Poland: Frank Mermoud's Visit

UNCLAS SECTION 01 OF 03 WARSAW 001632

SIPDIS

Sensitive

STATE FOR EB/EUR/NCE KOSTELANCIK AND SESSUMS
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS, MWILSON, JKIMBALL
TREASURY FOR OASIA MATTHEW GAERTNER
FRANKFURT FOR TREASURY JIM WALLAR

E.O. 12958: N/A
TAGS: EFIN ECON ENRG PREL PL
SUBJECT: Poland: Frank Mermoud's Visit

--------------
SUMMARY
--------------

1. (SBU) Frank Mermoud, Special Representative for Commercial and
Business Affairs, visited Warsaw July 14 to urge the Polish
government to change its position on the 13% reduction in
reimbursement prices for imported drugs that became effective July

1. Other topics discussed included energy security, European
integration and the Poland-U.S. bilateral economic relationship.
Mermoud advocated that Poland take a bolder approach to energy
supply diversification and look to alternative energy sources. He
suggested that Poland turn to the private sector, including U.S.
companies, for energy diversification. End Summary.

--------------
Ministry of Health
--------------


2. (SBU) At the Ministry of Health, Mr. Mermoud met with Deputy
Minister Boleslaw Piecha, Piotr Blaszczyk, the Director of the Drug
Policy Department and Zbigniew Niewojt, Chief Pharmaceutical
Inspector. Mermoud began by discussing U.S. dismay at the recently
enacted 13% reduction in the reimbursement prices of imported drugs
and asked the Deputy Minister to cancel these price cuts. He also
reminded Piecha of the promise Minister Religa made to Secretary of
Commerce Gutierrez at a meeting in Warsaw earlier this year to
maintain a dialogue with industry, which had not happened.


3. (SBU) Piecha assured Mermoud that he has maintained a dialogue
with industry and said that he would set up an additional meeting
with the American pharmaceutical companies in order to discuss the
price cuts and expansion of the reimbursement list directly. In the
interim, Piecha said that he did not have the authority to cancel
the price cuts because a decision to change the ordinance would
require all of the ministries' input and agreement. He explained
that the reason for the price reductions in the first place was to
free up funds in order to raise salaries of healthcare workers and
to place more innovative drugs on the reimbursement list. Piecha
also described in detail planned changes in Poland's reimbursement
policy including increased transparency and efficiency and the
addition of even more R&D drugs to the reimbursement list.

--------------
Ministry of Economy
--------------

4. (SBU) At the Ministry of Economy, Mermoud met with Andrzej
Kaczmarek, Deputy Minister of Economy, Cezariusz Kwaterski, Director
of the Department of Bilateral International Cooperation, Zofia
Schnitzer, a specialist in the same department, Zbigniew Barszcz, a
specialist at the Department of Economic Development and Wojciech
Szelagowski, Vice President of the Polish Information and Foreign
Investment Agency. Kaczmarek stated that Poland is interested in
cooperation with U.S. companies in the field of clean coal
technologies as it is rich in coal and anticipates utilizing coal as
a its main source of electric power production in the future.
Poland is also interested in joining the Coal Sequestration Forum.
During the upcoming US-EU Summit, Poles hope to have meetings with
American companies to convince them to participate in projects
including an LNG terminal and the Odessa-Brody-Plock pipeline.


5. (SBU) Kaczmarek was aware of the reduction of reimbursement
prices on imported drugs but said that he did not have the authority
to significantly influence the government on this issue, citing the
Ministry of Health as the point of contact. He emphasized that
Poland wants to maintain a good business relationship with the U.S.
In regards to the Caterpillar issue, Kaczmarek said that the new
Energy Bill that will take effect in 2007 will help solve the
controversy. Addressing the AIG real estate development issue,
Kaczmarek said that any potential decisions would be made by the
local government in Raszyn. He was frustrated that the central
government could not do more to solve the problem.

--------------
Ministry of Foreign Affairs
--------------

6. (SBU) At the Ministry of Foreign Affairs, Mermoud met with
Beata Kolecka, Deputy Director of the Department of the European
Union. Kolecka enumerated Poland's priorities in its bilateral
relationship with the U.S. as energy security, the Balkans, the WTO
and changing the current non-immigrant visa regime.


7. (SBU) Kolecka stated that the diversification of energy sources
was a priority for Poland and emphasized the need for transparency.
She urged the U.S. government to press for equal treatment,
transparency and ratification of the energy charter and transit
protocol at the G-8 summit. Kolecka stated that EU cooperation on
energy security issues should also be extended to other Easter
European countries, notably Ukraine. She mentioned several times
that Poland and the EU are very interested in keeping Ukraine part
the European sphere of influence and do not want to see it
cooperating closely with Russia. Mermoud echoed this sentiment.
When Mermoud asked about the recent Ministry of Health price cuts on
imported drugs, Kolecka was unaware of the problem but agreed that
all pharmaceutical companies should be treated equally under the
law. She assured Mermoud that she would follow up with the Ministry
of Health to attain additional information. At the end of the
meeting, Kolecka raised the issue of the US-EU Passenger Name Record
(PNR) agreement.
-------------- --------------
Polish Confederation of Private Employers Lewiatan
-------------- --------------

8. (SBU) Janusz Kaczuba, an advisor on international relations to
the Polish Confederation of Private Employers, Lewiatan, and former
Minister of Finance also met with Mermoud. Kaczurba explained that
populism in Poland is on the rise and that organizations like
Lewiatan are vital in counteracting the trend by supporting liberal
ideas. Kaczurba is concerned that a booming economy will put
pressure on the GOP to increase social transfers, asserting that
excessive social spending can be detrimental to the budget and the
economy. Asked about the revised Lisbon Agenda, Kaczurba said that
Lewiatan is determined to work actively with the current government
on implementing the Agenda in Poland, especially in the area of
innovation. A recent survey carried out by Lewiatan found that
innovation is at the bottom of the list of priorities for Polish
businesses.


9. (SBU) Kaczurba believes a more flexible labor law in Poland is
needed, but is not sure the current government will take up the
challenge. Kaczurba supports introducing labor laws that emulate
those found in other EU countries. Lewiatan is also interested in
exchanging best practices with the U.S. on management techniques and
labor relations, especially in medium-sized companies. Mermoud
suggested organizing a seminar between Polish and U.S. partners on
topics such as technological development, management practices and
trade issues.


10. (SBU) At the end of the meeting Mermoud promised to introduce
Lewiatan to the Council of Competitiveness as the first step towards
developing a relationship between the two institutions. Both sides
agreed that it would be worthwhile to encourage Polish officials to
visit business organizations in the U.S., with the Chicago Executive
Club being named as a good starting point.

-------------- --------------
Department of Economic and Social Analysis, Office of European
Integration
-------------- --------------

11. (SBU) Piotr Serafin, Director of the Department of Economic
and Social Analysis of the Office for European Integration and Jan
Hofmokl, an expert from the same department also met with Mermoud.
Serafin explained that at the request of the League of Polish
Families, the Office for European Integration prepared a report on
the costs and benefits of Poland's membership in the EU for the
period May 2004-May 2006. The report shows that the Polish economy
benefited from joining the EU as exports are rising, the Zloty
remains strong and foreign investment has increased. The sector
which appears to have benefited most from EU accession is
agriculture. Hofmokl observed that during the two years of EU
membership, Poland's trade has increased faster with its eastern
neighbors (Russia and Ukraine) and with other Visegrad countries
than with the West. Nevertheless, Germany still remains Poland's
main trade partner.


12. (SBU) Serafin noted that energy diversification is the obvious
course for Poland and that the involvement of U.S. companies in
energy security planning is a good idea. He added that Poland made
a mistake by taking the energy security issue outside of the EU at
the March 2006 summit.
With regard to absorption of EU funds, Serafin believes it is
necessary to wait a few more months for an accurate assessment of
the situation. Currently he observes a huge demand for funds from
local governments and NGOs. The quality of the projects has
improved, with about 80% of submitted projects receiving a positive
assessment. In addition, local and regional authorities are doing
well regarding spending of EU funds. However, problems remain with
large infrastructure projects and it is estimated that only 0.01% of
funds have been spent on them.


13. (SBU) Special Representative for Commercial and Business
Affairs Mermoud cleared on this cable.

HILLAS