International Bank L 1 for Reconstruction and Developme VOL. 8 V.(1O Preliminary Paper No. 8 for the Wlorking Party on the Polish Loan Application FILE COPY Foreign Trade in Poland Issued by: Eastern European Division Loan Department June 1, 1947 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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World Bank Document...same time war devastation has seriously curtailed Poland's ability to export so that she needs, for several years, a large excess Qf imports over exports. lWhile
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International Bank L 1for Reconstruction and Developme VOL. 8
V.(1O
Preliminary Paper No. 8
for the
Wlorking Party on the Polish Loan Application
FILE COPY
Foreign Trade in Poland
Issued by:Eastern European DivisionLoan Department June 1, 1947
by the war. In spite of the acquisition of the recovered terri-
tories, which before the war had an industry equal in size to
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that of all Poland, industrial production in 1946 vwas only 67
percent of prewar.
Tf to this is added the fact that during the war over six
million Poles lost their lives, it will be clear that several
years and substantial internal economic reorganization will The
required before Poland can reach her prewar level of exports.
During the war the country itself was divided in two, the
western part having been incorporated into Germany and the rest
organized as the so-called "General Government". This, of
necessity, distorted the wrhole economy of Poland. While the
western part was within the German customs area it was separated
from the "General Government" by a tariff barrier which ran
across the heart of Poland. During these years both areas were,
of course, entirely cut off from most of their prewar markets,
and had only a very limited trade with some of the other countries
of German occupied Europe.
The battles fought during the German invasion in 1939 and
the period of Soviet liberation, from 1944 to the end of hostili-
ties in 1945, resulted in widespread destruction of buildings and
industrial equipment. Warsaw was almost entirely destroyed and
the industrial capacity of such towns as Poznan, Rzeszow, Radom,
Bydgoszcz and WA!roclaw was very substantially reduced. The ports
of Gdansk (Danzig) and Gdynia were made unusable and the country's
system of internal communications was almost vwholly ruined. 1/
1/ For details of the damage done to Polish transport, industry,and agriculture respectively, see: Operational Analysis PapersNo. Transport Rehabilitation in Poland, No. Industrial Re-habilitation in Poland, and No. Agriculture and Food -inPoland, UNRRA European Regional Office, London.
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Poland's war losses are summarized in the following tabhle.
This table shows only material losses in the old territories
within the present boundaries of Poland, and leaves out of acc-
ount completely the heavy destruction in the recovered territories
which must have been about the same magnitude.
TABLE I
Poland's War Losses (Old Territories)(in million dollars at 1946 prices)
Agriculture 1,640Forestry 1,120Industry 5,560Transport & Communications. 3,470Public Administration 940Schools and Hospitals 750Houses and Personal Property 2,96o
Culture and Art 1J 80
Total 18,220
Source: Council of Ministers, 'Warsaw, 1947.
In the old territories alone, Poland suffered war losses of
18.2 million U.S. dollars in the form of Ihuildings, plant and
0 equipment, and raw materials. This omits altogether losses in
the form of the labor of the Polish population during the war,
which was entirely at the disposal of Germany, and the tremendous
losses of the Polish population in the form of death, disablement,
and the legacy of serious illness in Poland today.
It is clear that the effects of occupation and war devastat-
ion on such a scale make Poland's immediate postwar foreign
trade completely different from her prewar trade, and her ultim-
ate commerce with other nations. The needs for relief and for
the initial rehabilitation of industry have assumed paramount
importance in her import program, while the limitations on indus-
trial recovery imposed by the great devastation have seriously
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curtailed her exports.
Effects of Territorial Changes
As a result of the Yalta, Moscow and Potsdam agreemenQs
impoortant revision were made in Poland's frontiers. About 181
thousand square kilometers of predominently agricultural land in
the east were transferred to the U.S.S.R. while 104 thousand
square kilometers of territory, including the valuable industrial
area, of ex-German Silesia, together with a section of the Baltic
coast and of East Prussia, vwere acquired from Germany. As a
result, the area of Poland was reduced by 20 percent, to 312,700
square kilometers. These changes in territory and wartime up-
heavals between 1939 and 1946 reduced the country's population
by over 30 percent and its population per square mile by 16 per-
cent; today the population of Poland is about 24 million.
The territory acquired in the West was, before the war, more
productive agriculturally than that transferred to the U.S.SR
It is also true that the acquisition of the rich industrial area
of ex-German Silesia and of the port of Stettin have more than
doubled Poland's industrial potential. Since, however, the
territories involved were ruthlessly scorched by the Germans,
Poland's immediate industrial rehabilitation problem has been
greatly increased.
Table II, comparing industrial output in 1937 in the terri-
tories of prewar Poland, gives a clear picture of the changes in
industrial resources as a result of frontier revision.
As the table shows, Poland has now only 23 percent of her
former oil caDacity and none of her former resources of potassium
salts5 but has gained, in comparison with prewar, some very
importgnt coal mines, which, at their prewar capacity, would
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increase her coal production by as much as 80 percent at the end
of the four year plan actual production will be more than twice
the prewar level. Moreover, the country acquired increased de-
posits of iron ore, lead and zinc, and materials such as cadmium,
cobalt, gypsum, gneiss and knolin for wmhich she was formerly
entirely dependent on imports. Her steel producing capacity has
expanded by 48 percent.
Other changes in Poland's postwrar economy and their bearing
on the country's foreign trade prospects will be discussed in
* detail in the following sections of this Paper.
TABLE II
Poland's Industrial Production after Frontier Revision
(Production in 1937 in thousands of metric tons)
Prewrar Postwar Percent Increase(+)Poland Poland or Decrease ()
Pit Coal 36,200 65,650 + 78.6
Coke 2,124 5,353 +152,0
Lignite 18 7,611 Increased 412 timez
Zinc and Lead 492 1,214 +146.8
Iron Ore 792 865 + 7.9
Steel 1,;441 2,141 4 48.o
Crude Oil 501 141 71.9
Potassium Salts 522 0 -100.0
Source: Data supplied by the Polish Government except forthe production of pit coal, figures for which arebased on Statistical Year Book for Poland, London,1941. Figures for ex-German territories are fromGermany Basic Handbook, Section F. The MineralIndustries, Foreign Office and Ministry ofEconomic WP.arfare, London, 1941.
The Changed Commercial Organization
It is necessary, in order to understand Poland's postwar
foreign trade, to describe briefly the postwar economy.
Essentially the Polf.sh economy is a combination of nationalized
industry and private enterprise. At present about 80 percent of
the country's working population wrork in private enterprise,
while about 20 percent work in nationalized industry or central
and local government administration. In the nationalized sector,
which covers all the heavy industries and heavy engineering in-
dustries, a rigidly controlled structure of prices and wages is
at present in existence. These prices and wages are fixed on the
basis of strict economic costs, and an effort is made to ensure
that wage rates bear correct relations one to another, and that
all prices of commodities are true economic prices, including
the correct allowances for costs of labor and raw materials,
depreciation of capital, and management expenses. The free
enterprise sector of the economy, however, is free from all con-
trol, except that imported raw materials and raw materials in
short supply must be obtained through central government agencies.
Within this sector prices are many times higher than in the con-
trolled sector. For instance, while a ton of coal is sold by the
coal industry at 590 zlotys, a single meal in a free market res-
taurant costs about the same price and a pair of shoes in the
free market costs 15 thousand zlotys.
It is because of this dual price system that the Government
had to fix an official rate of exchange of one hundred zlotys to
the dollar, which, in fact, rules out normal international trade
through the free market. It is also the reason that Poland has
had to conclude commercial agreements with the rest of the world
on the basis of self-balancing barter agreements involving no
movements of foreign exchange. The trade which is carried on
outside trade agreements is either bi-lateral barter operations
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by individuals or companies, which occurs when the prices in
Poland and in the other countries are such as to make the trade
profitable, or, in some cases, exports and imports arranged for
free exchange at the official rate. Every operation carried on
outside the trade agreements must, of course, be covered by im-
port and export licenses.
It is obvious that the zloty cannot be stabilized in the
near future; stabilization awaits the equalization of controlled
and free market prices and the end of price fluctuations in the
outside world. WNhile two price levels exist within the country
the zloty cannot be assigned a fixed value which will enable
foreign comimerce to be carried on on a free trade basis.
Furthermore, large price fluctuations in the outside world., and
the inflationary pressures on world prices, combined with the
stabilization of prices in Poland, has made any realistic rate of
exchange for the zloty impossible for the moment. The problem
of stabilization of currencies is, of course, world-wide and one
which should be solved by the International Monetary Fund.
Poland is a member of this organization and, when cQnditions are
judged favorable, will co-operate with other nations, through the
Fund, in stabilizing the zloty.
As a result of the nationalization of her major industries,
and, to some extent, of her distribution system, the foreign
trade of the country is now largely controlled by state depart-
ments, co-operatives or state sponsored companies. The main
Government Department concerned is the Ministry of Navigation
and Foreign Trade, which is in charge of trade negotiations with
foreign countires.
As in most countries during and after the war, in Poland
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imports and exports are controlled by Government permits. Al-
though prewar tariff legislation is still in force, it is not
applicable to conditions existing today, and it has been sus-
pended except for small additional costs or duties which are
levied on goods produced under a State monopoly such as tobacco
and matches. The Government intends to give up the policy of
tariff protection. Although the system of fixing the prices of
commodities entering into foreign trade may appear to be a sub-
stitute for tariff, in fact, dince the prices are made to conform
to the controlled price structure, this is a temporary measure
due to the necessity of adapting prices of the commodities to
the Polish orice level. In fact, all the effects of tariffs and
export duties in obtaining favorable terms of trade can be ach-
ieved in the terms of the barter agreements themselves and further
price adjustments are irrelevant.
For the foreign trade transactions of enterprises which
belong to the nationalized sector of Polish industry, special
central trade bureaus were established, one for each major
branch of industry. These bureaus are limited companies, the
shares of Which are owmed by the respective federations of fac-
tories, These bureaus also act on behalf of co-operatives and
private firms in negotiations with foreign traders. However, it
should be noted that they have no monopoly of foreign commerce.
Private and public enterprise, which even have their own foreign
trade agencies, may deal direct with foreign traders,simply by
obtaining the necessary export or import licenses granted by the
Ministry of Navigation and Foreign Trade. The procedure for ob-
taining export and import licenses i$ the same, whether the app-
licant is a central bureau or a private enterprise. The central
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bureau or a private enterprise. The central bureaus are organ-
ized into branches, each bureau dealing with a different comm-
odity. The co-operatives "Spolem" and "Zwiazek Samopomocy
ChXopskiej" deal chiefly with imports and exports of agricultural
produce. No restrictions are imposed on private commercial
enterprise regarding the commodities dealt in.
The Spolem co-operative imports foodstuffs into Poland for
planned, countryside state distribution and also for distribution
through the open market. This co-operative, which has the right
to exDort directly certain agricultural products,V2 does not,
however, handle food supplied by UNRRA. The Co-operative
"Zwiazek Samoponocy Chlopskiej" and the commercial enterprise
"Dal" also import foodstuffs.
Private merchants tend to deal with commodities manufactured
or used by small and medium sized private undertakings. Subject
to Government licensing, private barter transactions are en-
couraged, besides exercising a general control over the type of
goods exported and imported, the Government is, of course, also
concerned with prices and the mechanism for effecting the
exchange.
1/ The term "foodstuffs" includes groceries, rice, grain, flour,root-crops, edible fats, dairy products, seeds and vegetables-fresh and tinned, but Spo%em does not include in its scopelivestock, bacon, ham and meat preserves. This co-operativeagency has the exclusive right to import agricultural anddairy machines, parts thereof, and fertilizers.
2/ These include dried ahdfresh berries, mushrooms, medicinalherbs, vegetables, seeds, bristles, horse-hair, tinned vege-tables, dairy produce, eggs, poultry, feathers and down,and agricultural machinery.
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UNRRA's Part
W7hen UNRRA commenced operations, the requirements of Poland
were calculated for a country of undefined area and with a
num'oer of inhabitants not yet precisely known. It was not until
the Potsdam conference that the scope of the changes in territory
and economic resources were even approximately known. However,
it wqas clear that Poland was in great need, not only of food but
of clothing and medical supplies, and of commodities required for
the rehabilitation of her agriculture, industry and transport.
It was also clear that Poland did not possess sufficient gold
and foreign exchange to pay for these.
In September 1945, Poland, therefore, concluded a basic
agreement with UNRRA whereby full scale relief and rehabilitation
assistance was to be given her; UNRRA's total assistance to
Poland is valued at 481.3 million U.S. dollars. The expenditure
of this sum is shown in the following table:-
TABLE III
Proposed Program of UNRRA Assistance to Poland0 (in millions of U.S. Dollars)
Categories of Aid Value
Food, Feed and Soap 201.52Clothing, Textiles and Footwear 82.7Medical and Sanitary Supplies 25, 8Industrial Rehabilitation Supplies 95.34Agricultural Rehabilitation Supplies 75.9
TOTAL 481.26
Source: UNXRA Bureau of Supply, WNashington
By the end of 1946, TURRA had supplied Poland with goods for
a total of 398 million dollars. These UNRRA commodities repre-
sented about 65 percent of Poland's total imports since the
end of the war which totalled 609 million dollars. Although
after the end of the war the Polish Government has concluded
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compensation agreements with various countries, valued at 447,
million dollars, up to the end of 1946, imports under these
agreements were valued at only 173 million dollars. Whereas
deliveries under most of these compensation agreements are still
to come, only some 83 million dollars of the UNRRA program re-
mains for delivery in 1947. It is evident that Poland will he
in a very precarious position in 1947 unless other sources of
essential imports are found. The aid given by UNRRA has not been
sufficient to rehabilitate, or even to feed Poland adequately;
without external aid of some kind in 1947 and a rapid revival of
her foreign trade Poland will again be close to starvation and
the progress of her economic life generally will be seriously
impeded. It is therefore important to examine Poland's postwar
trade prospects in some detail: an attempt to do this is made in
the following pages.
II. TRADE DEVELOPMENTS, 1919 to 1939
Difficulties in Building Poland's Foreign Trade
0 Before 1914 Poland did not exist as an independent country.
It was partitioned between Austria, Germany and Czarist Russia,
and the area concerned was regarded as a kind of economic hinter-
land by these three powers. Of necessity, wNhen she gained inde-
pendence, the economy had to be integrated and completely new
foreign trade patterns built up. Such economic adjuastments wTere,
of course, difficult and developed slowly. Poland had only .ust
succeeded in overcorniL.g this initial handicap and building up a
successful system of foreign trade when Germanyr rvt&v n in
1939.
The years from 1919 to 1924 were too unsettled to permit of
anything approaching normal foreign trade - or even collection of
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complete foreign trade statistics. To the handicap of the long,
pre-1914 partition, there was added the further handicap of a
five years' delay in economic reconstruction. Another factor of
importance was the lack of facilities for sea transport; although
Gdansk existed, Polish traffic was discriminated against and,
pending the construction of the port of Gdynia, a major seaport
belonging to Poland herself, port capacity was inadequate. After
1924 , energies which otherwise could have gone into the re-
establishment of foreign trade for the benefit of Poland's
standard of living and the development of her industries, were
diverted into the building of a Polish port and the re-adjustment
of transport facilities from the interior to the coast.
It was not until 1924 that modern Poland emerged as a cornm-
ercial nation. Even then, trade was conducted mainly with thc
Continent of Europe and particularly with her immediate neighbors
to the West, Germany, Austria and Czechoslovakia. As late as
1928, only 2,7 percent of all Polish exports went to overseas
cotmtries outside Europe. The main reasons for this were the
burden of adjustment to the economic unification of the country,
transport problems, and the bulkiness of Polish exports.
Poland depended on Germany for a considerable section of
its agricultural exports and industrial imports. Germany tried
to exploit this dependence by tariff discrimination against
Poland, which resulted in a tariff war, lasting from 1924 to
1933. In the course of this economic struggle, Poland changed
the direction of her foreign trade from Germany to the countries
of nothern Europe and to those across the seas. The share of
Germany and Austria in Poland's foreign trade fell from about 50
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percent in 1924 to only 20 percent in 1932. These adjustments
could only be achieved by radical changes in the composition of
Polish exports and imports, which of course, protracted the per-
iod of economic adjustment to postwar conditions.
0
0
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TABLE IV
Poland's Foreign Trade 1922-1938(in million zlotys)
Only after 1949, when the bulk of the imports of investment
goods should have come in, will the normal structure of irmports
develop. This will consist of a much "larger preponderance of
raw materials and semi-finished products, although the increased
size of the industrial economy will also involve appreciable im-
ports of investment goods for replacement and modernization. In
the case of raw materials in some instances smaller exports will
be required; wherever industry in the ex-German territories was
complementary to industry in the old Polish territories, and
movements of raw materials from one to the other resulted, these
movements will now be eliminated. But in other cases the in-
balance between industrial capacity and raw material supplies has
been accentuated by the transfer of capacity from Germany to
Poland and a more than proportionate increase in imports of raw
materials will be required.
Industrial and Transport Equipment: It seems fairly certain
that the development of the industrial capacity of the important
industrial areas of lower Silesia, the ex-German part of upper
Silesia, and other areas of Eastern Germany with their wide range
of finishing industries, will gradually bring about Poland's in-
dependence from imports of a variety of semi-manufactured and
finished goods. Once production in the western territories
reaches full capacity, Poland might even acquire an exportable
surplus in some of them. On the other hand, the very enlarge-
ment of industrial capacity will create increased needs for in-
dustrial machinery, and for maintenance and renewal items. A
large part of Silesian industry is equipped on old-fashioned
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ization, all of which will require equipment which cannot be
produced in Poland over many years to come. On the whole Poland
will thus be dependent on imports for a considerable quantity of
industrial and transport equipment such as modern plant for the
iron and steel and engineering industries, motor vehicles, river
barges and cranes,5 and machines and parts of all kinds.
Petrol and Oil
Before the wiar Poland produced about 507 thousand tons of
crude oil and did not import or export to any extent. In 1946,
however, on account of the loss of three-quarters of her pro-
duction, she had to import just over 300 thousand tons in the
form of final products. The needs of a greatly expanded Polish
industry and a greatly enlarged fleet of motor vehicles has
increased requirements, and there is no doubt that they will
continue to expand. Every effort is being made to expand pro-
duction by drilling new wells, hut the possibilities of expansion
are limited. While Poland has acquired some large German
synthetic oil plants, these are at present in a state of virtual
destruction; even when plans for the re-establishment of the
synthetic oil plant it Oswiecim are realized, domestic output
wrill be insufficient to fill Poland's needs. Petrol, oil, and
lubricants will, therefore, become regular items on Poland's
import list and far exceed the 1946 level of 300 thousand tons.
Raw Materials
The acquisition of the ex-German industry will, of course,
require the importation of larger quantities of raw materials.
Furthermore, in some industries there is now greater lack of
balance between capacity and raw material supplies. Whereas the
capacity of the steel industry has increased by about 50 percent,
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iron ore resources have increased by a bare ten percent; heavily
increased imports of iron ore are therefore inevitable.
Similarly, important new woool-combing and other textile
caDacity has been acquired, especially in Lower Silesia, without
any corresponding acquisition of cotton and wool. In the chemi-
cal industry, too, expansion has been mostly on the manufacturing
side without corresponding additions to raw material supplies.
Fertilizers
Poland is certain to be an importer of fertilizers on a
* considerable scale. Although agricultural production per hec-
tare in the western territories exceeded that in the territories
transferred to the U.S.S.R., the soils are relatively unfertile
and output can only be maintained by large applications of fert-
ilizers. Whereas, in old Poland, application of fertilizers per
hectare was about three kilos Qf nitrate, four of phosphates
and three of potash, in the new territories application wras much
larger, namely 18 to 20 kilos of nitrates, 20 to 25 of phosphates
and up to 30 of potash per hectare. As a result, fertilizer
requirements in present day Poland, in spite of a reduction of
one-fifth in its area, will ultimately reach twice the level
before the war. The total requirements will eventually reach
some 250 thousand tons of nitrate, 300 thousand tons of phos-
phates, and 325 thousand tons of potash salts, annually. These
amounts would be required merely to pursue the prewar system of
farming, but the decrease of livestock, brought about by the
war, has greatly decreased supplies of animal manure and, until
the livestock population is rebuilt,needs will be higher.
Although after the year 1947 it is anticipated that domestic
- 37 -
production of nitrates will satisfy requirements there will be
serious deficiencies in phosphates and potash amounting to some
85 thousand tons of phosphates in terms of B203 and 80 thousand
tons of potash in terms of K2 0 annually. It is clear, therefore,
that fertilizers will loom large in Poland's postwar requirements.
The Future Outlook
To sum up, wide scope exists for a general expansion of
Polish foreign trade. The Commodity structure of that trade is
bound to be different from that of the prewar years. Among
exports, coal, zinc and possibly finished industrial products
will be more important than before; timber and fertilizers less
important. Among imports, industrial raw materials, especially
textiles, ore and oil will become more prominent; steel products
and chamicals may recede in importance.
President conditions seem favorable to an expansion of
overseas trade; Poland has acquired a good seaboard and first-
class ports and two important limiting factors of the prewar
period have thus been removed. After its heavy war losses her
merchant fleet is gradually increasing. At the end of the war
it was only some 150 thousand deadweight tons, but as a result1/
of the acquisition of some 80 thousand tons from reparations
plus another 65 thousand tons from new building and purchase, it
1/ According to the Potsdam Agreement and the agreement with theTU.S.S,r . of August 16th, 1945, Poland is to receive 15 percentof the quota collected by the U.S.S.R. from its occupationzone and 15 percent of the reparations collected from thewestern zone of Germany, both free of charge, and in exchangefor deliveries to these zones. In return Poland is to delivereight million tons of coal in 1946, 13 million tons in each ofthe years 1947 to 1950 and 12 million tons per annum there-after throughout the occupation of Germany. All these de-liveries will be at a special price. It was agreed, in March1947, however, that these coal deliveries will now be halved.
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is expected that, by the end of 1949, the fleet will be sorne 295
thousand deadweight tons.
Changes in the Direction of Poland's Foreign Trade
Poland's first postwar trade agreements were dictated to a
large extent by transport possibilities, available surpluses on
both sides, and the urgency of the immediate needs of each of the
contracting parties. Ever since liberation, the Polish Govern-
ment has adopted a positive attitude towards the development of
international trade and has shown no desire to put obstacles in
the way of its expansion in any direction. Most continental
countries will presumably continue to trade with Poland roughly
approximately according to the prewar pattern, subject to the
shifts arising out of Poland's ohanged industrial structure. In
particular, the acquisition of a convenient seaboard, the avail-
abilitIy of greater export surpluses of coal, and the greater
needs for imported iron ore should all work in the direction of
increased trade with the Scandinavian countries,
In the trade with Germany, the U.S.S.R., the U.S.A. and
with the U.I,, however, some more fundamental changes are
apparent.
Germany: As a result of the changed economic structure of both
countries resulting from territorial changes, Germany's share in
Poland's trade is likely to be far less than before the war.
Agreements concluded in August 1945 and February 1946 provide
for the resumption of trade to the extent of about 21 million
U.S. dollars with the U.S.S.R. Occupied Zone. The commodities
imported into Poland included fertilizers, synthetic rubber, oil
and chemical products, thus reflecting the changes in the commod-
ity structure of Polish imports discussed above; in return,
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Poland exported coal, coke, benzol and naphthaline.
As for the future, it seems likely that Poland will export
manufactured products and coal to Germany. lWhat Germany could
sunply in return will depend upon the character of Germany's re-
constructed economy, but the bulk of the exports are certain to
be raw materials and semi-finished products. The commodities
included in the Polish-German eastern zone agreement provide at
least an indication of the type of articles likely to figure in
the German exports from this zone. As regards the western zone,
there is no doubt that German industry in the past supplied
Poland with an appreciable proportion of its industrial equipment;
the extent to which such imports could be resumed will depend
upon allied policy regarding the re-establishment of German
engineering and manufacturing industries. It would seem likely
that, if there is to be any solution to the present economic
crisis in Germany,such production will be expanded, and Poland
might well receive a part of the output.
U.S.S.R.
One of the most important new features in Poland's foreign
trade is the emergence of the U.S.S.R. as one of Poland's leading
trade -artners, although the abnormal emergency aspect of this
trade in the months during and after liberation must be emphas-
ized. Apart from UNREA imports, which were very small in 1945,
trade in that year with the U.S.S.R. accounted for over 90 per-
cent by value of Poland's total foreign trade. It should be
remembered that trade with the U.S.S.R. began before the end of
hostilities when the Polish Government was still cut off from
contacts with the west and at a time when conditions in the
country wrere chaotic. At that time, the problem facing the
- 40 -
Polish Government was not so much that of obtaining supplies on
favourable terms, as that of getting any supplies at all. Apart
from the U,S,S.R there were no alternative sources for such ess-
enti2al commodities as iron ore, wool, cotton and patrol. Equally,
no country but the U.S.S.R. was in a position to take delivery
of coal from Polish pitheads (practically the only export which
Poland had to offer in exchange) in its own transport at a time
when Polish railway transport was practically non-existant.
These extraordinary circumstances still persist, though to a
lesser degree, and they should be borne in mind when reviewing
the long-run prospects for Polish-Soviet trade.
The importance of the U.S.S.R. in Poland's foreign trade
should not be over-estimated. In 1946, 69 percent of all Polish
imports were provided by UNRRA, Which consequently was the great-
est single source of Poland's imports; the contribution of the
U S.S.R. to UNRRA supplies was, of course, small, the bulk being
supplied by North and South America and the British Empire. At
the same time, it should be remembered that 201 million dollars
out of the total UNRRA program of 481 million dollars was supp-
lied in the form of food and these are imports which will soon
disappear entirely. Furthermore, the share of the U.S.S.R. in
normal foreign trade is diminishing, it fell from over 90 percent
in 1945 to 57 percent in 1946. As other means of financing
Poland's rehabilitation are found, the share of the U.S.S.R. in
normal foreign trade will diminish even further. Nevertheless
it will remain a very important factor. The Soviet Union is the
nearest source of textile raw materials, hides, furs, fertilizers,
petrol, manganese ores and timber, all of which Poland needs
urgently. If the cost of overland transport can be kept at a
- 41 -
reasonable level, the U.S.S-R. may also prove the cheapest -ource
of supply. On the other hand, the U.S S.R. too will be hard
pressed by the enormous tasks of reconstruction, repair and fur-
ther industrialization which confront it, and Poland cannot look
to the U.S,S.R. for much of the capital equipment required for
reconstruction of industry. The fouldations at least for mutu-
ally satisfactory trade in good volume are clearly present,
though Poland's great needs for industrial and transport equip-
ment mean that, in the next few years, the proportion of her im-
ports received from the U.S.S.R. will rapidly diminish.
The United States
The development of trade between Poland and overseas coun-
tries is a difficult problem at the present time. There is no
doubt that, owing to the disappearance of Germany as a source of
industrial equipment, Poland requires imports from these coun-
tries on a very large scale. She requires industrial raw mater-
ials, such as raw textiles and rubber, and industrial equipment
for rehabilitation of industry and transport. The problem,
however, is to find means of paying for these imports. UNRRA
has enabled Poland to obtain roughly 481 million dollar's worth
of such supplies without making any corresponding exports, but
with the demise of UNRRA it will be impossible to finance these
imports, since Poland is not in a position to supply goods or
services which are required by overseaa countries. Thus, her
prewar exports of timber and food, which provided her with the
free exchange for overseas purchases before the war, are no
longer available in any volume. Coal, which she can export in
large quantities, could not be exported to distant overseas
countries on account of transport costs. Until her food pro-
- 42 -
duction increases to the extent necessary to permit her to resume
exports of highly processed foods, or until she can find other
products which she can produce and sell to those countries, she
will, therefore, be confronted with this difficulty of financing
imports from overseas.
The United States will undoubtedly have to supply the major
part of the capital equipment required for Polish industry and to
this extent will become of major importance in Polish foreign
trade during the next few years. Poland also requires supplies
of raw cotton, and a long list of other items from the U.S.
These imports will, at least in the short period, have to be
financed out of credits, although, when food production recovers,
there will, no doubt, be a market in the United States for high
quality Polish hams, fruit, mushrooms etc., as well as for
Polish handicrafts and perhaps glassware and china. Although the
United States will become a major supplier of Poland's imports,
her imports from Poland will never become very important. Apart
from credits Poland must rely largely upon obtaining foreign ex-
change from her exports to other countries in order to buy in
the United States.
The United Kingdom
The United Kingdom produces much of the capital equipment
that Poland requires to rebuild her industry. However, owing to
the devastation of Europe and the needs of British industry,
possibilities of Poland Dlacing orders in the U.K. are limited.
There is no doubt, however, that in the long run, Britain can
again provide Poland with large quantities of manufactured pro-
ducts. In this case the long period prospects of foreign trade
are very favorable since the U.K. will be a market for Polish
- 43 -
food, zinc, cement, and chemicals on a considerable scale.
Other Countries
Poland will also require, in the long run, considerable im-
ports from distant overseas countries in the form of tropical
products and raw materials. She has already entered into comm-
ercial relations with the Argentine, Brazil and the Wear East.
Exports to these countries could take the form of zinc, iron and
steel, chemicals, glassware, china and possibly finished textiles.
IV. FOREIGN TRADE SINCE LIBERATION
After liberation Poland commenced the tremendous task of
rehabilitating and reconstructing her economic life. Of necess-
ity the bulk of the materials and equipment for this purpose
had to be found within the country, but there existed extensive
needs, including those required to repair the great devastation,
which could only be met by importing on a large.scale. At the
same time there was, of course, the urgent need for imports
of food and clothing to feed and clothe the Polish population
0 during the emergency period immediately following the war. It
was obvious that the complete dislocation of transport would
impose most serious limitations upon the extent of imports from
other countries, and, in the early stages, imports had therefore
to be restricted to food and clothing to most relief needs, and
transport material to enable Poland to rebuild the transport
system as rapidly as possible. During the year 1945 foreign
trade, even including UNRRA supplies, was very small in volume;
as a rough estimate, the volume of imports in 1945 reached only
some 30 percent of prewar levels. During 1946, however, the
internal transport situation, and the port facilities, improved
rapidly, and trade expanded to nearly four times the level in
- 44 -
1945. During this year the importance of imports outside UNRRA
supplies increased considerably, and the foundations were laid
for normal foreign trade.
Exports throughout the two years remained at a very low
level; they would have been far smaller had it not been for the
large coal exoorts which were made possible by the acquisition of
ex-German mines. Naturally, the development of exports was poss-
ible only as industry was rehabilitated, and during the rhole of
1945 and 1946 imports were some three and three quarters times as
great as exports. This excess of imports over exports was a
symptom of the relief and rehabilitation needs of Poland and the
fact that she could not pay for her imports with exports; it
made possible relief of hunger and immediate essential investment
in both agriculture and industry. This situation wrill persist
throughout the whole of the four year plan. Though the need for
emergency food imports will disappear after the 1947 harvest, the
needs of industry and transport will more than counterbalance the
disappearance of food needs, and necessitate further overseas
investment on a large scale.
It was obvious that, in the first months after liberation,
the bulk of Poland's imports would have to come from UNRRA, which
set up a program of some 481 million U. S. dollars. During 1945
UNRRA imports were twio and three-quarters times as great as other
imports. Voluntary Societies also commenced operations in Poland,
which although not on so large a scale as UNRRA provided several
million dollars during 1945. Ow^ing to the fact that the U.S.S.R.
had gradually liberated the country from the East, trade with the
U.S.S.R. was naturally the first to recover after the war; during
1945 it accounted for 93 percent of the normal foreign trade.
- 45 -
Poland speedily tackled the problem of resuming normal trade
relations with the rest of the world. Naturally, her first att-
empts were directed towards Scandinavia and the Balkan countries
because her exports consisted mainly of coal and coke, which are
very costly to transport, and transport facilities governed the
direction of her foreign trade. During 1946 trade agreements
were concluded with 17 countries, covering almost every country
in Europe. Although normal trade was thereby expanded to four
times the 1945 level, the UNRRA imports were again the predominant
factor in foreign trade and were 70 percent greater than other
imports. The share of the US.S .R. in normal trade fell to
some 57 percent of the total trade.
Commercial Agreements
Some of the postwar changes in the organizatinn of Poland's
foreign trade were described in a previous chapter of this paper.
The greatest change, however, is the predominant part played by
trade agreements in Poland's foreign trade. The reasons for
this method of trading are shortage of foreign exchange, Poland's
surplus of coal, Poland's urgent needs for certain vital raw
materials, and transport difficulties. Having no reserve of
foreign exchange at her disposal, and in view of the currency
restrictions which prevail in most parts of the world, Poland
was forced to make individual agreements regarding the commod-
ities to be imported in exchange for her exports. In view of the
European coal shortage, she found herself in a favorable position,
through her coal exrorts, which were vital to industry in many
European countries. to insist upon receiving certain raw materials
essential for the resumption of industrial activity. Finally,
transport difficulties restricted her exports to neighboring
-46-
countries and, as most of these wlere in a similar position to
Poland with respect to devastation anid foreign exchange, she was
compelled to enter into barter agreements with her neighbors.
Thus the trade agreements which Poland had concluded since the
end of the war follow the same general pattern of barter
compensation,
The main principles by which they are governed are:-
1. The quantities of each commodity to be delivered
by each party are specificallyr listed in the
* agreement
2. The commodities to be exchanged must balance in
value at world market prices
3. There are no cash payments between the contracting
countries5 the settlement of accounts being
effected by entries in the books of the res-
pective National Banks. Amounts due for goods
supplied are paid by each National Bank to the
supplier in national currency
4. Prices and other terms and conditions of sale are
negotiated by Government organizations, or by
private corporations or firms in each country,
subject to the approval of their respective
Governments
5. Execution of trade agreements is controlled by
mixed commissions composed of representatives of
each country
6. Both Governments collaborate in providing the
necessary transport and transit facilities
- 4I7 -
Some deviation from the original, pure barter character of
these agreements takes place in the agreement with Sweden.
Sweden granted Poland a credit of 100 million Svwedish kroner
which will be gradually repaid as Polish exports to Sweden are
developed. The Agreement also provides that Poland will receive
"free" currency for about one-half of her exports, thus enabling
her to use this for purch4seS in other countries.
The trade agreement with Switzerland provides for a credit
of 40 million Swiss francs, as an advance on Polish exports of
coal, to be spent in Switzerland. Since these exports will ex-
tend over a period of over a year - until the end of September,
1947 - the arrangement gives Poland the possibility to order
urgently needed imports immediately. The agreement also provides
that when Polish coal exports to Switzerland will have reached a
total of 20 million Swiss francs, a further credit of 40 million
Swiss francs will be opened. Similarly, credit clauses are in-
eluded in the agreements with France, Denmark and Italy to enable
Poland to place orders for goods vwhich cannot be delivered
* immediately.
All the trade agreements which Poland has concluded after
liberation are listed in the following table. This shows that,
by the end of 1946, agreements vwere concluded with 17 countries
for a total trade turnover of 830 million dollars. These trade
agreements would be sufficient to provide Poland with imports
valued at 415 million dollars, though, in many cases, delivery
is still going on and will only be completed during 1947.
48
TABLE X
Poland's Trade Agreements Concluded after Liberation
Values as Expressed Value inDate of in the Agreement iViillion
Country Agreement (Imports plus Exports) US Dollars
U.S.S.R. July, 1945 190 million gold zloty 59.00July, 1945 595 million gold zloty 186.00April, 1946 192 million US dollars 192.00
Sweden August, 1945 440 million Swmedish kroner 10000Denmark Augusti', 1945 54 million Danish kroner 11,25
October, 1946 258 million Danish kroner 53.75Italy October, 1946 1560 million Italian lire 40*00France July, 1946 34 million US dollars 34.00Switzerland March, 1946 146 million Swiss francs 34.00Norway August, 1945 11 million US dollars 11.00
December, 1946 90 million Norwegian kroner 22.00Germany - SovietZone February, 1946 20.5 million US dollars 20.50
Bulgaria April, 1946 14 million US dollars 14.00Holland December, 1946 45 million Dutch florins 17.00Hungary October, 1946 1.26 million US dollars 1.26Czechoslovakia May, 1945 5,4 million US dollars 5.40
April, 1946 68 million US dollars 68.00Austria September, 1946 7.27 million US dollars 7,27Jugoslavia January 1# 1946 2.5 million US dollars 2.50
August, 1946 4.0 million US dollars 4.00Belgimn August, 1946 6 million US dollars 6.00Finland Julys 1946 3.4 million US dollars 3,40Iceland December, 1946 1.75 million US dollars 2.00
TOTAL 894.33
Source: Polish Ministry of Navigation and Foreign Trade,War sawv
/ Excluding the agreement of August 16th, 1945, with the U.S.S.R.regarding reparations. These agreements include only thosesigned up to the end of December 1946. Since that date thefollowing agreements have been signed:1. Soviet Zone of Germany, February, 1947, Imports 7.15 million
valent imports.3. Czechoslovakia, March, 1947, 200-300 million dollars imports
and equivalent exports over a five year period.4. Norway, February, 1947, Imports 66.32 million Norwegian
kroner, exports 44.94 million Norwegian kcroner, Good credit4 million kroner.
5. Uolland, February, 1947, Imports 155 million Dutch florins ,exports 155 million Duteh florinso
-49 -
Since transport difficulties are one of the main bottlenecks
in Polish foreign trade, special transport provisions are in-
cluded in many of the new agreements. Goods exchanged with the
U.S.S.R. are mainly carried by Soviet trains on the broad gauge;
Sweden has sent Poland some railway trucks and locomotives and
has recently organized communications by ferry; finally Switzer-
land and some of the Balkan countries have undertaken to carry
all goods exchanged in their own railwray freight cars.
The conduct of foreign trade through trade agreements must
be regarded as a necessity arising out of the special circum-
stances existing at the end of the war. At the same time consid-
erable trade has been carried on outside the trade agreements,
and this should grow progressively as economic conditions
throughout the viorld recover. VVhile it is clear that trade
agreements will continue to be an important feature of Polish
foreign trade, particularly in her commercial relations with
other planned economies, in the long run normal trading will
occupy a much more important position.
Appendix I summarizes the nature of the trade under each
agreement and its approximate value.
Prices and Vaelues
In analyzing the revival of Poland's foreign trade in the
immediate postwar period, one of the major difficulties is the
correct assessment of its value. In the official valuation supp-
lied by the Polish Government import and export values are ex-
pressed in postwar zlotys. This valuation represents the amounts,
in zlotys, received by the exporter or paid by the importer.
The export prices represent the current prices fixed by the
Ministry of Industry for industrial products and by the Ministry
- 50 -
of Navigation and Foreign Trade in agreement with the exporter
for other products. The price in zlotys of imported commodities
is determined by the Economic Committee, which works on the
principle that the price should correspond to the price prevailing
on the internal controlled market. An over-riding principle is
that, taken. together, the value of imports in zlotys should equal
the amount paid to exporters. In general, therefore, the zloty
values of imports and exports are made to conform with the price
structure of the controlled sector of the Polish economy, where
much lower prices and wages prevail than in the free market
sector.
To be comparable writh prewar or other trade data trade
statistics must be converted into dollars or pounds in such a
way as to express the true exchange value of the commodities
concerned. Neither the official rates of exchange between the
Polish and other currencies (100 zlotys 3 1 dollar) nor the black
market prices of the latter (which have, on occasion, reached
1,000 zlotys per dollar), however, provide a completely satis-
factory basis of comparison. Moreover, Poland was cut off so
effectively from the outside world for so many years that both
the general level of prices (if such a concept has any meaning
in an economy where some prices are fixed and others uncontrolled)
and the price relationships of different goods one to another
are quite unconnected with price levels and price relationships
in the world market.
To illustrate the problem we may consider coal exports,
which, in zloty value, accounted for 48 percent of all exports
in 1946. A total of 8.69 million tons was exported, valued at
only 5,115 million zloty. The average price of a ton of coal, in
- 51 -
Polish Government statistics, is thus about 590 zloty per ton.
The world market price is about ten dollars per ton. Thus the
rate of exchange for Polish coal is about 59 zloty per dollar.
In the case of other exports the exchange rate is about 140 zloty
per dollar. In the following analysis of Poland's foreign trade
since liberation, whenever possible comparisons are made on the
basis of zloty values, since this eliminates the problem of a
true exchange rate. In other cases comparisons are made on the
basis of world dollar values of the goods entering into the
foreign trade.
Trade in 1945 and 1946
IJNRRA supplies to Poland were specifically for relief and
rehabilitation and were designed to assist the country to resume
its normal economic life. They were not of the same character as
other imports and should not, therefore, be considered in any
discussion of Poland's progress in re-establishing normal foreign
trade. In order to examine the development, during 1945 and
1946, of Polandts postwrar pattersn of foreign trade, we will, for
the moment, disregard UNTRRA imports.
It should be borne in mind, vwhen considering postwar
recovery, that the prewar basis used in the following analysis is
given merely for purposes of comparison and that, as a result of
territorial changes, Polish imports and exports should, in the
long run, far exceed prewuar levels. In 1937 and 1938 exports (at
prices ruling in those years) amounted to some 225 million doll-
ars, wqhile imports totalled some 241 million dollars. The follow-
ing table shows progress in 1945 and 1946 towards overtaking this
prewar level. Although the figures are approximations, they
indicate the order of magnitude of the trade Poland has been able
- 52 -
to transact vwith other countries during the first two years
following liberation. It is clear that, imports and exports
within trade agreements approximately balance; the determining
factor in these imports so far has been the extent of exports.
In 1945 exports were on a very low level and reached only some
ten percent of prewar levels. Even if we exclude exports of
food, which were impossible immediately after the war, exports
rere only some 14 percent of the prewar level. In 1946, however,
rehabilitation was progressing at a much faster piace and exports
expanded to some three and a quarter times the 1945 level,
reaching about one third of the prewar level. Excluding food,
the percentage was 45 percent. If the 5.5 million tons exported
to Russia under the trade agreement of August 16th, 1945, are
included, exports were about 180 million dollars in 1946, about
45 percent higher than the figures quoted below and nearly half
of prewar exports.
TABLE XI
Polish Foreign Trade in 1945 and 1946 1/
(in million U.S. dollars at 1946 prices)
1937/38average 1945 1946
Exports 375 38 126
Importsnormal trade 400 34 139
UNRRA imports - 92 306
Other imports / 38
Total 400 126 483
1/ These statistics exclude coal exports to Soviet Russiaspecified in the trade agreement concluded on August 16th,1945 because such exports are part of the reparationssettlement betwreen Poland and Russia. Poland was to
(Footnotep continued next page)
- 53 -
deliver eight million tons of coal in 1946 (valuedat about 80 million dollars), but actually only 5.5million tons were so delivered, valued at about 55million dollars.
2/ Reparations and imports financed from the creditsraised in the United States. which together total38 million dollars.
Source: UNRRA Mission to Poland
For 1947 prospects are much brighter; it is estimated that exports
will rise to some 298 million dollars, which represents an in-
crease of 135 percent above the 1946 level. This level of ex-
ports is 80 percent of the prewar volume. Exports other than
food will be about ten percent greater than prewar levels, This
rapid revival to prewar levels of export will be achieved largely
by an expansion of coal exports to 20 million tons, which alone
will account for two-thirds of the total value of exports.
Owling to the termination of UNRRA activities during 1947,
imports will depend upon Poland's success in obtaining credits
from abroad, but assuming she is successful in this aim her im-
ports should greatly exceed exports this year. Assuming the
0 economic plan is achieved, imports will amount to 510 million
dollars, an excess of 212 million dollars over exports, and 27
percent higher than prewar. By 1949 imports will be over 90 per-
cent greater than before the war, while exports will be about
30 percent higher. On a per capita basis imports will be 180
percent greater and exports 90 percent greater.
Table XIII shows the development of trade in 1945 and 1946
according to countries. This shows the preponderance in Poland's
trade (excluding UNRRA imports) of the U.S.S.R. In 1945 the
U S.S.R. accounted for 93 percent and in 1946 for 57 percent of
the total trade turnover. At the same time the Scandinavian
countries are increasing relatively in importance, their share
- 54 -
increasing from seven percent in 1945 to 21 percent in 1946. Of
this most of the trade is with Sweden. The table shows clearly
how trade has expanded in 1946 to include the Balkans, Czechoslo-
vakia5 France and Switzerland. Trade with the United Kingdom and
the United States is developing only slowly, due to the fact that
these two countries have not as yet entered into trade agreements
with Poland. However, it should not be forgotten that Poland was
able to obtain supplies from these two countries, including in-
dustrial raw materials and equipment, through the UNRRA program.
An interesting feature of Poland's foreign trade is the
fact that she is building up credits in many countries. During
1946. although her imports slightly exceeded her exports by 845
thousand zlotys, or eight percent, at the same time she built up
debit and credit balances as follows:-
TABLE XII
Excess of Imports over Exports Excess of Exports over Imports(in thousand zlotys)
U.S.S.R. 1,880 Sweden 666Zone of Germany 262 France 386
Czechoslovakia 331 Denmark 295Hungary 156 Norway 211United States 126 United Kingdom 177Rumania 80 Switzerland 110
Source: Ministry of Navigation & Foreign Trade,Warsaw.
Her greatest debit balances are with the U.S.S.R., Czechoslovakia
and the Soviet Zone of Germany.
During 1946 imports from the U.S.S.R. exceeded exports by
nearly 40 million dollars, though it should not be overlooked
that this ignores the 55 million dollars exports in the form of
coal under the August 1945 agreement. Taking all other countries
together, exports exceeded imports by some 25 million dollars or
about one percent of the Polish National Income. This was
- 55 -
Poland's contribution in 1946, to the rehabilitation of Europe.
In the latter months of 1946 the excess of exports over imports
to these countries was even greater and amounted to two percent
of the national income.
TABLE XIII
Polish Foreign Trade in 1945 and 1946
(in million zlotys)
I m p o r t s E x po r t sCountry 1945 1946 1945 1946
Source: Polish Government memorandum to the U.N.Temp. Sub-Commission on the EconomicReconstruction of Devastated Areas,TLondon, 1946.
As far as food is concerned the Polish Government is planning
on achieving an average daily intake of 2,131 calories for the
agricultural population and 2,059 calories for the non-farm
population at the retail level in the food year 1946/47 2/ This
is an increase.over the level of consumption in the previous
food year which was 1,680 calories per head per day. After the
hardships of the Polish population during the war this increase
in fPood consumption is considered essential. On this basis it is
estimated that there is a deficit of 848 thousand tons of grain
for consumption alone, to which should be added a requirement of
175 thousand tons representing the necessary increase in stocks
of grain for distribution, bringing the total to 1,023,000 tons.
1/ See Operational Analysis paper No. Agriculture and Food in-Poland, European Regional Office, UNERA, London. In arrivingat the caloric totals, the oalories equivalent of the variousfoods have been based on Polish conversion tables.
- 73 -
It is estimated that, during the calendar year 1947, import re-
quirements will amount to only 560 thousand tons of grain, 45
thousand tons of which will be required for minimum stocks. On
the basis of this food import plan, the intake of the non-farm
population will be equal to only two-thirds of the corresponding
group in the United Kingdom and, though higher than last year,
will still be below the level of emergency subsistence food con-
sumption set by the nutrition committee of the Food and Agricul-
ture Organization of the United Nations. -b, a level which
cannot be long maintained without causing serious ill-health. It
is clear,,'therefore, that Poland's import requirements for food
could scarcely be reduced.
The figure of 38 million dollars for agriculture is largely
for the purchase of 60 thousand horses (22.5 million dollars),
which would be only a small proportion of the total number lost
(1,744 ,00) during the war. These are important not only for
draft power, but for their contribution to the fertilizer prob-
lem. A further item included beoause of the urgent need of
increasing tractive power on farms, and thus increasing agricul-
tural output in Poland, is that of 7.5 million dollars to be ex-
pended for agricultural tractors and machines. These investments
in agriculture are vital if the country is to be self-sufficient
in the year 1948.
Minimum requirements of rawrv materials include 87 million
dollars for the purchase of cotton, wool and other fabrics - an
2/ For European countries this is defined as an average dailyintake of 1,900 calories, requiring a national average supplyof no less than 2,,200 calories at the retail level.
- 74 -
expenditure of 3.5 dollars per capita. This is a low figure in
view of the acute lack of clothing, and Poland's cold climate,
the more so because some of these materials are re-exported in
finished form. Although the value of these materials is higher
than in prevwar years the quantities are approximately the same.
20 million dollars for liquid fuel, 5 million for rubber, are
essential to transport and industry. The remaining raw miaterials
for industry amount to 111 million dollars and seem reasonable
in view of Poland's rapidly expanding industrial capacity which
will involve not only increases in consumption but increases in
0 essential stocks thiroughout the country.
The total requirements of 80 million dollars for capital
equipment are modest. It is obvious that ten million dollars
for machine tools and 20 million for industrial and agricultural
machines are small In view of the tremendous war damage to in-
dustry and transport V1. Finally, ten million dollars for trans-
port installations, ten million for electrical utilities, 15
million dollars for port equipment and ten million dollars for
construction equipment are to be expected because of the destruc-
tion in these fields.
The estimates of exports are maxima, and since they are
based on the most favorable estimates of labor, transport avail-
ability, and spare parts, it is more than probable that at least
some of them will not be met.
The coal figure requires a word of explanation, during 1946
a total of 47.3 million tons of coal was produced, of which 5.5
1/ See page 4, also Operational Analysis Papers Nos. andIndustrial Rehabilitation in Poland and Transport Rehabilitat-ion in Poland. European Regional Office, UNRRA, London.
- 75 -
million tons vwas delivered to the Soviet Union as part of the
reparations settlement effected between the two countries and
8.7 million tons exported under trade agreements. In 1947 it is
expected that production will increase to 60 million tons. l, and
exports to 20 million tons. Requirements for domestic consump-
tion thus increase from 33.1 million tons in 1947 to 40 million
tons. Because of the likelihood of even higher domestic consump-
tion and the bottlenecks of transport and loading equipment, coal
export estimates appear to be optimistic.
Increased resources in non-ferrous metals, iron and steel,
and certain chemicals, will enable Poland to export more of
these commodities than in prewar years, and obtain 57 million
dollars from these exports. Extensive textile manufacturing
equipment acquired in the western territories will also make it
possible to export textiles to the value of 21 million dollars.
The total excess of required imports over estimated exports
is 216 million dollars.
The above figures are provisional. Revised estimates of
Poland's export possibilities in 1947 show about 55 million
dollars derived from textile exports and about 24 million dollars
from exports of sugar. On the other hand, exports of iron and
steel and non-ferrous metals will probably be considerably lower
than the figures above. Owing to these changes, the total value
of exports might be in the neighborhood of 340 million dollars.
There wrtill, however, also be changes in the import figures.
1/ This is contingent upon the Installation of imported coalmining machinery and equipment.
- 76 -
The Balance of Payments in 1947
The total excess of imports over exports given above is on
an F.O.B. basis; it does not take account of any "invisible"
items which must be included in order to measure the full extent
of the excess of Poland's expenditure abroad over her expected
receipts from abroad in 1947. The following "invisible" expen-
ditures must be added to the excess:
a. On account of the world shortage of certain manu-
tured capital goods, and the great competition in
placing orders with manufacturers, payments on
account must be made when ordering investment
goods. In 1947 when the bulk of the orders must
be placed, such payments on account are estimated
at 30 million dollars.
b: Transportation and insurance charges by foreigners
involved in the import of investment goods amount
to 30 million dollars.
Lc. Similar additional costs for food imports are
estimated at 35 million dollars.
d. The required imports were estimated on the assumption
that surplus property material and rolling stock
were already provided for by credits from the
U.S.A. The gross import requirements should,
therefore, be increased by 60 million dollars,
the differenice between the total credits of 90
million dollars which are available and the actual
expenditure of 30 million dollars during 1946.
e. Finally, it is estimated that financial and ad-
ministrative expenses abroad, in connection with
- 77 -
all imports, will amount to 40 million dollars.
The total of these additional expenditures is 195 million
dollars, which would, if there were no offsetting items, bring
the adverse balance to 411 million dollars. Poland's foreign
4trade problem in 1947 is thus resolved into finding the means of
financing this deficit of 411 million dollars.
iTAe will examine in turn the various sources of finance
available. The most obvious means of financing the deficit is
the utilization of any gold and foreign exchange available, but
in Pcland's case it is impossille to finance any of the deficit
in this way. At the end of the war Poland had approximately 71
million dollars' worth of gold and foreign exchange. Although
the United States recently unfroze all Polish blocked accounts
in the United States, valued at ten million dollars, some of the
gold and foreign exchange has been used and today the total re-
mains at alout 70 million, of wrhich 12 million, however, have
heen earmarked in settlement of any debts to the United Kingdom.
* ? Thus, Poland is left with only about 58 million dollars of liquid
assets abroad. This, however, cannot be used for buying imports.
Poland has several commitments to international institutions;
her contribution to the International Monetary Fund and the
International BEnk is 25 million dollars, and she has to pay 307
thousand dollars per annum to the United Nations, 36 thousand
dollars to the European Coal Organization, 40 thousand to
E.C.I.T.O. and 52,400 to the F.A.0. As other international in-
stitutions such as the projected International Trade Organization,
are formed other drains will be made on the available gold and
foreign exchange.
- 78 -
Another fact to be borne in mind is that, although before
the war, in 1937, Poland's foreign assets in the form of bonds,
letters of credit, stocks and shares, cash credits, etc. amounted
to about 70 million dollars, liabilities of the same nature
amounted to about 1,300 million dollars. It should be stressed
that these heavy liabilities abroad still exist, in spite of the
nationalization of large sectors of Polish industry. Although
Poland can, because of the adverse trade balance, make no pro-
vision at present for the indemnification of foreign investors,
the Government has stated its definite intention of making re-
payments in the long run.
In examining Poland's ability to pay for relief and rehab-
ilitation supplies the appropriate UNRRA council committee de-
cided that the country's gold and foreign exchange holdings at
the end of the war were below the minimum necessary for the
sta'oilization of Poland's currency and the fulfillment of her
international obligations. Obviously, the position is no differ-
ent now than at the end of the war; very little of the deficit
can be financed from these holdings.
The second possible source of financing the deficit is the
UNRRA program. Of the total UNRRA program of 481.3 million
dollars only 397.9 million dollars had been delivered in Poland
by the end of 1946. There is available, therefore, some 83
million dollars of further UNRRA supplies in 1947, most of which
will be delivered by the 31st March.
Of this, however, 10 million dollars are for medical supp-
lies which ca'not be counted against the deficit; the UNRRA
program, therefore, provides about 73 million dollars.
Of the 40 million dollars long-term credit given to Poland
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by the Import-Export Bank of the United States for the purchase
of rolling stock, and the 50 million dollar credit for the pur-
chase of American Army surplus stores, only 30 million dollars
had been spent by the end of 1946; there is thus available, in
1947, another 60 million dollars for purchases in the United
States.
Finally, it is estimated that available exchange and in-
visible exports in the form of receipts from shipping, transit
trade, remittances from Polish emigrants abroad and private
medium term credits, will amount to about 30 million dollars in
1947.
Although Poland participates to the extent of 15 percent in
the reparations due to the Soviet Union, and although equipment
carried away by the Germans is returned to Poland whenever it
can be identified, the bulk of the reparations will not be re-
ceived during the next three years and it is unlikely that any
appreciable assistance in meeting the deficit will be derived
from these sources, particularly in view of the serious economic
situation in Germany. In total, therefore, Poland's certain
sources of funds in 1947 amount to 162 million dollars. This
leaves a deficit of 248 million dollars which must be raised in
the form of direct relief from abroad, or long term credits.
The Polish Government is now making a new analysis of its
balance of payments in the years 1947-1949, taking account of all
kno.vn factors, including repayment of credits obtained in the
year 1946 through its trade agreements, return of looted equip-
ment from Germany and the utilization of foreign exchange, but it
is believed that the deficit will remain at approximately the
same level, though it will probably be nearer to 240 million
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dollars.
What are the prospects in 1947 for Poland receiving such
assistance? All efforts to continue relief to Europe's devastat-
ed countries, either in the form of UNRRA assistance or through
new international relief organizations, have failed. However, it
has been agreed that individual countries should make up their
own programs of relief supplies and that these programs should be
co-ordinated by a special committee of exports of the United
Nations. In practice, this means that the United States, which
will, in any case, be the largest contributor of relief supplies,
is formulating its own program of relief for the various
European countries. There is every hope that Poland will receive
a substantial share in relief in this form not only from the
U.S.A., but from other countries who wish to continue relief
programs. In regard to long-term credits, the creation of the
International Bank has enabled Poland, by becoming a member of
the bank, to apply for a long-term investment credit of 600
million dollars.
Without a more detailed analysis of the individual items in
the Polish requirements for raw materials, capital equipment,
transport charges, and payments on account it is impossible to
depict accurately the exact sources from wihich the long list of
requirements for funds would have to be financed. However, an
attempt has been made in the following table to set out, on the
one hand, the funds required, and on the other, the definite
sources at present knowm, and, finally, the outstanding require-
ments which would have to be satisfied from relief and from the
International Bank. This table, which must of necessity be very
approximate, has been drawn up by the UNRRA Mission on the basis
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of scattered information regarding the extent to which Poland's
own barter agreements will provide for imports under the various
headings, the undelivered items remaining in the UNRRA program,
and the knowm limitations on the purpose for which the Inter-
national Bank for Reconstruction and Development may loan funds.
It is clear from the table, that Poland will find the great-
est difficulty in financing her deficit of 248 million dollars.
At first sight, it might appear quite easy should the Internat-
ional Bank grant a loan of 600 million dollars. However, the
fact is that, out of the deficit of 248 million dollars, 79
million is in the form of food requirements and 35 million
dollars for expenses in connection with food imports. Since the
International Bank cannot, through its terms of reference, lend
for food, there is, therefore, a need of 114 million dollars
which can only be financed in the form of relief. There is also
another problem; out of the remaining total of 134 million
dollars which might conceivably be lent by the Bank, 33 million
dollars are for raw materials and 50 million dollars for finan-
cial) administrative and transport charges, for both of which
purposes the Bank might be unable to make loans. Summing up the
picture, however, it can be stated that Poland's estimated needs
in 1947 are 114 million dollars in the form of relief for food
impQrts, and 134 million dollars in the form of a long-term
credit from the International Bank.
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TABLE XXI.
Requirements and Sources of Funds for Poland's Imports n 1947(in millions of U.S. Dollars)
Requirements from:Require- Known Sources International
b. Capital Transitequipment trade,and raw shippingmaterials 70 etc. 20 - 50
Total 649 Exports 298 114 134UNRRA 73Transittrade,etc. 30
1/ 60 million dollars of rolling stock and surplus property areexcluded from this table since the credits have already beenobtained and the item would, therefore, enter on both sidesof the balance sheet.
Source: UNRRA Mission to Poland.
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More recent calculations of the balance of payments will al-
most certainly affect the above conclusions. It is believed
that, although the total deficit will be about the same, require-
ments in the form of relief food supplies might be only about
100 million dollars, while requirements for raw materials and
investment goods might be about 150 million dollars. Of the
latter, about 55 million dollars represent costs of raw materials
imports.
Progress is being made towards obtaining these funds. It is
encouraging to note that the committee of the United Nations, in
assessing the needs of various countries for relief, finally
fixed a level of 133.9 million dollars for Poland. In view of
the price changes which have occurred since import requirements
were built up,this amount seems to be approximately the right
order of magnitude, and it is to be hoped that the individual
countries, and particularly the United States, will implement
this decision and provide relief on this scale for Poland, thus
solving her import problem in the food field. The long-term
loan for industrial development is actively under consideration
by the Bank.
1948 and 1949
Turning to the years 1948 and 1949, the problem is somewhat
simpler. We have already seen in table XIX that the excess of
imports over exports in these years totals 555 million dollars,
all of which represents imports of capital equipment for dnvest-
ment. Furthermore, in 1948 and 1949, payments on account (some
30 million dollars), which were made in 1947, will count on the
credit side of the balance sheet, and the only additional charges
which remain will be the financial administrative and transport
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charges by foreigners on Polish imports. It is likely that the
latter will b.e offset to some extent by similar Polish charges
to foreigners which are likely to expand considerably as her new
transit trade develops and her merchant marine increases. It
thus seems likely that the total deficit in the twuo years 1948
and 1949 will not be far in excess of 600 million dollars. Latest
estimates Tndicate that it will be about 620 million dollars. If
the loan of 600 mi'llion dollars is granted by the International
Bank and only 13.4 million dollars of this is used in 1947, there
will be 466 million dollars available towrards the 620 million
dollars required. It is, of course, conceivable that by 1949
the prices of capital ecuipment throughout the world will have
fallen, and in this case the loan from the International Bank
.Tould 7robably enable Poland to realize the bulk of her import
program and her Four Year Plan.
To sum up the Polish foreign trade situation as it appears
at the beginning of the critical year 1947, Poland's import pro-
gram wprhich is so essential for success in the agricultural and
industrial rehabilitation of the country, depends upon her receiv-
ing assistance in 1947 from twro sources. First she needs approx-
imately 114 million dollars in the form of an extension of relief.
This is necessitated by the critical food shortage in Poland
which has neen caused by the war, and represents the price, to
the rest of the world, of restoring Poland to self-sufficiency
and laying the basis of future exports of food to non-sufficient
European countries. Secondly, the achievement of the Four Year
Plan in the industrial field is completely dependent upon a
heavy program of investment imports, and to finance these imports,
Poland must receive 600 million dollars from the International
Bank.
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It is hardly necessary to analyze the results of failure to
obtain these funds in 1947. Without food, Poland faces a con-
tinuation of meager rations on a bare subsistence level, and
without industrial investment from abroad., she cannot expand her
industrial production appreciably beyond present levels. Com-
pared with the wartime losses and sacrifices of the country, the
715 million dollars involved in helping Poland to her feet again,
is a trivial cost for completing the work that UNRRA began,
particularly when it is remembered that 600 million dollars of
this is a loan and would have to be repaid by Poland when her
industrial recovery was complete.
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APPE1TDIX
Trade Agreements Concluded by Polandto 31st December 1946-
U. S. S. R.
(1) Agreement dated: July 7, 1945.
Imports Exports
Quantities of merchandise not stated Quantities of merchandise not statedbut total value is given as but total value is given as 95,000,00095,000,000 Gold Zloty Gold Zloty
(2) Agreement dated: July 7, 1945. To be delivered by Dec. 31st, 1945.
UInder the terms of this agreement,, will be exported under this agreementsubject to importance also the in qualntities to be determined later:following comrmodities: rubber products, Metal fancy products,
oak barrels, box shooks, pegs andAnimal castings 40,000 bunches miscellaneousFabric for milling
Total imports valued 25 million Total exports valued 25 million SwissSwiss Fr. Also merchandise valued Fr. Also one million tons of coalat 48,000,000 Swiss Fr. covered by and coke valued at 48,000,000 Swisscredit deliveries. Fr. to repay credit deliveries.
Total value of imports $17,026,000 Total value of exports $17,026,000
- 93 -
NORINAY
(1) Agreement dated: August 29, 1945 Delivery by: December al. 1945
Imports Exports
Herrings 75,000 Bar Coal and Coke 600,000 Tons
Herrings 25,000 " Bunker coal 30,000
Cod liver oil 100 Ton Total tons 650,000
Imports total value $5,492,955 Exports total value $5,492,955
(2) Agreement dated December 31,1946 Delivery by: December 31, 1947
Cod liver oil 500 Ton Coal 600,000 TonsFish oil 300 " Coke 100,000Oil for canned fish 1,500 " Zino white 500Herring 200,000 Bar Lithopane 200Herring, fresh frozen 6,000 Ton Red lead 100
Fish other 1,OOO " Chemioals 140
Calcium nitrate 13,300 " Sheet iron 200Caliumn cyanamide 10,000 " High pressure tubes 4,000
Pyrites 50,000 " Sewage pipe 300
Vanadium ferro-alloys 1,500 " Cast iron pipe 1,000
Aluminum 500 " Iron sewagp pipe 700
Other miscellaneous items, Cast iron products 500quantities not specified Mlachine tools, chains,
and optical glass, quantitiesnot specified
Total tonnage 707,640
Imports total value 44,940,000 Exports total value 44,940,000Norwegian Kroner Norvwegian Kroner
tJ.S.S.R. ZONE IN GERIENY
Agreement dated Feb. 2, 1946 To be delivered: Dec. 31, 1946.
Imports Exports
Tons Tons
Potassium fert'ilizers 40% 177,.660 Coking coal 40,000Buna 4,000 Gas coal 50 zm/ra 100,000Synthetic gasoline 16,000 " ' 10-50 m/m 100,000Acetone 98% 50 " " unsorted 160,000Nitrate of soda NA NO2 98% 30 Metallurgic coke 400,000Anlydrons acetic acid 98% 30 Pure Benzol 12,500Crystalline anxalio Pressed iiaphthalene 1,600
acid pure 20Potassium Permangamate pure 5 Total tons 814,100
it cyanide 5Sodium cyanide 5Phartaceutical pepsin 1Carbon tetrachloride 99% 1
Total tons 197,807
Value: $10,223,000 Value: $10.,223,000
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BULGARIA
Agreement dated April 29, 1946 Delivery: April 30, 1947.
Imports Exports
Lamb hides 120 Tons Iron and steel products 21,251 TonsKid hides 9 " Chemicals 3,313 "
Tobacco 3,127 " Pharmaceuticals 64 "I
3,256 Tons 24,628 Tons
All other commodities subject toindividual agreements
Value of Imports: $7,000,000 Value of Exports: $7,000,000
HOLJAND
Agreement dated December 18, 1946 Delivery by: December 31, 1947