That, my friend, is what we call "clear coat failure". That will need a repaint (there is a recent thread where someone DIY'd their fender). Cee Dog also tried protecting the failed area with Opti-Coat, I forget how that turned out.
But yeah, you can polish over it--you'll take off some basecoat in the failed areas, and you may or may not flake off more clear from the edges. Also likely to get some polish residue in the edges.