The Netherlands is more at risk than most from Brexit and protectionism
Posted by hkarner - 11. März 2017
Source: The Economist
Subject: Who’s Nexit?
The retreat of globalisation threatens the Dutch economy
AS ANY football fan knows, little delights the Dutch more than beating the Germans. So, as the country prepares for an election on March 15th, it should be cheering an economy that, after lagging behind Germany’s for years, is at last outpacing it. GDP grew by 2.1% last year, which was the fastest rate since 2007 and a stronger performance than its neighbours, including Germany. Unemployment has fallen to 5.3% and more people are in work than before the crisis in 2007-08.
After years of belt-tightening, households are spending again, thanks to a strong housing-market recovery and rising wages. Government finances are sound. This year the budget may be in balance—perhaps even in surplus—and public debt may drop below 60% of GDP. Yet this sunny outlook has not brightened the mood of a tetchy election campaign.
That is not so surprising. Marieke Blom, the chief economist at ING, a bank, attributes the positive forecast mostly to tough government reforms over the past few years—particularly raising the retirement age to 67 (from 2021) and reforming the financing of the health-care system. Years of reform, austerity and recession have taken their toll. Pollsters predict strong votes for protest parties such as the Socialists and the PVV of Geert Wilders, an anti-immigration populist.Niek Stam, a trade-union leader, says that dockworkers in the port of Rotterdam will vote for Mr Wilders—not because they are racist but because they fear for their jobs, which are being threatened by robots, and for their pensions, which they see receding as the retirement age creeps up. Referring to Brexit, Mr Stam says some think “maybe we should do what the English are doing, as globalisation also brings harm.”
Jeroen Dijsselbloem, the finance minister, acknowledges that, despite positive forecasts, “many of our voters have really had some harsh times.” So truculent is the mood that a poll by Ipsos last May found that, in a country once enthusiastic about the EU, 46% favour a “Nexit” referendum on whether to leave.
Yet it is precisely places such as Rotterdam, the Netherlands’ “gateway to Europe”, that stand to lose the most from any retreat from globalisation. Over the past 20 years the Netherlands’ lucrative re-exports (computers shipped in from China, say, and then sent on to Germany) have quadrupled by value.
So Brexit and a protectionist America under the presidency of Donald Trump both threaten the Netherlands more than most. In an otherwise upbeat report on the country’s prospects, the European Commission picks out Brexit-related risks as an Achilles heel. Ratings agencies put the Netherlands (along with Belgium, Ireland and Malta) as being at high risk from Brexit. By value added, Britain is the Netherlands’ second-biggest export market after Germany (see chart).
Around 80% of the flowers and 70% of the plants that Britain imports come from the Netherlands. Growers could be particularly hard hit if Brexit led to new trade barriers. At a parliamentary hearing last month, representatives of other Dutch industries voiced similar concerns. The fishing lobby emphasised how much it needs access to British waters: 60% of the Netherlands’ fish, including 90% of its beloved herring, are caught there. Agricultural and food exports to Britain were worth €8.9bn ($9.8bn) last year. The farming lobby says it is already suffering from sterling’s weakness, which makes its products 20% dearer, and worries that the EU’s farming policy will become more subsidy-driven when Britain no longer has a seat at the table.
The country’s economic-policy bureau, the CPB, estimates that a “hard” Brexit, in which British trade is governed just by WTO rules, could cost the Dutch economy 1.2-2% of GDP by 2030. And Britain is not the only headache. Exports to America—and hence the threat of American tariffs—also matter disproportionately to the Dutch: 3.4% of GDP (compared with 2.6% on average for the EU) and 300,000 jobs depend on them.
Needless to say, a Nexit would cause much greater upheaval. Leaving the EU would hit the Netherlands much harder than Brexit will hit Britain, says Wim Boonstra, an economist at Rabobank’s research arm: “We’re the world’s second-largest exporter of agriculture; without free trade we would drown in milk and cheese.” The country grew rich in its golden age by sailing the seas and trading globally; on many measures it is still the world’s most open economy. Today it is the fifth-largest exporter of goods. A third of its GDP comes from exporting goods and services. Few countries have as much to lose from a world where drawbridges are pulled up and ships are kept in port.