The Netherlands as part of global value chains

Authors: Timon Bohn, Tom Notten, Khee Fung Wong

By participating in global value chains, the Netherlands has strong ties with other countries. It plays an important role as a link in global trade, especially in intraregional trade within the internal market. This chapter looks at the origin and composition of imports to the Netherlands. We also examine precisely what happens to these imports of goods and services. Dutch companies generally import many goods and services that are produced more efficiently in other countries or that they cannot produce themselves. A substantial proportion of these goods and services are essential to enable companies to export competitively.

6.1Key findings

The rise of global value chains means that global production processes are increasingly fragmented and scattered throughout the world. Raw materials, semi-finished products and even services are more likely to cross multiple borders, with the result that more than two-thirds of global trade now takes place through these global value chains (Baldwin & Lopez-Gonzalez, 2015; World Bank & WTO, 2019). Each country involved in these chains plays a different role. According to the OECD (2013), for example, small (and open) economies are generally highly dependent on foreign inputs that enable them to produce goods and services for the foreign market, and we find a similar pattern in the Netherlands. As Chapter 2 of this publication and various CBS studies (for example Lammertsma & Notten, 2019; Wong et al., 2019; Aerts et al., 2020b) have shown, the import content of Dutch exports is fairly large (approximately 60%); indeed, that share has grown steadily in recent years. The Netherlands’ active participation in global value chains is also reflected in the kinds of goods that the country trades in. Intermediate goods, for example, make up an important share of Dutch imports and exports (Jaarsma & Wong, 2019; 2020).

Imports that remain unprocessed

In this chapter we examine how various goods and services from the Rest of the World work their way through the Netherlands. The infographic at the beginning of this chapter shows what happens to imports entering the Netherlands. In 2019, the Netherlands imported around €590.7 billion worth of goods and services, of which €425.7 billion was accounted for by goods and €164.9 billion by services.noot1 A substantial proportion of total imports of goods and services (37%: the dark blue arrow) found its way directly to the foreign market in the form of re-exports. The vast majority of these are goods, in particular imports for the re-export of ICT products (such as telecommunications equipment and electrical appliances – which are generally ideally suited to container transport), chemical products, and petroleum and petroleum products. Only a small proportion of imports for re-export were services: for example, charges for the use of intellectual property that are paid through the Netherlands. The smallest import flow (the light orange arrow) in the infographic is imported goods and services intended directly for domestic consumption, in which road transport vehicles (including parts) are the largest goods category. Spending by Dutch tourists abroad constitutes the largest category of imports of services intended for the domestic market.

Imports that are processed

The majority of imported goods and services were intended for further processing by Dutch companies (see the dark orange and light blue arrows in the infographic). These ‘intermediate imports’ had a value of €278.2 billion, thus representing 47% of total Dutch imports. Intermediate imports comprise raw materials, semi-finished products, intermediates or support services that, in the Netherlands, are incorporated in other products, or used to provide services. The products or services that the Netherlands produces with them are destined either for the domestic market or for export. As the infographic shows, the Dutch economy processes two-thirds of intermediate imports to serve foreign customers (the light blue arrow). In 2019, €99.8 billion of goods and €83.4 billion of services were incorporated in exports. Petroleum products and chemicals are the main type of intermediate imports. The vast majority of imports of crude oil and petroleum products are incorporated in exported goods and services: for example, refined petroleum products manufactured from crude oil, or petroleum-based plastics and fuels used in exports of services by the transport sector. Chemical products are used mainly in export-driven production processes. The services imported by companies were mainly business services. A good deal of intellectual property was also imported by Dutch companies: this was used mainly for export production. The United States, the United Kingdom and Germany were the main countries of origin of services incorporated into Dutch exports.

Origin of intermediate imports incorporated in exports

The Netherlands plays an important role as a link in global trade, especially in intraregional trade within the internal market. A large share of the imports that are incorporated in exports came from the EU-28 and went to another (or the same) EU-28 country. Of the four EU countries considered separately in this chapter, the Netherlands required the most imports from Germany, followed by the United Kingdom, Belgium and France. Countries geographically close to the Netherlands – neighbouring countries in particular – are thus the main suppliers of the intermediate inputs needed for Dutch exports. The relatively high degree of dependence on imports from Europe applies particularly to industrial and chemical products. Crude oil and petroleum products were by far the most important imported products incorporated in Dutch exports, but the majority of these imports came from countries outside Europe (for example Russia, Norway and Nigeria). Lastly, the United States and China are also important players as regards imports to the Netherlands that are processed by Dutch companies. China was particularly important with regard to imports of machinery, transport equipment and industrial products. The United States was important with regard to imports of machinery and transport equipment, and raw materials and mineral fuels, but its importance to Dutch imports was particularly high as it relates to imports of services, especially American intellectual property.

6.2How the imports are used

This section provides a detailed description of the destinations of goods and services imported into the Netherlands in 2019. As the infographic at the beginning of this chapter shows, we also examine precisely what happens to Dutch imports of goods and services. Are they intended for Dutch consumers, are they processed by a Dutch company as part of its production for the domestic or foreign market, or do they leave the Netherlands for another country in a more or less unprocessed state in the form of re-exports? What goods and services do these imports comprise? And how have they changed in recent years?

Almost half of goods imports destined for re-export

In 2019, imports of goods amounted to €425.7 billion and those of services €164.9 billion, with a total of just under €590.7 billion (Table 6.2.1).noot2 As Table 6.2.1 shows (also represented by the dark blue arrow in the infographic), a substantial proportion of these imports are sent abroad directly: almost half of the goods imported (€425.7 billion) were destined for re-export (for example, a shipping container full of consumer electronics from China that is cleared through customs in the Port of Rotterdam and sold on to a wholesaler in Germany by a company in the Netherlands). In 2017, for instance, approximately €51 billion of the €55 billion of goods imported to the Netherlands from Asia was intended for re-export to Europe (Franssen et al., 2020).

Not only goods are re-exported, services are too. Re-exports of services, amounting to €11.1 billion, are much smaller, consisting mainly of royalty and licence payments to special purpose entities (SPEs) registered in the Netherlands that manage intellectual property rights and transfer the payments they collect directly to foreign parent companies (Mellens, 2011; CBS, 2016).

	Imports for domestic consumption			Imports destined directly for foreign market (imports for re‍-‍export)	Total
	imports for intermediate consumption		imports intended for direct domestic consumption
	domestic consumption	exports
	x billion euros
Goods imports	51.8	99.8	64.9	209.2	425.7
Service imports	43.2	83.4	27.3	11.1	164.9
Total	95.0	183.2	92.2	220.3	590.7

Approximately 16% of imports go directly to Dutch consumers

The smallest import flow (the light orange arrow) in the infographic consists of imported goods and services intended directly for domestic consumption: for example, a bottle of wine produced and bottled in France is an example of an import intended directly for Dutch consumers. A piece of agricultural machinery imported from the United States by a Dutch agribusiness, however, also falls into the category of imports intended directly for domestic consumption (investments in fixed assets). These goods imports amounted to €64.9 billion in 2019. Imports of services intended directly for domestic consumption amounted to €27.3 billion. Spending by Dutch tourists abroad, for instance, falls into this category. Altogether, imports of goods and services that were intended directly for domestic consumption in 2019 made up approximately 16% of total imports.

Two-thirds of intermediate imports further incorporated in exports

The majority of imported goods and services were intended for further processing by Dutch companies. These intermediate imports amounted to €278.2 billion, thus representing 47% of total Dutch imports. Intermediate imports can be subdivided into intermediate imports of goods and intermediate imports of services: these amounted to €151.6 billion and €126.6 billion respectively in 2019. Intermediate imports are incorporated in products or used to provide services either for the domestic market or for export. The Dutch economy processed almost two-thirds of these intermediate imports to serve foreign customers, as €99.8 billion worth of goods and €83.4 billion worth of services were incorporated in exports in 2019. Large quantities of computers, computer parts and telecommunications equipment imported from China, for instance, are incorporated in exports. Many financial services, intellectual property rights and licences from the United States are also used in Dutch exports (Aerts et al., 2020a). Section 6.5 considers in more detail these imports that are incorporated in exports.

Intermediate imports of goods and services incorporated in products or services for the domestic market by Dutch companies amounted to €95.0 billion, of which €51.8 was accounted for by goods and €43.2 billion by services. Coal from Russia is an example of an intermediate import destined partly for the domestic market, as Dutch energy companies can use it to generate power for Dutch households or industry. LED lamps from China used by Dutch construction companies building commercial premises are another example. Fees paid by Dutch media companies to American companies for broadcasting rights to films, series or television shows are an example of imported services incorporated in services for the domestic market (Aerts et al., 2020a).

6.3Composition and origin of goods imports

Highest import value: crude oil and petroleum products

Crude oil and petroleum products were by far the largest category of imported goods, with an import value of €51.0 billion (Table 6.3.1). These imported products are used mainly in further processing for export, or leave the country in an unprocessed state as re-exports. The crude oil and petroleum products category is also the one with the highest import value with regard to further processing for domestic consumption. The second largest category is telecommunications equipment, with an import value of €27.1 billion. More than three-quarters (78%) of these imports are destined for re-export. Imports of electrical appliances, the third largest import category, amounted to €26.0 billion, and almost two-thirds of these imports (66%) were intended for re-export.

	Imports for domestic consumption			Imports destined directly for foreign market (imports for re‍-‍export)	Total
	imports for intermediate consumption		imports intended for direct domestic consumption
	domestic consumption	exports
Goods category (SITC-2)	x billion euros
Total (goods)	51.8	99.8	64.9	209.2	425.7
Crude oil and petroleum products	4.8	24.9	0.9	20.5	51.0
Telecommunication and sound recording apparatus	0.9	3.2	2.0	21.0	27.1
Electrical appliances, n.e.s.	3.2	3.5	2.1	17.2	26.0
Road vehicles	1.5	4.1	13.6	4.5	23.6
Computers and office machines	1.1	1.3	3.8	16.6	22.8
Miscellaneous manufactured articles, n.e.s.	2.4	2.1	2.8	12.0	19.2
Miscellaneous machinery, n.e.s.	1.5	3.1	3.1	7.7	15.3
Professional and scientific instruments, n.e.s.	0.5	1.0	1.3	11.4	14.2
Articles of apparel & clothing accessories	0.6	0.2	3.1	9.1	13.0
Medicinal and pharmaceutical products	2.7	1.0	2.9	6.0	12.6
Vegetables and fruits	1.1	1.1	2.4	7.9	12.5
Organic chemicals	0.6	6.9	0.3	4.3	12.1
Specialised machinery	1.2	2.6	2.6	4.9	11.3
Manufactures of metal, n.e.s.	2.9	2.6	1.0	3.5	10.0
Gas, natural and manufactured	2.1	2.8	1.6	2.4	8.9
Iron and steel	1.7	2.9	0.1	3.4	8.1
Chemical materials and products, n.e.s.	0.7	1.7	0.2	5.4	8.0
Generators and motors	0.7	1.1	0.9	4.3	6.9
Coffee, tea, cocoa, spices, and manufactures thereof	0.6	2.5	0.7	2.2	6.0
Plastics in primary forms	0.6	2.0	0.0	3.3	6.0

Imports for re-export: dominated by ICT products

Imports for re-export, amounting to €209.2 billion, were the largest category of imports into the Netherlands in 2019 (Table 6.3.1). Mellens et al. (2007) found that re-exports worldwide are dominated by ICT products – such as machinery, computers and electronics –, which are generally ideally suited for container transport. We find the same pattern in the composition of Dutch imports for re-export in 2019, of which these goods comprised more than a quarter. Imports of telecommunications equipment for re-export amounted to €21.0 billion, electrical appliances €17.2 billion and office and automatic data processing machines (computers) €16.6 billion. In addition to ICT products, Mellens et al. (2007) also emphasised that chemical products play a major role in re-exports. This is confirmed by the 2019 figures, in which imports of chemical products for re-export amounted to €25.8 billion, or one-eighth of total imports for re-export.noot3 The Rotterdam oil port plays a vital role in imports of crude oil and petroleum products for re-export. These products had a value of €20.5 billion in 2019. Imports of clothing and accessories for re-export, with a value of €9.1 billion, and fruit and vegetables, with a value of €7.9 billion, were also substantial.

Petroleum products and chemicals: important intermediate imports

After imports for re-export, imports for intermediate consumption were the next largest category, amounting to more than €151.6 billion in 2019. These imports are incorporated in goods and services sold both in the Netherlands and elsewhere. Imports of crude oil and petroleum products for intermediate consumption amounted to €29.7 billion, of which imports worth €24.9 billion were incorporated in exported goods and services: for example, refined petroleum products manufactured from crude oil, or petroleum-based plastics and fuels used in exports of services by the transport sector. Imports of chemical products for intermediate use amounted to €22.1 billion. Chemical products are used mainly in export-induced production processes. Electrical appliances to the value of €6.7 billion were imported for intermediate consumption. Intermediate consumption includes electronic components and parts, which are included in the broad category of electrical appliances. Other goods categories for intermediate consumption with a substantial import value are road transport vehicles (including parts) with an import value of €5.6 billion, metal goods to the value of €5.5 billion, and iron and steel to the value of €4.6 billion. Sections 6.6–6.8 look in more detail at the countries of origin of goods incorporated in exports and the exports particularly reliant on processed imports, as is the case, for example, with exports of crude oil and chemical products.

Road transport vehicles: the largest category for direct domestic consumption

Imports intended directly for domestic consumption, amounting to €64.9 billion, were much smaller than the two types of imports mentioned above. Among these imports, the largest goods category was road transport vehicles (including parts), with an import value of €13.6 billion. These imports accounted for 57.6% of total imports of road transport vehicles, hence more than half of the road transport vehicles (for example private cars and motorcycles) were intended directly for Dutch consumers or entrepreneurs. This category also includes after market products such as replacement parts and accessories. Imports of computers and office machinery intended directly for domestic consumption amounted to €3.8 billion, and miscellaneous machinery €3.1 billion. Imports of typical consumer goods intended directly for domestic consumption, such as clothing and accessories, amounted to €3.1 billion, and medicines and pharmaceutical products €2.9 billion. In addition to road transport vehicles, more than half the imports of other transport equipment (including aircraft and ships and boats) and furniture and accessories are intended for direct domestic consumption.

Intermediate imports and Factory Europe

Table 6.3.2 shows what ultimately happens to imports from particular countries. Germany is the largest import partner for goods, accounting for €76.5 billion, followed by Belgium (€42.8 billion) and China (€42.3 billion). Looking at the European Union (EU) as a whole, we find that it accounts for €242.3 billion, thus the EU internal market accounted for 57% of total goods imports into the Netherlands.

Imports from EU countries intended for further processing by Dutch companies amounted to €90.1 billion, accounting for 59% of total intermediate goods imports. The fact that the Netherlands imports large quantities of goods for intermediate consumption from EU countries confirms the hypothesis of Baldwin and Lopez-Gonzalez (2015) that global production chains are not evenly spread throughout the world but concentrated in regional blocks. The Netherlands is part of the European regional block, known as ‘Factory Europe’, in which the European internal market probably plays a major role (Fritsch & Matthes, 2017).

	Imports for domestic consumption			Imports destined directly for foreign market (imports for re‍-‍export)	Total
	imports for intermediate consumption		imports intended for direct domestic consumption
	domestic consumption	exports
Countries and country groups	x billion euros
Germany	11.9	17.5	15.4	31.7	76.5
Belgium	6.5	11.5	9.1	15.8	42.8
France	2.1	3.6	2.9	8.2	16.8
United Kingdom	2.8	7.0	2.8	11.6	24.2
Other EU-28	10.5	16.7	12.6	42.3	82.0
United States	2.7	6.6	5.1	20.1	34.5
Other America	1.3	3.7	1.1	8.4	14.5
China	4.0	5.3	6.1	27.0	42.3
Other Asia	4.2	9.7	6.1	37.6	57.7
Rest of the world	5.8	18.2	3.7	6.5	34.4

Relatively large amounts of intermediate goods imports from the United Kingdom

The United Kingdom ranks fifth among the Netherlands’ main import partners, with an import value of €24.2 billion. Of that €24.2 billion, slightly less than half (€11.6 billion) was intended for re-export. According to Franssen et al. (2020), these re-exports were destined mainly for the European hinterland: they show that the Netherlands is an important intermediary between the United Kingdom and the European hinterland. Compared with goods imports from other EU countries, Dutch companies import relatively large quantities of goods for further processing from the United Kingdom, as 41% of imports from the United Kingdom are intended for further processing, as compared to 37% in the case of other EU countries. It should be noted, however, that crude oil and petroleum products account for a substantial share of the goods imported from the United Kingdom (CBS, 2019).

Importance of imports from China and United States increased

China and the United States are the main non-European import partners, with an import value of €42.3 billion and €34.5 billion respectively. The majority of imports from China, the United States and other overseas countries/country groups are destined for the foreign market, in particular for re-export to the European hinterland (Franssen et al., 2020), thus highlighting the Netherlands’ position as a trading hub. Imports for intermediate consumption from both China and the United States amounted to €9.3 billion in 2019: those from China were used more, relatively speaking, to serve the Dutch market (€4.0 billion) than those from the United States (€2.6 billion). Both countries’ shares of total imports for further processing have increased in recent years (Figure 6.3.3). China’s share increased from 5.1% in 2015 to 6.3% in 2019, whereas that of the United States went up from 5.8% to 6.3% (Aerts et al., 2020b).

Share of imports from the European Union also increased

As Figure 6.3.3 shows, in addition to those of China and the United States, the United Kingdom’s share of total imports for intermediate consumption has gone up, from 5.2% in 2015 to 6.2% in 2019. This increase is due mainly to higher imports of crude oil and petroleum products (CBS, 2019). This growth in import value was due to price increases as well as due to higher volumes of imports. The EU countries’ share of goods imports for intermediate consumption has also gone up, from 55.3% in 2015 to 59.5% in 2019 (the EU-28 is shown from the left vertical axis to the orange bar). Excluding the United Kingdom, the EU countries’ share of goods imports for further processing rose from 50.0% to 53.0%.

Show datatable6.3.3 Shares in total goods imports for intermediate consumption, by country (group) (%)Hide datatable6.3.3 Shares in total goods imports for intermediate consumption, by country (group) (%)

6.3.3 Shares in total goods imports for intermediate consumption, by country (group) (%)

	Germany	Belgium	France	United Kingdom	Other EU	United States	Other Americas	China	Other Asia	Rest of the world
2019	19.4	11.9	3.8	6.5	18	6.2	3.3	6.1	9.2	15.8
2018	18.8	11.8	3.6	6.9	17.5	5.4	3.1	5	9	18.8
2017	19	11.8	3.6	5.8	16.8	5.2	3.3	4.7	9.7	20
2016	19.4	11.5	3.8	5.6	16.4	5.2	3.7	4.9	8.9	20.7
2015	17.6	10.7	3.8	5.3	17.8	5.2	3.2	4.6	9.8	22

6.4Composition and origin of services imports

Other business services predominant in services imports

The largest category among imports of services was ‘other business services’ (Table 6.4.1). The Netherlands imported business services to the value of €51.3 billion in 2019, the vast majority of which (91.6%) were imported by companies. Almost two-thirds of this €47.0 billion worth of imports of business services intended for intermediate consumption was used to enable goods and services to be exported from the Netherlands. Of these business services incorporated in exports, professional and management consulting services accounted for €15.4 billion and technical and trade-related services for €14.9 billion.

Intellectual property: an important foreign services input to generate exports

Payments to other countries for the use of intellectual property were the second largest category, with an import value of €25.0 billion, and the majority of these (97%) were intended for intermediate consumption. More than three-quarters of these intermediate imports were intended for further processing in Dutch exports of goods and services. Payments for the use of intellectual property include for example software licences and fees for the use of patents.

	Imports for domestic consumption			Total
	imports for intermediate consumption		imports intended for direct domestic consumption
	domestic consumption	exports
Service category	x billion euros
Total (services)	43.2	83.4	27.3	164.91)
Other business services	16.1	30.9	4.3	51.3
Royalties	5.9	18.3	0.8	25.0
Travel	2.1	1.7	15.3	19.2
Transport	4.6	12.5	0.9	18.1
ICT services	4.4	6.7	4.2	15.3
Financial services	4.4	2.8	0.3	7.5
Manufacturing services	0.8	3.3	0.1	4.2
Construction	2.0	0.4	0.5	2.8
Personal, cultural and recreational services	0.9	1.7	0.1	2.6
Maintenance and repair services	0.7	1.1	0.0	1.8

¹⁾Includes imports for re-export of services.

The third largest category is travel, with an import value of €19.2 billion. Unlike the two previous service categories, 80.1% of imports of travel services are intended for private consumption. These include spending by Dutch tourists abroad. Other imports of travel services fall into the category of business travel.

Imports of transport services amounted to €18.1 billion in 2019, of which 94.7% were intended for intermediate consumption. Freight transport falls into this category: Dutch companies hiring foreign freight forwarders to transport goods, for example. The remaining 5.3% are imports of transport services for domestic consumption, including passenger transport.

The Netherlands imported telecommunications and computer services to the value of €15.3 billion in 2019, of which 72.8% were intended for intermediate consumption, and again the majority of which were incorporated in Dutch exports of goods and services, for example imported ICT services. The remaining 27.2% were intended for domestic consumption, for example the use of telecommunications networks by Dutch consumers using their mobile phones on holiday abroad.

The US, Germany and the UK: very important in Dutch imports of services

Table 6.4.2 shows how services imported from various countries/country groups work their way through the Netherlands. The United States is the largest import partner for services (€21.8 billion), followed by Germany (€19.9 billion) and the United Kingdom (€19.6 billion). The EU internal market, with €96.2 billion, accounted for 58% of total services imports. Imports from EU countries intended for further processing by Dutch companies amounted to €77.5 billion, accounting for 61% of total imports of services for intermediate consumption. Compared with imports of goods, China and other Asian countries had a modest share of intermediate imports of services.

	Imports for domestic consumption			Total
	imports for intermediate consumption		imports intended for direct domestic consumption
	domestic consumption	exports
Countries and country groups	x billion euros
Germany	5.1	9.8	5.0	19.9
Belgium	3.0	5.0	2.0	10.0
France	2.5	4.5	1.8	8.9
United Kingdom	6.0	11.2	2.4	19.6
Other EU-28	10.7	19.7	7.4	37.8
United States	6.5	12.6	2.7	21.8
Other America	1.7	3.4	0.8	6.0
China	0.5	1.0	0.4	1.8
Other Asia	3.3	5.9	2.4	11.5
Rest of the world	2.9	6.7	2.3	12.0

As Figure 6.4.3 shows, the EU countries’ share of total intermediate imports of services has increased from 54.7% in 2015 to 61.3% in 2019 (the EU-28 is shown from the left vertical axis to the orange bar). This growth is broad-based. Imports of services from Germany, Belgium, France, the United Kingdom and other EU countries (in particular Ireland and Poland) contributed to this growth. This is in line with Lemmers (2015) and Bohn et al. (2018), who observed that the proportion of trade in the services sector has grown sharply since 2000 compared with trade in the manufacturing sector. Excluding the United Kingdom, the EU countries’ share rose from 39.5% in 2015 to 47.4% in 2019. Although intermediary imports of services from the United Kingdom did go up, that country’s share fell from 15.2% to 13.6%.

Show datatable6.4.3 Shares in total service imports for intermediate consumption, by country (group) (%)Hide datatable6.4.3 Shares in total service imports for intermediate consumption, by country (group) (%)

6.4.3 Shares in total service imports for intermediate consumption, by country (group) (%)

	Germany	Belgium	France	United Kingdom	Other EU	United States	Other Americas	China	Other Asia	Rest of the world
2019	12.2	6.6	5.8	14.1	24.9	15.6	4.2	1.2	7.5	7.9
2018	12.3	5.8	5.7	12.3	23.0	13.8	4.6	1.7	7.5	13.3
2017	11.7	5.9	5.3	12.7	22.0	13.9	4.8	2.0	6.6	15.1
2016	11.2	5.5	4.6	13.9	20.0	13.6	4.1	2.4	6.8	18.0
2015	10.2	5.7	4.4	15.2	19.2	14.2	4.5	2.0	6.6	18.1

6.5The importance of imports to Dutch exports

As the previous sections have shown, less than a quarter (23.4%) of goods imports and slightly more than half (50.5%) of services imports are used in the production of goods and/or services for export. Conversely, Dutch exports of goods and services are generally highly dependent on foreign inputs. Chapter 2 of this publication, for example, shows that in 2019 each euro of domestically exported goods required approximately 46 cents worth of imported goods and services. This ‘import content’ was 38% in the case of Dutch exports of services. Sections 6.5–6.8 look in more detail at the origin and composition of the imports that are incorporated in Dutch exports. We will see, for instance, which imports from which countries are incorporated in exports to certain major trading partners. We also examine in detail which foreign inputs are ultimately vital to enable particular export products to be made, or particular Dutch services to be provided abroad.

In general, exports of services are more reliant on the import of services than exports of goods (Table 6.5.1). More than three-quarters (77%) of the embodied imports are services. The same pattern can be seen in exports of goods:noot4 the majority (76%) of total imports required for these exports are goods.

	Goods exports		Service exports
	x million euros	%	x million euros	%
Total exports	232,472		172,634
Goods imports	82,101	76	14,437	23
Service imports	25,663	24	48,051	77

6.6International interrelatedness via Dutch imports and exports

Nowadays more and more goods and services are produced in long, geographically fragmented value chains. Table 6.6.1 illustrates the interrelatedness of the global economy via the Dutch chain. It shows to what extent imports of goods and services from one country (or region) are incorporated in exports to another country in 2019. In 2019, for example, goods and services to the value of €24.5 billion that were ultimately destined for other countries were imported from Germany. Of these imports from Germany, 16% – €3.9 billion – were incorporated in exports to Asia. At the same time, Dutch companies used €19.7 billion worth of imports to enable them to export goods or services to the Americas. Of these imports, 56% came from the EU (€10.9 billion), 16% from the Americas itself (€3.1 billion), and 13% from Asia (€2.6 billion).

European production chains: important for the Netherlands

The figures show once more that the Netherlands plays an important role in intraregional trade within the internal market, as previously highlighted by Baldwin & Lopez-Gonzalez (2013). A large share of the imports that are incorporated in exports (€57.1 billion, accounting for 34% of total imports for intermediate consumption) came from the EU-28 and went to another (or the same) EU-28 country. This should come as no surprise, as a large amount of trade still takes place within Europe. Imports from the EU-28 intended for Dutch exports to all countries (both inside and outside the EU) are very important, amounting to 53% (€90.3 billion). Of the four EU countries examined (in 2019), the Netherlands required imports mainly from Germany (€24.5 billion), followed by the United Kingdom (€15.8 billion), Belgium (€15.1 billion) and France (€7.2 billion). Altogether, the imports from the other 24 EU countries used to process exports amounted to €27.8 billion. Countries geographically close to the Netherlands – neighbouring countries in particular – are thus the main suppliers of the intermediate inputs needed for Dutch exports. The figures also suggest, however, that imports from the United Kingdom are also important (accounting for almost 10% of total imports incorporated in Dutch exports), and that any trade barriers due to Brexit may be problematic for Dutch exports in general.

Imports from the United States: more important for Dutch producers than imports from China

Outside Europe, the United States and China are important players for imports to the Netherlands processed by Dutch companies (Aerts et al., 2020a). Despite the growing influence of China in recent years (Creemers et al., 2020; Draper, 2020), Dutch companies still require imports from the United States worth more than three times the value (€16.5 billion) of imports from China (€5.2 billion) in order to produce their exports. This is partly explained by the fact that the United States is not only an important supplier of goods but also the main supplier of services (Notten & Voncken, 2019; Aerts et al., 2020a). Imports from China, on the other hand, are almost entirely goods. Compared with other trading partners listed in Table 6.6.1, imports from China would seem to be less important for Dutch exports. This only applies at an overall level, however: imports of particular products from China, especially computers and parts (for example chips), are vital for Dutch exports. These high-tech imports from China are incorporated mainly in exports of various services, road vehicles and specialist machinery (Aerts et al. 2020a).

6.7Unravelling export-related imports in more detail

Goods imports incorporated in exports

Figure 6.7.1 shows the composition of imported goodsnoot5 used in the production of Dutch exports in 2019. It distinguishes between chemical products; mineral fuels and raw materials; industrial products; machinery and transport equipment; and food and beverages.noot6 Imports of raw materials and mineral fuels in the amount of €32.5 billion were required to produce exports in 2019. As we saw in section 6.3, these were mainly imports of crude oil and petroleum products. Dutch companies additionally used (for example imported) between €12.6 and €16.3 billion worth of each of the other product categories.

The EU as a whole is again the Netherlands’ main import partner. The 28 countries comprising the EU are shown in Figure 6.7.1 from the left vertical axis to the orange bar. The EU countries are responsible for just over half (51%) of the imported goods required for Dutch exports. This dependence is slightly less than the 53% share if we consider both goods and services (Table 6.6.1). The EU’s share is higher than 50% in every product category except raw materials and mineral fuels (70% of which come from countries outside the EU).

A clear regional specialisation in imports from the EU-28

The high degree of relative dependence on imports from Europe is especially true in the case of industrial products (73%) and chemical products (71%). Notable for these two categories: the other EU-28 countries were much more important in terms of imports of industrial products (and machinery and transport equipment) than chemical products (and other categories). This may be related to the outsourcing of production to Central and Eastern Europe (Fritsch & Matthes, 2017). Belgium is also an import country of origin for imports of chemical products: 20% of these came from Belgium, almost double the Belgian share of imports of all goods (12%). Europe’s limited share in Dutch imports of raw materials and mineral fuels is explained by the large amount of imports from other countries. According to Aerts et al. (2020a), these imports are attributable mainly to Russia and Norway. France – the second largest economy in the EUnoot7 following the departure of the United Kingdom – is not predominant in any import category compared with the other selected EU countries. The main category of imports from France was food and beverages (with an 8% share).

Outside the EU-28, China and the United States play a major role in Dutch imports of almost all categories except food and beverages: 11% of the total imports used for export came from those two countries. China was particularly important as regards imports of machinery and transport equipment (China’s share was 13%) and to a lesser extent industrial products (9%). The United States was also important as regards imports of machinery and transport equipment (9%) and raw materials and mineral fuels (9%). Almost a quarter (24%) of imports of machinery and transport equipment came from Asia (including China). The main categories in the case of the Americas (for example the United States and Other America) were raw materials and mineral fuels (15%). A large share of imported food and beverages used in production for export also came from Other America (8%).

Show datatable6.7.1 Composition of imports used for exports, by origin and goods category, 2019Hide datatable6.7.1 Composition of imports used for exports, by origin and goods category, 2019

6.7.1 Composition of imports used for exports, by origin and goods category, 2019

	Germany	Belgium	France	United Kingdom	Other EU	United States	Other Americas	China	Other Asia	Rest of the world
Chemicals	3553	2912	887	1086	1926	1015	383	752	1421	592
Raw materials and natural products	1393	2226	448	4107	1589	3063	1954	119	4392	13230
Industrial products	4475	2078	614	577	3428	632	98	1334	1073	945
Machinery and transport equipment	4525	1773	435	595	3145	1424	105	2064	1892	369
Food and beverages	2603	1920	1036	365	1497	169	1040	196	1151	2598
Total	16548	10910	3420	6730	11586	6302	3580	4465	9928	23070

Crude oil and petroleum products: the main imports required for exports

Table 6.7.2 shows the origin of the top 20 categories of imported goods incorporated in Dutch exports of goods and services. This table, which breaks down the origin of the main imported products in more detail, essentially yields the same insights as Figure 6.7.1. By far the main category of imported goods incorporated in Dutch exports was crude oil and petroleum products, with a value of €24.6 billion. More than a quarter (25.5%) of the total import value of goods for further processing consisted of crude oil and petroleum products. Almost half of those imports came from the ‘Other countries group’ (Rest of the World), which mainly comprises Russia, (€5.4 billion), Norway (€2.4 billion), Iraq (€1.3 billion), Nigeria (€1.2 billion), Kuwait (€936 million) and Saudi Arabia (€664 million). The imports of crude oil and petroleum products intended for export were incorporated mainly in exports of the same category, crude oil and petroleum products (€17.5 billion), accounting for 71% of imports incorporated in exports. Large amounts of crude oil and petroleum products were also incorporated in exports of organic chemical products (€1.3 billion), plastics in primary forms (€1.2 billion), and transport services (€1.1 billion). An example of this is crude oil imported through a Dutch port, processed into end-products in oil refineries (for example petrol, kerosene, diesel and LPG) or into semi-finished products (for example as a raw material for plastics that can be made into toys and packaging materials) for distribution to other countries. The imported crude oil and petroleum products are incorporated in exports, the majority of which are intended for the EU (56%), with 15% going to America, 12% to Asia, and 17% to the Rest of the World.

Imports incorporated in exports often end up in the EU

The second largest category of imports was organic chemical products, with an import value of just under €7 billion. A quarter of these imports were used in exports of the same category (€1.9 billion), 18% in plastics in primary forms (€1.2 billion), 13% in crude oil and petroleum products (€876 million), and 9% in industrial services (€620 million). Two-thirds (67%) of the required imports that are incorporated in exports are destined for the EU and 14% for Asia. In third and fourth places respectively are road transport vehicles (€4 billion) and miscellaneous machinery (€3 billion). Of the imports of road transport vehicles required to produce exports, 87% ended up in the same export category, the remainder mainly in business and industrial services, generators and motors, and specialist engines. Electrical appliances (€3 billion) round out the top 5. As Table 6.7.2 shows, a wide variety of imported goods categories are required to produce exports, ranging from crude oil and petroleum products (for example to produce chemical products) to cereal products (for example to produce cattle feed). Almost all imported products that are incorporated in exports are destined for the EU, the only exceptions being machinery (specialist machinery, metalworking machinery and miscellaneous machinery) and miscellaneous instruments and devices. A lot of Dutch-manufactured machinery destined for export ends up in Asia (30%) and the Americas (16%), and the same pattern is found for instruments and devices.

As regards imports required for Dutch exports, the EU was the main supplier, relatively speaking, of dairy products and eggs (99% of the import value of this category), paper, cardboard and articles (90%), plastics in primary forms (85%), iron and steel (83%), road transport vehicles (81%), and meat and meat products (74%). The Americas were of more than average importance as a region of origin for imports of oil seeds and fruits (52%), vegetable oils and fats (17%), and specialist machinery (15%). Lastly, Asia (including China) was important as regards imports of devices for telecommunications and for recording and reproducing sound (61%), vegetable oils and fats (38%), and electrical appliances (31%).

	EU-28	Americas	Asia	Rest of the world	Total
Goods category (SITC-2)	x million euros
Total	49,194	9,882	14,393	23,069	96,538
Crude oil and petroleum products	6,655	3,345	4,202	10,387	24,589
Organic chemicals	4,436	798	1,328	307	6,870
Road vehicles	3,198	399	304	50	3,951
Miscellaneous machinery, n.e.s.	2,119	184	510	127	2,940
Electrical appliances, n.e.s.	1,677	229	905	76	2,886
Iron and steel	2,311	45	171	265	2,792
Gas, natural and manufactured	699	87	2	1,819	2,608
Manufactures of metal, n.e.s.	1,826	99	510	59	2,495
Specialised machinery	1,568	378	470	62	2,478
Coffee, tea, cocoa, spices, and manufactures thereof	635	224	112	1,434	2,405
Plastics in primary forms	1,670	111	163	11	1,955
Paper and paper manufactures	1,746	62	104	30	1,941
Cereals and cereal preparations	1,376	47	33	437	1,892
Miscellaneous manufactured articles, n.e.s.	1,300	120	395	57	1,872
Fixed vegetable oils and fats, crude, refined or fractionated	511	303	682	316	1,812
Telecommunication and sound recording apparatus	499	150	1,037	12	1,697
Chemical materials and products, n.e.s.	1,134	201	205	106	1,647
Oil seeds and oleaginous fruits	438	791	62	232	1,523
Dairy products and birds' eggs	1,143	4	0	11	1,158
Meat and meat preparations	856	136	91	75	1,158

Services imports incorporated in exports

Figure 6.7.3 shows the top 6 imported services necessary to generate Dutch exports in 2019. The service category ‘Other business services’ came first, with an import value of €25.2 billion, followed by imports of royalties, with a value of €14.2 billion. Imports in the transport services category amounted to €10.2 billion, and imports of ICT services €5.5 billion. These four categories accounted for 75% of total imports of services required to produce exports in 2019. More than 56% of imported services came from the EU in 2019, emphasising the above-average importance of the EU in Dutch imports of services. The category with the largest EU share was industrial services, with 92%, although imports in this category were modest (€2.7 billion, for example less than 5% of total imports of services for export). The smallest EU share is of payments for intellectual property (40%). This is due to the major role played by the United States in imports of royalties, for example where a Dutch company purchases a licence to allow it to use a software product developed in the United States. Other examples are payments of royalties for movies and music, and franchise fees in the commercial sector and accommodation and food services sector.

Many imports of services from the United Kingdom incorporated in exports

Interestingly, dependence on the United Kingdom for imports of services was above average in the EU-28, due largely to imports of business services. That category, accounting for 39% (€25.2 billion), was by far the largest service category in total imports of services incorporated in exports. The United Kingdom was responsible for 18% of imports of business services, but it also had a substantial share of all the other service categories: it had a 12% share of total imports of services used for exports. Relatively speaking, Dutch dependence on the United Kingdom for imports of services was almost twice as high as Dutch dependence on imports of goods (7%). It is not inconceivable that Brexit will have consequences for Dutch companies that import services particularly from the United Kingdom, as the new trade regime for services appears to introduce barriers (Kirkegaard, 2021). The United Kingdom’s share of Dutch exports of processed goods imports (7%) was significantly lower than those of Germany (17%) and Belgium (11%). Conversely, the United Kingdom’s share of Dutch imports of services (12%) was higher than those of Germany (11%) and Belgium (6%). Germany and Belgium were also less important than the other EU countries in terms of imports of services. The remaining EU-28 had a 12% share of imports of goods intended for export, and its share of services was almost twice as large.

Imported services often used in exports to the EU-28

In addition to the EU-28, we can see that the United States is very important as regards imports of services, especially royalties, as explained in Aerts et al. (2020a). Looking at the export markets, we find that most imports of services were used in exports of goods and services destined for the EU. The share that goes to the EU – depending on the service category – was between 59% (royalties) and 68% (industrial services). Above-average shares of processed royalties and personal services went to the Americas (approximately 16%), and the share of financial services incorporated in exports destined for Asia was also above average (18%).

Show datatable6.7.3 Composition of imports used for exports, by origin and service category, 2019Hide datatable6.7.3 Composition of imports used for exports, by origin and service category, 2019

6.7.3 Composition of imports used for exports, by origin and service category, 2019

	Germany	Belgium	France	United Kingdom	Other EU	United States	Other Americas	China	Other Asia	Rest of the world
Other business services	2686	1708	1464	4459	6514	2947	884	512	2838	1177
Industrial services	467	316	674	316	976	122	10	7	41	57
ICT services	761	336	203	915	1480	651	116	35	731	312
Royalties	1415	224	345	1914	1792	4644	748	69	328	2753
Transport services	1886	1066	607	704	3640	696	292	120	522	694
Other services	750	519	497	731	1772	1138	868	26	321	304
Total	7965	4169	3790	9039	16173	10198	2918	769	4781	13911

6.8Which export products are most dependent on which imports?

As we have seen in previous sections, the majority of intermediate imports of goods and services are ultimately incorporated in exports. This section examines this link between Dutch imports and exports from the point of view of exports. In other words, we shall examine which exported goods and services are highly dependent on imports, and precisely which types of goods and services from which countries are required.

No exports without imports

Table 6.8.1 shows the top 5 categories of goods that were most dependent on imports per euro exported in 2019.noot8 Overall, each euro of domestic goods exported included an average of 46 cents of previously imported goods and services. The crude oil and petroleum products category was most highly dependent on imports, with foreign inputs making up more than 84% of exports. Note the exceptional role of petroleum, which also has the highest export value of all categories of goods. The share of imports in Dutch exports would be much lower (and the earnings from exports of domestic goods correspondingly higher) if this category were not included in total exports (for example 41% instead of 46% for the Dutch economy as a whole excluding crude oil and petroleum products). Of the €20 billion of imported products required, 86% (€17.5 billion) consisted of crude oil and petroleum products. Other imported products required for the export of crude oil and petroleum products were organic chemical products, accounting for 4% of the imports used. This share seems to be fairly small in percentage terms, but it nevertheless amounted to some €876 million. Natural and industrial gas accounted for a 2% share (€369 million) of processed imports.

In second place in Table 6.8.1 is the organic chemical products export category. Exports of organic chemical products required €4.5 billion worth of imports. Of this €4.5 billion of processed imports, 41% (€1.9 billion) were in the same product category (chemical products). Approximately 42% of these imports came from Belgium and Germany, 19% from Asia, and 10% from the United Kingdom. Of the imports required to enable the export of chemical products, 28% consisted of crude oil and petroleum products (€1.3 billion) and 8% of other business services (€351 million). Almost two-thirds (63%) of the business services required were imported from Europe.

Third in the list of export categories with the highest relative dependence on imports is cattle feed. Some €2 billion worth of imports was required to enable the export of €3.4 billion worth of cattle feed, amounting to 59% of the total export value of cattle feed. Of the €2 billion worth of imports, 22% (€444 million) consisted of cereals and cereal products, almost half of which were imported from France (31%) and Germany (18%). Approximately 20% (€397 million) consisted of vegetable oils and fats, half of which came from Other Asia and the Rest of the World. Soya accounted for approximately 15% of imports (€299 million).

Exports of plastics in primary forms mainly require imports of organic chemical products, which represented some 30% of the required imports (€1.2 billion), and crude oil and petroleum products, with a 28% share of the required imports (just under €1.2 billion). Almost two-thirds (65%) of the imported organic chemical products required came from Europe (Belgium and Germany in particular). Many business services and industrial services, mainly from Europe, were needed for exports of plastics in primary forms.

Fifth on the list is the coffee, tea and cocoa category. Exports of this category of goods again required a large quantity of the same category of imports (€1.7 billion, a 57% share of total imports for exports of coffee, tea and cocoa), three-quarters of which came from outside Europe. Other important imported products in the coffee, tea and cocoa export category were business and industrial services, sugar and honey, and paper and cardboard.

If we were to expand the list in Table 6.8.1, the result would be a long list containing a wide range of Dutch export products that are highly dependent on foreign inputs (not shown). For instance, the import content of exported cosmetics and cleaning products, road transport vehicles, other chemical products, professional instruments and devices, and electrical appliances ranges between 46% and 51%.

	Required imports (1)	Export value (2)	Import content of exports (1)‍/‍(2)‍*‍100
Goods category (SITC-2)	x million euros	x million euros	%
Total (goods)	107,764	232,472	46.4
Crude oil and petroleum products	20,305	24,136	84.1
Organic chemicals	4,547	7,139	63.7
Feedstuff for animals (excluding unmilled cereals)	2,017	3,422	58.9
Plastics in primary forms	4,118	7,989	51.5
Coffee, tea, cocoa, spices, and manufactures thereof	2,934	5,725	51.3

Services: less dependent on imports

The pattern is slightly different as regards exports of services, as Table 6.8.2 shows. Exports of services are on average less dependent on imports than exports of goods. Approximately 36 cents for every euro of exported services consisted of intermediate imports. This finding is in line with a study by De Backer & Miroudot (2014), which shows that services supply chains are generally shorter than goods supply chains. Only the ‘industrial services’ category to a large extent (50%) comprised imports of goods and services. Exports in other service categories – payments received for use of intellectual property (42%), other business services (35%), and ICT services (34%) – each comprised at least a third of previously imported goods and services. Transport services, the second largest category of exports of services (amounting to €33.4 billion), had an import content of 30%. Other service categories, such as financial services, travel, insurance services, and government services, had an import content of less than 20%.

The categories shown in Table 6.8.2 are characterised by high consumption of imported services, partly or largely in the same category. For example, slightly over half (51%) of the imports required to export royalties also consisted of royalties (plus 17% of other business services and 14% of ICT services). In the case of other business services, 56% of the imports required consisted of the same category of business services (and 11% of royalties). The imports required for exports of ICT services were slightly more varied, with other business services (30%), royalties (28%) and ICT services (16%) being the most important. Dependence on imports was highest for industrial services, relatively speaking. Unlike the three aforementioned service categories, exports of industrial services were far less dependent on imports of services than the other service categories. The required imports of industrial services consisted mainly of crude oil and petroleum products (19%), organic chemical products (19%), and a variety of other goods. The share of the three largest service categories in exports of industrial services (other business services, royalties and industrial services) altogether amounted to only 15%. This may be due to the trend whereby the Dutch processing industry is increasingly exporting industrial services as bundles integrated with goods. This phenomenon is known as ‘servitisation’ (Neely, 2008).

	Required imports (1)	Export value (2)	Import content of exports (1)/(2)*100
Service category	x million euros	x million euros	%
Total (services)	62,488	172,634	36.2
Manufacturing	3,340	6,660	50.1
Royalties	9,856	23,195	42.5
Other business services	17,214	49,227	35.0
ICT services	8,506	24,723	34.4
Transport	10,197	33,434	30.5

6.9References

Open references