Executive Summary

The Internationalisation Monitor describes trends in internationalisation and the consequences thereof for the Dutch economy and society. It is published quarterly as part of the Globalisation programme at Statistics Netherlands (CBS), which is commissioned by the Dutch Ministry of Foreign Affairs.

In this edition, we focus on the different aspects of the close bilateral ties between the Netherlands and the United States (US). The US has always appealed to the imagination. For centuries, the largest and most powerful economy in the world has been a magnet for travellers, investors and traders. American-Dutch relations go back over four hundred years.

To this day, the US is one of our most important trading partners. In 2018, around 7.5 percent of all Dutch goods imports originated from the US while the US received around 5 percent of Dutch exports. The US is by far the largest trader in services in the world; around 11 percent of Dutch service imports originated from the US last year. As for Dutch service exports, 7.5 percent went to the US.

In terms of capital flows as well, the US is a global leader and maintains close ties with the Netherlands. The Netherlands is an important destination for such capital flows; most of the capital is transferred to holdings without any real economic activity. The use of the Netherlands as a stopover plays a role here. Investments mainly go back and forth between the Netherlands and the US within a particular industry. More and more American companies are establishing themselves in our country. The number of multinationals in the Netherlands – including from the US – is on the rise. One in five foreign multinationals in our country has an American parent company. More and more Dutch people are therefore working at American companies: last year, more than 200 thousand. Furthermore, emigration to the US is still an important phenomenon: last year more than six thousand Dutch people moved to the US for at least six months.

Listed below are some of the main findings presented in this edition:

Chapter 1: United States economic profile

• The US is by far the largest economy in the world with a GDP of 17,248 billion euros in 2017. The US is 23 times larger than the Netherlands in terms of GDP.
• The US is not densely populated. In 2017, it had a population density of only 36 inhabitants per sq km on average; in the Netherlands, population density is 509 inhabitants per sq km.
• The most populous states are California, Texas, Florida and New York. These states also make the largest contribution to the US economy.
• Average GDP per capita in the US was close to 53 thousand euros in 2017; in the Netherlands it was 43 thousand euros.
• The US recorded an average annual economic growth rate of 2.2 percent over the period 2013–2017, versus 1.8 percent GDP growth in the Netherlands.
• The US economy recovered much more rapidly from the crisis in 2008 than the Netherlands.
• The largest economic sector in the US is the sector real estate and rental and leasing, followed by the public sector.
• The largest differences in economic structure between the US and the Netherlands are seen in the service sector. The contribution of the sector real estate and rental leasing to GDP is 6.4 percentage points larger in the US than in the Netherlands, whereas trade, transport, accommodation and food services are 3.1 percentage points smaller and business services 3.0 percentage points smaller. Agriculture, forestry, fisheries and hunting are more than twice as large in the Netherlands compared to the US.
• The economic structure of the federal states in the US varies widely. Finance and insurance are concentrated on the east coast, computer and electronics manufacturing on the west coast. Motor vehicle, body, trailers and parts manufacturing is mainly located in the southeast and chemical manufacturing around the Great Lakes and in the south. Mineral extraction in concentrated in the rural states in the mid-west. Accommodation and food services is the most important economic activity in the states of Nevada and Hawaii.
• The wealthiest states in terms of GDP per capita are situated on the east coast, followed by the states on the west coast. In the south lie the poorest states.
• The US is the world’s second largest goods exporter, only surpassed by China. The Netherlands is fifth in the global ranking.
• The US is the world’s third-largest high-tech goods exporter while the Netherlands ranks ninth.
• The US is by far the largest exporter of services, the Netherlands the ninth largest.
• The US is the world’s top outward direct investor with an amount three times larger than that of the Netherlands, which is the world’s second largest. However, most direct investment into the Netherlands concerns the channeling of capital to other countries.
• The US is the world’s leading recipient of inward direct investment; almost half is invested in American manufacturing. The Netherlands ranks fifth as recipient.
• With respect to research and development expenditures (R&D), the US and the Netherlands rank tenth and eighteenth respectively.
• With respect to revenue from intellectual property rights, the US is number one in the world, while the Netherlands is in third position.

Chapter 2: US Foreign Direct Investment

• The US position of outward and inward foreign direct investment (FDI) is the largest in the world.
• Motives for FDI are avoidance of the costs of international trade, making use of relative cheap production factors abroad that are used intensively and making technology accessible in foreign R&D centres. On the other hand, direct investments may also be funneled to third countries.
• US outward direct investments increased from 1,425 bn euros in 2000 to 5,323 bn euros in 2017. More than half went to Europe.
• The Netherlands is a destination of growing importance for American outward FDI. Up until 2003, the Netherlands was the third largest recipient; between 2004 and 2008 it became the second largest. From 2009 onwards, the Netherlands has been the largest recipient. In 2017, total inward FDI from the US amounted to 829 billion euros.
• Aside from the Netherlands, Luxembourg and Ireland are increasingly important recipients of American FDI. This is mostly driven by fiscal arguments.
• For the Netherlands, Luxembourg and Bermuda as recipients, around 80 percent of inward investments concerned holdings in 2017. The average share going to holdings in the top ten recipient countries was 59 percent.
• The bulk of direct investments in the Netherlands is related to holdings funneling funds to third countries. Therefore, only a minor share of the American FDI ends up in the Dutch economy.
• To obtain a more accurate picture of economic activity related to FDI from the US, it is better to exclude holdings. After correction, the United Kingdom remains the most important single recipient of FDI from the US. In 2017, Canada ranked second, Ireland third and the Netherlands fourth. China, Singapore and the Caribbean islands of the United Kingdom have emerged as increasingly important destinations; on the other hand, it turns out that Luxembourg and Bermuda are not included anymore in the top ten destinations for American direct investments after adjusting for holdings.
• After correction, US investments in the Netherlands show an increase from 64 bn euros in 2003 to 178 bn euros in 2017. Around 32 percent was invested in the financial sector and 31 percent in manufacturing.
• In 2017, total FDI received by the US amounted to 3,563 bn euros. More than two- thirds came from Europe. The UK was the largest source of these investments; Japan (outside Europe) the second largest. After ranking third between 2008–2013, the Netherlands dropped to fifth position in 2017, being overtaken by Canada and Luxembourg.
• In 2017, the largest direct investments by the top ten investors in the US were made in chemical manufacturing (578 bn euros) and the financial sector (426 bn euros).
• In 2017, Dutch FDI in the US amounted to 325 bn euros, mainly consisting of stakes in the US manufacturing sector.

Chapter 3: Trends in bilateral trade with the US

• In 2017, the US was the fifth largest trading partner for Dutch goods exporters and fourth largest destination for service exporters, making it the single most important non-European destination for both goods and service exports from the Netherlands. As for Dutch imports, the US ranked fourth as trading partner for goods and first as foreign supplier of services.
• In 2017, Dutch goods exports to the US amounted to 19.8 billion euros, of which 72 percent were domestically produced goods. In the same year, Dutch goods imports from the US stood at 30.9 bn euros. The value of service exports to the US that year amounted to 14.6 bn euros, while service imports from the US amounted to 20.7 bn euros.
• Over the past three decades, Dutch exports to the US have grown by an average of 5.6 percent annually, close to the average annual growth rate of total Dutch exports during this period.
• The Netherlands has a considerable trade deficit with the US. The bulk of this trade deficit is on account of large re-export flows.
• The most important commodities in Dutch exports to the US are refined oil products, semiconductor manufacturing equipment, beer and passenger cars. The highest value is traded in exported works of art, in dried, salted and smoked fish and in beer.
• Top commodities in imports from the US are medical instruments, telephones and other telecommunications equipment, and aircraft and aircraft parts.
• Dutch high-tech exports to the US amounted to 5.7 billion euros in 2017, of which 37 percent were re-exported goods. The US is the second largest market for domestically produced exports of high-tech products, after South Korea. Exports of domestically produced high-tech products are dominated by high-tech machinery and scientific instruments.
• The main categories in Dutch service exports to the US are technical, trade-related and other business services, professional and management consulting services, and charges for the use of intellectual property. Audiovisual services, R&D services and personal, cultural and recreational services occupy the highest shares in Dutch service exports to the United States.
• Import of services from the US is dominated by charges for the use of intellectual property and professional and management consulting services.
• Since the global financial crisis, the Netherlands has become less important for the US as a trading partner. The Netherlands’ share in both import and export of goods has diminished despite growing absolute numbers. The Netherlands is the 8^th largest import partner and the 22^nd largest export partner for the US.
• The most important federal state in goods trade with the Netherlands in 2017 was Texas. Other states heavily involved in this trade with the Netherlands are California, New Jersey, New York and Illinois. These also happen to be states with the highest levels of economic activity in the US.
• The Netherlands has considerable shares in the US import market of dyeing and tanning extracts, machinery for semiconductor manufacturing and birds’ eggs. The Netherlands also has a considerable market share in US imports of construction services.
• The Netherlands is an important destination for US exports of radioactive and associated materials, margarine and prepared fats, oils and waxes. For US service exports, the importance of the Netherlands as a destination is highest in charges for intellectual property.

Chapter 4: Revenues in bilateral exports

• International trade is increasingly characterised by trade in intermediate goods and services, due to the rise of global value chains (GVCs). In order to properly assess the importance of the bilateral trade relationship to both the US and the Dutch economy, it is essential to look at the value added that is created in the domestic economy, parallel to the traditional international trade figures.
• The production of goods and services that were exported abroad led to a value added creation of approximately 245 bn euros in 2017. Roughly 6 percent of this value added (15 bn euros) was due to direct exports to the US. The highest value added was created during the production of Dutch-made exports, but the share of value added generated by the export of services is increasing.
• Enterprises active in other business services, wholesale and retail trade and transport and storage generate the largest revenue in direct exports to the US.
• Aside from the 15 bn euros in value added that is created by direct exports to the US, the Netherlands also profits from exports that go to the US via other countries (indirect exports). In 2015, these amounted to 7.4 bn euros. Most of these exports first went to Germany, Belgium, Ireland, the UK or China before going to the US.
• Dutch manufacturing sectors benefit (relatively) the most from such indirect exports to the US. Service sectors mainly derive their value added from direct exports to the US. This indicates that manufacturing sectors are embedded in global value chains in which the Netherlands and the US are somewhat separated.
• In turn, the US earned 34.1 bn euros due to the direct export of goods and services to the Netherlands in 2015. In addition, the US also earned 5.7 bn euros in exports which reached the Netherlands via other countries. As a result, the US earned 39.7 bn euros in exports to the Netherlands.
• This is more than the Netherlands earned through exports to the US by 15 bn euros.
• Two-thirds of the revenue from US exports to the Netherlands – some 26.4 bn euros – were intended for domestic consumption. The remainder of 13.3 bn euros was earned through re-exportation from the Netherlands to a final destination abroad, such as Germany and the UK.
• With a total revenue of 15.2 bn euros, the American business services sector earned the most from exports to the Netherlands, followed by financial services and trading companies in the US. Indirectly, the US mainly benefited from Belgian, Irish and German exports to the Netherlands and through the business services sector abroad.

Chapter 5: Relations between Dutch companies and the United States

• One in five foreign enterprises in the Netherlands is US-based. In 2016, this boiled down to over 2,800 US enterprises in the Netherlands. These are often found in IT and other information services, manufacturing and wholesale or retail trade.
• US enterprises in the Netherlands generated roughly 184 bn euros in turnover in 2016, for example one-third of the total turnover generated by all foreign enterprises in the Netherlands. Between 2012 and 2016, turnover at American firms in the Netherlands grew faster than at any other foreign enterprises.
• The largest turnover increase at US firms was achieved by already established firms; newcomers since 2012 (be it greenfield or merger/acquisition) are more modest in their turnover performance. The opposite holds true for other foreign firms in the Netherlands. Newly established German, Belgian, Japanese and British firms in the Netherlands generate a substantial amount of turnover.
• Despite growing turnover, employment at US firms showed a slight decline between 2012 and 2016. While employing a substantial number of persons –‍ 200 thousand in 2016 – US firms that have exited the market since 2012 as well as incumbent US firms offset the increase in employment at new American firms since 2012. Employment at other foreign firms in the Netherlands increased substantially over this period.
• More than two-thirds of US firms in the Netherlands are active in import of goods; approximately half of US firms export goods. These are mainly found in manufacturing and wholesale and retail trade.
• Foreign firms are well represented in the periphery of the Netherlands, for instance in Delfzijl, Zeeuws-Vlaanderen or in Noord-Limburg. Most American firms are located in the Randstad area of the Netherlands. In Amsterdam the share of American firms in all foreign firms is highest, followed by Zaandam, Haarlem, Gooi en Vechtstreek and Rijnmond.
• More than 63 thousand enterprises in the Dutch business economy were active in export of goods in 2016. Around one-tenth of these enterprises reported having exported goods to the US in that year. Roughly 121 thousand enterprises imported goods in 2016, of which over 10 thousand imported goods from the US.
• In 2017 roughly 7 thousand firms exported goods to the US, at an average transaction value of 2 million euros. The majority of these exporting firms are not very dependent on the exports to the US in terms of their total export value. For approximately 44 percent of these firms, exports to the US take up less than 5 percent of their total export value. Roughly 17 percent depends on trade with the US for more than half of their exports.
• Manufacturing firms, wholesalers and retailers export the largest volumes on average to the US. However, their dependence on exports to the US is also not exclusive. More than half of the exporting enterprises in these sectors depend for less than 5 percent of their exports on the US as a destination. Exporters that have a larger stake in the US can be found in the sectors IT and information, other business services and construction.
• Affiliates of Dutch enterprises active in the US generated 323 bn US dollars in turnover in 2016, spent 5 bn US dollars on R&D and employed 475 thousand people. All of these figures represent an increase compared to 2012, with R&D expenditure by Dutch firms in the US showing the most substantial rise.
• Dutch firms in the US are relatively large in size compared to other foreign firms in the US. More often than other foreign firms, they operate in the IT and information sector.

Chapter 6: Employment at US companies in the Netherlands

• In 2016, the Dutch business economy offered 3.7 million full-time equivalents (FTEs) in employment opportunities. Forty percent of these FTEs was available at multinationals. Five percent or 201 thousand FTEs were created by US-based multinationals.
• Over half of the FTEs at US companies in the Netherlands were available in manufacturing and trade.
• US-based multinationals employed relatively more men and more highly educated employees, compared to other multinationals or Dutch non-multinationals, also when compared within each sector.
• The median annual salary of employees at US companies was over 20 thousand euros higher than the median annual salary at other companies (not corrected for hours worked).
• Compared within the sector, the median annual salaries as well as the average hourly rates were highest at US multinationals.
• Employees at US companies in the Netherlands worked more than twice the number of hours per year compared to other companies. The difference is most pronounced in the trade sector.
• Employees at US companies report working the highest number of extra hours per week, also when compared in terms of the employees’ educational level.
• Employees at multinationals experience the highest level of mental fatigue (burnout complaints) from work, female employees in particular. They also experience higher work pressure than employees at other companies.
• More than half of the employees at US companies report having received training or some other form of education in the past two years. At other multinationals, this share was less than half and at non-multinationals less than 40 percent.
• Workplace harassment is more common at multinationals (both US-based and other). Improper conduct by customers is more common at non-multinationals.

Chapter 7: Migration between the US and the Netherlands

• In 2017, there were 6,774 emigrants from the Netherlands to the United States against 8,481 people migrating from the United States to the Netherlands.
• Dutch emigrants to the US had a higher median income than the average Dutch emigrant: 37 thousand euros in 2016, versus 19 thousand for emigrants to other countries.
• The average age among emigrants to the US is lower than the average for emigrants to other countries: in 2017 this age was 30.2 years, compared to 32.1 years for the group of emigrants to other countries. The average age in the Netherlands in 2017 was 41.6 years. Immigrants were even younger than emigrants: immigrants from the US were 28.2 years old on average, compared to 29.6 years on average for immigrants from other countries.
• Emigrants to the United States are highly educated. Of the emigrants to the US whose education level is known, 66 percent are highly educated, compared to 48 percent of emigrants to other countries and 33 percent of the total population.