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Poland: Cross-border Trade With Neighbors Declining

Prague, 16 July 1998 (RFE/RL) -- Unregulated cross-border trading, once the mainstay of commercial relations between many Central and East European (CEE) countries, is in decline.

This was perhaps inevitable, considering changes in the economies the region; they are becoming increasingly sophisticated. But it also reflected conscious moves by various governments to introduce stable rules into commercial activities, to tax profits and to control the flow of currencies between countries.

The result has been to shift trading patterns toward wholesale, large scale operations between big companies. This, however, adversely affected the interests of many small businesses and numerous individuals throughout the region.

The apogee of the wild cross-border commerce was in the years 1994-96, following revolutionary upheavals in Central Europe and the subsequent dissolution of the Soviet Union.

The activity focused on Poland, the crossing point between the Germans, the Russians, the Lithuanians, the Belarusians, the Ukrainians, the Slovaks and the Czechs. It led to the establishment of large, mostly privately run trading centers -- the bazaars -- on all Polish borders as well as in the country's center.

To illustrate the economic magnitude of this procedure suffice it to note that by 1997 the turnover of the 15 largest bazaars reached an officially confirmed figure equivalent to about $2.2 billion, with unofficial estimates putting the amount about 25 percent higher.

More than half of the turnover came from exporting Polish-made products to other countries. In this way, the bazaar commerce, partially untaxed and unregulated, was a major source of Poland's export earning.

More than 120,000 people were employed last year by the 15 largest bazaars, while hundreds of thousands profited from businesses linked with the commercial activity itself (suppliers, hotels, restaurants, travel companies and so on).

According to a recent study by the Polish Institute of Market Research the scope and volume of trade at almost all bazaars have been declining during the last two years. And the institute says this decline is not only likely to continue, but will almost certainly accelerate. This assessment is shared by traders themselves.

The institute says that the decline has been prompted by economic changes in Poland and the neighboring countries. The Polish currency, the zloty, has been gradually gaining strength in relation to both the U. S. dollar and the German mark. This strength has also been a factor in the rapidly declining value of the Russian and Belarusian rubles as well as the Ukrainian hryvna. The Polish products have become more and more expensive.

Concurrently, there has been growing demand for better, more modern or sophisticated products which could hardly be supplied by small firms catering to traditional bazaar clientele.

The institute says that policy decisions by several governments provided another factor affecting trading. Belarus introduced a steep duty on imported furniture, for example, while Russia imposed higher payment for import of almost all foreign-made products. And Poland enacted last year a law making it more difficult for easterners to enter the country.

Recent figures on cross-border travel confirm the trend: a 37 percent decline on both the Polish-Russian (Kaliningrad) and the Polish-Belarusian borders. The Lithuanian and Ukrainian crossing have been less affected, but the movement had declined there as well.

The downward slide in the bazaar commerce has been particularly painful for small businesses and individual traders. They have constituted a great majority of suppliers (institute estimated that about 65 percent of products sold at the bazaars came from small or medium size firms).

Public protests have been staged in Poland, Belarus and the Russian enclave of Kaliningrad this year. But to no avail. The downward trend is continuing.

By contrast, large scale, tax-paying and strictly regulated supermarkets and department stores are likely to profit from that development. And indeed, networks of such supermarkets have recently appeared in the eastern parts of Germany and also in Poland as well as in border regions of the Czech Republic. There is every reason to assume that more of them will come.