Netherlands Economy and Export Opportunity for U.S. Businesses

Overview of the Netherlands Economy

The global economy has become increasingly interconnected. What were once isolated events in a foreign country now produce ripple effects throughout the world. The financial crisis of 2008 illustrated how deeply countries have become dependent on one another. The Netherlands is no different. As a burgeoning economy, Holland boasts strong catalysts for future economic growth.

Key Exports and Trade Environment

A strong incentive for investment in the Netherlands is its market economy. As a member of the EU, the Netherlands benefits from an average tariff rate of just 1%. This arrangement allows goods and services to flow freely and easily throughout the region. With low tariffs, industries with comparative advantages are better able to import or export their goods.

The top exports from Holland are highly price-sensitive in the context of international competition. The table below presents the top four exports from Holland:

The top products are highly sensitive to economic circumstances and price. Engines, machines, and electronics are all highly price elastic. Oil and pharmaceuticals, however, are relatively price inelastic — they are typically purchased in similar quantities regardless of price in the short run. In addition, the recent weakness of the Euro relative to other currencies has made Dutch exports particularly competitive. For instance, the U.S. dollar has appreciated relative to the Euro since the financial crisis. This economic climate is especially beneficial for exports, as a stronger dollar makes European-made goods cheaper for foreign buyers. Items such as electronics, machines, pumps, and oil therefore become more competitive as the dollar continues to strengthen relative to the Euro.

Natural Resources and Economic Diversity

Machines and technology are also important for their residual and spillover effects on the broader economy. The Dutch agricultural sector, for example, is highly mechanized and strongly focused on international exports. Thanks to significant technological advances, the agricultural sector employs only about 4% of the Dutch labor force yet produces large surpluses each year. The Netherlands has at times supplied one quarter of all the world's exported tomatoes, and roughly one third of the world's exports of chilies, tomatoes, and cucumbers pass through the country. The Netherlands also exports one-fifteenth of the world's apples. This productive surplus creates a strong incentive to export, generating wealth for the country in the process.

As a free-market economic system, Holland is also partially dependent on its natural resources, which are critical to any economy as a means of further growth and development. Venezuela, for instance, derives the vast majority of its wealth from oil and petroleum-based products; the sharp decline in oil prices placed enormous pressure on that country because it lacked a sufficiently diverse resource base to fall back on. Holland is better insulated against such shocks because it possesses a diverse array of natural resources. In addition to natural gas and petroleum-based products, the country holds large quantities of peat, limestone, salt, sand, and gravel — each with distinct economic applications. Gravel and sand are particularly valuable for infrastructure-related projects and activities.

This abundance of natural resources, coupled with a free-market system, has created substantial wealth for the Netherlands. In terms of Gross National Income (GNI), Holland recorded 46,400 PPP dollars according to 2013 figures. GNI grew every year from 1990 onward, including during 2008. Holland's GDP stands at approximately $854 billion per year. On a per capita basis, this translates to roughly $51,000, placing Holland among the top 20 wealthiest nations in the world. For perspective, France — nearly twice the size of Holland — has a GDP of $2.8 trillion, yet its per capita GDP is only $43,000. Holland is not only smaller, but appears to be more efficient with the resources it possesses.