have also been
expressed about the anti-competitive nature of Poland's petroleum market, including the state
monopoly over storage f acilities as well as im port and foreign investment restrictions.32
92. Restructuring of the gas industry is being carried out under the Organizational Restructuring
Programme of Poland's Gas Industry, approved by the Council of Ministers in 1996.  The Programme
is currently being updated to incorporate the provisions of the Energy Law, passed by Parliament in
1997.  It intends to separate upstream and downstream activities as part of the restructuring.
93. MFN tariffs on oil and unprocessed minerals averaged 3% in 1999, and ranged from free to
12%.  On processed and refined petroleum products, the MFN tariffs ranged from 3% to 9%, and
averaged 4.8%.
(b) Electricity
94. In addition to oil and coal, Poland’s energy sector comprises gas, electricity, and heating.
Coal is the dominant fuel, accounting for 90% of Poland's production of primary energy and 65% of
energy consumed.  Over 95% of Poland’s electricity is generated from coal-fired power plants.  The
rest is from power plants using gas.  There are 15 large power stations, along with 35 smaller power
plants.  There are 33 electricity distribution companies and the Polish Power Grid Company.
95. Energy prices established by enterprises holding concessions are controlled by the
Government.  Poland adopted an overall energy policy in 199533, and in April 1997, enacted the
Energy Law, aimed at developing a competitive a nd market-oriented energy sector by deregulating
prices and allowing new suppliers. The new regulatory regime, including the formation of anindependent Energy Regulatory Agency (ERA), defines the conditions for commercial production and
distribution, and grants interconnection to the Polish power grid to new power suppliers.  The ERA, as
well as approving energy prices, arbitrates on disputes and licenses new private energy producers.
 34
Heating and electricity prices were deregulated from January 1999, but subject to price rises in 1999being capped at 15% and 13%, respectively.  Gas prices were deregulated in 2000.
                                                     
30 An additional 15% of equity was provided to employees.
31 EC (1999).
32 Stevens and Dow (2000).
33 Government paper on the De-monopolization and Privatization of the Electrical Energy Industry of
October 1996.  The Government’s objectives were outlined in The Aims of the Energy Policy in Poland till theYear 2010, released in 1995.
34 Prices for gas, electricity, and heating must be a pproved by the Chairman of the ERA.  These prices
must ensure that all justified costs of production, storage, and distribution are covered, and protect customers
from unjustified price increases.  Prices between different consumer groups must be based exclusively onjustified costs (thereby prohibiting cross subsidies) unle ss otherwise specified by law.  The detailed terms for
formulating energy prices are to be specified by ordinance from the Minister of Economy in consultation withthe Minister of Finance and the Chairman of the ERA.Poland WT/TPR/S/71
Page 91
96. Foreign investment and privatization in power generation is proceeding in line with the
strategy adopted in July 1998 and in December 1999, which is aimed at privatizing the power sector
by 2002.  This limits the merger of entities dealing with the production, transmission, and distribution
of electricity to a market share of 15%.  Poland is to adopt an EU Directive to allow large
corporations to select their electricity source from any EU supplier.35  A number of electricity
generators, distributors, and heat power plants have  been designated for privatization, such as the
Patnow Adamov Konin power company and the Bedzin heat and power plant, which were privatized
in 1999.  About ten power distribution companies covering the medium and low-voltage lines only are
to be privatized annually until 2002.36 However, despite some successes, power privatization has been
slow.
(4) MANUFACTURING
(i) Policy trends
97. Poland’s policies in manufacturing appear to be largely aimed at preparing for EU accession.
The policy guidelines applied during the 1990s and recently reaffirmed in the Government’s policy
programme for 1999-2002, adopted in February 1999, are considered to be broadly in line with those
of EU policies.37  These guidelines endorse the continued transformation of the economy to free
enterprise based on markets and rules of competition.  Their key objectives are to facilitate industrial
development and to improve international competitiveness.  Poland’s policies focus on industrial
restructuring and modernization through privatization as well as controlling state aid.
98. Privatization coupled with foreign direct investment remain key policy objectives for
restructuring Poland’s industrial base.  The private sector now dominates the manufacturing sector,
accounting for 78% of value added and 76% of output, up from 59% and 57%, respectively, in 1995.
Almost two thirds of manufacturing employment is with private firms, compared with less than half in1995.  Moreover, foreign investors have financed much of this privatization.  Well over half of
Poland’s inward foreign direct investment as at end-1998 was in the manufacturing sector.  Within the
sector, the main areas of foreign direct investment have been food, beverages, and tobacco; transport
equipment; and non-metallic products (Chart IV.5).
99. Nevertheless, there has been some major slippage in implementation of restructuring
policies.
38  Privatization of some key sectors, such as steel, chemicals, and pharmaceuticals, for
example, remain incomplete, and further restructuring of public enterprises within these and other
sectors is needed.  Completing the privatization process within the Government’s announced
timetable of 2001 will be a major challenge, especially following the Russian economic crisis that has
adversely affected the privatization prospects of some important state-owned enterprises.  Moreover,achieving further industrial restructuring requires greater control of state aid.  This requires better
quantification of state aid and implementation of legislative controls on its use.
                                                     
35 The Directive requires that 25% of the market  be opened to competition by 2000, and 33% by 2010.
36 The state-owned enterprise, the Polish Power Grid Company, has a monopoly over the transmission
and distribution of high-voltage lines.
37 EC (1999).
38 Many of these aspects have been identified by  the OECD and the European Commission as part of
the accession process (OECD, 2000; and EC, 1999).WT/TPR/S/71 Trade Policy Review
Page 92
Food, beverages 
and tobacco
28.0
Textiles and clothing  1.4
Wood and wood products 
(including furniture)  2.5
Pulp, paper,
 printing and publishing
8.9Chemicals and chemical 
products (including rubber 
and plastics)
10.7Non-metallic products
16.2Electrical machinery 
and optical equipment
6.4Transport equipment
22.8Other
3.1
Source : Ministr y of Econom y (1999b ), Report on Poland's Industr y in 1998.Chart IV.5
Foreign direct investment in manufacturing activities, 1998
Per cent
100. Polish industry tends to be heavily fragmented, and rationalization is needed to improve
efficiency.  The progressive removal of almost all tariffs on imports of manufactured products from
the EU under the Europe Agreement has already expos ed Polish industry to greater competition, and
this is likely to intensify fo llowing EU accession.  Moreover, fo llowing membership, Poland’s MFN
tariffs would fall considerably, on average, as it adopted the EU common external tariff.  In 1999, this
was, on average, substantially below (by about two thirds) Poland’s manufacturing tariff levels.  All
industry groups, defined at three-digit ISIC, would experience substantial cuts in average MFN tariffs,
some by as much as almost 80%.39  This should promote a more neutral tariff structure for Poland
across both production and trading partner, thereby improving Poland’s efficiency.  Polish industriesmust compete in the home market with exports from all sources if Poland is to maximize the
economic benefits from multilateral trade liberalization.
                                                     
39 However, Poland’s MFN tariffs would increase following accession on some individual products,
thereby possibly increasing net (effective) protection in a few areas.  In 1999, EU tariffs on manufacturedproducts exceeded Polish tariffs on approximately 550, or 7% , of tariff lines.  While most of these increases are
relatively minor (of less than one percentage point), a number of items currently duty free or with minimal ratesin Poland would be increased significantly after EU accession.  Examples would include certain video cameras
(from 3% to 14%) and certain motor vehicle kits for assembly (from free to either 10% or 19%).  A few other
items, especially certain organic chemicals, which were dutiable in 1999 at ad valorem  rates of 15%, would
become subject to specific duties that in 1999 would have provided higher ad valorem  equivalents.  Moreover,
tariffs only provide a partial, albeit important, picture of protection.  Other protective measures need also to beconsidered.Poland WT/TPR/S/71
Page 93
(ii) Sectoral policies and trade developments
101. The manufacturing sector accounted for 19% of GDP in 1998, down from 20.7% in 1995;  it
employed almost 30% of the workforce.  By far the largest manufacturing groups, by output, were
food, beverages and tobacco, followed by metals and metal products; and chemicals (Chart IV.6).
Due mainly to the Russian crisis, manufacturing output growth slowed in 1998 to about 5%.
102. MFN tariffs on industrial products averaged 16.1%  (unweighted) in 1999 and ranged widely,
from duty free to 293% levied on certain beverages and food products (Table AIV.1).  Effective
protection afforded to producers of final goods is hi gher than that implied by simple tariff averages
due to the escalatory nature of the Polish tariff structure, in particular for sectors such as food,
beverages and tobacco;  textiles; wood and wood products; motor vehicles;  and consumer electronics.
Food, beverages 
and tobacco
29.5
Textiles and clothing
6.1
Wood and wood products 
(including furniture)
9.1Pulp, paper,
 printing and 
publishing
4.2Chemicals and chemical 
products (including 
rubber and plastics)
12.8Non-metallic products
6.0Metals and metal products
13.3Non-electrical machinery 
and equipment
7.3Electrical machinery 
and equipment  3.7Transport 
equipment
8.2
Source : Ministr y of Econom y (1999b ), Report on Poland's Industr y in 1998.Chart IV.6
Composition of the manufacturing sector, 1998
Per cent
(a) Food processing (ISIC 311)
103. Food processing is an important economic activity in Poland, contributing almost 30% of
manufacturing output and 6% of GDP in 1998.  Th e sector employed almost 4% of the total
workforce.  The industry has expanded, largely based on foreign direct investment.  Output comprisesmainly meat products (accounting for 21% of the sector’s output in 1998); alcoholic beverages (21%);
dairy products (15%); sugar (7%); and fruit and vegetable processing (7%).
104. Some 90% of the food processing industry is privately owned.  The main areas of foreign
investment in food processing are those in which privatization is most advanced, especially in theWT/TPR/S/71 Trade Policy Review
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manufacture of sugar confectionery, beer, soft drinks, and tobacco products.  Some 28% of the stock
of foreign investment in manufacturing  was in food processing at end-1998.
105. MFN tariffs averaged 28.8% (unweighted) in 1999 and ranged from zero to 98%.  However,
as noted previously, these are likely to under-estimate the tariff protection on foodstuffs because of
the high incidence of specific duties on these items, which are not fully reflected in the Secretariat’s
estimates.40  Some 37% of duties on imported food products had specific duties in 1999.
106. Many of the sectoral policies operating on processed foodstuffs assist farmers and have
therefore been discussed previously (section (2)).
Meat processing (ISIC 3111)
107. Meat processing is one of the largest manufacturing segments in Poland, after motor vehicles,
steel, and oil refining.  Activities include processing and canning of poultry, pork and beef.  Some65% of processed meat consumption in Poland is pork.  Substantial excess capacity exists in the
industry, especially for canned poultry, where it is estimated to be as low as 50%.  Foreign investment
is relatively low in meat processing compared with other foodstuffs.
41
108. Ad valorem  import tariffs on meat products from MFN sources averaged 35.8% (unweighted)
in 1999, and ranged from free to 60%.  However, over half of tariff rates were specific duties.
Dairy products (ISIC 3112)
109. Dairy products are considered by the Government to be a strategic industry in Poland.  It is
dominated by the production of milk beverages, yoghurts, ice cream, and cheese.  Foreign investment
in dairying has been limited, and is mainly found in yoghurt and ice cream production.  The average
MFN tariff in 1999 was relatively high, at 39%, and ranged from 5% to 80%.  Some 3% of tariff rates
had specific duties.
Sugar products and chocolate confectionery (ISIC 3118, 3119)110. The majority of the 76 sugar plants operating in Poland are state owned.  The Government is
in the process of privatizing more plants.  Foreign investors participate in about a dozen Polish sugar
plants, and these are performing best.
42  Sugar consumption in Poland has increased due to expanded
output of manufactured foodstuffs, especially sugar and chocolate confectionery.  Use of sugar in
processed foods grew by 50% from 1991 to 1998.  Confectionery processors have substantial foreigninvestment.  Annual sugar production in Poland exceeds 2 million tonnes.
111. The average MFN tariffs on sugar products in 1999 was 32.5%, and ranged from 10% to
40%.  However, only a quarter of tariff lines had ad valorem  duties.  Tariffs on chocolate
confectionery averaged 31.9%, with a range of 6% to 45%.  Only about one tenth of these tariff rates
had ad valorem  duties.
                                                     
40 Specific tariff rates were excluded from the estimates because ad valorem  equivalents were not
available, and only the ad valorem  component of composite or alternate duties was included.
41 Only a small percentage of firms, numbering about 165, meet EU standards.  These firms account for
50 to 60% of Poland’s meat production capacity.
42 Private sugar plants are said to enjoy the best financial and economic standing (Polish Agency for
Foreign Investment, 1999c).Poland WT/TPR/S/71
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112. Poland scheduled separate tariff quotas in the WTO (Schedule LXV) on sugar confectionery,
chocolate, and other cocoa products.  The minimum quota level on sugar confectionery was to
increase from 4,600 tonnes to 7,800 tonnes from 1995 to 2000, and on chocolate and other cocoa
preparations, from 1,500 tonnes to 2,500 tonnes.  However, Poland has not operated these tariff
quotas.   According to Polish authorities, tariff quotas have not operated on these products because
tariffs were not raised.
Grain mill and bakery products (ISIC 3116, 3117)
113. Production of grain mill and bakery products has grown in recent years in line with increased
consumption.  Privatization and foreign investment have helped to improve efficiency.
114. Cereal flours were dutiable in 1999 at a compound  rate of 25% plus € 0.10 per kg. net.  Tariff
quotas also applied on flour from wheat or meslin and other cereal flours.  The quota levels in 1999were 8,962 tonnes and 1,552 tonnes, respectively, of which 53% and 2% were utilized.  The in-quota
tariff rate in 1999  on cereal flours was 25%.  A tariff quota of 584 tonnes also applied to imports of
flour, meal, flakes, etc. of potato in 1999, of which none was utilized.
43  The in-quota tariff rate in
1999 was 25% if it was higher than € 0.20 per kg. net.  A tariff quota on certain brans and other
residues, ranging from 49,530 tonnes in 1995 and to have risen to 82,550 tonnes in 2000, has notoperated.
115. MFN ad valorem  tariffs on grain mill products averaged 16.4% in 1999, and ranged from
10% to 40%.  Two thirds of tariff rates contained specific duties.  Tariffs were, on average, higher for
bakery products, averaging 36% in 1999.  Just over half of these tariff rates had specific duties.
Fruit and vegetables canning (ISIC 3113)
116. A large share of fruit and vegetables grown in Poland is processed into products such as
juices, including apple concentrate, jams, and other preparations, like tomato sauce.  Ad valorem
tariffs in 1999 on these products ranged from 10% to 98%, and averaged 30.8%.  However, over half
of the tariff lines contained specific duties.
117. Imports of certain sauces and preparations were subject to a tariff quota in 1999 of 635,200
litres, of which 3% was utilized.  The in-quota rate in 1999 was 35% if it was higher than € 0.35 per
kg.  Imports of certain preserved vegetables were al so subject to a tariff quota of 110 tonnes in 1999,
but there were no imports.  The in-quota rate was 50%.
118. Poland has not applied the tariff quotas on jams and fruit juices because, according to the
authorities, tariff rates were not increased on these products. These would have provided in-quota
imports on jams and fruit juices of 1,000 tonnes each in 1995, rising to 2,000 tonnes in the year 2000.
Other food preparations and animal feeds (ISIC 312)119. The manufacture of food concentrates and other preparations is an important industrial
activity in Poland, and has recorded consid erable growth in recent years.  MFN ad valorem  tariffs on
these products combined averaged 30.8% in 1999, and ranged from free to 293%.  Over one third of
rates had specific duties.
120. Tariff quotas applied in 1999 to some of these products:  vegetable extracts and pectic
substances had a total in-quota level of 18.4 tonne s, of which 11% was utilized.  No imports were
                                                     
43 WTO document G/AG/N/POL/32, 2 March 2000.WT/TPR/S/71 Trade Policy Review
Page 96
recorded in two out of the three quota categories.  The in-quota tariff rates on these products ranged
from 15% to 40%.  The tariff quota on imports of potato and cereal starch of 2,400 tonnes in 1999
was fully used.  Tariff quotas totalling 929 tonnes on certain residual food preparations was 93%
used, although no imports occurred under one of the two quota categories.  Another tariff quota
applied to imports of malt extracts of 120 tonnes, of which 27% was utilized.  The in-quota rate in
1999 for these products was 30%.44
121. Imports of starches are monitored under the special agricultural safeguard provisions
maintained by the Ministry of Agriculture.  Price-based action was implemented on imports of maize
(corn) starch from November 1999.45
122. Animal feed is mainly processed from domestic cereal grains, especially wheat, barley, oats
and meslin, and oilseeds, and from imported fodder, mostly high-protein materials, especially soyameal, bone meal, and fish meal.  Almost two thirds of enterprises producing animal feed have been
privatized, and foreign investment is increasing.  The livestock industry has benefited from the
enhanced efficiency of animal feed production, but is still penalized by the relatively high protection
provided cereals and oilseeds, which raises substantially the costs of animal feed and encourages
crops instead of livestock.
(b) Beverages (ISIC 313)
123. The brewery industry is well established in Poland and has experienced substantial growth,
aided by rising domestic beer consumption.  The industry is fully privatized, and breweries dominated
by foreign firms account for 80% of the market.
46  The six major breweries supply two thirds of the
market;  imports account for about 5% of the market.  Special licences from the Ministry of
Agriculture are needed to produce, bottle, purify, and trade in alcohol products.  This is aimed at
curbing illegal production.  Such licensing requirements were recently extended to wine.  Domesticproduction of alcoholic beverages receives substantial tariff protection.
47
124. Imported beer from MFN sources was dutiable at an alternate duty of 30% or if higher € 0.25
per litre.  A tariff quota of from 342,000 hl rising to 570,000 hl. over the period 1995 to 2000, has not
operated.  According to the authorities, this was because tariffs on these products had not been
increased.
125. Imported wine from MFN sources was dutiable in 1999 at various specific rates, depending
upon the type and alcohol strength.  Champagne was dutiable at rates ranging from 30% or if higher
€ 42 per hl. up to 52.5% plus € 105.2 per hl. plus € 0.18 per kg. net.  The highest rate applied to
champagne with an alcoholic content exceeding 22% volume.  Other sparkling wines were dutiable at
the lower duty rate, irrespective of alcohol content.  Still and fortified wines were dutiable at 30% orif higher € 25 per hl., and 25% or if higher € 5 per hl.
                                                     
44 Imports of albumin and derivatives were also subject to a tariff quota of 0.51 tonnes in 1999, but
there were no imports.  Similarly, there were no imports of dextrin and other modified starches in 1999, despitea tariff quota operating of 361 tonnes.
45 WTO document G/AG/N/POL/33 of 2 March 2000.
46 Heineken has a 40% share in the market following a merger involving its Polish subsidiary.  The
merger was conditional upon Heineken agreeing to discontinue production of all local brands, giving otherbrewers access to its distribution network, and continuing to purchase hops locally (EBRD, 1999).
47 The simple average tariff applying to imports of spirits and alcoholic products was 288% in 1999;
however, less than 2% of the tariff lines had ad valorem  rates (Table AIV.1).Poland WT/TPR/S/71
Page 97
126. There is a small, but expanding, wine industry in Poland, dominated almost exclusively by
private firms.  A tariff quota of 7,670 hl. applied to  imports of wine and grape must in 1999, of which
none was utilized.
127. Imports of vermouth and other flavoured wines of less than 18% alcoholic strength were
dutiable at an MFN rate of 30% or if higher € 12.5 per hl., unless in a container exceeding two litres,
when the rate fell to 20%.  A tariff quota of 635,200 litres applied to these products in 1999, but therewere no such imports.
128. Imports of alcohol of more than 80% strength were dutiable at a rate of 293.3% or if higher
€ 162 per hl.  Tariff quotas totaling 231,000 litres also operated, of which 2% was used.  No imports
were recorded under one of the two quota categories.
129. Vodka is the main alcoholic spirit produced in Poland.  Some 90% is produced by state-
owned enterprises.  The Government plans to privatize all plants by 2001.  Vodka production has
declined in recent years in line with changing demand patterns in favour of lighter alcoholic
beverages, especially beer and wine.
130. Imports of spirituous beverages were dutiable in 1999 at 293.3% or if higher € 6.67 per hl.
Tariff quotas also applied to most imports, totaling 6,362,100 litres, of which 12% was utilized.These utilization rates varied from 6% for spirits distilled from grape wine to 40% for gin and vodka.
131. The manufacture of soft drinks and mineral waters is expanding in Poland.  Foreign
participation is substantial, especially in the manufacture of soft drinks and tonic waters.  Imports of
soft drinks and mineral waters were dutiable at rates ranging from 20% and 30% in 1999, and
averaged 21%.  Certain fermented and non-alcoholic beverages are subject to a higher rate of excise,
if imported, of Zl 89, compared with Zl 66 if produced in Poland.
(c) Tobacco products (ISIC 314)
132. The manufacture of tobacco products is based on blending locally grown tobacco with
imported leaf.  The domestic market is supplied predominantly by private manufacturers, especially
foreign firms established in Poland.  Foreign investment in the tobacco industry amounted to
US$1.1 billion at end-June 1999.
133. High MFN tariffs applied to imported tobacco products in 1999; the simple tariff average was
226.6% (Table AIV.1).  The duty on imported cigarettes and cigars was 189% or if higher € 20 per
thousand pieces.  Other manufactured tobacco products were dutiable at a rate of 251.7%.  Tariff
quotas totalling 6.04 billion pieces applied to cigarettes and cigars in 1999, of which 16% was
utilized.  The tariff quota applied to imports of other manufactured tobacco products of 1,300 tonnes
was fully utilized.
48
134. Cigarettes producers may also be assisted by the excise tax arrangements.  Imported cigarettes
attract an excise duty of 150%, while domestically produced cigarettes pay excise of Zl 63.70 to
Zl 97.40 per thousand pieces.  As well as potentially discriminating against imports, these
arrangements discriminate between domestic products in several ways.  Foreign-brand cigarettes
produced in Poland are subject to a higher excise tax of Zl 97.40 per thousand pieces compared with amaximum excise tax on Polish brand cigarettes of Zl 83.40 per thousand pieces.  Moreover, shorter
Polish cigarettes (less than 70mm) are taxed at a lower rate of Zl 65.60 per thousand pieces, and
Filterless Polish cigarettes at Zl 63.70 per thousand pieces.
                                                     
48 WTO document G/AG/N/POL/32, 2 March 2000.WT/TPR/S/71 Trade Policy Review
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(d) Textiles, clothing, and leather products (ISIC 32)
135. The Polish textile, clothing, and leather industries are undergoing substantial restructuring in
an attempt to reverse falling productivity and competitiveness.  These industries are heavily
fragmented with most firms employing well under 250 employees.49  The largest segment, clothing
manufacture, has tended to grow in recent years at the expense of textile manufacturing, as producers
concentrate more on finished products.  While there have been some successful pockets, most of theseindustries have experienced declining profitability and production levels due to increased import
competition and reduced exports to traditional markets, especially Russia and Ukraine.  In 1998, the
sector contributed 6% of manufacturing output.
136. Poland has special safeguard provisions for imports of textiles and clothing.  These apply to a
wide range of products, including yarns, fibres, a nd certain apparel, such as hats, ties and babies’
garments.  Although Poland has not used these provisions,  the mere listing and monitoring of these
products for possible safeguard action may itself be trade restricting.
137. Under the WTO Agreement on Textiles and Clothing, Poland has carried out the first two
stages of product integration, in 1995 and 1998, covering 16% and 17%, respectively, of total imports.
Import quotas with the EU, CEFTA and EFTA members have been abolished.
Textiles (ISIC 321)
138. The textiles industry comprises mainly the manufacture of floor coverings, including carpets
and floor mats, curtains, cotton and wool yarns and fabrics, and knitted or crocheted products, such as
stocking garments and linen.  It employed some 133,000 employees in 1998, and contributed 2% of
manufacturing output.  It depends mainly on imported raw materials.
139. The industry is undergoing substantial restructuring and investment in the face of increased
import competition from Asian exporters and declining export markets, especially in Russia andUkraine.  Total production fell by almost 3% in 1998, and is well down on its 1994 levels.  However,
performance is variable within the industry;  pr oduction of finished textiles grew strongly in 1998.
The industry is restructuring more towards producing processed textiles, but this still represents a
small share of the industry.  The main industry segments of fabric manufacturing, such as textile
weaving and spinning of textile fibres, as well as of made-up textile articles (excluding apparel) and
knitted and crocheted fabrics, all contracted in 1998.  Most firms are currently performing
unprofitably.
140. While three quarters of firms are privately owned, the largest firms remain state owned.  Of
the top eight textile producers in 1998, three were fully state owned and three partly.  Foreign
investment is, however, increasing and in 1998 there were 40 enterprises that had foreign capital, 25%more than in 1997.  Government policy for the industry is to increase privatization and
commercialization, which was to have been completed by 1999.  According to the Government,
without greater investment capital, the industry’s decline in competitiveness will continue
irreversibly.
50
141. MFN tariffs on textiles in 1999 ranged from free to 30%, and averaged 13.7%.  Tariff quotas
on certain flax and hemp yarns have not operated.  According to the authorities, this was due to tariff
rates not being raised on these products.
                                                     
49 Polish Agency for Foreign Investment (1999d).
50 Ministry of Economy (1999b), p. 114.Poland WT/TPR/S/71
Page 99
142. Additional protection against imported fibres and yarns has been provided by Poland’s anti-
dumping arrangements.  Synthetic fabrics imported from Chinese Taipei are subject to a three-year
quota from 1999, while Korean imports are under investigation.  Similarly, imports of synthetic fibres
and acrylic yarns from the Republic of Belarus and Lithuania, respectively, are being investigated for
alleged dumping.
Clothing (ISIC 322)143. In 1998, employment in the clothing industry was above 250,000, and it accounted for some
2% of industrial output.  Privatization in clothing is almost complete;  some 94% of firms are
privately owned, including the five largest producers in 1998.  The incidence of foreign investment,
although relatively low compared with other sectors, is higher in clothing than textiles.  At end
June 1999, over 80% of foreign investment in Poland’s textile and apparel industry was in clothing,and amounted to US$229 million.
144. MFN tariffs on clothing imports ranged from 9% to 25% in 1999, and averaged 21.5%.
Imports from the EU and CEFTA members are duty free, except for a 6.4% customs duty levied on
imports of certain apparel from Hungary.
145. Clothing articles appear to be granted additional protection against imports by an excise tax,
which applies to imported products at a rate of 17.7%, while domestic clothing is tax exempt.
146. Exports to the United States and Canada are subject to MFA quotas.  Export permits for up to
120,000 pieces or 300,000 m
2 are issued to exporters of these products to such markets by the
Ministry of Economy.
Footwear and leather products (ISIC 323, 324)
147. The leather products industry is relatively small, comprising some 15% of the textiles,
clothing, and leather products’ industries output in 1998.  Approximately three quarters of production
is footwear, and one fifth is tanned and dressed leather.  The rest is other leather products such as
luggage, handbags, and horse products like saddles and harnesses.  Some 76,000 employees worked
in the leather industry in 1998.  It has declined overall since 1996, and contracted in 1998 by 16%.
Although production of non-footwear leather products expanded slightly in 1998, shoe production fell
by 23%, due primarily to increased competition from imported Chinese footwear.  The industry’s
profitability has deteriorated, and investment has fallen.  Some 90% of firms are privately owned, but
there is little foreign investment.
148. Footwear and other leather production receive relatively high protection.  MFN tariffs ranged
from 9% to 17%, and averaged 11.9% for imported footwear in 1999, and from 5% to 25%, averaging
17.6%, for leather and other leather products (Table AIV.1).  However, much higher tariffs applied toChina, the main source of imports at 40% for footwear and from 25% to 70% for leather and other
leather products.  Additional dumping levies were also imposed from March 1999 on footwear
imports from China.  The additional specific duties, initially set at € 1.5-4 per pair depending upon the
shoe type, are to be phased out uniformly over three years.
149. These products have also benefited from export restrictions imposed on raw hides since 1993
to overcome the domestic shortage of hides associated with declining livestock numbers.  This
benefits the Polish tanning and leather industries by reducing domestic raw leather prices below the
export levels that would otherwise prevail on the domestic market.  Thus, Polish tanners and
manufacturers of leather products, including footwear, implicitly receive an input subsidy because of
the export restrictions, while livestock and producers of raw hides are effectively penalized as a result.WT/TPR/S/71 Trade Policy Review
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The extent of this subsidy/penalty is the difference between domestic and world prices for leather.
Although not available, comparisons that show Polis h domestic leather prices to be some 25% below
EU levels suggest it could be substantial.51  Tariff quotas on raw sheepskins and fur skins have not
operated;  according to the authorites, this was due to tariff rates not being raised on these products.
150. Tanned or finished fur hides and fur apparel also appear to receive additional protection from
discriminatory excise taxes.  Imported fur hides are dutiable at an excise tax of 25%, while domestichides are either tax free or taxed at 20%.  Fur imports are subject to an excise tax of 17.7%, while
domestic products are either free of excise or taxed at 15%.
151. Apart from China, the main suppliers of foot wear have been Germany, Italy, the United
Kingdom, and Brazil.  Some two thirds of footwear trade is with EU markets.
52  Imports from CEFTA
members are also duty free.
(e) Wood and wood products (ISIC 33)
152. Poland’s main wood products are furniture and other products, especially sawn timber, boards
(chipboard, fibreboard and scaleboard) and plywood.  The industry accounted for about 9% of
industrial output in 1998.  A number of state-owned enterprises were privatized or liquidated in 1998,
but the industry has attracted relatively little foreign investment.  A substantial share of output,especially of furniture, is exported, mainly to the EU.
153. MFN tariffs on wood and wood products ranged from 3% to 12% in 1999, and averaged
9.3%.  Tariffs were, on average, slightly higher on wooden furniture, at 11.7%, and ranged from 9%
to 12%.
(f) Pulp and paper products (ISIC 341, 342)
154. Production of pulp, paper and paper products accounted for 4% of industrial output in 1998.
The main items of production are pulp, paper, including cardboard, newsprint, tissues, writing andcopying paper.  About half of output is used in packaging.  The industry has undergone considerable
restructuring and privatization, including substantial foreign investment, accounting for 9% of foreign
investment in manufacturing.  Some 98% of the industry is now privately owned, and nine state-
owned firms remain.  As part of the industry's modernization and investment, it has moved into more
value-added paper and paper products and terminated unprofitable and inefficient items such ascigarette tissue, tracing paper, and light-sensitive paper.
155. The industry is highly competitive and is expanding.  The Government’s 1998 restructuring
programme of the "consumption of the fibrous raw ma terials in the paper industry", gives priority to
the construction of a "whitened pulp factory" to meet the expected 50% expansion in the production
of paper and cardboard by 2010.  Much of this increase will come from using enhanced recyclingtechniques.
156. Imports of pulp and paper products were dutiable at MFN rates ranging from 3% to 11%, and
averaged 8.4%.  Higher tariffs, of up to 27%, applied to imports of certain printed and published
material.
                                                     
51 EU (1998).
52 The EU abolished quantitative import restrictions on footwear and leather products from Poland in
1992, and tariffs from January 1995.Poland WT/TPR/S/71
Page 101
(g) Chemicals (ISIC 35)
157. The chemical industry comprises mainly the production of basic industrial petrochemicals,
such as plastics, fertilizers, and pesticides, as well as soaps, paints, varnishes, and pharmaceuticals.  It
is a major industry in Poland accounting for some 13% of industrial output in 1998 and employing
over 225,000 workers.  Plastics accounted for the largest share of chemical output in 1997, at almost
20%.  Sales expanded by 45% from 1994 to 1998.
158. While 97% of firms are privately owned, two th irds of output is still from state-owned
enterprises, especially in petrochemicals, fertilizers, and pharmaceuticals.  The sector has undergone
widespread restructuring to improve efficiency and performance through major investments, rising to
US$1.1 billion in 1998, and enhanced productivity.  Foreign participation has been substantial:  by
June 1998, foreign investment had climbed to US$1.3 billion, mainly in household chemical products,paints and varnishes, pharmaceuticals, industrial gases and plastics;  some 11% of foreign investment
in manufacturing was in the production of chemicals and related goods.
159. Restructuring of the chemicals industry was promoted by the Great Chemicals Synthesis
Programme, adopted by the Government in the mid-1990s, aimed at industrial rationalization.  This
programme was reviewed by the Government in 1998 and supplemented by another programme in1999 aimed at full privatization of the industry by 2001.  The modernization and privatization
programme plans 105 investment ventures by 2005 involving investment of US$3 billion.  It is
envisaged that half of this will come from foreign investors.
Plastics and resins (ISIC 3513)
160. This subsector comprises the production of plastics, mainly polyvinyl chloride and
polyethylene, as well as semi-finished and fini shed plastic products, including pipes and tubes.
Private investment grew threefold from 1995 to 1998.  Foreign investment has also been significant,
and amounted to US$79 million at end-June 1998.  MFN tariffs on these goods ranged from 6% to
14% in 1999, and averaged 9%.
Fertilizers and pesticides (ISIC 3512)
161. About 90% of the industry consists of the manufacture of nitrogenous and phosphatic
fertilizers and chemical components of fodder mixtures.  The rest is primarily pesticides.  Sales offertilizers have declined substantially, from US$1.3 billion in 1995 to US$0.9 billion in 1998, largely
due to the deteriorating condition of the agriculture sector.  However, sales of pesticides have grown
steadily, exceeding US$200 million in 1998.  Five major plants, all of which are state owned,
dominate this sector;  although converted to joint-stock companies in the early 1990s, they have not
yet been privatized.  To maintain profitability, these plants produce other basic chemicals, such asacids, pigments polymers, and reagents.
162. MFN tariffs on imported products ranged from free to 9% in 1999, and averaged 6.8%.
Fertilizer plants also receive government subsidies intended to benefit farmers through lower fertilizer
prices.  However, it is probable that at least a share of this subsidy also assists fertilizer producers.
Basic industrial chemicals (ISIC 3511)163. Poland produces a range of basic organic and inorganic chemicals.  These include mainly
sulphuric and nitric acids, ammonia, pigments, dyes, ethylene, caprolactum, polyurethane,
polystyrene, and caustic soda.  MFN tariffs on these goods in 1999 ranged from free to 18%, andWT/TPR/S/71 Trade Policy Review
Page 102
averaged 8.4%.  Tariff quotas on certain finishing agents and dyes of 114 tonnes in 1995 rising to
190 tonnes in 2000 have not operated.
Paints, varnishes, and lacquers (ISIC 3521)
164. The manufacture of paints and varnishes in Poland is mainly concentrated in four enterprises.
Many types of varnishes are produced, including mainly ophthalmic and emulsion varnishes.  The
industry has undergone substantial investment, including from foreign sources.  These products wereimportable from MFN sources in 1999 at a uniform tariff rate of 9%.
Pharmaceuticals (ISIC 3522)
165. The pharmaceuticals industry has grown in recent years in line with consumption.  In 1998,
sales amounted to US$1.7 billion;  it is estimated that sales will increase to US$3.5 billion by 2005.
53
Most of domestic production comprises drugs and ready-made medicaments.  Several of the major
producers are either fully or partly state-owned.
166. Most pharmaceuticals produced in Poland are sold domestically, with some exports to Central
and Eastern European countries.  They are either generic-type drugs or produced under licence from
foreign companies.  Consequently, foreign investors play a significant role in this sector.54
167. Reform of the pharmaceuticals sector began in 1989 when the distribution of drugs,
previously a monopoly held by the state-owned enterprise CEFARM, was opened up to private
distributors.  Currently, pharmaceuticals are distributed by a large number of private wholesalers to
6,200 pharmacies and 900 hospitals.  The distribution segment is currently undergoing rapid
consolidation, with mergers among key distributors.  The main private distributor, ORFE SA, has a
domestic market share of 11% and a 19% share of the import market.  CEFARM, which has retained
a 30% domestic market and is a major importer of drugs, is to be privatized.  There are no restrictions
on foreign investors entering the distribution network.
168. The action programme for "restructuring of the Polish pharmaceutical industry" is aimed at
accelerating the commercialization and privatization of state-owned enterprises and the gradual
removal of price controls.
169. MFN tariffs on imported pharmaceuticals ranged from free to 94%, and averaged 7.4%.
Soaps and cosmetics (ISIC 3523)170. Production in this sector comprises mainly cosmetics and perfumery products followed by
washing and surface-active agents such as cleaning preparations and detergents.  Sales have grown
rapidly in recent years, aided by increasing exports mainly to Central and Eastern European countries.
Private investors are prevalent in the industry.  At end-June 1999, foreign investment in the industry
amounted to US$235 million.  Leading internati onal companies are the largest manufacturers in
Poland.  MFN tariffs on these products ranged from 7% to 32% in 1999, and averaged 17.1%.
Perfumes and beauty preparations are subject to an excise tax of 20% if produced in Poland compared
with 25% for imported products.
                                                     
53 Polish Agency for Foreign Investment (1999e).
54 The Polfa conglomerate, for example, was privatized in 1997 with Pilva (Croatia) acquiring a 70%
stake in Polfa Krakow in October 1997 and the United Kingdom company, Glaxo Wellcome, acquiring an 80%interest in early 1998.Poland WT/TPR/S/71
Page 103
(h) Iron and steel (ISIC 371)
171. Poland is a major world steel producer.  The industry accounts for some 13% of industrial
output, of which one quarter is exported.  Production covers a wide range of raw steel as well as hot
and cold-rolled products.  The restructuring programme provides for the commencement of new
privatization plans for all steel mills by 2001.  However, further privatization of the industry remains
a major challenge, given the still high share of production from state-owned enterprises and theirdependence on state aid.
55
172. In 1998, the Government announced a Programme for Restructuring the Steel Industry from
1998 to 2005, aimed at modernizing and privatizing mills with foreign participation.  In this
connection, the Government also approved a labour redundancy scheme costing Zl 12 million, aimed
at reducing employment from 90,000 to 40,000 over the plan’s life.  Details were contained in aRegulation of the Ministry of Economy dated May 1999.  Plans included the early privatization of the
two largest mills, Huta Sendzimira and Huta Katowice, which together account for two thirds of
production.
56
173. The full programme is expected to cost Zl 12 billion by 2005. The Plan foresees an increase
in steel production by 2010 from the current level of 9 million tonnes to over 11 million tonnes, with85% of the domestic supply being met from home production.  However, given the world steel
market, substantial expansion of steel production while liberalizing the domestic market and
controlling state aid will be a major challenge.
174. MFN tariffs on steel and steel products in 1999 ranged from 3% to 14%, and averaged 13.9%.
The transition to zero tariffs on imports of EU steel under the Europe Agreement was delayed until
2000 when the remaining tariff of 3% was abolished.  Steel producers have also benefited from
contingency protection through anti-dumping actions.  Dumping investigations are currently underway on imports of steel sheets from all countries and on hot-rolled steel sheets from the Russian
Federation, Ukraine and Kazakhstan.
(i) Machinery and electrical equipment
175. The manufacture of machinery and electrical equipment account for some 11% of
manufacturing output.  About two thirds of  production is non-electrical equipment.
Non-electrical machinery and equipment (ISIC 382)
176. This subsector covers mainly the production of machinery and equipment for agriculture and
forestry as well as for the food processing industries.  Agricultural machinery includes the
manufacture of tractors, ploughs, rotary mowers, and spraying machines.  Production is dominated by
a few firms, including the state-owned enterprise Ursus Tractor Industry Plants.
57  The agricultural
machinery market is suffering from falling demand.  Industry restructuring and modernization is
progressing slowly.
177. Food processing machinery is mainly imported, especially for use in the sugar and fruit
industries.  Local production meets about 20% of the market.  Privatization of local firms has been
                                                     
55 Restructuring and privatizating the steel industry is considered crucial for EU accession (EBRD,
1999).
56 However, these plans suffered a setback when a key foreign investor withdrew.  Tenders for
privatization of the Huta Sendzimira as well as Cedler and Florian mills were advertised in May 1999.
57 Polish Agency for Foreign Investment (1999f).WT/TPR/S/71 Trade Policy Review
Page 104
slow and there is little foreign involvement.  Metal-working machine tools are also produced in
Poland.  Some three quarters of output is produced by 11 state-owned enterprises.  Most machines are
imported.  A restructuring programme has been prepared for several enterprises, but implementation
has been slow.
178. With the exception of some specialized industrial machinery, dutiable at 35%, imported non-
electrical machinery was dutiable in 1999 from MFN sources at rates of generally below 10%.
Electrical equipment (ISIC 383, 385)
179. Manufacture of electrical machinery and equipment in Poland covers household appliances,
consumer electronics, electric lights, medical, precision and optical instruments, and clocks.  Sales
amounted to US$4 billion in 1998, and accounted for almost 4% of Poland’s manufacturing output.
Foreign investment in the sector is significant, amounting to US$360 million at end-June 1999, andrepresented 6% of foreign investment in manufacturing in 1998.
58
180. About two thirds of output comprises electrical machinery and apparatus.  This includes the
manufacture of electric motors, generators, insulated wire and cable, electricity distribution apparatus,
and batteries.  Sales have grown rapidly, almost  doubling over the period 1994 to 1998.  A few major
firms dominate the industry, and foreign investment is significant.  About 90% of the foreigninvestment in electrical equipment is in this segment.
181. MFN tariffs on electrical machinery and equipment were generally a uniform 9% in 1999.
Higher tariffs applied to other electrical products, including household appliances, consumer
electronics and communications equipment, ranging generally from free to 24%, with a simple
average of 11%.  Higher tariffs, of up to 35%, applied to imports of a wide range of precision and
optical equipment as well as clocks.  A dumping investigation is currently examining imports of cable
from the Republic of Belarus.
182. The electronics sector benefits from duty-free entry of imported materials and components
not produced in Poland.  A Strategic Development Programme was also adopted in November 1998 to
develop the so-called "blue- opto electronics" sector.
183. Video cameras, recorders, and televisions produced in Poland are subject to excise tax at a
rate of 10%  while similar imported products are subject to a rate of 11.1%.
(j) Transport equipment (ISIC 384)
Motor vehicles (ISIC 3843)
184. Motor vehicle production in Poland has expanded recently, and in 1998 accounted for some
8% of manufacturing output and 23% of foreign investment.  About one third of vehicles are
assembled from imported kits.  Foreign participation in the industry is substantial.
59  As well as
passenger cars, there is local production of light and heavy commercial vehicles, including trucks and
busses.  There is also a large components industry in Poland, also involving substantial foreign
participation.
                                                     
58 Polish Agency for Foreign Investment (1999g).
59 Foreign companies Fiat and Daewoo purchased the two state-owned motor vehicle plants,
respectively, in the early 1990s.  Since then, other major foreign manufacturers have entered Poland, includingGeneral Motors.Poland WT/TPR/S/71
Page 105
185. Government policy has been to provide protection to enable the restructuring needed to
improve the industry’s competitiveness.  The provision of tariff protection on final vehicles and
components, combined with duty-free imports of CKD kits and favourable tax advantages, attracted
foreign manufacturers to develop assembly operations in Poland.  Stage II of Poland’s industrial
policy for motor vehicles is to encourage manufacturers to increase domestic component manufacture.
The Government is encouraging greater domestic value added in motor vehicle production, includingthe replacement of vehicle assembly from CKD kits.
186. Tariff protection has been substantial for motor vehicles.  In 1999, the MFN tariff was 35% or
if higher € 1,250 per unit on imported motor vehicles, and 35% on trucks and buses.  Original
components and CKD kits were importable duty free.  These rates provided motor vehicle assembly
operators with substantial effective protection.
60  Components not used as original equipment were
dutiable at a rate of 15%.
187. Import tariffs on passenger and commercial motor vehicles from the EU, currently phased
down to 15%, will be abolished from 2002.  Certain EU manufacturers receive additional preferential
access to the Polish market under bilateral duty-free tariff quotas, totaling 42,250 passenger cars and
170 lorries, negotiated as part of the Europe Agreement.
188. Excise tax rates on imported motor vehicles of 2.3% or 11.1%, depending upon engine size,
are higher than the corresponding rates levied on domestic vehicles of 2% and 10%.
Shipbuilding (ISIC 3841)
189. Poland is the world’s fifth largest ship manufacturer.  Some 90% of ships are exported,
mostly to the EU.  Shipbuilding accounted for 6% of manufactured exports in 1998.  Traditionally the
shipbuilding industry has been a major recipient of state aid.  Of the original five construction
shipyards, four are still operating with minority state ownership.  The Gdansk yard was liquidatedfollowing closure and has recently been purchased for redevelopment and the production of oil
platforms.  Privatization has been much slower in the repair segment.  Although all of the six repair
shipyards have been transformed into joint-st ock companies they remain fully state owned.
Substantial investment and modernization is required.
61
190. The simple average MFN tariff on ships and repair was 9.4% in 1999; yachts and other
pleasure craft were dutiable at a rate of 25% (Table AIV.1).  Sea-going yachts attract higher excise
taxes of 25% if imported compared with rates for domestic boats of either 20% or zero (for crafts
priced below € 2,400).
191. Poland is a member of the OECD’s Working Group on Shipbuilding.  However, like most
other OECD members, it has not ratified the Agreement Respecting Normal Competitive Conditions
in the Commercial Shipbuilding and Repair Industry.  This agreement is yet to come into force.
                                                     
60 The effective rate of protection is a standard tool for measuring net assistance to an activity.  It takes
into account the effects of assistance on both outputs and inputs and relates it to what the activity’s value added
would be without assistance.  It therefore provides a more reliable indicator of the extent of economic
distortions generated by the assistance structure.  Tariffs of 35% on final motor vehicles combined with duty-free importation of components, would provide effective assistance for vehicle assembly of well over 150%,depending upon the level of unassisted value added.
61 Ministry of Economy (1999b).WT/TPR/S/71 Trade Policy Review
Page 106
 (5) S ERVICES
192. The services sector has become the most important activity for the Polish economy:  it
accounted for close to 75% of GDP in 1998, up from 70% in 1995, and around two thirds of total
employment.  Activities are mainly market servic es, including commerce and repairs, construction,
transport and communications, and energy, gas, and water.
(i) Commitments under the General Agreement on Trade in Services (GATS)
193. Poland made WTO commitments in all service sectors except "recreational, cultural and
sporting services" and "other services not included elsewhere" (Table AIV.2).  However, the coverage
of commitments varies across service activities within each sector, and is generally narrow, with
many subsectors not scheduled.  For example, commitments on distribution services excluded
commission agents’ or franchising services, and wholesaling and retailing of a number of products,such as beverages, tobacco, and pharmaceuticals (Table IV.1).
194. Poland participated in the WTO negotiations on basic telecommunications and financial
services and increased its commitments in these areas.  The commitments on basic
telecommunications came into force following Poland’s acceptance of the Fourth Protocol to the
GATS on 29 July 1998.  Previously, Poland’s commitments were limited mainly to enhanced (orvalue added) telecommunication services.  Poland is  well advanced in its efforts for deregulation of
the domestic telephone network and construction of alternative networks.  Commitments on financial
services are yet to come into force pending Poland’s acceptance of the Fifth Protocol to the GATS.
Nevertheless, Poland has implemented such arrangements in its financial services legislation to meet
similar commitments made under its EU accession process.
195. Poland listed MFN exemptions in the GATS of indefinite duration on several services.  These
made Poland’s MFN treatment in these services conditional on Polish exports receiving reciprocaltreatment from trading partners.  Commercial presence rights contained in commerce and navigation
treaties, business and economic regulation treaties, and promotion and protection of provisions
contained in foreign investment treaties that go beyond Poland’s specific commitments are subject to
reciprocity.  Other services with an MFN exemptio n cover all passenger and freight transport services
(excluding maritime services), which are subject to reciprocal access by other countries; preferentialaccess embodied in bilateral air transport agreements; and fishing and fish-related services subject to
preferential access to Polish waters provided under bilateral agreements, particularly covering the
Baltic Sea basin.  Poland also scheduled an indefinite exemption from MFN treatment in audio-visual
services for cultural reasons, thereby reserving the right to extend preferential treatment to selected
trading partners (Table IV.2).Poland WT/TPR/S/71
Page 107
Table IV.1
Summary of main GATS commitments
Service subsector Summary
Distribution - cover only wholesale & retail trade, except for wholesaling of beverages, tobacco products,
pharmaceuticals, medical goods, cosmetics, surgical & orthopedic instruments, & retailing of
beverages, tobacco products, pharmaceuticals, medical & orthopedic goods
- foreign wholesalers must be licensed to distribute imported goods through commercial
presence; retailing of such goods cross border unbound
- presence of natural persons unbound except for cross-industry measures permitting temporary
stay of managers, specialists and business visitors.  Intra-corporate transfers of such personnel
employed by the parent company for at least 1 year are granted an extendable 1-year stay.  Such
entry subject to a market test
- foreigners must seek permission to acquire real estate
- no commitments scheduled for other services, such as commission agents’ or franchising
services
Education - guarantee full market access and national treatment for the provision of private education
services at the primary, secondary, higher and adult levels via all modes of supply except
presence of people.  This is unbound except for cross-industry measures permitting temporary
stay of managers, specialists and business visitors, subject to a market test
- foreigners must seek permission to acquire real estate
Enhanced
telecommunications- relatively limited commitments; some restrictions on foreign participation may significantly
impair competition
- cross-border, consumption abroad & commercial presence subject to a national treatment
limitation that only fully-owned Polish companies can directly link with foreign
telecommunication networks; only the public network can be used
- market access via commercial presence is limited by having to use one of three different
network systems  that are based on locally-made equipment
- foreign equity limit of 49% for carriers providing inter-town services- presence of natural persons unbound except for cross-industry measures permitting entry and
temporary stay of managers, specialists and business visitors.  Intra-corporate transfers of such
personnel employed by the parent company for at least 1 year are granted an extendable 1-year
period stay.  Such entry subject to a market test
- foreigners must seek permission to acquire real estate
Courier - full market access and national treatment (excluding written correspondence e.g. letters) for
cross-border and commercial presence
- presence of natural persons unbound except for cross-industry measures permitting entry and
temporary stay of managers, specialists and business visitors.  Intra-corporate transfers of such
personnel employed by the parent company for at least 1 year are granted a 1-year period of stay
which may be extended.  Such entry subject to a market test
- foreigners must seek permission to acquire real estate
Health care - full national treatment for cross-border, consumption abroad & commercial presence of medical
& dental, veterinary & other medical services
- national treatment of presence of foreign medical & dental doctors subject to limited voting
rights within professional associations; nationality requirements for foreign doctors & hospital
boards restrict market access
- national treatment for hospital services limited by prohibiting foreign private sector hospitals &
their patients from receiving public support
- presence of natural persons unbound except for cross-industry measures permitting entry and
temporary stay of managers, specialists and business visitors.  Intra-corporate transfers of such
personnel employed by the parent company for at least 1 year are granted an extendable 1-year
stay.  Such entry subject to a market test
- foreigners must seek permission to acquire real estate
Table IV.1 (cont'd)WT/TPR/S/71 Trade Policy Review
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Service subsector Summary
Accounting - full market access & national treatment to foreign accounting, auditing & bookkeeping firms for
cross-border & consumption abroad
- limitation on commercial presence via nationality requirements for auditors and required
approval of qualifications
- presence of natural persons unbound except for cross-industry measures permitting entry and
temporary stay of managers, specialists and business visitors.  Intra-corporate transfers of such
personnel employed by the parent company for at least 1 year are granted an extendable 1-yearstay.  Such entry subject to a market test
Advertising - cover all advertising, except alcohol, pharmaceuticals & tobacco products
- full market access & national treatment via commercial presence, but cross-border unbound
- presence of natural persons unbound except for cross-industry measures permitting entry and
temporary stay of managers, specialists and business visitors.  Intra-corporate transfers of such
personnel employed by the parent company for at least 1 year are granted an extendable 1-year
stay.  Such entry subject to a extendable market test
- foreigners must seek permission to acquire real estate
Legal - national treatment provided through all modes, but market access & national treatment via
commercial presence & people limited by Polish nationality and authorization requirements
- presence of natural persons unbound except for cross-industry measures permitting entry and
temporary stay of managers, specialists and business visitors.  Intra-corporate transfers of such
personnel employed by the parent company for at least 1 year are granted an extendable 1-year
stay.  Such entry subject to a market test
- foreigners must seek permission to acquire real estate
Architectural &
engineering- exclude architectural services; full market access & national treatment for cross-border,
consumption abroad and commercial presence on engineering services
Construction - wide coverage & accords full market access & national treatment for commercial presence
- national treatment provided for presence of people, but market access unbound
- presence of natural persons unbound except for cross-industry measures permit entry and
temporary stay of managers, specialists and business visitors.  Intra-corporate transfers of such
personnel employed by the parent company for at least 1 year are granted an extendable 1-yearstay.  Such entry subject to a market test
- foreigners must seek permission to acquire real estate
Source: USITC (1998), General Agreement on trade in Services: Examination of the Schedules of Commitments Submitted
by Eastern Europe, the European Free Trade Association , and Turkey , US International Trade Commission,
Investigation No. 332-385, September, Washington, D.C.
Table IV.2
MFN exemptions on audio-visual services
Audio-visual service Description of measure Criteria Countries awarded preference
Motion picture & video tape
production & distributionPreferential treatment
including access to fundingCooperation agreements All countries
Cinematographic works &
television programme
production & distributionPreferential treatment Specific European origin
criteriaAll European countries
Public transmission of audio-
visual worksNational treatment EC Television
broadcasting Directive
(No. 89/552), European
origin criteriaParties to the Council of Europe
Convention on Transfrontier Television, or
other European countries with which an
agreement may be concluded
Source:  USITC (1998), General Agreement on trade in Services: Examination of the Schedules of Commitments Submitted
by Eastern Europe, the European Free Trade Association , and Turkey , US International Trade Commission,
Investigation No. 332-385, September, Washington, D.C.Poland WT/TPR/S/71
Page 109
(ii) Telecommunications, postal, and audio-visual services
Telecommunications
196. While the Polish telecommunications industry has grown in recent years, it still requires
additional investment and modernization to foster  economic development.  It has a relatively low
density of fixed telephone lines, of 26 per 100 inhabitants in 1999, up from 8.6 in 1989.62  Mobile
phone growth has been substantial, and ten inhabitants per 100 had a mobile service in 1999.  Thetelecommunications sector is expected to grow at about 25% per annum and to reach US$5 billion in
2000.  Network investment and phone usage in Poland were among the lowest in the OECD in 1997,
and price levels the second highest.
63  Poland’s telecommunications market is dominated by the state-
owned enterprise, TPSA, and regulated by the Ministry of Post and Telecommunications, which also
sets telecommunications policy.
197. The 1990 Telecommunications Law established the national operator TPSA.  It provided
TPSA with a statutory monopoly over international ca lls, telex, and telegraphic services.  Competition
in local and domestic long-distance calls was allowed.  However, in practice, few licences for
domestic services became operational, and although the Ministry adopted a more liberal licensing
policy after legislative amendments in 1995, new operators experienced long delays in penetrating themarket, mainly due to interconnection difficulties.  TPSA therefore effectively held a monopoly on
domestic telephone services, owning 99% of local lines; it remains exempt from licensing
requirements.
64
198. However, in recent years, the Government has adopted a more vigorous policy aimed at
privatization and deregulation of the telecommunications sector.  Greater private sector participation
is regarded as necessary to improve efficiency and to enhance Poland’s capacity to meet the growing
demand for telecommunication services.65  The local telephone market was opened to foreign
investors without limitation under the Telecommuni cations Act of 1990.  A new Telecommunications
Law, intended to be adopted in 2000, will remove TPSA's monopoly over telex and telegraphic
services.  Its statutory monopoly on international calls and over mobile satellite services and networks
is due to end in line with Poland’s GATS commitments as from 2003.  New operators are being
licensed to provide fixed telephone services in certain regions.  The policy is to establish increasedcompetition across the network by licensing new operators to compete with TPSA.
66  Most of these
new operators are joint ventures with foreign affiliates.  However, foreign investment limits of 49%
apply to all telecommunication operators supplying international, long-distance, and mobile services.
There is no capital limitation for carriers providing local call services.
199. Apart from foreign investment limits and the re quirement to use the international network of
TPSA until 2003, the market for mobile phone services appears open to foreign suppliers.  The mobile
market is expanding rapidly, with 4 million cellular phones at end-1999, and is expected to grow to
over 6 million users by 2002.  There are currently three providers of mobile services in Poland, each
with dual licences to provide GSM 900 and DCS 1800 services.  Two GSM licences were issued in
                                                     
62 This is still low compared to average penetr ation rates in Western Europe of 40% to 45%.
63 OECD (2000).
64 Although the legislation provides for the issue of licences to construct alternative fixed networks to
deliver telecommunication services, this has rarely occurred.
65 Although TPSA installed 5.5 million new phones  during the 1990s and had 8.5 million subscribers at
end-1998, 2 million subscribers were still waiting for connection (ERBD, 1998).
66 The company, Netia, for example, has 23 licences to provide fixed telephone services in defined
areas covering one third of the population.  Similarly, Telfonia Lokalna, is licensed in seven regions andElektrim, via its subsidiary El-Net, has a licence to provide fixed telephone services in Warsaw.WT/TPR/S/71 Trade Policy Review
Page 110
1996 to joint-venture companies ERA GSM and PLUS  GSM to compete with the analogue mobile
network launched in 1992 by Centertel, a joint vent ure between France Telecom and TPSA.  Centertel
was awarded the third dual licence by tender in 1999.  Problems with poor quality links and the
charges paid to TPSA for interconnection has en couraged ERA GSM and PLUS GSM to expand their
own long-range networks, including devel oping microwave and fibre-optic systems.
200. In addition to TPSA, there are 54 independent licensed public fixed telephony operators,
including 24 for the provision of local services within the independent operator’s networks and seven
for mobile services.  There are also 76 licences for the provision of internet services, eight licences for
provision of tele-information services, and five licences for providing data transmission services.
However, independent operators are yet to penetr ate the market significantly.  At end-1998, TPSA
had 8.5 million subscribers while independent fixed telephony operators had 318,000.  Of the threemobile providers, ERA GSM and PLUS GSM combined had three quarters of the market.
201. The Government commenced privatizing TPSA in late 1998 with its successful flotation on
the Warsaw Stock Exchange and sale of 15% of the shares;  5% were offered to domestic investors
and 10% overseas.  The Government intends to privatize another 25% to 35% and distribute a further
15% to employees by end-1999.   A strategic investor is expected to be chosen by mid-2000.
202. Legislative changes have been made to accommodate the deregulatory policies.  The new
Interconnection Ordinance was adopted in 1999, and a draft new Telecommunications Law submitted
to Parliament in February 1999.  The new legislation is expected to become effective from
October 2000.  This provides for guaranteed interconnection to the public network by licensed
entrants to be overseen by a new independent regulatory body, the Telecommunications Regulatory
Authority.  TPSA will also have to be licensed under the new legislation.  It also provides for the
provision of universal services
67, and for price caps to be applied to these services.  The provision of
universal services will be funded from the Universal Services Fund, to which all operators and
telecommunications service providers with annual revenues exceeding € 2 million will contribute 1%
of their revenue.  Subsidies are paid from the Fund to providers to recover their costs in meeting the
universal service obligations.  Provisions also exist in the legislation aimed at controlling the use of
market power by public operators in charging for universal services.68
203. The new arrangements are expected to provide greater transparency and scrutiny in
interconnection fees charged to new operators by TPSA.  It should enhance competition and thereby
lower prices and improve service quality.  Efficiency will also be enhanced by tariff re-balancing
between fixed rental fees and variable telephone call charges as well as between local, domestic, and
international services.  Deregulation should reduce the sustainability of cross-subsidization.  TheOffice for Competition and Consumer Protection has publicly recognized the excessively high fees for
long-distance calls under the existing monopolistic situation and the maintenance of a tariff structure
that is not justified by the costs of providing specific telecommunications services.
69
Postal services
204. Similar legislative reforms are proposed for postal services and are expected to become
operative by 2001.  The draft postal law proposes a new independent Postal Market Regulation
                                                     
67 These are defined in the legislation as provision of fixed public telephone services, including access
to emergency call facilities; free directory services; facilities for the disabled; and itemized billing on
subscriber’s request (Article 48).
68 A public operator with significant market power is defined in the legislation as having at least a 25%
share of the region’s services.
69 OECD (2000).Poland WT/TPR/S/71
Page 111
Authority, and the deregulation of the postal sector by relaxing the monopoly on letters held by Polish
Post, Poczta Polska.  It is expected that a programme for the restructuring of the state-owned postal
services enterprise will be considered by the Council of Ministers in 2000.  Poland’s GATS
commitments provide for open access in courier services for all modes of supply, but exclude delivery
of written correspondence, such as letters.
Audio-visual services205. The National Broadcasting Council supervises the broadcasting sector under the Broadcasting
Act of 1992.  One of its main tasks is to establish polices for the audio-visual sector in cooperation
with the Prime Minister.  It is also responsible fo r setting the legal conditions governing broadcasting
and for granting licences.  Amendments aimed at adjusting Poland's audio-visual legislation with EU
requirements were adopted by Parliament and signed by the President in 2000.
(iii) Transport
206. Poland’s transport infrastructure is in need of substantial investment and modernization.  In
1998, the Government released a Plan for the Development of Transport Infrastructure up to 2015.  It
proposes developing the country’s transport systems in several stages, covering roads, railways,
inland waterways, airports, and seaports.  A number of legislative amendments and institutionalchanges were to have been made in recent years aimed at meeting EU requirements regarded as
essential for membership.
Roads
207. Only about one fifth of Poland’s 350,000 kilometres of roads are in good condition.  A third
require urgent repair.  The 1998 plan aims to adapt the existing road networks and safety standards to
European norms.  The estimated cost, including new toll ways, is Zl 90 billion.  The 1993 Motorway
Construction Programme provides for 2,600 kilometres of motorways over 20 years.  However,progress has been slow, largely due to funding shortages.  The Government generally meets about
15% of the costs of road construction, largely by earmarking 30% of excise tax receipts from fuel
sales for new and improved roads.
208. Road projects have mainly been funded by private firms under build-operate-transfer (BOT)
schemes.  The Government awarded licences to private firms to build and operate the roads and tocollect tolls for up to 30 years to recoup costs, after which the roads were transferred to the State.
However, since September 1998 these are being replaced with PPP (public-private-partnership)
arrangements whereby the State retains equity in the project and meets up to 50% of the construction
and operating costs of roads, but maintains a share in future profits.
70
Railways
209. Poland’s rail network totals 22,300 kilometres and is in need of modernization to upgrade the
service to international standards. About half of commercial freight is carried by rail. The Railway
Department of the Ministry of Transport and Maritime Economy regulates railway services, and the
General Railway Inspectorate, created in 1998, monitors and enforces technical standards of
infrastructure and railway construction.
210. Privatization of the state-owned railway company (PKP) is planned.  PKP has suffered large
and increasing losses, estimated at Zl 1 billion in 1998, partly due to declining coal movements.  Its
                                                     
70 Polish Agency for Foreign Investment (1999h).WT/TPR/S/71 Trade Policy Review
Page 112
total debt is Zl 4.7 billion, and investment of up to Zl 3 billion is needed to modernize its
infrastructure.  The restructuring programme provides for expenditure of Zl 1.65 billion annually until
2003 and reduction in the workforce by some 60,000.  As a start, PKP was split into three segments
from July 1998, handling passenger, freight and infrastructure.  These are due to be transformed into
joint-stock companies from 2000 and to be partially privatized by 2002.  The draft law on
restructuring was discussed by Parliament in late 1999.
211. The Government intends to end PKP’s monopoly in 2005 by allowing foreign carriers.  In
June 1998, the Government awarded the first licences to independent operators to provide national
railway services.
Maritime
212. The main objective of Poland's maritime transport policy is to harmonize arrangements with
the OECD and EU requirements.  The guidelines ca ll for the provision of such services according to
free and fair competition with no discrimination in favour of domestic operators, including provision
of government subsidies.  Maritime policy is handled by the Department of Maritime Transport of the
Ministry of Transport and Maritime Economy.  Poland’s cabotage policies reserving coastal shipping
to Polish-flag vessels are due to be terminated by 2001, when the new Maritime Code is expected tobecome effective.
213. Increased competition and transformation of the economy has adversely affected the shipping
industry.  All administrative measures restricting or discriminating against foreign shipping services
have been abolished, according to the authorities, as part of Poland’s treaty with the EU in 1991 and
its accession to the OECD in 1996.  There are no subsidies or other support measures for Polish
shipping industries.  International sea transport services are open to foreign competition.  The Polish
shipping fleet has declined and now accounts for 15% of Poland’s cargo shipping – foreign vesselsship the rest. At end-1998 the Polish fleet numbered 148 vessels, of which about half were state
owned.  Poland’s main shipping lines are state owned.
214. The largest state-owned line, Polish Ocean Lines Group, has rationalized its services,
reducing its fleet size from 178 to 44 vessels, and is now operating profitably on major international
routes.  Privatization of state-owned shipping companies is under way.
71
215. Poland has ten seaports, all state owned.  The t op four ports, at Gdansk, Szczecin, Gdynia and
Swinoujscie, handle over 90% of all cargo.  Port handling capacity is expected to double to
110 million tonnes by 2015.  The programme for privatizing port services is being developed and
should be implemented from 2001, in accordance with the Maritime Code and the new Law on
Seaports and Harbours.  Ports are being restructured as state-owned, joint-stock companies. These areto be partially privatized without foreign participation.
216. Ports are being restructured and modernized, aided by a new port law passed in 1997.  A
number of new wharves and terminals are being constructed, such as the Katowice wharf at Szezecin
built to handle liquid cargo.  A new LPG terminal has opened at Gdansk, along with a grain and feed
terminal.  The main ports also operate free zones, which enable firms to carry out light processing andassembling free of VAT and customs duties.
                                                     
71 The Polish Ocean Line Group is to be privatized, as is the Polish Steamship Company, after it has
been restructured; the Polish Baltic Shipping Company is to be partially privatized.Poland WT/TPR/S/71
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Aviation
217. Policies on civil aviation in Poland are formulated and administered by the Civil Aviation
Department of the Ministry of Transport and Maritime Economy.  The General Inspector of Civil
Aviation is responsible for technical matters, such as air safety and airplane inspection.  Poland has
three main international airports, at Warsaw, Gdansk and Kralow, as well as a number of smaller
international and regional airports.  The Ministry of Transport plans substantial investment to upgradefive major airports.  A draft Aviation Law is to be introduced in 2000 to replace the Air Law of 1962,
and a Civil Aviation Office is to be established. Airfares have been deregulated.
218. Three of the main airports (Warsaw, Rzeszow and Szczecin) are managed by the Polish
Airports Commission (PPL), which also has equity in several other airports that are managed by
independent companies.  PPL intends to modernize eleven main airports at an estimated investment ofUS$1 billion.  Airports are being restructured usin g commercial law partnerships between PPL, local
authorities, and private businesses, with privatization the next step. Gdansk’s Rebiechowo airport,
owned 50% by PPL, 30% by the State Treasury and 20% by local authorities, is to be privatized first.
219. Air services are provided mainly by the state-owned Lot Polish Airlines and EuroLot.  Lot
has a 50% share of the international passenger market (with Lufthansa in partnership and SASproviding the main competition), and over 80% share of the Polish charter market.  Lot must adhere to
specific community service obligations specified in its licence.  Two private licences have been
granted, but operations are yet to commence.
72  Lot has incurred heavy losses and, according to the
authorities, has received no government subsidies or loan guarantees.  Lot, a joint-stock company
since 1992, was slated for privatization by 1993, and then in 1999 by selling 49%; British Airways
was interested.  In November 1999, an agreement was completed to sell 10% of the shares in Lot to
the Swiss carrier, SAirGroup, for US$33.7 million.73  Under the agreement, the Swiss airline will
increase its ownership of Lot shares to 37.6%;  the State Treasury will retain 51% ownership;  and the
remaining shares will be distributed to Lot employees.  A new share issue, expected to raise US$150
million, will be used to restructure the company’s finances.  The agreement ends a seven-year
privatization process for the company.
220. International air passenger and cargo services in Poland are governed by some 85 bilateral
agreements whereby access is based on reciprocity arrangements.  However, most of these pre-date
Poland’s economic transformation when the currency was non-convertible.  A number of the
restrictions on foreign airlines have since been lifted.  Lot has priority or exclusive rights to be the
Polish operator under bilateral agreements.  Poland strictly applies bilateral capacity and sharing
provisions with foreign airlines.  An "open skies" agreement is being negotiated with the EC.  Thiswould open the Polish market to international comp etition (from European operators).  Consequently,
the Government is seeking a minimum five-year transitional period to liberalize its air services after
EU accession.
221. Airport ground services can be supplied by any licensed entity, but must be effectively
controlled and substantially owned by Polish nationals.  Generally these services are provided by onelicensed entity at each airport.  At Warsaw airpor t such services are provided by Lot Ground services.
                                                     
72 About 100 licences have been granted but have not met operational certification requirements.
Domestic air services supply requires a licence from the Mi nistry of Transport and an Air Operator Certificate
issued by the General Inspector of Civil Aviation.  Only Polish air carriers licensed and registered in Poland
with substantial ownership and control in Poland can operate such services.
73 SAirGroup and Lot also signed a strategic cooperation agreement allowing Lot to become a partner
from 2000 of the Qualiflyer Strategic Alliance; a European  airline alliance formed by Swissair, Sabena, Turkish
Airlines, TAP, Air Littoral, Crossair, AOM, Lauda Air, and Tyrolean Airways.WT/TPR/S/71 Trade Policy Review
Page 114
An additional operator is scheduled to be licensed when the new passenger terminal is opened in
2000-01.
(iv) Financial services
222. The provision of financial services has undergone substantial transformation during the
1990s, led mainly by banking and security sector reforms.  The capital market was established in 1991
with the Law on Public Trading in Securities and Tr ust Funds.  This provided a regulatory framework
for capital markets and established the Warsaw Stock Exchange and the Polish Securities and
Exchange Commission (PSEC) to supervise and regulate the securities and capital markets.  The
Warsaw Stock Exchange opened in April 1991 as a jo int-stock company with the State Treasury as
the major shareholder.  However, the financial se ctor remains relatively narrow in its provision of
services and use of monetary instruments.  Neverthe less, the financial market is maturing in response
to increased demand for such services.
Banking and finance
223. Although still relatively under-developed, the Polish banking system has changed
substantially during the 1990s in response to the transformation of the economy.  The provision of
banking services, such as consumer finance and credit cards, is increasing.  At end-1999 net bankingassets amounted to Zl 350 billion, representing over  half of GDP.  There were 80 commercial banks
and about 900 co-operative banks at end-June 1999.  The banking system comprises state-owned
banks, foreign-owned banks and Polish private banks.  The Polish banking system is regulated mainly
by the 1997 National Bank of Poland Act and a new Banking Act of 1998.
224. Bank privatization has accelerated since 1997, aided by significant foreign participation.  At
end-June 1999, there were only ten banks with majority state ownership, holding 44% of total bank
assets, compared with 29 such banks at end-1993, holding 80% of total bank assets.  The number ofprivate banks at end-June 1999 had risen to 70.
74  The largest bank privatization was made in June
1999 with the sale of 52% of Bank Pekao; 80% of Bank Zachodni was also privatized.  The State
currently has majority ownership in two large bank s, the Polish Savings Bank and the Bank for Food
Economy.  The Polish Savings Bank has recently been transformed into a single-owner state
company.
225. Participation of foreign banks in the privatization process has been considerable.  Foreign
banks have either purchased large stakes in Polish banks during privatization or established local fully
owned banks.  At end-June 1999, well over half of private banks (36 out of 70) had majority foreign
equity, of which half were 100% foreign owned.  Majority foreign-owned banks accounted for 52% of
the total equity capital of Polish banks, and 26% of their total net assets.  Private interest remainshigh.  At end-June 1999, foreign investment in the Polish banking sector amounted to Zl 3.8 billion,
of which about 91% was invested in banks with majority foreign equity.
75 Sixteen banks were listed
on the Warsaw Stock Exchange at end-1998;  most had majority foreign ownership.  In many cases,
foreign bank licences required taking over a troubled domestic bank, but entry restrictions, including
requirements on incorporation and on opening branches in Poland, were removed from 1999.  Nolimit exists on the number of foreign bank licences.  Banking consolidation is also occurring through
                                                     
74 In 1997, the State floated 85% of shares in Bank Handlowy and 70% of its shares in PBK-Warsaw.
In June 1998 it floated 15% of shares in Bank Pekao, and in October 1998 sold its 37% stake in Bank
Przemyslowo Handlowy.
75 Banks with 100% foreign ownership accounted for well over three quarters of the foreign equity of
such banks. The main sources of foreign investment were generally the United States, the Netherlands, France,and Austria.Poland WT/TPR/S/71
Page 115
mergers between major Polish banks.  The larges t bank merger in Poland occurred between four
commercial banks on 1 January 1999, and more are expected.
226. Apart from its monetary and exchange rate policy roles, the National Bank of Poland, as the
country’s central bank, is also responsible for banking supervision as well as setting and
implementing prudential regulations.  These are performed by the Bank’s General Inspectorate of
Banking Supervision, which is the executing agency of the Commission for Banking Supervision,established in 1997.  It is responsible for licensing and supervising banks to ensure safety of bank
depositors.  Existing supervisory and prudential requirements are consistent with EU and international
standards.  Banks must maintain a capital base of no less than 8% of risk-weighted assets and off-
balance-sheet commitments, and a minimum capital of € 5 million.  Banks also contribute to a Bank
Guarantee Fund to provide deposit guarantees for depositors and to help assist troubled banks.  TheBanking Supervision Commission released 13 resolutions and five regulations in 1998, aimed at
implementing additional prudential requirements.  Moreover, regulations covering new fields of bank
operations and harmonizing Polish prudential standards with relevant recommendations of the Basle
Committee for Banking Supervision and EU Directives became effective from 1999 (Resolution
15/1999 of April 1999).
227. The securities market and non-bank financial institutions are developing in Poland.  Share
market capitalizations continue to grow quickly, although from a relatively small base.  However,
there is currently no private bond market.  By end-1998, there were 253 listings on the Warsaw Stock
Exchange.
228. The PSEC licenses and monitors services of individual brokers and brokerage houses,
investment advisers, and trust funds and trust fund societies.  Currently there are 47 licensed brokers
and brokerage houses, and 17 permits for investment and trust fund societies, which manage 64 funds.Foreign venture capital investment funds are incr easing.  Moreover, the National Investment Funds,
established in 1995 as part of the Government’s privatization programme and floated on the stock
exchange in 1997, are managed by joint ventures involving Polish banks and international financial
institutions.
229. Private pension funds have been licensed since early 1999, involving substantial foreign
participation.  Currently, some 21 funds are operating.  Expected investments of US$1 billion in 1999
are forecast to rise to US$20 billion in 2004.
Insurance
230. The Polish insurance market is expanding by some 25% per year.  It comprized 55 insurance
companies at end-1998, of which 53 were privatel y owned and there were two state-owned non-life
insurance companies.  One of these, PZU, dom inates the insurance market, including for life
insurance, through its subsidiaries.  Its market share for each exceeds 40%, and hence is regarded
under Poland’s anti-monopoly legislation as having a dominant position in these markets.  However,
PZU does not have a statutory monopoly.  The next largest insurer is Warta, which has about 14% of
the market.
76
231. Foreign participation, in the insurance market has been substantial mainly via joint ventures,
and continues to expand, primarily from Germany and the UK.77 At end-1998, the share of foreign
investment in the sector was 33%, up from 25% one year earlier. The Government still intends to
                                                     
76 EBRD (1999).
77 For example, German insurer, Allianz AG Ho lding commenced operations in Poland in 1996 as
Allianz Polska SA, and introduced life insurance activities in 1997 through Allianz Polska Zycie.WT/TPR/S/71 Trade Policy Review
Page 116
privatize the loss-making PZU, which is being restructured.78  Sale of a 30% stake has been approved
and is planned for 2000, to be followed by another 30%.
232. From 1999, foreign insurance branches from all countries and agencies have been allowed
into the Polish market (on a reciprocal basis).  Operating a foreign branch in Poland or extending the
scope of insurance business requires a security deposit to be lodged to safeguard against future
obligations.  The security amounts to 50% of the minimum guarantee capital, and must be held by alarge Polish bank.  The security, with interest, will be refunded when the branch closes and meets all
its insurance obligations.
233. Foreign insurers may only pursue insurance activities in Poland by establishing a "main
branch of an insurance undertaking" (Article 41a).  They cannot provide insurance through
intermediaries.  Reinsurance provisions were changed in April 1996 to harmonize with OECDstandards.  Polish insurance companies can reinsure  abroad, above the previous limit of 80% of their
annual insurance premiums (up to 100%), subject to the following requirements: that no single
overseas reinsurer receives more than 15% of annual premiums; that no more than 20% of annual
premiums are made with reinsurers within the same group; and that a maximum of 25% is with
reinsurers within the same country.
79  There are no restrictions on advertising in Poland by foreign re-
insurance undertakings.  Polish citizens may purchas e insurance abroad from insurance companies not
licensed in Poland provided written refusal of the insurance contract has been obtained from a
minimum of three domestic companies.
234. The insurance market is regulated by the State Office for Insurance Supervision, established
under the Insurance Law of 1990.  Legislation was amended in 1995 to improve prudential
requirements, including minimum capital, reserve, investment, and solvency standards, and the
establishment of an Insurance Guarantee Fund to protect policy holders.  Licensed firms cannot carryon life and non-life insurance simultaneously.
(v) Tourism
235. Responsibility for tourism development and policy was transferred on 1 January 2000 from
the State Sports and Tourism Administration to the Tourism Department of the Ministry of Transport
and Maritime Economy.  The Polish Tourist Organization was established by law in 1999 to conducttourist promotional activities.  The Polish Agency of Tourism Development is responsible for tourist-
related investments.
236. Poland’s expanding tourism industry offers significant potential.  In 1998, 88.6 million
foreigners visited Poland, an almost five-fold increase since 1990.  However, only about one fifth
were estimated to be tourists staying at least one night in Poland.  Although almost 50% of totalarrivals came from Germany, the Czech Republic, Slovakia, and former USSR countries, arrivals
from the United States, Israel, and other European countries, especially Finland, the Netherlands,
Sweden, Norway, and the United Kingdom, are rising quickly.
80  Poland’s share of the European
inbound tourist traffic in 1998 was 5%.  In 1998, Poland’s estimated foreign currency receipts from
tourists amounted to US$8 billion, down from US$8.7 billion in 1997.
                                                     
78 In January 1999, PZU received from the Treasury a package of 22.2 million warrants, convertible
into shares in Bank Handlowy, aimed at stabilizing PZU and making it more attractive for privatization.
79 The Minister of Finance may vary these conditions provided they increase the security of the Polish
insurer.  The limits of 15% and 20% do not apply to insurance firms from WTO or OECD Members.  Insurersfrom OECD members are also exempt from the 25% limit.
80 The proportion of business tourists increased from 35% in 1997 to 46% in 1998.Poland WT/TPR/S/71
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237. Tourist accommodation facilities have also increased considerably, adding substantially to the
construction industry.  Foreign investment has been significant, totalling US$340 million in mid-
1998, in hotels, restaurants, and other tourist facilities.  By end-1999, foreign investment in hotels,
mainly as joint ventures, amounted to some US$200 million;  Sheraton, for example, had invested
US$80 million.  The state-owned Orbis chain of hotels was partially privatized in 1998;  an additional
9.3% was to have been sold in 1999.81  Since 1989, foreign firms are no longer required to form
franchise agreements with Orbis, which has a market share of over 40%.
238. The 1997 Law on Tourist Services, with amendments in 1999 aimed at EU harmonization,
governs the provision of tourist services by domestic and foreign firms within Poland.  Tourist agents
and operators must be licensed.  Foreign operators can provide such services through a representative
office established in Poland.  The legislation also covers the licensing of tour guides and theclassification of tourist accommodation facilities.
                                                     
81 According to the Government, priv atization was not necessary because the Orbis chain of hotels was
transformed into a joint-stock company in 1998.Poland WT/TPR/S/71
Page 119
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