The post-war years have seen dramatic changes in Eastern Europe. The geopolitical map has been transformed from the Cold War era in which, under the yoke of the Soviet-led Warsaw Pact, countries like Poland, Hungary and the GDR struggled in state-controlled economies where GDP figures were stifled or invented. Two decades on from the fall of the Berlin Wall the economies of the former Soviet Bloc are making huge strides. Indeed GDP growth in Emerging Europe, as these economies are now becoming known, far outstrips that of the Eurozone. This presents great opportunities for UK business.
By way of example, the Polish economy is expected to expand by 2.9 per cent this year, and Lithuania is heading for 4 per cent growth. It is clear that Emerging Europe has some of the best opportunities for British firms. This has not happened overnight: there has been steady growth averaging 4 per cent in Poland for the past decade. As I shall go on to explain, enhancing our ties with Emerging Europe is particularly relevant for British business during a period when the Eurozone economies are faltering.
Moreover, growth in Emerging Europe creates a number of opportunities both for indigenous British firms and the Eastern European diaspora living in the UK. Members of that diaspora are both well placed and incentivised to increase trade between Britain and these countries. There is empirical evidence to suggest that immigrant networks are associated with increasing exports to their country of origin. A 2009 study found that with a 10 per cent uplift in the numbers in the diaspora within a community, exports to their country of origin increased between 0.5 and 1 per cent. Significantly, between countries where the culture and language are most different the uplift in trade was largest.
Within the UK, the importance of this group of potential exporters has not gone un-noticed by several national trade bodies. I understand that the British Chambers of Commerce and UKTI are actively seeking to utilise its potential. More particularly, Poland has been selected by Downing Street and UKTI as a country we should be targeting to increase exports. Mobilising the Polish diaspora within the UK will be of key importance. Beyond that, I firmly believe we must encourage British business to engage more with all Eastern European diasporas here fully to take advantage of these remarkable commercial opportunities.
Trade with Emerging Europe is anticipated to bring £30 billion per annum exports by 2020. A most encouraging prospect indeed, even if frankly the figure seems somewhat ambitious given that sterling’s strength has been hampering exports. However, we can make great strides as UKTI continues to become more proactive as a trade body, something I have long called for, and UK Export Finance becomes one of the greatest arsenals of export finance in the world.
However, we must never ignore the social and political aspects of this increasing interface between the UK and Emerging Europe. There has been much discussion about the overall effect increased migration from the former Sovbloc countries has had in the UK, particularly on the labour market. A recent study found that 14 per cent of start-ups in Britain are created by immigrants, employing some 8.3 million them. Thus, far from “taking” British jobs, these immigrants are in fact creating them. Moreover, another study found that since 2004, 95 per cent of male Eastern Europeans found work on arrival and so have never been a burden on the benefits system.
Nevertheless, whilst I remain convinced that most immigration into the UK has been positive, it is important to be cautious regarding its effects on society. The Left’s big mistake has often been to fail to realise that the less you do to prevent unacceptable levels of immigration and abuse of the welfare system, the more you end up fuelling xenophobia. That’s why we are right to introduce the Immigration Bill, which will only permit newcomers to receive welfare for 3 months. We also need to ensure that as part of any renegotiation with Brussels we retain the power to prevent citizens of new EU countries from immediately coming to the UK for work. Free movement of people is one thing; allowing unfettered access to citizens of countries with very different economic and social backgrounds to ours is quite another.
All of which said, I firmly believe that promoting further liberalisation within the Emerging European nations, and thus pushing back the remnants of authoritarian statism, must be a good thing. It surely accords with our national interest for them to prosper and so allow countries like Poland to become ever more important trading partners. Incidentally one specific issue worth singling out is that Poland and several other Eastern European countries have untapped resources of shale gas, as does the UK. Encouragement of the intra-European energy trade will help us all.
In conclusion, let me say that my views on pan-European multilateral trade stem in part from the pride I take in my Polish heritage. I have been deeply honoured by the Prime Minister appointing me to be his special adviser for Eastern Europe and will do everything I can to play my part in fostering trade and social ties.
With the shadow of post-war communism lifted, we can celebrate the close national ties developed during World War II when Polish Armed Forces fought alongside ours. This rich history of mutual co-operation was brought home to me recently by the tributes paid to four brave Polish scientists who made a major contribution at Bletchley Park in cracking the Enigma Code. We can use such warm sentiments to ensure our commercial co-operation with Emerging Europe goes from strength to strength.
The article was published on the 4th September 2014 at Conservative Home.