Executive Summary

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

Sustainable development was defined in the Brundtland report as ‘an economically viable, environmentally sound, and socially acceptable development that meets the needs of the present without compromising the ability of future generations to meet their own needs’. For a long time, priority was given to economic growth. However, health, safety and social and economic stability within society are also key indicators of the quality of life and the growth of well-being. The choices made by Dutch producers and consumers affect jobs, incomes, (non-renewable) resources and the environment in other countries. The goods and services imported into the Netherlands are produced in other countries; this production generates jobs and incomes but also puts pressure on local (non-renewable) resources and environment.

One of the drawbacks of globalisation is the increasing pressure on the environment. For example, the depletion of natural resources, deforestation to meet the rising demand for certain products, and emissions from growing international transport. The ecological and environmental aspects of globalisation have become more prominent due to increasingly severe issues and growing damage to the environment. Sustainable international trade can make an important contribution to achieving a number of Sustainable Development Goals (SDGs) as set by the United Nations and thus can increase global well-being. Making the Dutch economy and trade more sustainable is an important policy theme. This means that it is very important to have a clear overview of developments and trends taking place in the trade in sustainable goods. Knowledge of the environmental impact of trade and the behaviour of companies is another important aspect.

Hence, this Internationalisation Monitor focuses on the environmental aspect of Dutch international trade: how does globalisation contribute to the issues and solutions in the area of environmental sustainability? International trade both contributes to environmental issues and to their solutions. Listed below are some of the main findings presented in this edition:

Chapter 1: International trade in raw materials

• The Netherlands is the second largest importer of materials and raw materials in the EU and the imported weight has grown significantly since 2000. Large flows of goods come from neighbouring countries (e.g. sand and gravel from Germany), but also from more distant countries (crude oil from Russia, corn from Ukraine or iron ore from Brazil). In terms of import value, high-tech materials from China represent a large share.
• The Netherlands is the second largest exporter of materials in the EU and even the single largest exporter when it comes to raw materials only. This is mainly due to the prominent role of re-exports compared to other EU countries. Large flows of goods go to neighbouring countries. For example, a lot of sand goes to Belgium and natural gas to Germany. In addition, large quantities of scrap metal are sent to Turkey. In terms of export value, more distant destinations are emerging, with important examples being baby milk powder to China and microchip machines to Taiwan, South Korea or China.
• The Netherlands is ‘only’ the 14^th largest consumer of materials in the EU and the 12^th largest consumer of raw materials. This relatively frugal consumption is explained by the relatively lower material input for road and other construction works as a small and densely populated country; and at the same time, by the typically service-oriented economy that requires relatively little material input.
• The Netherlands is highly dependent on other countries for its own material consumption and production.
• The Netherlands is the highest scoring member of the EU in terms of resource productivity. In 2019, the Netherlands earned €5.3 from each kilogram of material used. That is more than twice the EU average.
• The Dutch raw material footprint, measured in kilograms of raw material equivalents, is small from an international point of view. This indicates frugal use of raw materials. In the Netherlands, the footprint was 9.7 tonnes per inhabitant and in the EU it was 14 tonnes per inhabitant.
• The Netherlands has the highest share of secondary input compared to total material use of all EU countries.

Chapter 2: The international trade in environmental goods – a first step

• Some goods are less harmful to the environment than others. Environmental goods are goods that can contribute to improving the quality of the environment, managing natural resources and reducing material consumption and pollution. A universal list of environmental goods has not been internationally defined, although there are several suggested lists. In this chapter, we use a broad as well as a narrow definition.
• In 2010, the Netherlands imported approximately €93bn worth of environmental goods according to the broad definition, amounting to 28% of total Dutch imports that year. In 2020, imports of environmental goods fell sharply to about the level of 2012, contracting even more than the total import value. This caused the share of environmental goods in imports to fall to approximately 26%.
• When focusing on the narrow definition of environmental goods, imports and exports are approximately 5 to 7 times smaller than according to the broad definition. The import value of environmental goods according to the narrow definition rose as of 2013 and reached a peak in 2019, then stagnated in 2020. However, the share in total imports continued to grow.
• The Dutch manufactured exports of environmental goods (broad definition) grew from just over €60bn in 2010 to €87bn in 2019. According to the narrow definition, Dutch-made environmental exports grew from €10bn in 2010 to nearly €17bn in 2019, representing a growth rate of 58%. Not only did the export of Dutch-manufactured environmental products grow more strongly according to the narrow definition than according to the broad definition, it also continued to grow in 2020. The share of environmental goods in total Dutch-manufactured exports grew from 5.1% to 6.4% over the past decade.
• According to the broad definition of environmental goods, the Netherlands ranks 8^th in terms of the share of environmental goods in total imports and 12^th in terms of their share in total exports. This relatively high ranking is due to the fact that the Netherlands trades disproportionately large quantities of WTO-defined environmental goods, such as certain mineral fuels and electronics. According to the narrow definition of environmental goods, the Netherlands scores significantly lower than the EU average: 20^th in terms of imports and 24^th in terms of exports.
• Germany is the largest trading partner when it comes to trade in environmental goods according to the narrow definition. China comes second in terms of imports, while the main export destinations of Dutch-manufactured environmental goods are Europe and the US.
• Static converters are the most important environmental import product of the Netherlands, followed by electrical vehicles and solar panels. In Dutch-manufactured environmental exports, products of iron or steel (e.g. for tubes or pipes) rank first while these materials and parts are widely used for the construction of some environment-related goods.
• Enterprises trading in environmental goods are mainly active in manufacturing or in wholesale and retail trade. The manufacturing sector exports its own manufactured goods in particular, while the wholesale and retail sector mainly import and re-export environmental goods. The manufacturing industry, with the highest exports of self- manufactured environmental goods, is the industry that produces machines and equipment with specific purposes, just outranking the automotive industry.
• About 70% of the Dutch manufactured export value is carried out by enterprises having less than 250 persons employed. Such traders are often medium-sized enterprises.

Chapter 3: Trade in goods with a high environmental impact

• The Netherlands is a major international trader in products with a large environmental impact (throughout the life cycle from production to consumption of those products). This chapter looks specifically at meat, palm oil, clothing and laptops.
• The Netherlands is the fourth largest importer of meat in the EU and the largest exporter. Much of this export is domestically produced. In 2019, the Netherlands earned €8.7bn from the production of meat and meat products, with 40% attributable to the domestic market and 60% to exports. These exports required €2.7bn in imports, such as live animals and meat that still needs to be processed, as well as many animal feed raw materials (corn, palm oil, soy, wheat).
• The Netherlands is the largest importer and exporter of palm oil in the EU and refines a lot of crude palm oil itself for use in the domestic food industry, among other things. Two-thirds of the imported crude palm oil ends up abroad after processing in the Netherlands. Almost half of all imports end up abroad as food (animal feed, dairy products, soups, sauces, baby milk powder, meat, etc.). In addition, 17% goes directly abroad as re-exports.
• The Netherlands is the fourth largest importer of clothing in the EU and the third largest exporter. The Netherlands is primarily a transit country. No less than 78% of the €16bn in imported clothing goes directly abroad. The main countries of origin for Dutch clothing imports outside the EU are China and Bangladesh.
• The Netherlands is the largest importer and exporter of laptops and tablets and here, too, the Netherlands is primarily an important transit country. For example, 80% of the €15bn in imported laptops and tablets immediately passes through the Netherlands to other countries. The vast majority of imports come from China, where high-tech parts from the US, Taiwan or Japan are often assembled into end products.
• As a consumer, producer and in particular a transit country, the Netherlands is an important facilitator of international trade flows in meat, palm oil, clothing and laptops.

Chapter 4: Non-tariff measures and Sustainable Development Goals

• International trade can be an important driver of sustainable development. Non-tariff measures (NTMs) are trade measures that primarily guarantee the health and welfare of humans, animals, plants and nature. Although compliance with NTMs can bring extra costs, they can also contribute to the Sustainable Development Goals (SDGs). This chapter provides a better picture of this relationship and also describes which parts of Dutch imports and exports are subject to such SDG-related NTMs.
• A recent project of the United Nations investigated per product and NTM whether there is a direct link with specific SDGs (Kravchenko et al., 2019). This project provides insights into the extent to which NTMs reflect the commitment of economies to achieving the SDGs. Their analysis results in quantitative indicators of how much and what share of countries' NTMs are positively related to the SDGs. NTMs can also have negative effects on SDGs. For example, good health is targeted by an NTM, which costs more money, which negatively affects the SDG on poverty. The negative effects are not incorporated in this study.
• Kravchenko et al. (2019) find that 42% of all NTMs are positively related to an SDG, where in particular SDG 12 (responsible consumption and production), SDG 3 (good health and well-being) and SDG 2 (zero hunger) can most often be linked to NTMs.
• Concerning SDGs 2 and 3, it is mainly the Sanitary and Phytosanitary Measures (SPS) that can contribute to these because of their focus on food safety and quality. For SDG 12, it is mainly the Technical Barriers to Trade (TBT) that arise from major international conventions and apply to many products at the same time.
• The study of Kravchenko et al. (2019) does not take into account the actual trade in products subject to such NTMs. The percentage of all NTMs that can be related to SDGs provides no information on the prevalence of these measures in international trade.
• For this reason, these data are enriched with the Dutch International Trade in Goods statistics. This analysis provides insight into the share of Dutch imports that is subjected to NTMs related to specific SDGs.
• The analysis also outlines the portion of the Dutch export value on which receiving countries impose such NTMs. Moreover, this information can be specified to individual receiving countries.
• This analysis confirms that a large proportion of Dutch imports and exports is directly affected by NTMs related to SDG 3 and SDG 12.
• Nearly 40–50% of all import value is subject to SDG3 and SDG 12 related NTMs. This means that for almost 50% of the total value of goods imported by the Netherlands, rules apply that relate to responsible consumption and production.
• On the Dutch export side, we also see that most NTMs are linked to SDG 12. However, the percentage is a lot higher at almost 80%. When we look at specific countries, we see that exports to China are relatively most affected by these SDGs related NTMs.

Chapter 5: Do international firms produce more efficiently?

• The chemical and pharmaceutical industry has the highest energy intensity within the NACE category industry.
• Within the NACE category industry there has been a 12% decline in energy use during the period 2015–2018.
• High and low productive firms are more energy intensive than average productive firms. This effect is the most pronounced for firms within the chemical and pharmaceutical industry.
• Firms that invest more in R&D also seem to be less energy intensive.
• For firms that are more energy intensive than average, there seems to be a negative relation between exporting and energy intensity. In other words, exporting firms seem to have a lower energy consumption per unit of production than non-exporting firms within this group.
• Foreign multinational firms seem to be more energy intensive than non-multinational firms or Dutch multinationals. This effect is more pronounced for firms that are already relatively energy intensive.
• For firms that import a relatively large amount of goods, there seems to be a positive relationship between imports and energy intensity. In other words, these firms seem to be more energy intensive than non-importing firms. This is a curious result, which requires more research to be fully understood.