Netherlands’ Participation in GVCs: Facts and Features

Abstract

AbstractIn recent decades, global value chains (GVCs) gave national economies new opportunities to increase competitiveness by placing some segments of production processes in foreign locations with lower costs. The purpose of this work is to identify what factors influenced the integration of the Netherlands into GVCs, and also to consider the features of this integration from a sectoral and geographical point of view. The basic methodology for assessing the characteristics of the participation of the Netherlands in GVCs is the input-output approach. For a number of reasons, the UNCTAD-Eora GVC Database was chosen as the statistical background of the study. Based on the calculations, the authors came to the conclusion that the Netherlands has one of the highest GVCs participation rates: 78% compared with the global average of 51%. The high level of Netherlands GVC involvement is due to its deep backward linkages. The Netherlands is one of the few cases where the share of foreign value added (FVA) in gross exports exceeds the share of domestic value added (DVA): 54% versus 46%. However, forward links in Dutch value added chains are much weaker. The main factor that influenced the development of upstream ties was the high level of re-exports in the country’s gross exports, which was facilitated by the Netherlands’ status as a European transit and offshore center. Another factor that facilitated country’s upstream relations was the industrial nature of economy, which relies heavily on the import of foreign components. The most GVC integrated industries are Dutch chemical, food, agriculture industries and the manufacture of electrical appliances. The most important Dutch GVC partners are Germany and China.KeywordsGlobal value chains (GVCs)Value added tradeNetherlandsRe-exportsForeign value added (FVA)Domestic value added (DVA)GVC participation rateJEL CodeF10F15F19F23F60F69