The Role of Foreign Direct Investment and Trade Policies in Poland's Accession to the European Union

Abstract

The challenge of a pre-accession strategy is to identify policy measures that would improve allocative efficiency, reduce adjustment cost and strengthen Poland's growth potential within the framework of integration into the European Union (EU). The first section of this report examines foreign trade institutional and policy issues in the broader context of investment regime and competition. The second section briefly examines developments in foreign trade with a focus on identifying main challenges in the near future. Section 3 discusses market access for Polish products with an emphasis on non-tariff trade barriers. Section 4 focuses on foreign direct investment, addressing questions related to its role in the adjustment to liberalization of trade with the EU and its impact on convergence to EU levels. Section 5 examines foreign trade institutions and policies in terms of their impact on resource allocation and economy-wide efficiency. Section 6 outlines the premises of a strategy that would simultaneously accomplish the twin goals of a fast accession and minimization of adjustment costs associated with EU membership. The grounds and means of this strategy go beyond the trade sector proper. It also offers suggestions on how to redesign Poland's institutions in order to avoid the trap of slow growth triggered by government-made distortions of foreign and domestic trade.