European Union – economy first

shutterstock_513990880_for web

 

Czesław Siekierski, a Member of the European Parliament and Chairman of the Committee on Agriculture and Rural Development, talked with WBJ about the economic aspect s of European integration in this time of political and structural crisis in the European Union

Interview by Ewa Boniecka

WBJ: Which policies should the EU focus on in order to maintain its economic position in the world – currently it represents 25 percent of global GDP – and how can the process be made more dynamic?

Czesław Siekierski: Firstly, the EU must focus on increasing efficiency, as currently it is not adequate in comparison with high labor costs in Europe. As a result, the economic viability of our economy is insufficient. Apart from that we must put even more effort into developing innovation to match the level of global leaders in this field such as South Korea, Israel or the US. The European economy still makes too little use of technological development and the level of digitalization is still low, but there are prospects for improvement in this field due to the implementation of the so-called Digital Union. These weaknesses of the European economy decrease our competitiveness in comparison with our major competitors.

60%
of global trade exchange is carried out by international corporations

Globalization and the emergence of the global market make it a must for us to negotiate advantageous trade deals that guarantee that the European market is opened only for those products that meet our high standards in terms of environment, salaries, animal welfare and greenhouse gas emissions.

For years, at the European Parliament you have been dealing with the topic of food production and agricultural policy – areas that are very important for our country. What are the current challenges faced by the Common Agricultural Policy and how do you see them from the perspective of Poland’s interests?

I have been member of the Committee on Agriculture since 2004, and before that I also dealt with these issues back in Poland. It’s an important field as it is connected with food security, both in the case of access to food, as well as its quality. The importance of the security of supply is growing in this context, for example due to a dynamic growth in global population, the depletion of farmland and climate change that causes natural disasters, which then threaten agricultural production. No less important is the second aspect of this security – the awareness in society that nutrition impacts health. This results in an increased demand for good quality food, produced according to high standards.

“In 2015-16 Poland experienced an ‘investment gap’ that has hampered our economic growth”

The Common Agricultural Policy was one of the first Community polices, set up in 1962. Currently it represents about 40 percent of the EU budget, but it used to be as high as 75 percent. Thanks to the CAP, the Community was able not only to eradicate food shortages that plagued the continent after the war, but also to make food its leading export.

The main challenges for European agriculture, similarly to the entire economy, are connected with the evolution of the global market. Our products must be competitive, efficiency must increase and our high production standards must be proliferated throughout the world in order to create a fair playing field for competitive play.

Also, let us not forget that agriculture is not only production, but also environmental issues, the influence exerted over rural areas, the climate, landscapes, etc.

Polish agriculture has made significant progress since the country’s accession to the EU, which is visible in the multiplication of our agri-food exports. However, in order to maintain this positive dynamic, we must continue to invest in our competitiveness on a European and global level.

How do you perceive the condition of the European free market and the market for services and their functioning? What problems are Polish producers and exporters faced with?

The main problem of the common EU market in recent years is growing state protectionism, especially in the countries of Western Europe. This is the case, for example, with agri-food trade. Our producers report growing obstacles in the form of non-tariff barriers that take on the form of requirements concerning additional certificates, labeling of products, increased and directed controls, etc. It is a serious problem that puts the common EU market in jeopardy.

30 million
jobs in the EU are connected with the export of European products

Barriers on the freedom to provide services are even more serious, and even the famous directive on services from 2006, partially liberalizing the market for services in Europe, was not able to change it. The countries of the so-called old Union are not capable of competing in term of process with Poland or other countries in the region, so they refer to social dumping and introduce additional requirements that are proclaimed to be in the interest of workers’ rights, but in reality raise the cost of our services and limit our competitiveness. Our transport services are particularly affected in this regard, and thanks to the common market managed to become one of the largest in Europe. Europe needs to open itself up to international trade.

Can the current protectionist tendencies of the US and some other countries impede that process?

If based on fair rules, international trade benefits all parties involved. Europe is one of the largest beneficiaries of the global exchange – in the EU around 30 million jobs (almost every seventh job) is connected with the export of our products.

Lately, especially after the presidential elections in the US (“America first”) there is a growing global fear that protectionism could harm global economic growth. The US has unilaterally left the Transpacific Partnership (TPP), the future of the Transatlantic Agreement (TTIP) and some other bilateral and regional deals (for which negotiations have started after the failure of the WTO Doha Round) remains uncertain.

40%
of the EU budget is spent on the Common Agricultural Policy

It would appear that the Trump era in international trade will mean greater popularity of bilateral agreements, at the expense of regional ones. But the rebirth of the WTO cannot be excluded as well, and for which there are visible signs (the ratification of the Trade Facilitation Agreement in February 2017(TFA)).

It is also worth noting that currently around 60 percent of global trade exchange is carried out by international corporations and the role of global capital is still growing, while the significance of countries is decreasing.

How do the concepts of the Morawiecki plan and its emphasis on the role of public funds in investments resonate with the EU model and the Juncker Plan for reviving investments in the Union through the transfer of public funds from the Union to Member States?

The weakest element of the economic growth of both Poland and Europe is inadequate means for investment. In order to stimulate investment, the Union has introduced the so-called Juncker Plan that envisaged the creation of the European Fund for Strategic Investments. It is a joint undertaking of the European Commission and the European Investment Bank (EB) that, in a three-year period, envisages leveraging investments amounting to €315 billion from the initial €21 billion (€16 billion guaranteed by the EU budget and €5 billion from the EIB). These activities, undertaken mainly by the introduction of financial instruments, caused an influx of investment projects that by the end of 2016 amounted to around €160 billion. As a result of this optimistic data, it has been decided to prolong the program for the next three years while doubling the funds for it.

“The main problem of the common EU market in recent years is growing state protectionism, especially in the countries of Western Europe”

The Juncker Plan generates additional funding for the economy – financial instruments are based on small capital, and other such instruments are based on them, which may cause some distortion on the financial market in the future.

In Poland, the main driver of investment is EU funds, which has been particularly visible in 2015-2016 when moving from the previous to the next EU financial perspective, and Poland experienced an “investment gap” that has hampered our economic growth. It would appear that the realization of the Morawiecki plan is largely dependent on EU funding, including after 2020.

Some Polish economists and businesspeople are in favor of opening a broad discussion on the topic of adopting the euro in Poland and on our country’s future accession to the euro zone. How do you see this from the perspective of Polish political interests and our economic and financial capabilities?

There are various opinions on the issue. Both being part of the euro zone, as well as keeping our own currency has its positive and negative aspects. Adopting the euro is, however, connected with reaching a certain level of development, and shortcomings in this regard were responsible, for example, for the trouble experienced by Greece. That is why one should not repeat simplified opinions saying that adopting the euro was the cause of the breakdown of the Greek economy. If that had been the case, Greece would no longer be in the euro zone, while at the same time the majority of society still wishes to remain part of it.

Poland cannot compare itself with countries such as Estonia or Slovakia, since we are a larger country with a different economic structure. A decision as important as this one should be discussed. That is why, in my opinion, it was a mistake to dissolve the team at the Polish National Bank that was dealing with the analytical side of the process, as even if we are not willing to join the euro zone any time soon, we should still observe what is going on there.


 

Czeslaw_Siekierski_for web

Czesław Siekierski

A Polish politician and Member of the European Parliament (MEP) as part of the European People’s Party. He has been Chair of the European Parliament’s Committee on Agriculture and Rural Development since 2014. Siekierski holds a PhD in agricultural economics. His academic work is focused on rural area development and management, as well as EU integration.

Pin It