The Netherlands - Overview of economy

The Dutch have a long history as merchants and traders. From the 1600s through the 1700s, Dutch ships carried spices and other raw materials from India, Asia, and the West Indies to Europe and then carried manufactured products back to these areas. Dutch merchants were responsible for opening seaborne trade with China and Japan. Their success was based on the design of their ships which had large cargo holds and small crews. This reduced the costs of transporting goods. It was not until the late 1700s that the British displaced the Dutch as the world's main trading nation. Today that tradition continues as the nation remains dependent on foreign trade.

The Dutch economy is a private free-market system . The main impact of the government on the economy is through regulation and taxation. The Dutch have long been renowned as merchants and almost two-thirds of the economy is now based on foreign trade. Along with the United States, the country has consistently been one of the main proponents of international free trade and the reduction of duties and tariffs on goods and services. A member of the European Union (EU), the nation is set to replace its currency with the euro, a common currency that will be used by 11 of the 15 members of the EU. This process, known as European Monetary Union (EMU), is expected to expand the already large volume of trade between the EU member states and link the economies of these nations to a degree never seen before. The Dutch have been among the strongest supporters of EMU. The Netherlands is home to some of the world's largest corporations, including Royal Dutch Shell and Unilever. Despite its small size, the Netherlands ranks number-seven in the world in total value of its corporations.

The nation is in the midst of a long-term economic expansion that began in the 1990s. The Dutch economy grew at an average rate of 2.8 percent during the 1990s, while the rest of Europe averaged only 1.6 percent growth rates. In 2000, the kingdom's gross domestic product (GDP) per capita was US$25,695. The Netherlands ranks number 20 out of 191 nations in GDP and number 16 in GDP per capita . The Dutch workforce contains about 7 million people. The current economic expansion is based on increased foreign trade, consumer spending, and investment. By 2000, unemployment in the Netherlands was the lowest since the 1970s, and the nation's economy averaged over 4 percent growth per year. The economic growth of the past decade raised the GDP from US$299.4 billion in 1995 to US$365 billion in 1999. The success of the economy is the result of adjustments and transformations that Dutch businesses underwent in the late 1970s through the 1980s. The government cut its role in the economy by privatizing many public corporations, and a substantial number of Dutch companies began incorporating advanced technology and communications into their business practices. In doing so, the Dutch reformed their economy before most of their European neighbors and became far more competitive than those countries. The low level of unemployment and the rising economy have spurred inflation . In 2000, the kingdom's inflation rate was 2.6 percent and that figure is predicted to rise to 3.4 percent in 2001 (this is compared with the EU average rate of 1.6 percent).

Like many of the other industrialized European nations, the Dutch economy has been marked by the growth of the service sector and the relative decline of agriculture and industry as percentages of GDP. Despite the lessening importance of agriculture, the sector continues to be highly profitable. The modern Dutch agricultural industry is highly technological and sophisticated. Although it only employs about 4 percent of the workforce, agriculture produces enough food to feed the nation and provide a significant number of exports. The Netherlands is the world's number-three producer of agricultural goods.

Although industry has declined as a proportion of the overall economy, it remains a major factor in the Dutch economy. For centuries, the Dutch economy was based on maritime trade; however, shipping and fishing are now only minor components of trade. The main industries include chemical and metal processing. The nation is also one of the world's main producers of natural gas. The rise in global energy prices has produced high profits for Dutch energy companies. The energy company Royal Dutch Shell is the fifth-largest corporation in the world, worth US$191.3 billion in 1998, with operations throughout the globe. Other areas of industry include mining, food processing, and construction. The geographic location of the country, at the crossroads of Northern Europe, has allowed it to emerge as a major port of entry into the continent for goods and services. Many goods are shipped first to the Netherlands and then transported by land, air, or sea to other nations in Europe. Two of its ports, Rotterdam and Amsterdam, are among the busiest in the world.

Services dominate the economy and 73 percent of employees work in this sector. The primary services are transportation, the distribution of goods, and business services. There is also a strong financial sector that includes banking and insurance. The Dutch are major investors in foreign countries and foreign businesses (investment abroad is 3 times the level of foreign investment in the Netherlands). The Dutch have US$160 billion invested in other countries.