The conversation is led by Marcin Wandałowski, editor of the publication of the Civic Congress.
While the global economy has been mainly based on marketplace mechanisms until recently, the marketplace has become heavy "contaminated" by subsidies. What does that come from?
The shocks of fresh years – starting with the covid, through fluctuations in supply chains, the manipulation of energy prices by the Russians, and in the full-scale war in Ukraine ending – importantly influenced the way economies function, forcing state interventionism. The bad organisation of global markets, which should be decently regulated by the planet Trade Organisation (WTO), has affected all hiccups and national states had to step in.
Such crises do not happen often. However, they open their eyes to a kind of sensitivity of economical systems. The best example of this is the German economy, which relied besides much on Russian fossil fuels and was heavy dependent on exports, peculiarly on the Chinese market. Without state intervention, the shock would consequence in massive redundancies and the collapse of many companies.
Of course, any visions of liberal doctrine would indicate that the marketplace would so be cleared, which would shortly find a fresh balance. However, it is hard to imagine that elected authorities, besides liable for maintaining social stability, can look at specified economical tsunamis without taking any action.
The shocks of fresh years – starting with the covid, through fluctuations in supply chains, the manipulation of energy prices by the Russians, and in the full-scale war in Ukraine ending – importantly influenced the way economies function, forcing state interventionism.
Public intervention was just considered little evil?
The mobilisation of subsidies in European countries, in peculiar the largest ones, specified as Germany and France, which in 2022 accounted for nearly 52% of the full public aid expenditure in the EU, was due to specified an knowing of the public interest by governments. Was that economically efficient? Of course not. This has helped companies and workers in the short term, but has besides caused crucial marketplace distortions and has caused many possible risks, mainly for smaller, economically weaker countries, which cannot afford specified large support for their companies.
Therefore, the way state aid is granted in EU countries is closely monitored. Everyone looks at each other, knowing that subsidies make space for unfair competition. However, it is comforting that the scale of the subsidies actually mobilised and paid in EU countries is much lower than the amounts of support that were initially declared.
We are presently dealing with a transitional period caused by economical turbulence over the last fewer years. We haven't found a fresh balance yet and at this point we don't know what it'll look like. However, permanent reversal from the marketplace should not be a desirable direction of change.
Do you anticipate the subsidies launched to be ephemeral or will they stay in the global, in peculiar European, economical scenery already permanently?
Finance ministers of all EU countries are aware that the introduction of specified subsidies is not a good way. We are working to find solutions that will reconstruct free marketplace mechanisms as shortly as possible. It seems that we are presently dealing with a transitional period caused by economical turbulence over the last fewer years, e.g. the German economy has been shrinking for the second consecutive year – after a GDP decline of 0.3% in 2023, the European Commission is forecasting a decrease of 0.1% for this year. We haven't found a fresh balance yet, and at this point we don't know what it'll look like. In addition, we may be possibly exposed to further shocks from China or the United States. However, permanent reversal from the marketplace should not be the desired direction of change. We gotta reconstruct the marketplace on the ground. fair play. This has been a serious problem in the last decades.
Mass worldwide subsidies are not only aid to companies but besides the creation of inefficient allocations on the market. Should Europe so follow the same way as the United States or China? For me, this is simply a rhetorical question, due to the fact that we know that central economical control is not working.
The Americans and the Chinese may disagree...
Overproduction in China and respect for the rules of the planet Trade Organization is simply a well-known subject that Prime Minister Tusk has already discussed 10 years ago with Chinese and US leaders. As Europe, we have had a coherent policy in this area for many years. The aim is to make a coordinated, EU-wide support framework, based on nonsubjective criteria, alternatively of surpassing state aid, which is highly unproductive and "kills" our interior market.
Mass worldwide subsidies are not only aid to companies but besides the creation of inefficient allocations on the market. Should Europe so follow the same way as the United States or China? For me, this is simply a rhetorical question, due to the fact that we know that central economical control is not working. Therefore, we are already discussing, among EU finance ministers, that we should retreat from subsidies as shortly as possible. However, we must do this with our head in mind, given the interests of EU companies and industry.
In the absence of any consequence to our arguments from China, as the Union, we have gradually begun to introduce trade correction mechanisms to guarantee a level playing field for all players. This started a fewer years ago erstwhile the Head of the European Council was Donald Tusk. The final decision on duties on electrical cars is simply a consequence of a policy of restoring the balance between Europe and China.
Speaking of which, the second – the European Union has late introduced any instruments to defend the European marketplace from external actors, a large part of which is centrally subsidised by the countries. However, this is another dimension of interference with marketplace mechanisms...
We inactive have quite a few work to do. The EU marketplace is to any degree integrated. The current crisis, and more specifically the mobilisation of subsidies from individual countries, shows its fragmented nature, which limits us, blocks us. Therefore, any European companies, alternatively of entering the various markets of the Old Continent, like to enter the US marketplace right away, which is large and provides easier financing, primarily through the stock exchange (in Europe banks account for about 70% of corporate debt and in the US only for about 20%). In Europe, we inactive face different barriers and we cannot talk about integration as much as in the United States.
Recent studies of the global Monetary Fund have shown that the average cost of trade barriers on the EU service marketplace is equivalent to the situation of having a 110 % work in the Union for service providers. In short, there is virtually no single marketplace for services in the EU, and we know that services represent about 75% of the European economy. In the sphere of goods, the situation is better and the average cost of non-tariff trade barriers corresponds to a work level of around 44%. This is inactive much worse than in the United States, where this value is about 15%. This situation shows us that a gigantic EU market, which is the origin of growth for the EU, and especially for the Polish economy, requires extremist integration. This is simply a chance for Europe to grow quickly.
The instruments protecting the EU marketplace are part of a long-standing EU trade policy that raises issues specified as environmental requirements, labour rights, labour ethics. Intentionally, this should lead to higher standards for these areas among the Union's trading partners. Anyone who wants to cooperate economically with us must adapt to them. It's happening and it's going to keep going.
The fact is that among the tools utilized by the Union are, for example, late loud duties on Chinese cars.
I consider the introduction of specified instruments to be a step towards a level playing field (level playing field). The discussion with the Chinese on the scope of customs is not intended to transcend the commercial war. Rather, it is intended to encourage them to seriously consider how to make a trade model that is more balanced and beneficial for both parties. I believe that we are able, besides in the case of the mediate State, to accomplish economically justified relations, by moving distant from those based on politically motivated subsidies.
The discussion with the Chinese on the scope of customs is not intended to transcend the commercial war. Rather, it is intended to encourage them to seriously consider how to make a trade model that is more balanced and beneficial for both parties.
Before the pandemic, the allocation of economical processes occurred primarily according to the economical account key. Rich about the experience of the last 4 years, alternatively of the lowest costs, we are looking at safety issues today. Do you think that position will be permanent with us, or in subsequent years – when, for example, the war in Ukraine is over, and the planet will scope an economical and geopolitical balance – we will return to the logic of functioning primarily according to cost efficiency?
Looking at the geopolitical situation in Europe and in the world, I can see clearly that there is no return to Business as user. Apart from the request to increase arms spending – in Poland we will spend about 4.7% of GDP in 2025 – I besides mean dependence on Russian natural materials, Chinese outlets or any kind of natural materials or components produced exclusively in the Central State. The crisis of fresh years has clearly shown that this approach was wrong.
We are dealing with countries with different political systems from democracy. Therefore, we cannot presume that their actions will coincide with our expectations of at least respect for principles and values. The best example is the current tension between China and Taiwan. It is not known how it will end. Will the situation clear? Or will the nationalist and militaristic direction prevail, resulting in another armed conflict?
We don't know the answers to these questions. Therefore, in order to guarantee our safety, we must have at least the basic factors of production under our control, specified as antibiotics for children. The turbulence of fresh years caused that many of them could not be obtained in pharmacies – we were addicted to markets that at any point stopped supplying them. akin examples include energy sources, food and communication systems.
There is no return to business as usual – to dependence on Russian natural materials, Chinese outlets or certain natural materials or components produced exclusively in the Central State. The crisis of fresh years has clearly shown that this approach was wrong.
By betting on security, can we accept higher costs?
We have no choice but to do so, and I am afraid that this will be very necessary, especially in the early phase of the transformation of the European economy. But we must be prepared for all kinds of turbulence in global supply chains, specified as military equipment. We should be more diversified and have organised production and deliveries closer to the Far East, and in any cases besides a much greater focus on home production.
