INTELLIGENCE MEMORANDUM DOING BUSINESS WITH POLAND
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CIA-RDP85T00875R001700030109-7
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July 1, 1972
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DIRECTORATE OF
INTELLIGENCE
Confidentia!
Intelligence Memorandum
Doing Business With Poland
,O~ C
DOCUMENT SER"VECES BRANCH
FILE COPY
no NOT NFTRflY
Confidential
ER IM 72-109
3':_+? y 1972
U",
Copy No. . 3
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
July 1972
INTELLIGENCE MEMORANDUM
DOING BUSINESS WITH POLAND
Introduction
1. In doing business with Poland, Western governments and
businessmen have learned to do much, or most, of the work involved in
bridging differences in economic policy, institutions, and attitudes. The US
Government will become more involved in such efforts through the mixed
US-Polish commission to be set up this year to facilitate trade. This
memorandum briefly considers some of the main factors with which US
officials will be reckoning - the Polis:i regime's economic objectives and
problems, its specific hopes and limitations in the field of foreign trade,
and the conditions for negotiating and carrying out business deals with
Poland.
2. Since Edward Gierek and his supporters took over in Poland in
December 1970, they have brought a new urgency to the task of stimulating
Polish 'economic growth. The productivity of Polish industry increased very
slowly in the 1960s, and urban workers saw little improvement in their
living conditions. Gierek and his supporters feel they must do better.
3. The new leadership counts on trade with the West to help in
realizing its ambitions. The Poles hope to change the composition of this
trade, increasing the share of manufactures in exports and the share of
technically advanced machinery and equipment in imports. In fact, much
of the large amount of new machinery needed to modernize the structure
of the Polish economy must come from the West. There is an acute shortage
in the Communist world of equipment for high-priority industries, avid all
the Communist countries are looking to the West for help in developing
the same fields - petrochemicals, automobiles, food processing and
packagir., t,ixtiles, and supporting industries and services.
Note: This memorandum was prepared by the Office of Economic
Research.
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4. Polish leaders are planning to buy during the current plan period
(1971-75) sonic US $2.5 billion worth of plant and equipment in the West,
double the amount in 196( -70. They a:e ready to go deeper in debt to
finance some of these. imports - trade plans imply an increase in
indebtedness to the industrial West from about $1.2 billion in 1971 to
as much as $2 billion by 1975. The Poles are prepared to buy about
$400 million of the total imports of equipment from the United States.
But, as Poland is fully aware, most of what it wants can be supplied from
a goc4l many Western countries - including West Germany, Japan, Italy,
and the United Kingdom - and these countries will compete for the
business. The United States will have to meet this competition, and the
Poles, of course, hope that the US effort will lead to even more attractive
Western terms.
5. The Poles are concerned to obtain the most favorable interest
rates, repayment periods, and other terms for major deals with the West,
although they are less rabid than the Soviets about interest rates. They
are also embarked in an effort to beat down Western trade barriers, mainly
nontariff barriers. Moreover, they will use whatever leverage they have as
customers to increase Polish exports of manufactures, most of which have
found rough sledding in Wesa. rn markets. Chief among the means are
arrangements for partial repayment of credits with goods and various kinds
of joint ventures with big exporting firms.
6. Finally, the Poles have come to expect We-tern governments and
firms to absorb most of the special costs and pains of doing business with
them. A good deal of time and effort must be invested in educating Polish
customers and in serving as stalking horses for deals with other counties.
Western trade representatives are expected to endure cheerfully the rather
severe restraints on their access to people and information in Poland, and
to learn for themselves the informal channels and means - sometimes
including bribery - through which business is done in Poland. Formal
intergovernment channels are used by the Poles, as by the other East
Europeans, chiefly to lobby for favorable action on their claims and
expectations. They will surely expect the same of the new US-Polish
commission.
The Economy Under Gierek
7. Favorable short-run economic trends and a candid approach to
Poland's longer run problems have won the Gierek regime considerable
public acceptance in the year and one-half since the Polish riots. Gierek
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took care to remove the immediate causes of the riots within a few months
of taking power. He rolled back food prices, which had been boosted during
the Christmas season of 1970; imported emergency meat supplies; and
scrapped an unpopular incentives system that was ready for general
introduction in industry. In contrast to Gomulka, Gierel. went directly to
the workers to hear their complaints, and he has continued to do so. He
also has rewritten ~3omulka's 1971..75 plan, edging up the goals for raising
the standard of living. But as he has told the workers, substantial
improvements probably cannot be achieved even by 1980.
8. Gierek's campaign to win the confidence -- and patience -- of
the workers has been helped by good economic results. Personal
consumption rose strongly in 1971, sparked by large increases in imports
of meat and other consumer goods, a drop in prices of consumer
manufactures, and a 5% rise in real wages. Investment and industrial output
also increased sharply and agricultural production grew by a healthy 4%.
Trade trends also were favorable - solid gains in exports to the West gave
Poland a $113 million trade surplus in 1971 in spite of the added imports
of meat.
9. The rapid growth of output is continuing this year. In the first
five months, increases in investment, industrial production, employment,
and labor productivity all were above plan. Because crop prospects thus
far are only average, the agricultural sector will be hard pressed to achieve
half of the overall 4.6% increase planned for 1972. However, purchases
of animals for slaughter, and of milk and eggs, are running higher than
expected. Thus far, wages are rising by an extremely fast 10%. Trade, at
least through April, is booming; exports are up by 29% and imports by
24%.
10. Although the economy is off to a good start, many of Gierek's
1971-75 goals still are highly optimistic. The plan projects a more rapid
yearly increase in national income than achieved in 1966-70, but with a
slower growth of investment and employment than in that plan period.
This combination of targets depends on achieving both substantial gains
ir, productivity and major shifts within industry. The most dramatic
structural change is slated for the high-priority chemical industry; investment
in producing synthetic fibers and plastics is to rise from 20% of all chemical
investments in 1966-70 to 47% in 1971-75, largely offset by a sharp plunge
in the share of chemical fertilizers from 23% to 6%. Within industry as
a whole, the share of food processing and consumer goods production in
investn,l-nt also is to increase.
11. Trade plans - also ambitious -- call for a growth of exports at
9% compared with the 10% annual rate achieved in 1966-70. Imports are
to rise at almost a 10% annual rate, compared with 9% in the last five-year
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plan period. Little if any change is foreseen in the geographic structure
of trade. Poland will continue to depend heavily on trade with CEMA
countries(l) for major raw material supplies and for most exports of
machinery and other manufactures. CEMA and other Communist countries
will still account for about two-thirds of total turnover, and one-half of
that will come from the USSR.
Trade with the West
12. Even though Poland will continue to rely heavily on domestic
output of investment goods and on purchases from the USSR and Eastern
Europe, the West will play a key role in Gierek's plans to restructure and
modernize Polish industry. In addition to a strong preference for Western
technology, there is a shortage of the right kinds of equipment in the CEMA
area. Thus Poland is joining other Communist countries in seeking Western
machinery on favorable terms in order to develop the same industries -
plastics, petrochemicals, automobiles, food processing, textiles, and support
industries.
13. Even the cautious Gomulka regime vigorously sought, expecially
in the late 1960s, to obtain trade, credit, and market concessions from
Western countries. Poland has been a full member of GATT since 1967
and conducts one-third of its trade with the West - more than any other
CEMA member except Romania. Trade turnover with the West has more
than quadrupled since 1955, reaching $2.7 billion in 1971 (see Table 1).(2)
'Trade with the industrial West now accounts for three-fourths of this
turnover. Trade with the less developed countries (LDCs) has been slipping
as a share since the mid-I 960s, when it accounted for about 30% of Poland's
non-Communist trade. West Germany surpassed the United Kingdom as
Poland's main Western trade partner in 1970. Following these two countries
in importance are Italy, the United States, and France.
14. Poland has run trade deficits with the industrial West in 8 of
the 1 1 years between 1961 and 1971 (see Table 2). Small trade surpluses
were achieved in both 1970 and 1971. Poland has done better in this respect
in trade with the LDCs. In fact, since trade balances with many of these
countries are settled in hard currency, Polish surpluses have been very useful
in making payments on credits from the industrial West.
15. Imports from the West have provided machinery of advanced
technological design, rolled metals, chemicals, and raw materials for light
industry (largely textile fibers, fabrics, and yarns). Large grain imports have
helped to boast livestock production for both domestic consumption and
1. The Council of Mutual Economic Assistance includes the USSR, Bulgaria,
Czechoslovakia, East Germany, Hungary, Poland, Romania, and Mongolia.
2. The tables are in Appendix A.
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export. Poland still receives almost 80% of its imported machinery from
CEMA cotntries. The West, however, provides more than one-half of total
imports of chemicals, processed foods, and articles of light industry. For
the commodity composition of trade by geographic area, see Table 3.
16. Poland's ability to export to developed Western countries is
presently limited mainly to agricultural products and industrial materials -
hard coal, ores, and metals. The economy is still geared to produce for
the domestic and other Communist markets and is not generating
manufactures, especially equipment, that are readily salable in the West.
In fact, in 1970, only 7% of Polish exports to the industrial West were
machinery and equipment. Polish machinery sells much more readily in the
LDCs, accounting for two-fifths of exports to the LDCs in recent years.
17. Polish indebtedness to the industrial West on medium-term and
long-term credits is estimated at about $1.2 billion at the end of 1971.
This includes about $700 million owed to Western Europe and Japan, and
about $500 million to the United States, mainly for Commodity Credit
Corporation (CCC) credits and very long-term P.L. 480 loans. In addition,
the USSR reportedly extended a hard currency credit of $100 million for
purchases of meat in 1971-72; it is not known whether all of this loan
has yet been drawn. Poland's debt position with Western Europe and Japan
is summarized in Table 4.
US-Polish Relations
18. Poland has long had considerably more trade with the United
States than any other East European Communist country. By 1971 this
trade totaled $180 million cc.mpared with $66 million for Rcmar,:r., the
closest contender. c!isli imports from the United States dropped drastically
in 1965 after the withdrawal of P.L. 480 credits and by 1971 were still
only one-half of the 1964 level (see Table 5). The trade likewise shifted
in 1965 from a deficit to a surplus. During the past seven years, Poland
has run a cumulative surplus of $212 million in trade with the United
States. This compares with a cumulative deficit of $498 million during
1957-64. Part of the surplus has been used to make payments on past credits
and on the claims agreement signed in 1960.
19. Poland is the only East European Communist country to have
drawn heavily on US credits. During 1957-66, Poland drew $538 million
in P.L. 480 credits, $61 million in Mutual Security Act loans, and
$22.9 million worth of Export-Import Bank guaranteed credits for the
purchase of agricultural commodities. In addition, drawings on CCC credits
totaled $134 million during fiscal years 1963-71. Outstanding indebtedness
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on P.L. 480 credits amounted to $402 million on 31 January 1972(3)
Indebtedness on CCC credits; which-are--payable in equal installments over
three years, was roughly $40 million as of mid-1971. During fiscal 1972,
Poland drew about $60 million in CCC credits. In addition, Poland owes
$5 million on the surplus property loan of 1946 and $50 million on the
Mutual Security Act loans of 1957, 1958, and 1959.
20. In commodity structure, Poland's trade with the United States
is quite different from its trade with Western Europe. The present pattern
of trade mainly involves an exchange of Polish hams and semi-manufactures
for US grain and other agricultural commodities (see Table 6). Imports of
machinery and equipment made up only 4% of total Polish purchases from
the United States in 1971.
21. An example of one of the few equipment orders placed in the
United States is the $7 million contract signed by Polimex-Cekop with
DuPont and Petiocarbon Developments, Ltd. of the United Kingdom in
November 1971 for the construction in Pionki of a plant based on Corfam
technology. About 85% of the equipment is to come from the now-closed
DuPont plant at Old Hickory, Tennessee, and the remainder from
Petrocarbon. DuPont has granted :Oland exclusive selling rights in Poland
and selling rights in all other countries except the United States and Japan.
The plant is scheduled to begin operation in 1974 and to have a capacity
of about 2 million square meters a year. The Polish product is to be sold
under the trade name of Polcorfam. Another contract signed in 1971 was
that with Epstein Process Engineering for the purchase of $8 million worth
of cooling plants.
22. Polish sales to the United States have more than tripled since
tiLe reinstatement of most-favored-nation (MFN) status to Poland in 1960.
Poland's desire to establish hard currency markets despite price
considerations, and the fact that Polish hams and semi-manufactures have
long been salable here, undoubtedly played a major role in achieving this
increase, but the availability of MFN facilitated this drive.
Trade Plans
23. In the effort to increase its competitiveness in the sale of
manufactures in Western markets, Poland plans a huge increase in imports
3. A large part of 'he repayment on P.L. 480 loans currently is in Polish zlotys.
Poland's current annual payments on P.L. 480 amount to almost $50 million, of which
only some $15 million is in hard currency. P.L. 480 zlotys so far have been used
to finance cultural, scientific, and medical projects in Poland and to some extent to
finance US Embassy expenses. Any other uses, such Ps for advertizing and commercial
publicity, would have to be negotiated with Polish officials.
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of advanced capital equipment. The plan for 1971-75 calls for imports of
machinery and equipment from the West worth $2.5 billion, twice the level
of such imports in 1966-70. The Poles expect these imports to result in
a trade deficit with the industrial West of $70 million in 1975. Although
the regime expects a positive balance on services with the West, sizable
new credits will be needed to finance the current accoant deficit over the
period.
24. Planned purchases are to raise the share of machinery and
equipment in total imports from the industrial West to more than 40%
in 1975, compared with 28% in 1970. The share of fuels and consumer
goods in imports from the West also is expected to increase, while the
share of agricultural materials and foodstuffs is to decline sharply.
25. The planned change in the structure of exports to the industrial
West is far less dramatic. Poland expects a slight increase in the share of
machinery and equipment, chemicals, textiles, and other industrial products,
and a small decline in the share of traditional exports - foodstuffs, raw
agricultural materials, fuels, and o, ?s and metals.
26. The trade plan for 1971-75 indicates a willingness to increase hard
currency indebtedness by drawing heavily on long-term Western credits. In
fact, the regime is prepared to increase its import targets if it can either
achieve above-plan exports or find new sources of credits. Since the Poles
expect inflationary trends in the West to continue, they regard it as good
business to buy on long-term credit; the Gomulka regime has been accused
of shortsightedness in failing to take full advantage of available credit. As
the plan now stands, Poland hopes to finance as much as 60% of its imports
of Western machinery and equipment by means of credits of seven or more
years. In additio-., the country presumably will receive some shorter term
credits so that by the end of 1975 hard currency indebtedness on
medium-term and long-term credits might total $2 billion. Debt servicing
during 1971-75, excluding the $500 million owed to the United States,
might run as follows:
Million US $
1971
1972
1973
1974
1975
Repayments on credits
drawn prior to 1971
165
145
113
80
50
Repayments on credits
drawn during 1971-75
0
19
77
126
182
Total repayments
165
164
190
206
232
Interest payments
41
48
57
69
83
Total debt
servicing
206
212
247
275
315
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27. Poland's chances of getting the needed credits are good. Many
Western countries are eager to boost sales of machinery and equipment
to Poland, and the Polish record for making repayments (including those
to the United States) is spotless. Also, present debt servicing - more than
one-fifth of exports to the industrial West - is not beyond Poland's
capabilities. Although the debt servicing to export ratio is high by Western
standards, it is quite respectable by East European standards. The ratio
is 40% for the Romanians and 20% for the highly conservative Hungarians.
28. The Polish regime would particularly like to expand its imports
of US technology and equipment during 1972-75. As far back as 1968
an adviser to the rolish Ministry of Foreign Trade said that Poland hoped
that the United States would figure prominently in Poland's economic plans
through 1985. The Poles, however, stress that if they are to import much
capital equipment from the United States, they must have Export-Import
Bank credits and guarantees. Export-Import Bank credits, which currently
bear a rate of 6%, are now competitive on the world market. So far,
Romania is the only East European Communist country to have become
eligible for Export-Import Bank financing since enactment of the Export
Expansion Finance Act of 1971.
29. In December 1971, Poland submitted a $350 million shopping
list of desired purchases of machinery and equipment from the United
States. In April 1972, a Polish trade mission submitted an expanded version
of this list, containing about 30 items valued at more than $400 million.
Among the major items are equipment for an oil refinery in Gdansk ($45
million), a catalytic cracking plant in Plock ($20 million), an
ethylene-propylene plant ($35 million), a silicon steel mill ($30 million),
a ball bearing plant ($15 million), two meat processing plants ($26 million
and $6 million), a brewery ($24 million), and several textile plants ($55
million), Also included are various types of electronic equipment ($44
million) and equipment and know-how for the production of agricultural
machines ($14 million). Some of this equipment will provide output
previously imported (for example, the steel mill and the petroleum
equipment). Some will help boost supplies of consumer goods and exports -
for example, the meat processing and textile plants.
30. The Poles exerted considerable pressure on US Embassy personnel
in Warsaw and on US government officials in the United States during
1970-71 to get approval for an export license permitting the sale of US
catalytic cracking technology to Poland. In August 1971, such approval
was granted and an application was submitted by Universal Oil Products
(UOP) Co. of Chicago for this technology. However, it was not until
June 1972 that Poland awarded a contract to UOP after seeking competitive
bids from other US firms.
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31. Poland also submitted a list of items it would like to export to
this country. As with their trade with other Western countries, the Poles
want to push sales of semi-manufactured and manufactured goods such as
chemicals, pharmaceuticals, furniture, iron and steel products, and
machinery. Because of the difficulties of selling manufactured goods here,
however, hams and semi-manufactures probably will dominate Polish exports
to this country for some time. Poland's sales of manufactures to the United
States will probably continue to be lsrgely small-lot, one-time transactions
such as the contract won in 1971 for the delivery of $10 million worth
of battery operated golf carts.
New Contracts
32. In line with the five-year plan, Poland has already signed a number
of contracts and received substantial credits from Western Europe and Japan
for machinery to be delivered by 1975. One of the largest deals is an $85
million Italian credit to cover the purchase of machinery and equipment
for a new Fiat plant to be constructed in Poland.
The new plant is to produce a popular priced
small car; a larger Fiat has been built under license since 1967. About
three-fourths of the cost of the plant is to be repaid by de;iveries of Fiat
spare parts produced in Poland. In March 1972 the National Westminster
Bank of London reported that it had signed an agreement with Bank
Handlowy Warszawie for $16 million worth of credits, with an option to
raise it to $26 million. These credits, which are backed by the Export Credits
Guarantee Department (ECGD) of the British Gov%rnment are to be used
to finance 85% of British capital and semi-capital goods and associated
services.(4) Repayment periods will range from five to eight years from
the date of delivery or completion. Interest is to be at whatever rate is
current for ECGD credits at the time the contract is signed. The rate is
currently 6%. In 1971, British Petroleum (BP) signed an agreement with
the Ciech foreign trade enterprise for the construction of an oil refinery
in Gdansk. The agreement includes financing by BP and promises of delivery
of crude oil for the refinery beginning in 1976.
33. In addition, West European countries have concluded a number
of deals for which financing arrangements are not known. The Polish foreign
trade organization Varimex has signed a contract 'o import $4 million worth
of textile machines from a French concern (SACM). The West German firm
Textar is to build a factory in Poland to produce brakes and clutch linings
for cars, trucks, and b>>ses. The first stage of this contract - signed with
Poland's Polmot trade enterprise - is worth about $11 million. Petrocarbon
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Development Ltd. of the United Kingdom has agreed to deliver a natural
gas separation and helium liquefaction plant worth $7 million. The contract
will be handled on the Polish side by Polimex and the Polish Gas Union,
who will be responsible for civil engineering and offsite facilities. Another
British firm - Woodhall-Duckham Ltd. - signed a contract worth $13
million in March 1972 with Polimex-Cekop for the delivery of installations
for a caprolactam factory. Duckham heads up a group which also includes
Inventa of Switzerland and TechniPetrol of Italy. Duckham and
TechniPetrol are to handle the detailed engineering and procurement and
supply of equipment. Inventa, which is supplying the know-how, has agreed
to take about 10,000 metric tons of caprolactam over four years as part
payment. The project is to be financed by "multinational credit
arrangements."
34. Poland is looking beyond its traditional ties with Western Europe
to Japan. Like the United States, Japan has been only a marginal supplier
of capital equipment but has become increasingly interested in the CEMA
market. Poland would like to buy a wide range of Japanese equipment
and plants for the chemical, petrochemical, iron and steel, non-ferrous
metals, engineering, electronics, and light industries. In June 1970, three
Japanese firms, the Mitsui Bussan Co., C. Itoh and Co., and the Nichimen
Jitsugyo Co., extended a $100-million seven-year credit at 6%7% annual
interest for the purchase of Japanese equipment. In return, Poland is to
ship 20 million tons of coking coal to Japan during 1974-84. So far, Poland
has ordered a ball bearing plant ($10 million), a polypropylene plant ($10
million), and a nylon-6 textile plant ($20 million). In April 1972, Poland
ordered a $20 million tandem cold strip mill for the Lenin Steel Works.
Payment is to be made in US dollars over a period of eight years. In March
1972, Poland requested additional credits of $400 million to $500 million
from Japan but is unlikely, to get this much.
35. Apparently, only one large contract has yet been signed with US
firms on the basis of the shopping list presented to the United States. In
fact, Poland is looking in Western Europe and Japan for much of this same
equipment. Furthermore, US affiliates in Europe stand a better chance of
getting a Polish contract than do firms located in the United States. An
official of the Handlowy Warszawy Bank in Warsaw recently stated that,
although Poland is anxious to obtain US machinery, it believes that the
best way to do this is through US subsidiaries in West Germany. The
willingness of the Poles to buy the equipment here will depend on whether
or not they can obtain favorable credit terms and, to a lesser extent, on
whether they can persuade US firms to take Polish products as at least
partial payment for machinery and equipment. West European and Japanese
firms are more willing to accept this type of arrangement than are US firms.
In addition, US firms may not have the patience to deal with the often
slow-moving Polish trade apparatus, especially since the chances of obtaining
a contract even after protracted negotiations are uncertain.
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36. US firms are far behind those of Western Europe in their
knowledge of how to operate in Poland. West European firms have already
established contacts inside Polish industrial and trade enterprises and
ministries. They have learned on their own, perhaps with an assist from
the Embassies, the informal cl.annels and means (sometimes including
bribery) through which business is done in Poland. They maintain these
connections with frequent visits. Furthermore, European traders apparently
have learned to endure - when they cannot circumvent - the rather severe
restraints on access to people and information in Poland.
37. In addition to conventional trade contracts, Foland is actively
seeking joint production venture arrangements. West European firms often
have been willing to oblige, and Poland has claimed exports of several million
dollars a year resulting from such deals. In 1970, such exports represented
nearly one-fourth of total machinery exports to those Western countries
with which Poland was conducting joint ventures. Illustrative of recent joint
venture arr:,ngements is a ten-year agreement signed in February 1971
b'?tween Ponar, the Polish Machine Tool and Industrial Association, and
the Swedish state-owned SMT Machine Co. AB. The agreement calls for
a two-way turnover of $30 million during 1971-76 and includes plans for
bilateral deliveries and the assembly and sale of these machine tools in
do-7estic and foreign markets.
38. Poland is interested in joint venture arrangements with the United
States in such areas as tourism, the development of Poland's raw material
base, and joint production of machinery. In January 1972, Intercontinental
Hotels, a subsidiary of Pan Am,;rican Airways, signed a franchise and
technical agreement with Poland for a 750-room hotel in Warsaw. Poland
is to carry out the actual c-!~struction. Intercontinental is to assist in
planning, decorating, and management and to provide worldwide reservation
services as long as the hotel meets Intercontinental's stand,irds. In May 1977
the Polish foreign trade enterprise Bumar and the Warsaw Ludwig Warynski
Construction Machinery Works signed a long-term agreement with the
Koehring International Corporation of Milwaukee on technical and trade
cooperation and co-production in modern hydraulic building machinery. The
Polish construction machinery industry has been granted the right to
produce and sell certain types of construction machines designed by Merck
and, Hambrock, the Koehring subsidiary in Hamburg. The agreement also
provides for sales by Koehring of certain products of Bumar in Western
Europe.
Polish Business Facilities and Procedures
39. Poland is not easy to do business with. The regime does not
officially permit sales representatives of Western firms to set up permanent
offices in the country. The Poles prefer that foreign firms deal directly
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with Polish state trading enterprises but will allow them to make
arrangements through state agencies that accept foreign representations.
Western businessmen can go through the red tape of gaining ministry
approval to make exploratory contacts with Polish enterprises. The Ministry
of ,oreign Trade does, however, permit Western firms to open technical
liaison and service facilities, provided that prior sales of equipment, requiring
servicing, have been made to Polish end-users.(5) In practice, although not
officially, these facilities are no, precluded from offering expanded customer
services, which might include market promotion and sales. Q a
number of Swedish, Japanese, and British firms have already opened such
offices, and Caterpillar Tractor is considering the establishment of a servicing
facility in the Polish sulphur mining area. Besides formal restrictions, there
are physical obstacles to the establishment of offices. Hotel rooms rented
on an extended basis often have to suffice because of shortages of housing
and regular office space.
40. Poland will permit the opening of trade and technical information
centers. In December 1971 the Polish government agreed in principle to
the establishment of a US Trade and Technical Center in Warsaw. As
discussed in Appendix B, the British opened a Technical Information Center
in Warsaw in late 1971.
41. End-users in Poland play an important role in deciding on imports.
They must place orders through the foreign trade companies (such as
Polimex and Bumar), but they can turn down a bid if it does not offer
the desired technical standards. The end-users often indicate in their
specifications preferred prices and the countries (and even the firms) with
which they would prefer to deal. The foreign trade companies, however,
generally send requests for quotations to a broader range of potential
suppliers in an attempt to obtain the best possible deal. Representatives
of the end-using firt;,s as well as Lie foreign trade companies participate
in market research and fact-finding missions and ;i the actual commercial
negotiations. End-users naturally are mainly concerned with specifications,
while foreign trade firms, banks, and the ministries worry more about
financing. Difficulties in reconciling tti, se interests have been a major factor
in protracted negotiations on contracts with Western firms, especially for
machinery.
42. For example, negotiations - still not completed -- on a plant for
producing electrical steel sheet have been long and expensive. The experts
representing interested US firms have had to make many trips to Poland.
Furthermore, the US firms are in comp; tition with about eight to ten
foreign firms, including the Japanese, on bidding for the prince contract.
5. The Soviets, East Germans, and Romanians permit both sales and technical
representatives of a few Western firms to open offices in their countries.
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In June 1971 the subsidiary of a US steel company waa awarded a con'i.act
to provide technical specifications in an agreement signed with Centrozap,
a Polish trading organization. In the spring of 1972, however, matters were
obviously still at the talking stage. In early April 1972, a representative
for a US manufacturer met in Krakow with officials of Biprostal, a Polish
agency responsible for technical negotiations on steel mills, chemical plants,
and the like, to discuss the steel plant.
43. Trade arrangements as well as provision for joint ventures have
been spelled out in some detail in long-term trade agreements which Poland
has signed with several Western countries, including West Germany, the
United Kingdom, Austria, and the Benelux countries. These agreements
universally call for: the furthering of economic and scientific-technological
cooperation and industrial co-production; the establishment of mixed
government commissions (which typically include on the Western side,
businessmen and bankers as well as government officials); annual protocols
to the trade agreement governing the goods exchange; and stipulation as
to means of payment and general pricing policies. Maritime shipping
protocols and other relevant agreements concerning trade and payments are
referenced in, or appended to, the trade agreements. In addition, trade
agreements with GATT members include the provision that the Western
partner will reduce or abolish restrictions on Polish imports during the
period of the agreement and that both parties will grant each other
most-favored-nation tariff treatment. Arbitration procedures for commercial
disputes are usually spelled out in an "arbitration clause" in contracts
between Polish and Western firms. Unless otherwise specified, Polish civil
legislation calls for the site of artibration to be determined by analyzing
the contract to establish the country with which the contract "is mast
closely connected."
44. The mixed government co_,imissions meet once or twice a year
to negotiate annual trade protocols and to evaluate and promote trade and
economic cooperation. A Polish-Italian mixed commission, for example, will
hold its next meeting in the fall of 1972, when it will discuss the broadening
of industrial cooperation and the expansion of Italian deliveries of industrial
installations to Poland. The commission also will discuss credits to be
arra:.ged for the Italian machinery. Thus, the commission will serve as a
working group on subjects brought up in June 1972 during talks between
the Polish and Italian foreign trade ministers. The West German-Polish mixed
commission has on occasion set up a working group to do the same kind
of thing.
45. Bargaining over quantitative restrictions on certain goods is an
important element in the formulation of Polish trade agreements with
developed Western countries. Annual protocols effecting long-term trade
agreements contain goods lists specifying q%iantity or value ceilings and/or
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licensing requirements for certain products and product groups. Quota
ceilings imposed by Western countries are raiset9 annually for various
products, but in cases in which Poland has made substantial inroads into
a domestic market, or for a variety of other reasons, some Western quotas
remain at fixed or nearly co:istant levels. The more sensitive products subject
to rigid quotas are generally those goods Poland has had considerable success
in selling in the West, including fruits, vegetables, meat products, coal, textile
and wood products, a few steel and machinery items, and a range of light
manufactures, including glass products and certain consumer goods
(especially footwear).
46. Although Polish trade agreements with Western countries contain
a statement of intent by the Western partner to reduce and to eventually
eliminate quota restrictions against Polish imports, such statements are
invariably accompanied by an escape clause stating that the Western country
reserves the right to maintain certain quotas deemed to be in the national
interest.
47. Talks leading up to the long-term trade agreements have in some
cases been very lengthy. The Po, ;s' insistence on a clause covering industrial
and economic cooperation agreements was the primary cause of the
protracted talks with the British between December 1968 and the final
signing of the five-year trade agreement in April 1971. Talks with the West
Germans dragged on in the fall of 1969 and the following winter because
of disagreements over credit terms. In the end, reference to credit
arrangements was omitted from the trade agreement.
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Statistical Tables
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Polish Trade by Geographic Area ;t/
Million US
1975
1955
1960
1965
1970
1971
Plan
Turnover
1,852
2,820
4,568
7,155
7,910
11,282
Communist coun-
tries
1,183
1,780
2,956
4,739
5,163
7,295
Free World coun-
tries
668
1,041
1,612
2,416
2,747
3,987
Imports
932
1,495
2,340
3,608
4,038
5,797
Communist coun-
tries
605
950
1,347
2,473
2,721
3,768
Free World coun-
tries
327
545
793
1,134
1,317
2,029
Exports
920
1,325
2,228
3,548
3,872
5,485
Communist coun-
tries
578
830
1,409
2,266
2,442
3,527
Free World coun-
tries
49?j
819
1,282
1,430
1,958
a. Because of rounding, components may not add to the
shown.
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Table 2
Polish Trade with the Industrial West a/
Million US $
Year
Turnover
Imports
Exports
Balance
1961
942.2
527.1
415.1
-112.0
1962
971.7
509.9
461.8
-48.1
1963
933.6
500.8
482.8
-18.0
1964
1,137.5
587.6
549.9
-37.7
1965
1,148.1
546.7
601.4
54.7
1966
1,335.3
677.9
657.4
-20.5
1967
1,408.5
724.4
684.1
-40.3
1968
1,537.9
801.3
736.6
-64.7
1969
1,639.7
859.0
780.7
-78.3
1970
1,847.6
896.8
950.8
54.1
1971
2,093.1
1,031.0
1,062.1
31.1
a. Data are from Polish statistics. Because of
rounding, components may not add to the totals
shown.
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Poland: Commodity Structure of Trade, by Geographic Area
1971
Percent of Total
'Imports
0
z
o
t
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Machinery and
equipment
Fuels and power
Ores and met:-Is
Chemicals
Light industry
products
Processed foods
Raw agricultural
materials
Other
Exports
Communist Free World Communist
Total Countries Countries Total- Countries
Free World
Countries
100. 0 100.0 100 .0 100.0 100.0 100.0
...... ~---- ------
37,9 43.7
6.4 8.9
16.4 17.2
11.0 7.5
7,0 6.0
6.7 3.7
7.7 5.6 10.0 3.5
6.9 6.4
25.8 42.3
1.4 14.0
14.9 8.1
18.1 9.1
55.4 20.1
11.9 17.5
6.4 10.9
9.2 9.0
9.1 9.9 10.4 6.8
13.1 9.2 2.9 20.0
7.6 3.9 2.7 8.2
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Poland: Estimated Drawings and Debt
Servicing on Medium- and Long-TE.-m Credits
from Western Europe and Japan
1966
1967
1968
1969
1970
1971
Million US $
Drawings on credits
received
140
175
210
235
205
260
Debt servicing
125
138
162
177
191
205
Repayments
105
115
135
45
155
165
Interest
Indebtedness at end
20
23
27
32
36
40
of year 1
355
415
490
580
630
725
Debt servicing as a share
of exports to the indus-
trial West
22
24
25
26
23
21
a. Indebtedn ^ss I at the end of 1965 is estimated at $320 mil-
lion.
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T ab' e 5
Polish Trade with the tT.iited States a/
Million TJS $
Year
TMorts
Exports
Turnover
Balance
1956
3.7
27.4
31.1
23.7
1957
73.1
30.0
103.1
-43.1
1958
105.2
29.7
134.9
-75.5
1959
74.7
31.9
106.6
-42.8
1960
143.1
38.8
181.9
-104.3
1961
74.8
41.3
116.1
-33.5
1962
94.4
45.8
140.2
-48.6
1963
108.9
43.1
152.0
-65.8
1964
138,1
54.2
192.3
-83.9
1965
35.4
65.9
101.3
30.5
1966
53.0
82.9
135.9
29.9
1967
60.8
91.0
151.8
30.2
1968
82.4
96.9
179.3
14.5
1969
52.7
97.8
150.5
45.1
1970
69.9
97.9
167.8
28.0
1971
73.3
107.2
180.5
33.9
1956-71
cumulative
total
1,243.5
981.8
2:225.3
-261.7
a. US Department of Commerce trade data.
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Polish Trade with the United States
by Selected Commodities a/
Million
Percent
US fi
of Total
1970
1971
1971
Total imports
69.9
73.3
100.0
Food, beverages, tobacco
20.1
39.2
53.5
Of which:
Barley
3.3
4.5
Corn
5.4
18.8
25.6
Soybean oil and meal
8.6
9.0
12.3
Tobacco and cigarettes
1.7
1.7
2.3
24.0
14.8
20.2
Hides and skins, un-
dressed
1.7
4.9
6.7
Soybeans
10.0
7.7
10.5
Cotton, raw
5.7
Oils, fats, and waxes
12.9
10.1
13.8
Chemicals
6.5
3.5
4.8
Manufactures and semi-
manufactures
2.4
2.6
3.5
Machinery and equipment
3.6
2.6
3.5
Other
0.4
0.5
0.7
a. Data are from US sources. Because of rounding,
components may not add to the totals shown.
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Polish Trade with the United States
by Selected Commodities
(Continued)
Million
Percent
US $ of Total
1970
1971
1971
Total exports
97.9
107.2
100.0
Food, beverages, tobacco
54.8
51.2
47.8
Of which:
Canned hams and
shoulders
39.2
36.8
34.3
Canned cooked pork
7.8
6.5
6.1
Cod blocks, frozen
3.4
4.5
4.2
Crude materials
3.2
3.1
2.9
Chemicals
3.4
4.1
3.8
Manufactures and semi-
manufactures
34.3
46.9
43.8
Of which:
Iron and steel semi-
manufactures
6.2
19.2
17.9
Iron and steel manu-
factures
5.9
6.3
5.9
Fabrics
3.8
4.1
3.8
Furniture
2.3
2.5
2.3
Clothing and footwear
2.2
3.3
3.1
Machinery and equipment
1.9
1.5
1.4
0.3
0.5
0.5
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The British Technical Information Center
The Technical Information Center of British firms associated with the
Overseas Marketing Corporation, Ltd. was e::tablished in Warsaw in late
1971. The Center represents the interests of 33 British industrial firms,
including PYE of Cambridge, Ferranti, ICI Plastics (Film Division),
International Combustion, Ltd., the RACAL Electronics Group, Alginate
Industries, Colloids, Ltd., and Smith Kline and French. Among the functions
of the center are the following:
The organization of expositions and exhibition displays
of machinery and equipment.
The provision of technical catalogues and the distribution
of pamphlets and other publications on products of the
various British firms.
The organization of technical symposia and film shows.
The offering of basic consulting services in order to
promote contacts between representatives of British firms
and the corresponding Polish minis*-.,..-,, industrial unions,
design offices, research establishme.,' ~,, and industrial and
trade enterprises.
The publication of a technical bulletin in the Polish
language.
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