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U.S. DEPARTMENT OF STATE
NETHERLANDS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS




                         THE NETHERLANDS

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                     1992      1993      1994

Income, Production and Employment:

Real GDP (1990 prices) 2/         287,371   288,520   294,290
Real GDP Growth Rate (pct.)           1.4       0.4       2.0
GDP (current prices) 2/           302,806   308,779   320,564
By Sector:  3/
  Agriculture                      10,753    10,054    10,215
  Energy/Water                      4,839     5,000     5,107
  Manufacturing                   110,054   107,204   109,677
  Construction                     16,183    16,667    17,204
  Rents                            26,389    28,655    30,295
  Financial Services               13,871    14,677    15,054
  Other Services                   82,742    87,796    89,785
  Government/Health/Education      29,731    30,645    31,183
  Net Exports of Goods & Services  13,521    15,467    16,667
Real Per Capita GDP (USD)          18,995    18,900    19,153
Labor Force (000s)                  6,158     6,233     6,306
Unemployment Rate (pct.)              6.7       7.7       8.8

Money and Prices:  (annual percentage growth)

Money Supply (M2)                     6.6       8.5       6.0
Base Interest Rate 4/                 8.7       8.1       6.4
Personal Savings Rate                 9.1       8.7       9.0
Retail Inflation                      2.0       1.3       1.1
Wholesale Inflation                  -1.2      -1.9       0.0
Consumer Price Index                106.4     109.2     112.2
Exchange Rate (guilders/USD)
  Official                           1.76      1.86      1.85

Balance of Payments and Trade:

Total Exports (FOB) 5/            128,736   126,290   133,790
  Exports to U.S.                   5,287     5,451     6,000
Total Imports (CIF) 5/            122,269   117,500   124,516
  Imports from U.S.                13,746    12,839    14,000
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt                    0         0         0
Debt Service Payments (paid)       14,689    15,791    18,509
Gold and Foreign Exch. Reserves
  (end of period)                  35,086    40,449    40,806
Trade Balance 5/                    6,467     8,790     9,274
  Trade Balance with U.S.          -8,459    -7,388    -8,000


1/ Estimates based on available monthly data in October 1994.
2/ GDP at market prices.
3/ GDP at factor costs.
4/ Figures are actual, average annual interest rate.
5/ Merchandise trade.
6/ All of dollar figures have been converted to the exchange
rate of $1 = 1.86 guilders for 1993.

Sources: Central Bureau of Statistics (CBS), Netherlands
Central Bank (NB), Central Planning Bureau (CPB)



1.  General Policy Framework

    The Netherlands is a prosperous and open economy, and
depends heavily on foreign trade.  It is noted for: stable
industrial relations fostered through consultations among
employers, unions, and government; a large current account
surplus from trade and overseas investments; natural gas
exports making Holland a net exporter of a popular fuel; a
geographic location as a European transportation hub with the
world's largest port (Rotterdam), one of its top airports
(Amsterdam-Schipol), and an excellent road and rail system,
making it a prime production and distribution center for
foreign firms seeking access to Europe.

    Dutch trade and investment policy is among the most open in
the world.  The government has reduced its role in the economy
since the 1980s, and privatization continues with little debate
or opposition.  Nevertheless, the state dominates the energy
sector and plays a large role in transport, chemicals,
aviation, telecommunications, and steel.

    Elections in May 1994 produced a new, three-party,
left-right coalition government. The government inherits an
economy that moved out of shallow recession in 1993 (GDP grew
0.4 percent) and that has begun sustained, export-led growth.
Growth is expected to be at least 2 percent in 1994, and near
2.8 percent in 1995.  The consensus forecast is for annual
average growth of 2.2 percent over the next four years
(although the Finance Minister has warned of a possible
downturn in the international business cycle after 1996). 
Inflation is low and falling;  1994 CPI inflation is expected
to be 2.8 percent, slowing to 2.7 percent in 1995. 
Nonetheless, the government must grapple with a number of
structural economic problems if the Dutch economy is to fully
live up to its potential.

    A key government goal is to stimulate the creation of
350,000 new jobs over the next four years.  A cut in the
"collective burden" of taxes and social security contributions
is seen as key to boosting employment and improving
competitiveness, but Dutch industry is not convinced the
government is doing enough on this score.  The government also
plans to continue (and perhaps speed up) the process of
deregulation and antitrust reform begun under the previous
government.

    With much "fat" in spending already pared away, budget cuts
are getting into areas which were regarded as untouchable:
development aid, social security, defense, education.  The 1995
budget cut spending by 4.6 billion guilders ($2.5 billion).
Total planned cuts are 18.2 billion guilders ($10 billion) by
the end of 1998.  A combination of budget austerity and
economic growth will reduce the budget deficit from the 
current 3.75 percent of GDP to 3.3 percent of GDP in 1995. 
Public debt will rise from 79.4 percent of GDP at the end of
1994 to 79.9 percent in 1995.  

    The deficit is largely funded by government bonds.  Since 
January 1, 1994, financing has also been covered by issuing
Dutch Treasury Certificates (DTC).  DTCs replace a standing
credit facility for short-term deficit financing with the
central bank which, under the Maastricht Treaty, was abolished
in 1994.


2.  Exchange Rate Policies

    Since the European Monetary System (EMS) was introduced in
1979, the Netherlands Central Bank (NB) has maintained a stable
exchange rate between the guilder and the German mark using
interest rate policy.  The guilder is one of the strongest
currencies in Europe.  When the EMS fluctuation bands widened
to 15 percentage points in August 1993, the Dutch and Germans
agreed to keep the guilder in the original 2.25 point
fluctuation band.  Because Germany is the Netherlands' main
trading partner, the link with the mark is expected to stay
intact.  A strong guilder should encourage Dutch imports from
the United States and reduce exchange rate risks to U.S.
investors in the Netherlands.  There are no multiple exchange
rate mechanisms.

    The NB exerts control over money market rates by adjusting
short-term rates and by varying the terms of banks' access to
NB financing.  The NB's open market policy gives the bank a
tool to signal the market the way it wants it to develop.  For
this purpose the NB uses a three billion guilder portfolio of
Treasury issues from which it buys or sells.

    There are no exchange controls, although Netherlands
residents must obtain an exchange license for certain large
international financial transactions.


3.  Structural Policies

    Limited, targeted investment incentives have been a
well-publicized tool of Dutch economic policy to facilitate
economic restructuring, and to promote energy conservation,
regional development, environmental protection, research and
development, and other national goals.  Subsidies and
incentives are available to foreign and domestic firms alike
and are spelled out in detailed regulations.  Subsidies geared
to the previous objectives are in the form of tax credits which
are usually disbursed through corporate tax rebates, or direct
cash payments in the event of no tax liability.

    The Investment Premium Regulation (IPR), the only major
strictly investment incentive currently available, aims to
encourage investment in areas with high unemployment with
subsidies for new investments (industrial buildings and fixed
assets).  The IPR applies to investments of which at least 25
percent is the investor's own capital.  Grants range from 10 to
20 percent of the investment in buildings and equipment, and
sometimes land.  A 20 percent grant is available for new branch
and restructuring projects, and 15 percent for expansion
projects.  Local subsidies are also available from regional
development companies.  

    To combat relatively low spending on research and
development by Dutch firms, the government set up "Senter", an
independent agency to encourage and financially assist firms in
innovative research and development projects in targeted
fields.  Senter's programs are open to firms without regard to
nationality of ownership that have Dutch-based research and
development operations. There are few restrictions on size and
other elements of participating firms, and selection for
funding is competitive.

    Senter emphasizes technology transfer, and many programs
are geared to linking firms from diverse sectors. Senter has a
700 million guilder (over $376 million) annual budget. A
similar agency, "Novem", has a 300 million guilder ($161
million) budget for energy and environment-related programs.  

    In another effort to attract investment, in 1993 the
government established an office to give binding tax rulings to
foreign companies in advance of investment.  While normal taxes
are not relaxed, companies can clarify, often favorably, tax
situations that may be open to interpretation.

    In November 1993 the previous government set up a 900
million guilder (about $484 million) industrial fund to finance
restructuring projects by medium and large Dutch enterprises. 
The money came from the government, commercial banks, insurance
companies, pension funds, and the National Investment Bank. 
Financing for new projects is available up to a ceiling of 50
million guilders per project.  The fund was intended to improve
the structure and competitiveness of the economy, but has so
far been used by just one company.


4.  Debt Management Policies

    With a current account surplus of three percent of GDP in
1993 and no external debt (all public debt is denominated in
guilders), the Netherlands is a major creditor nation. 
Nonetheless, since the early eighties, the gross public debt of
the public sector (EMU criterion) has grown sharply, to 79.4
percent of GDP in 1994.  If current policies are followed, most
observers predict little decrease in the debt as a percentage
of GDP in the next four years.  Debt servicing and rollover
have risen to nearly ten percent of GDP.  All of the
government's financing needs (budget deficit and debt
servicing) are covered on the Dutch domestic capital market. 
There are no difficulties in tapping the domestic capital
market for loans.  Government bond issues are usually
over-subscribed, and public financing requirements have
recently been met long before the end of each fiscal year. 
Since the late eighties, the Dutch have significantly improved
their fiscal balance.  The Netherlands is a participant in and
strong supporter of the IMF, IBRD, and other international
financial institutions.


5.  Significant Barriers to U.S. Exports

    The Dutch economy is an open one.  Dutch merchandise and
services exports represent more than 50 percent of GDP, making
the Dutch economy one of the most internationally-oriented in
the world.  The Netherlands is the ninth largest U.S. export
market, as well as being a country with which the United States
has one of its largest bilateral trade surpluses: $7.4 billion
in 1993.  Total U.S. exports to the Netherlands in 1993 were
down seven percent over 1992.  However, a nine percent increase
is forecast for 1994.  In 1993, imports from the U.S. accounted
for nearly 11 percent of total Dutch imports.  The Netherlands
is among the top three direct investors in the United States,
along with the United Kingdom and Japan; Dutch accumulated
investment in the United States in 1993 grew to 68.5 billion
dollars.  The U.S. is the largest investor in the Netherlands: 
U.S. direct investment fell slightly, to about 19.9 billion
dollars in 1993.

    Most trade barriers that do exist result from common EU
policies.  The following are areas of potential concern for
U.S. exporters to the Netherlands:

    Agricultural Trade Barriers:  Agricultural trade bariers
are generally driven by the Comaon Agricultural Policy (CAP),
and common external tariffs that serve to severely limit
imports of U.S. agricultural products. Bilateral import
barriers are confined to the restrictive acceptable limits of
Aflatoxin in peanut imports.  These limits are independent of
EU directives and at times, serve to restrict U.S. peanut
imports.

    Offsets for Defense Sector Contracts:  The defense ministry
requires all foreign contractors to provide at least 100
percent offset/compensation for defense procurements over five
million Dutch guilders (about $2.7 million). The seller must
arrange for the purchase of Dutch goods or permit the
Netherlands to domestically produce components or sub-systems
of the weapons systems it is buying.

    Broadcasting and Media Legislation:  Liberalizing
amendments to the Dutch Media Act admitting local and foreign
commercial broadcasters into the Dutch cable network took
effect in 1992.  Dutch compliance with the EU Broadcasting
Directive and its 50-percent-EU-content-where-practicable
requirement is not primarily a bilateral issue, but one between
the United States and the EU.  U.S. television programs are
popular and readily available in the Netherlands.

    Cartels:  Although the export sector of the Dutch economy
is open and free of competition restraints, cartels exist in
the domestic sector of the economy.  Cartels have been legal in
the Netherlands if accepted for registration by the
government.  Cartel arrangements include restrictions against
market entry, restrictions on sales territories, and sales
quotas.  Cartels are not necessarily limited to Dutch
companies.  In order to comply with EU requirements to curtail
cartels, the government in 1993 and 1994 introduced legislation
to break up the cartel system.  The new government is expected
to proceed quickly with the anticartel bill.  For the time
being, cartels are a potential threat to foreign firms seeking
to do business in the Netherlands.  However, the U.S. Embassy
knows of only two complaints by U.S. firms of having been
disadvantaged by cartels in the Netherlands, and these did not
involve exports.

    Public Procurement:  Central government procurement is
generally open and transparent and complies with the EU
procurement directive and the GATT government procurement
code.  However, independent studies show that transparency and
enforcement in this area can be deficient, especially at the
local authority level, and with offset or local content
requirements.  

    In this regard, the EU utilities directive may have a
positive effect.  It requires more public notification and
ending the virtual monopoly of two Dutch companies in public
utility construction for local authorities.  However, the U.S.
Embassy has received no complaints from U.S. firms since 1992. 
Because U.S. firms operate primarily in the export-oriented
sector of the economy and at the central government level of
procurement, they appear to have experienced little
discrimination in public procurement sector since 1992.


6.  Export Subsidies Policies

    The EU is a signatory to the GATT subsidies code, making
the Netherlands subject to the provisions of this code.

    Under the Export Matching Facility, the Dutch government
provides interest subsidies for Dutch export contracts
competing with government-subsidized export transactions in
third countries.  These subsidies under the "matching fund"
seek to bridge the interest cost gap between a Dutch and
foreign export contract which has benefited from foreign
interest subsidies.  Under the Dutch scheme, the government
provides up to 10 million guilders (about $5.4 million) of
interest subsidies per export contract up to a maximum of 35
percent per export transaction.  To qualify, the export
transaction must have a Dutch content of at least 60 percent. 
For defense, aircraft, and construction transactions, the
minimum Dutch content is one-third of the export portion of a
contract.

    The Dutch have a local content requirement of 70 percent
for exporters seeking to insure their export transactions
through the Netherlands Export Insurance Company (NCM).

    In the aerospace industry, the Dutch government has
indirectly supported Fokker, the Dutch aircraft manufacturer,
with loans and loan guarantees as well as with direct support
for development programs.  With the purchase of a majority
interest in Fokker by Deutsche Aerospace (DASA), it is expected
that the Dutch government (which had owned 31.8 percent of the
company) will reduce support of Fokker.  

    There are some subsidies for shipping.  Under strict
conditions, Dutch shipowners ordering new vessels or buying
existing vessels not older than five years may be eligible for
a premium of 10 percent of the contract price distributed over
five years.  Subsidies for shipbuilding have been gradually 
reduced since 1980.  The present guideline is the seventh EU
directive which allows a maximum aid level of nine percent for
shipbuilding after consideration of tax allowances.  In
conformity with the OECD understanding, the government grants
interest rate subsidies (maximum two percent) to Dutch
shipbuilders up to 80 percent of a vessel's cost with a maximum
repayment period of 8.5 years.  This subsidy is only available
when it will be "matching" similar offers by non-EU shipyards. 
The government may also guarantee loans to Dutch shipping
companies for investment purposes.


7.  Protection of U.S. Intellectual Property

    The Netherlands has a generally good record on IPR
problems, with the exception of the enforcement of antipiracy
laws (see below).  It belongs to the World Intellectual
Property Organization (WIPO), is a signatory of the Paris
Convention for the Protection of Industrial Property, and
conforms to accepted international practice for protection of
technology and trademarks.  Patents for foreign investors are
granted retroactively to the date of original filing in the
home country, provided the application is made through a Dutch
patent lawyer within one year of the original filing date. 
Patents are valid for 20 years.  Legal procedures exist for
compulsory licensing if the patent is determined to be
inadequately used after a period of three years, but these
procedures have rarely been invoked.  Since the Netherlands and
the United States are both parties to the Patent Cooperation
Treaty (PCT) of 1970, patent rights in the Netherlands may be
obtained if PCT application is used.

    The Netherlands is a signatory of the European Patent
Convention, which provides for a centralized Europe-wide patent
protection system.  This convention has simplified the process
for obtaining patent protection in the member states. 
Infringement proceedings remain within the jurisdiction of the
national courts.  The enforcement of antipiracy laws remains a
concern to U.S. producers of software, audio and video tapes,
and textbooks.  The Dutch government has recognized the
problems in protecting intellectual property.  Legislation was
enacted in early 1994 to explicitly include computer software
as intellectual property under the copyright statutes.  


8.  Worker Rights

    a.  The Right of Association

    The right of Dutch workers to associate freely is well
established.  One quarter of the employed labor force belongs
to unions.  Unions are entirely free of government and
political party control and participate in political life. 
They also maintain relations with recognized international
bodies and form domestic federations.  The Dutch unions are
active in promoting workers' rights internationally.  All union
members, except most civil servants, have the legal right to
strike.  Even Dutch military personnel are free to join
unions.  Measures are pending which would grant the right to
strike to civil servants not involved in "life-essential"
activities; meanwhile, disputes involving this sector are
subject to arbitration.

    b.  The Right to Organize and Bargain Collectively

    The right to organize and bargain collectively is
recognized and well-established.  There are no union shop
requirements.  Discrimination against union membership does not
exist.  Dutch society has developed a social partnership among
government, private employers, and trade unions.  This
tripartite system involves all three participants in
negotiating guidelines for collective bargaining agreements
which, once reached in a sector, are extended by law to cover
the entire sector.  Such agreements cover about 75 percent of
Dutch workers.

    c.  Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited by the
constitution and does not exist.

    d.  Minimum Age for Employment of Children

    Child labor laws exist and are enforced.  The minimum age
for employment of young people is 16.  Even at that age, youths
may work full time only if they have completed the mandatory 10
years of schooling and only after obtaining a work permit
(except for newspaper delivery).  Those still in school at age
16 may not work more than eight hours per week.  Laws prohibit
youths under the age of 18 from working at night, overtime, or
in areas which could be dangerous to their physical or mental
development.  In order to promote the employment of young
people, the Netherlands has a reduced minimum wage for
employees between ages 16 and 23.

    e.  Acceptable Conditions of Work

    Dutch law and practice adequately protect the safety and
health of workers.  There is no legally-mandated work week; it
is set by collective bargaining.  The average workweek for
adults is 38 hours.  The legally-mandated minimum wage is
subject to semi-annual cost of living adjustments.

    f.  Rights in Sectors with U.S. Investments

    The worker rights described above hold equally for sectors
in which U.S. capital is invested.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                              1,055
Total Manufacturing                                    7,775
  Food & Kindred Products                     955
  Chemicals and Allied Products             3,406
  Metals, Primary & Fabricated                494
  Machinery, except Electrical                991
  Electric & Electronic Equipment             468
  Transportation Equipment                     80
  Other Manufacturing                       1,382
Wholesale Trade                                        3,090
Banking                                                  131
Finance/Insurance/Real Estate                          5,199
Services                                               1,845
Other Industries                                         791
TOTAL ALL INDUSTRIES                                  19,887   

Source: U.S. Department of Commerce, Bureau of Economic
Analysis

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