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Country Commercial Guides for FY 2000: Poland Report prepared by U.S. Embassy Warsaw, released July 1999

CHAPTER III:   Political Environment

A.   Nature of Political Relationship with the United States

The United States and Poland have enjoyed warm bilateral relations since 1989. Every post-1989 Polish government has been a strong supporter of a continued American military and economic presence in Europe, and has identified membership in NATO, the European Union, and other Western security and economic structures as Poland's principal foreign policy priorities. Poland was invited to join NATO at the July 1997 NATO Summit in Madrid. Following ratification of Poland's accession by all the member states, including the United States (where the vote in the Senate was 80-19-1 in favor), Poland, along with the Czech Republic and Hungary, became a member of NATO in March 1999 and thus a U.S. ally. Poland served successfully as the Chairman in Office of the Organization for Security and Cooperation in Europe (OSCE) in 1998. Poland has done a superb job as the formal protector of American interests in Iraq since the Gulf War and cooperates closely with the United States on such issues as nuclear non-proliferation, human rights, regional cooperation in Central and Eastern Europe, and reform of the United Nations.

Poland has been the largest recipient of U.S. assistance to Central and Eastern Europe. Since 1989, the U.S. has committed more than USD 4 billion to such areas as debt reduction, privatization, financial stabilization, financial institution building, entrepreneurial training, support for a free press and other democratic institutions, and efforts to improve Poland's environment. One of the Peace Corps' largest programs in the world is in Poland.

A graphic illustration of Poland's close cooperation with the United States has been the large number of high-level visits exchanged between the two countries in recent years. In 1998, Prime Minister Jerzy Buzek visited Washington, as did Foreign Minister Bronislaw Geremek. President Kwasnieski and Prime Minister Buzek also participated in the Washington NATO Summit in April 1999. High-ranking U.S. visitors to Poland since 1997 include President Clinton, Secretary of State Albright, Secretary of Defense Cohen, and many Senators and Representatives.

Economic issues are playing an increasingly larger role in the bilateral relationship. A significant issue is the widening differential between tariffs on products originating in the EU and those of non-EU origin (including U.S.). This differential results from the gradual reduction of Poland's tariffs on EU products under its Association Agreement with the EU and the unchanging level of MFN tariffs. Most affected thus far are automobiles and electrical generating equipment, which face tariff differentials that U.S. companies fear will price them out of the market. Another issue of considerable significance is the imposition by Poland of a 50-percent European-content quota for television broadcasts, which Polish television regulators assert is necessary to meet requirements for EU accession. Poland also has delayed enacting 50-year IPR protection for preexisting sound recordings starting with recordings made in 1946, a commitment they made in TRIPS. In addition, Poland has in some cases applied phytosanitary standards to agricultural products in ways that effectively result in the creation of non-tariff trade barriers. In past years Poland seemed to apply product certification procedures with much the same result.

B.   Major Political Issues Affecting the Business Climate

Leaders of Poland's major political parties have repeatedly expressed strong public support for foreign and specifically U.S. investment. Substantial foreign direct investment is considered essential to Poland's achieving its overarching goal of raising the standard of living to the levels of Western Europe. Factions in the current governing coalition's senior partner, Solidarity Electoral Action (AWS), and several smaller opposition parties, most notably the Polish Peasant Party (PSL) and the Movement for the Reconstruction of Poland (ROP), oppose the sale of land to foreigners, especially Germans. Although all of Poland's major political parties at one time or another have exhibited some reservations about allowing foreigners to acquire dominant positions in strategic firms, the current government intends to allow foreign investors to compete for controlling interests in all or most of those strategic firms that are to be privatized. As for trade issues, political parties' support for reducing tariff and non-tariff trade barriers varies from the avowedly open-market stance of the Freedom Union (UW), the governing coalition's junior partner) to the generally protectionist position of PSL and the parties of the far right; though, overall, Poland has been lowering trade barriers in accordance with its international obligations to WTO. While all major political parties are in favor of Poland joining the EU (which means Poland will have to adjust its laws and regulations to comport with the EU's acquis communautaire), they differ in their level of enthusiasm.

Trade unions are also an element for foreign business to consider. The Polish trade union movement, the engine of communism's collapse in the 1980's, has occasionally been problematic for foreign investors, particularly when managers of newly privatized state enterprises have instituted management changes. Resistance has also come from often-bloated enterprise middle management. But considering the huge growth and magnitude of U.S. investment, few American investors have encountered significant difficulties with Polish unions.

C.   Brief Synopsis of the Political System, Schedule for Elections and Orientation of Major Political Parties

Poland is a parliamentary democracy. A new Constitution adopted in 1997 enhances several key elements of democracy including judicial review and the legislative process, while continuing to guarantee the wide range of civil rights, such as the right to free speech, press, and assembly, that Poles have enjoyed since 1989.

Poland has a bicameral Parliament, comprised of a Lower House (Sejm) and upper house (Senate). Within the legislative branch of the government, the Sejm has most of the power; the Senate may amend legislation passed by the Sejm or delay it. Both bodies are democratically elected. Poland's last Parliamentary elections were in September 1997 when two parties with roots in the Solidarity movement, Solidarity Electoral Action (AWS) and the Freedom Union (UW), won 261 of the 460 seats in the Sejm and formed a coalition government. The Parliament is elected to a four-year term, which expires in September 2001, when new Parliamentary elections will take place unless called earlier.

The Polish Prime Minister, who forms a government with a vote of confidence by the Sejm, chairs the Council of Ministers. Jerzy Buzek of the AWS has been Prime Minister since the Parliamentary elections in the fall of 1997. There are 23 cabinet ministers, two of whom serve as Deputy Prime Ministers, drawn from the governing coalition parties.

Poland's President, who serves as the country's head of state, is Aleksander Kwasniewski, an ex-communist turned social democrat, who defeated former Solidarity union leader Lech Walesa in Poland's second post-war free Presidential election in November 1995. He has a five-year term. The Polish President is the commander-in-chief of the armed forces and may veto legislation passed by the Parliament. According to the new Constitution, Presidential vetoes can be overturned by a three-fifths vote in the Sejm.

The most influential political parties are:

Solidarity Electoral Action (AWS): The center-right AWS is the larger of the two parties that form the governing coalition. AWS is itself a coalition of over 30 political groupings allied with the Solidarity trade union. AWS was the big winner of the 1997 Parliamentary elections, winning 201 of the Sejm's 460 seats. Its platform supports privatization and welcomes foreign investment. AWS is led by Solidarity trade union Chairman Marian Krzaklewski and Prime Minister Jerzy Buzek.

Democratic Left Alliance (SLD): the largest opposition party in the Sejm, the left-of-center SLD is a coalition comprised mostly of successor parties to the communist-era Polish United Workers Party (PZPR) and is headed by former Minister of Internal Affairs Leszek Miller. The party's leadership generally supports liberal economic policies but stresses the importance of cushioning the harsher effects of economic reform.

Union of Freedom (UW): UW is the smaller of the two parties in the governing coalition and, like AWS, has its origins in the Solidarity movement. UW pursues a mainly socially liberal, pro-free market course. Its membership is a diverse mix of liberal free-market thinkers, intellectuals, and social activists. The party is led by Deputy Prime Minister and Minister of Finance Leszek Balcerowicz, who authored Poland's economic "shock therapy" in the early 1990s.

Polish Peasant Party (PSL): headed by former Deputy Prime Minister Jaroslaw Kalinowski, the PSL has grown from a communist-subordinated party into a classic European agrarian party.

Movement for the Reconstruction of Poland (ROP): a rightist, nationalist party headed by former Prime Minister Jan Olszewski, ROP supports lower taxes, but the party's strong populist wing criticizes privatization and foreign investment. ROP has seen a decline of its fortunes in recent years and now has only a few deputies in Parliament.

Fatherland, the Polish Family, and other far-right parties: These parties are splinters from the larger parties and are nativist, anti-E.U., and, in some cases, anti-NATO. Their radical views have won them only a few seats in Parliament.

Union of Labor (UP): UP is an ideologically pure social-democratic party that advocates a broad social safety net. It is the smallest of the major parties in Poland and has no representation in parliament.

D.   Local Government

Provincial and local government can play an important role in facilitating or hindering trade and investment in Poland. Poland recently undertook a major provincial and local-government reform and decentralization. As of January 1, 1999, Poland's 49 provinces (wojewodztwa) were consolidated into 16 and given sweeping new authority, particularly in the areas of economic development and investment. Each province now has its own parliament (sejmik), which chooses a Governor (Marszalek), as well as a Chief Administrator (Wojewod) appointed by the central government to manage central programs in the province. The reform has also created a new level of county (powiat) government, which is responsible for providing many local services. Party affiliations play an increasingly important role in local Polish politics, particularly in larger cities, but are not yet as significant as in the United States.