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.

With the ratification of the Maastricht Treaty in 1992, the European Monetary Union (EMU) was officially established. It also created the European Central Bank (ECB) and laid the foundation for the introduction of the euro as the Union’s single currency. On 1 January 2002, enterprises and individuals in the Eurozone could pay with euro banknotes and coins for the first time. Today, the Eurozone encompasses 19 EU Member States. According to Eurostat, the Eurozone is currently home to more than three quarters of all EU residents and almost 85% of combined GDP. The euro has become the world’s second most widely used currency after the United States dollar.

The introduction of the euro and EMU was a political process spanning several decades and accompanied by ups and downs. This Internationalisation Monitor deals with the historical run-up, the starting position of the participating countries, the convergence criteria, the economic developments – notably in international trade – after the introduction of the euro, the Euro crisis and the challenges ahead. The most recent developments, such as high inflation due to surging energy prices and the war in Ukraine, will once again pose major economic challenges – among other things – to the Eurozone. Time will tell what the future has in store for the Eurozone economies and the Dutch economy; at the time of writing this publication it is too early to say.

Despite the shortcomings and risks of a single currency and monetary policy, there have been major benefits for both consumers and businesses. Through increased trade and investments, the introduction of the euro added to the benefits of the internal market. Mutual transactions become cheaper as enterprises are no longer exposed to exchange rate risk. This Internationalisation Monitor shows, among other things, how Dutch goods trade within the Eurozone has developed since 2002 and describes the characteristics and developments of Dutch enterprises with exports inside the Eurozone. These developments are set against the trade with the rest of the world, with a particular focus on trade with EU countries that have recently adopted the euro. In addition, we examined what the introduction of the euro has meant for Dutch goods trade within the Eurozone and to what extent the increase in trade can be attributed to the additional benefits of the Eurozone over and above the benefits of the internal market.

The introduction of the euro gave European integration and cooperation an even deeper dimension. The economies of the participating countries became even more intertwined through increased trade and investment. The interconnectedness of the Netherlands with the other Eurozone countries, through participation and integration in production chains, is also discussed in this Internationalisation Monitor. We not only look at how much the Netherlands earns from direct and indirect exports of goods and services inside the Eurozone, but also vice versa.

Listed below is a summary of the main findings presented in this edition:

Chapter 1: The Eurozone – past, present and future

• The founding of the Eurozone or EMU with a single common currency, by then twelve EU countries, was the result of political and economic aspirations such as European integration, greater influence on the world stage, elimination of exchange rate risks, price transparency, greater monetary stability and ultimately more prosperity.
• The average GDP per capita (constant prices) in the Eurozone increased by 15% between 1999 and 2007. However, there was no change in the period between 2007 and 2020. The first period showed overall decreasing differences (convergence) between Eurozone countries, whereas the second period showed increasing differences (divergence). A similar pattern held true for unemployment.
• The convergence criteria, which measure a country’s preparedness to adopt the euro, served to build trust before the start of the euro system with candidate countries fulfilling strict requirements with respect to their government budgets, national debts, inflation, interest rates and exchange rates. However, although not all countries managed to fulfil all these requirements in time, they were still accepted as Eurozone members. The most prominent example is Greece. The convergence criteria have given a good indication of the state of the Eurozone and the differences between EMU members, but the deteriorating performances since the Euro crisis were for most EMU members a consequence of the crisis rather than a cause.
• There were many underlying problems in the Eurozone that became apparent during the Euro crisis, from intrinsic weaknesses to a suboptimal focus and from errors in the architecture to barriers to big solutions.
• Since 2012, the Eurozone has made significant improvements with respect to its economic stability thanks to effective ECB policies, a European Stability Mechanism, the beginnings of a European Banking System and a European Capital Market Union, and stimulus packages.

Chapter 2: Dutch trade within the Eurozone

• Imports from Eurozone countries amounted to €216 bn in 2021. That is 41% more than in 2015 and 129% more than in 2002. Goods imports from euro area countries grew less than those from non-euro countries. Due to growing globalisation, the Netherlands is increasingly trading outside the euro area. The import share of countries outside the Eurozone has increased by 5 percentage points over the past 20 years to 59% in 2021. This is mainly due to a significantly larger import share of European countries outside the EMU and East Asian trading partners (e.g., China, Japan, Taiwan and South Korea).
• In 2021, with €322 bn, 55% of Dutch goods exports went to euro area countries, making the Eurozone the most important sales area. The value of exports to Eurozone countries more than doubled between 2002 and 2021. Due to a doubling of the importance of the East Asian trade region in Dutch exports, the share of exports to non-Eurozone countries increased by 6.5 percentage points over the period 2002–2021.
• The most important trading partners within the Eurozone are Germany, Belgium and France. In this order, they are the most important for our goods import and export.
• From the Eurozone, the Netherlands mainly imports manufactured goods such as iron and steel and clothing, but also chemical products, which include medicinal and pharmaceutical products. Manufactured goods, chemical products and machinery and equipment are the most important goods that the Netherlands exports to other Eurozone countries.
• In terms of the importance of Dutch goods trade, the enlargement of the Eurozone with the accession of seven EU Member States between 2007 and 2015 had a modest impact. Conversely, joining the Eurozone proved to be very important for the recently acceded countries (Slovenia, Malta, Cyprus, Slovakia, Estonia, Latvia and Lithuania). The latter saw their combined share of Dutch goods imports and exports increase in the period 2015–2021. Nevertheless, these seven newly acceded countries play a limited role in the Dutch trade in goods.
• The Netherlands imported services worth €85.1 bn from the Eurozone in 2021 (42.4% share). The main import partners for the Dutch market are countries that have been part of the Eurozone from the beginning. The most imported services from the other Eurozone countries are business services, transport services, use of intellectual property and travel services. Dutch services imports are mainly focused on the non-Eurozone countries. Nevertheless, in the period 2014–2021, imports from the Eurozone grew faster than those from countries outside the EMU.
• Dutch services exports to the Eurozone amounted to €88.0 bn in 2021, with an export share of 41.8%. Again, countries like Germany, Ireland, Belgium, France and Italy are the most important export markets in the Eurozone.

Chapter 3: The Netherlands and the Eurozone in global value chains

• In 2020 €56.4 bn of value added was generated due to domestically produced exports to the Eurozone, €21.2 bn due to re-exports, €38.7 bn due to the exports of services and €4.2 bn due to travel traffic.
• In both 2015 and 2020 wholesale was the most important sector, measured by value added due to exports. IT services grew particularly hard over this period.
• In 2020 €45 bn of value added was generated by exports to Germany, €21 bn by exports to Belgium and €16 bn by exports to France.
• 1.1 million jobs were dependent on exports to the Eurozone. Of these 1.1 million jobs, almost half, around 450 thousand were dependent on exports to Germany. 
• Besides direct exports to the Eurozone, the Netherlands also earns from exports to the Eurozone via other trading partners, in which Dutch intermediate goods and supporting services are further processed and used in the exports of these other trading partners, with the Eurozone as destination. According to OECD figures, in 2018 the Netherlands earned €8.2 bn from indirect exports to the Eurozone. In the same year, the Netherlands earned €144.9 bn from direct exports to the Eurozone. The Netherlands thus earned a total of approximately €153.1 bn in direct and indirect exports to the Eurozone in 2018.
• Although export earnings as a percentage of GDP rose from 19.4% in 1995 to 20.8% of GDP in 2018, the share of earnings from exporting to the Eurozone decreased from 56,8% in 1995 to 52,6% in 2018, despite enlargement.
• Around 78% of Dutch export earnings in the Eurozone was due to final consumption, such as household consumption and investments. The remaining 22% was due to Dutch intermediate goods and supporting services that were used in the exports of Eurozone countries to markets outside the Eurozone. The most important final destinations of Dutch value added embedded in Eurozone exports to other countries were the US, the UK and China.
• Most direct and indirect earnings from exports within the Eurozone were generated by the wholesale and retail trade sector, followed by business services. In the manufacturing sector, export earnings were highest in the chemical industry and the food, beverages and tobacco industry.
• Measured in terms of value added, the Netherlands also has a trade surplus with the Eurozone. The trade surplus amounted to €22.9 bn in 2018. Germany earned the most from directly and indirectly exporting to the Netherlands, followed by France and Belgium.
• Around 64.4% of Eurozone export earnings in trade with the Netherlands was due to consumption and investments in the Netherlands. The remaining 35.6% was due to exports by the Netherlands to other countries. 41.9% of Eurozone exports that went on from the Netherlands had a final destination within the Eurozone. Other important destinations were the US, the UK and China.

Chapter 4: Which effects did EMU participation have on Dutch goods trade?

• In this chapter, we isolate the effect of EMU participation on the goods trade between the Netherlands and its trading partners. We apply two complementary analyses. In the first analysis, we compare Dutch trade with the original EMU-6 countries (apart from the Netherlands, Italy, France, Germany, Belgium and Luxembourg) with a counterfactual, based on the synthetic control method. In a second and rather descriptive analysis, we examine how Dutch goods trade developed with all original EMU-12 countries combined since the introduction of the euro, compared to a group of control countries (i.e. US, UK and Japan). The second analysis also highlights a small number of new EU and EMU Member States and their development.
• Using the synthetic control method (SCM), we analyse the development of Dutch trade with each individual EMU-6 trading partner taking into account the heterogeneity in trade determinants that may persist across trading partners.
• The results of the SCM overall indicate that an increase in trade as a result of EMU participation cannot be confirmed. On the contrary, for Germany, France and Italy, the value of trade with comparable non-EMU partners developed more positively. On the other hand, the EMU effect on trade with Belgium and Luxembourg is positive, as trade after the introduction of the euro was higher compared to trade with similar countries that are not part of the EMU.
• The conflicting findings that emerge from this first analysis can be reconciled with factors other than EMU participation, e.g. position in the value chain, which may explain these heterogeneous effects across the original EMU-6 countries.
• The results from the second analysis suggest that the growth of Dutch trade with the accession countries (new EMU-12) was very similar to trade development estimations based on a comparable group of non-EMU countries. This clearly reconfirms the results from the first analysis.
• The development of Dutch exports to Slovakia as well as Lithuania shows an accelerated growth since their EU membership in 2004 in comparison with the control group of the US, the UK and Japan.
• At a later stage, when the euro was adopted, the effect of EMU membership on trade was sluggish but remained positive.
• The relatively positive EMU effect for countries like Slovakia and Lithuania, that adopted the euro years after EU membership, suggest that the marginal gains from trade from EMU membership is larger for countries that initially do not trade a lot with each other.

Chapter 5: Exporting goods inside the Eurozone: what characterises these enterprises and their exports?

• Despite an increase in both the total number of exporters and the number of enterprises exporting goods inside the Eurozone from 2016 to 2021, in the same period the share of enterprises exporting inside the Eurozone decreased from 80 to 75%.
• The share of exports that were destined for the Eurozone fell from 55% in 2016 to 53% in 2021, in favour of goods exports to Asia and the US.
• The share of exports conducted by large enterprises going to the Eurozone decreased from 53% in 2016 to 50% in 2021 in favour of exports to Asia, the US and other countries in Europe. The share of exports from medium sized enterprises going to the Eurozone remained stable during this period.
• The number of exporters increased with respect to every country in the Eurozone between 2016 and 2021. With an average annual growth rate of 6.7%, the largest relative growth was seen in the number of enterprises exporting goods to Lithuania.
• The further away the destination, the larger the share becomes of large enterprises. Nearly 90% of exporters to Belgium and Germany are SMEs; however, exports to destinations such as Malta, Cyprus, Slovakia and Lithuania are more often carried out by large enterprises with a share between 25 and 30%.
• Around 73% of the enterprises that began exporting inside the Eurozone in 2016 exported to one Eurozone country only. Just over half started exporting to Belgium and just under one in three started exporting to Germany. Of the enterprises that continued exporting successfully beyond 2016, some managed to expand the number of export markets. In 2021, slightly more than half were still exporting to only one country, while 14% of successful exporters were exporting to six or more countries (possibly including non-Eurozone countries).