Speech by Sigrid Kaag, Minister for Foreign Trade and Development Cooperation, at the launch of the Statistics Netherlands report Nederland Handelsland (The Netherlands – a trading nation) on 9 September 2019
Ladies and gentlemen,
The Netherlands ¬– a trading nation. These five words encapsulate an important truth. The Netherlands’ prosperity is inseparably bound up with its entrepreneurial spirit, with the ability and boldness to look beyond your own borders for growth opportunities. The report that has just been presented is a good illustration of this. So I’d like to thank Statistics Netherlands (CBS) and congratulate them on this first edition of Nederland Handelsland, which from now on will be published annually.
I’m also delighted that a recent champion of Dutch TV’s ‘The Smartest Person’, no less, was on hand to talk us through the content of the report. So I think we can be confident that the numbers add up.
And the numbers are impressive. The Dutch economy and Dutch exports are growing steadily. This growth compares favourably with the stagnation being experienced in surrounding countries. But although we have a good score, we can’t afford to pat ourselves on the back too much. The sun is still shining here, but there are clouds gathering over neighbouring countries. It will only take a slight change in the way the wind blows for the skies to darken here too.
And make no mistake, there’s some unsettled weather on the horizon. Patterns of global trade are always changing, but in recent years the changes have been more noticeable than ever. That makes it all the more important for us to understand them properly. And to keep close tabs on how the Dutch economy is faring. Which markets are growing, and which are shrinking? Which products and companies are doing well, which are doing less well?
That’s why, as part of my trade agenda, I asked CBS to carry out this survey. I believe that access to reliable data on international trade flows is vital. We need that data to make informed decisions. And you won’t find many better at collecting and interpreting data than CBS.
Peter Hein van Mulligen has just told us what’s in the report. I don’t intend to go through the figures all over again. But I would like to pick out three things that I found particularly striking.
First, this publication highlights the importance of foreign trade to the prosperity of the Netherlands. Exports account for 2.3 million full-time jobs in our country. And that number is still rising. The Dutch economy grew by half a per cent in the second quarter of 2018 compared with the first quarter. And exports were up three per cent. At a time of open speculation about an approaching European recession, these are impressive figures. Foreign trade is still the engine of the Dutch economy.
The second thing that strikes me in this report are the fascinating changes in the export sector. The most eye-catching development is that UK investment in the Netherlands is soaring, but Dutch investment in the UK is plummeting. In 2016, Dutch firms invested 50 billion euros. The figure for 2018 was minus 11 billion euros. So we’re not just talking about a sharp fall in investment, but actually about disinvestment. On the other hand, UK investment in the Netherlands has risen from 14 billion euros in 2016 to 80 billion euros in 2018. It’s not difficult to guess why.
I have mixed feelings about these figures, since the UK is an important ally and trading partner that has decided it wishes to leave the EU and the common European market. Given the ongoing talks in Brussels and the political debate in the UK, it’s not clear what Brexit and our future trading relationship will look like. That uncertainty is breeding caution among Dutch businesses and has led to volatility in flows of British capital. The government has therefore devised a campaign to make business aware of the potential consequences of the approaching Brexit – these figures suggest to me that business has already drawn its own conclusions.
The third thing that caught my eye are the areas where there are still opportunities for the Netherlands. For instance, the Netherlands’ share of India’s imports has fallen. India has a vast and growing economy, and there is plenty of scope for expanding trade ties. With the upcoming state visit, and the parallel economic mission, we are showing the way in this regard. This CBS publication spotlights what can be achieved with good regional economic diplomacy. I’m thinking here in particular of the Netherlands’ focus on the ASEAN 5, which has led to strong growth in Dutch exports to this focus region in the past nine years.
We’re also missing opportunities as regards female entrepreneurship. The number of women running a business actually declined between 2012 and 2017. If we’re on the subject of untapped economic potential, this is a prime – and depressing – example. The CBS report is a clarion call for renewed action on this point.
Having discussed the opportunities, I hope you will forgive me if I also mention a number of threats. As nobody with access to a newspaper or a Twitter account can fail to have noticed, the global trading system is under pressure. I stressed this point today in an interview with the Dutch newspaper Het Financieele Dagblad. The US-China trade war is casting a dark shadow over the market. Around the world we’re seeing an increasing tendency towards protectionism. US import duties are an example of this trend, but in Europe too we’re hearing calls for greater protection of our own markets.
This development stems from a series of complex situations, each of which can be traced back a long way, but essentially the origins of many present-day trade conflicts lie in the – in retrospect unwarranted – optimism that prevailed as the 20th century drew to a close. In the late 1990s it was widely assumed that China’s membership of the World Trade Organization would lead not only to greater prosperity in that country, but also to a more liberal economic policy. As it turned out, prosperity certainly did rise, but China did not become a liberal and open market economy. What we are seeing now in China is a rapid transition towards a highly developed economy, with a particular focus on acquiring a technological lead.
A second development I’d like to touch on is the way the economy and security are becoming ever more closely entwined due to the digital revolution. Opportunities for innovation are at the same time sources of potential vulnerability in terms of our infrastructure and society. New technology is pushing back the boundaries of what we thought was possible, but it is also creating dependency. This will have major implications for privacy, national security and the labour market in the years ahead. The trading relationship with China has become more equal, and hence more complex. The government’s China strategy is premised on this reality.
This changing relationship is also the origin of the friction between the United States and China. The US has made known its dissatisfaction at the World Trade Organization’s inability to ensure a level playing field. The way China operates on the international stage does, after all, put pressure on the basic principles of an open trading system. It only opens its own markets to foreign companies to a very limited extent. So why should other countries give China full access to their own markets? The logic is sound, but increasingly uncompromising rhetoric entails the risk of a transition from the rules-based system that we know, to a power-based system.
I share all these concerns. But we can’t simply shut the gate and pull up the drawbridge. That’s not an effective way of resolving the existing tensions. That’s why I’m calling for an alternative approach. We must continue to work on rules for free trade, a strong multilateral system and open markets. Be open where possible, protect where necessary. That should be our motto.
In the EU, too, we must form a united front. And make maximum use of our strong position in the global economic system to promote reforms to the multilateral trading system. We need strategic partners in this endeavour. Partners that choose trade over isolation, and cooperation over conflict.
Ladies and gentlemen,
The Dutch government is committed to achieving coherence between trade agreements and international environmental, labour and human rights treaties. Economic ties between the EU and third countries must be linked to compliance with international treaties like the Paris climate agreement. So I’d like to see compliance with that agreement be an established part of broad-based trade deals. I think the new European Commission has a key role to play here. I call on them to keep pursuing an open and sustainable trade policy. It can do this by leading efforts to modernise the World Trade Organization. And, when concluding trade agreements, by seeking a commitment to compliance with international agreements on the climate and human rights. And also by taking the lead on international corporate social responsibility.
That is in any case what the Dutch government will be pressing for, and I hope to read about the positive results next year’s CBS report, Nederland Handelsland 2020.