Good partners

international relations have always played a critical role in the economic development of countries. Global trade in goods has increased more than 250-fold since 1950. In particular, however, the political changes that happened in the 1980s had a significant global impact on the foreign trade sector, with a particular focus on Europe. Predominantly, the visible growth of Poland's foreign trade dynamics with EU member states has increased in recent years. The value of products exported from Poland has risen by exactly the same indicator as the value of imported goods during this period. 

SEHR IMPORTANT

For many years, German-Polish relations have been of special and unquestionable importance for both sides. The volume of German-Polish trade has doubled only in the last decade. In 2020, Germany held a significant position as the largest trading partner of Poland, covering 28.9% of Poland's total exports and almost 22% of total imports. Common interests in many areas and close partnerships in organizations such as the EU and NATO provide a solid foundation for deepening trade links. Certainly, one of the historical factors that influenced the intensification of relations was the signing of the Polish-German Treaty of Good Neighborship and Friendly Cooperation concluded in 1991 after the end of the Cold War, supporting, among others, Poland on German support in rapprochement with the EU, which Poland finally joined to in 2004. Despite the political differences, which are particularly noticeable today, trade relations have been based on mutual support and cooperation for over 30 years, as Germany is now one of Poland's most important strategic partners in politics and business.

Almost 29% share of the German business in the Polish market is concentrated on the automotive and electrical industries. The most frequently imported products are cars and car parts ($9.01 billion) and packaged drugs ($5.21 billion). Poland mainly imports these products from Germany with a turnover of $69.6 billion. Considering exports, Poland is a leader in the export of car parts, reaching a significant $14.6 billion, cars ($6.8 billion), seats, and computers, exporting mainly to Germany. The automotive industry has remarkable importance not only for the internal economy but for foreign expansion. Participation of German businesses in the Polish market (28.9%) is ahead of France (6%) and proves a huge disproportion, dependence, and concentration on one market. Overall revenue growth in bilateral trade in 2019 did not slow down its pace. In January-September 2019, Polish exports to Germany increased by 4.9% compared to the same period of 2018, while German exports to Poland increased by 4.1%. In particular, the strong growth in demand in the private sector recently has made Poland even more interesting. "Made in Germany" products have also a very good reputation in Poland, which leads to a dynamic increase in imports of German products.

BETTER THAN EVER BEFORE

Despite the difficulties created by the ongoing Covid-19 pandemic, German-Polish trade is doing surprisingly better than ever before and the transformation of the global economic order is accelerating. In the first year of the pandemic, the Polish economy proved to be particularly resistant to international trends resembling the same trends as during the global financial crisis of 2007-2008. At that time, Poland was the only country in the EU that continued to have positive economic growth. However, the outlook was not very optimistic — the beginning of 2020 looked rather worrying. In Poland, GDP in the second quarter fell by 8.9% compared to the three previous months. In Germany, it was even an astonishing 10.1%. Heavy traffic jams on the Odra-Neisse border, lockdown, restrictions, and temporarily closed factories made the entrepreneurs significantly worried. Finally, however, bilateral trade suffered less than experts speculated. Analysis shows that Poland exported more goods and services to its western neighbor than ever before, showing record numbers in Q1 2020. According to the initial results of the Federal Statistical Office, Germany's foreign trade with Poland in 2020 equaled over €123 billion, which makes our western partner the first in the ranking of Polish trade partners. According to recently published reports, exports amounted to the equivalent of €66 billion — more than ever before. Interestingly, in the first months of this year, exports from the US to Germany fell by 10%, while at the same time the rate of exports of Polish products to Germany rose by 15%. It is definitely no coincidence that this increase appeared in the year of the Covid-19 crisis. However, it is related to using such moments as an own advantage. Polish companies saw the crisis as an opportunity to establish contacts with German contractors and spread their wings. Poland, together with China, the Netherlands, the US, and France, is currently one of the five most important trade partners of Germany in the world.

The trade relations between both countries took on a completely new meaning during the Covid-19 pandemic. The interest and concern for stable relationships are now the responsibility of both parties, which may cause getting closer trade relations, and in the future, also reorganize global supply chains.

REORGANIZATION ON THE CARDS?

The fragility of Euro-Asian trade relations has been exposed in recent months. As a result, it may lead to reorganization in strategic sectors in the future and ultimately the relocation of production facilities to Europe. There is a possibility that adaptation and shortening of production chains after the end of the Covid-19 pandemic will benefit the entire CEE region. Even before the pandemic, its analysis had begun not only for technological reasons but also for ecological reasons. The idea of creating an environmentally friendly industrial production zone in the EU is being considered more and more often by Polish and German entrepreneurs and politicians. Moreover, taking into account the organization of the world economy, the fight against climate change requires completely new priorities. It can no longer be just to produce goods as cheaply as possible, but as CO2-neutral as possible. According to the calculations of the Polish Economic Institute, the country's economy could gain $8.3 billion annually by restructuring European supply chains in the most optimistic scenario.

Not only trade but also investments are of great importance in mutual economic relations. The largest investment projects are registered in the sectors of the automotive industry, machinery and chemical industry, banking, and energy. In particular, engines, finished trucks, and cars are often produced by foreign manufacturers and largely exported. Investments by giants such as BASF or Daimler are changing the Polish economy and are an important development factor for the regions and the entire country. Almost 5,000 German companies have invested a total of €35 billion in Poland or 17.7% of all foreign capital invested in Poland. On the other hand, it should be noted that the close economic interdependence between trading partners can become as dangerous as it is lucrative.

Currently, German-Polish economic relations can be described as relatively good and still developing. The correlation of these two important countries can be both profitable and conflictual. The tight political dialogue in the EU arena, caused mostly by the Polish and Hungarian rulers, strongly limits the possibilities for dialogue in an environment conducive to investment. Will Poland still have the possibility to maintain its position on the international market? The populist doctrine which is preached in Poland and an extreme misunderstanding of the need to guarantee security for foreign investors (including media law and the “Polish deal”) isn’t conducive to investment. Whether the Polish economy will maintain its position — also in the context of cooperation with Germany — can be realistically evaluated only in the perspective of the next two years and how the current government, not thinking about the development of the economy and international trade, will try to win the next elections at all costs. Maybe it is time for the state insurer to issue an insurance policy for the current government against the risk of financial losses on the international market.

BERLIN-WARSAW TRADE BULLETIN

• The volume of German-Polish trade has doubled only in the last decade.

• In 2020, Germany held a significant position as the largest trading partner of Poland, covering 28.9% of Poland's total exports and almost 22% of total imports.

• Almost 29% share of the German business in the Polish market is concentrated on the automotive and electrical industries. The most frequently imported products are cars and car parts ($9.01 billion) and packaged drugs ($5.21 billion).

• Interestingly, in the first months of this year,  exports from the US to Germany fell by 10%, while at the same time the rate of exports of Polish products to Germany rose by 15%.

Family Business Initiative Association (IFR) is a Warsaw-based alliance that groups entrepreneurs who own family businesses, as well as experts and scientists who support this community. Agnieszka Grabowska-Dubiel is an IFR expert and a proxy at the law firm Grabowski & Partners (GWLAW).