Competitiveness of Polish Milk Processing Industry During the Integration to the European Union

To analyse competitiveness of Polish milk processing industry during Poland's integration to the EU the study employs the concept of comparative advantage of international trade theory. It has been shown that the mechanism of comparative advantage can explain much of the competitive performance both in the recent past and in the near future, given the technological and structural characteristics of the industry (technological gap and pending restructuring) as well as the properties of the macroeconomic environment associated with the recent market reforms, realized economic growth and ongoing integration with the European Union (appreciating real exchange rate, rising wages and high real interest rates). Empirical tools used involve: domestic resource cost ratio (DRC), private cost ratio (PCR) and policy analysis matrix (PAM). These have been used first to estimate and decompose recent comparative advantages for the industry (as a whole and its selected product-specific activi! ties), and then, to project future (dynamic) comparative advantages up to 2010. The later is based on a set of consistent assumptions as regards future macroeconomic performance as well as sector-specific assumptions concerning the prospected harmonization of domestic market policies with the Common Agricultural Policy of EU and conditions for the industry to realize necessary improvements in factor productivity and product quality.