Integration of Netherlands into Global Value Chains: View from the Perspectives of Domestic Value Added Decomposition

Abstract

AbstractOver the past decades, many economies have integrated into global value chains (GVCs). These processes were elapsing unevenly, with large country and sectoral differences. Some metrics have been developed in the research literature that made it possible to assess and compare the degree and depth of chain engagement. This paper aims to identify the specifics of the integration of the Netherlands into GVCs in terms of such an indicator as the share of Dutch domestic value-added (DVA) incorporated into third country exports (DVX). The decomposition of the country’s gross exports developed based on a broader input-output approach, served as a key methodology for assessing the participation of the Netherlands in GVCs. The UNCTAD-Eora GVC Database was chosen as a statistical base of the study. Based on calculations and analysis, the authors came to some conclusions. A special feature of the Netherlands is a high share of foreign added value (FVA) in gross exports, and, accordingly, a low share of DVA. At the same time, from 2008 to 2018, the value of DVA of the Netherlands showed an upward trend, while the share of DVA in gross value added exports also increased, which indicates that DVA is growing faster than FVA. During the same period, the dynamics of the DVX showed mixed results: in terms of value, it increased, but as a percentage of gross Dutch exports it slightly decreased, which, in our opinion, indicates the loss (albeit not significant) of the competitiveness of the Netherlands in the downward chain of added cost. Most of the downstream links in the chain in terms of DVX are involved in such sectors of the Dutch economy as the chemical industry, the oil and gas industry, the retail and wholesale trade, as well as agriculture, fishing and hunting. Geographically, the Netherlands’ DVX was focused on the countries of the European continent, which confirms the conclusions about the emerging regional GVC hub in Europe.KeywordsValue-added tradeGVCsNetherlandsExports decompositionForeign value addedDomestic value-added incorporated in the export of third countries (DVX)JEL CodesF14F23F60