It’s a rule of thumb in international (trade) relations: if you have a small home country, you have a large foreign country. For the Netherlands, that foreign country is called Germany. We maintain close relationships with our largest neighbor in all respects. With a trade volume of 172 billion euros in 2020, the Dutch-German trade relationship is one of the largest in the world, so the German and Dutch economies are highly intertwined, says BNR in-house economist Han de Jong.
Elastic
‘The Dutch and German economies are strongly intertwined through trade. And while there are differences, the economic structure is quite comparable. It is therefore no wonder that economic development in both countries does not diverge significantly. The GDP growth trend shows that both economies are quite in tune with each other.’
The chart below speaks volumes, the economies of Holland and Germany appear to be tied together with a rubber band.
The Netherlands compete better
In terms of GDP, the Netherlands and Germany are therefore lagging behind, but that says in itself little, after all, GDP is a container concept. Because if you look at competitiveness, for example, the Netherlands will tower comfortably above Germany before 2022. If you consult the list of the most competitive countries (a ranking by the International Institute for Management Development), the Netherlands is at 6 place, while Germany is in 15th place. To give an example: Denmark is in the lead, Venezuela closes the row as number 63).
And more
A selection from the same list: The Netherlands is more competitive than Germany in digital terms (place 6 vs. place 19). And Efficiency it may be a German invention, but the Netherlands scores better, both in terms of government efficiency (12th place vs 21st place) and business efficiency (3rd place vs 21st place). Finally, the Netherlands also leaves behind its large eastern neighbor when it comes to infrastructure: in the sum of the subcategories basic infrastructure, technological infrastructure and scientific infrastructure, the Netherlands ranks 5th, followed by Germany in ninth place.
The graph below leaves no room for misunderstanding, the Netherlands scores better than Germany in many sub-categories.
The Netherlands innovates better
The Netherlands also scores higher than the Germans in the field of innovation. Every year, the World Intellectual Property Organization publishes the Global Innovation Index, a ranking of the most innovative countries. The Netherlands is number 5 on this list, Germany takes 8th place.
There is even a World Bank ranking in which it is easiest to do business. The researchers then examine issues ranging from access to credit and electricity supply to tax legislation. With 22nd place, Germany takes the lead over the Netherlands, which moves into 42nd place. There are 190 places in this list, last place is for Somalia, New Zealand is in first place.
The Dutch are even happier than the Germans
Ok, it’s easier to do business in the Federal Republic and our eastern neighbor leaves us behind in more areas, but are the Germans happier than the Dutch? No! Because according to the World Happiness Report, the Netherlands ranks 5th and our eastern neighbors 14th. The Finns remain the happiest, the unluckiest six in place 146. Logically, that place is for Afghanistan.
But on one aspect the Germans are once again far behind: on the economic trend. Where the Netherlands on the category overall economic performance holds a 19th place, Germany is in 5th place.
“The coherence of production in Germany and the Netherlands will recover in the near future.”
The largest export partner
After China, the Netherlands is the most important supplier of goods for Germany. In 2021, we exported goods worth 133.4 billion euros to our large eastern neighbour, compared to 106.8 billion a year earlier. The top 5 of these exports are crude oil and petroleum products, household appliances, fruit and vegetables, various manufactured goods and telecommunications equipment. Those 133 billion are also enormous in a relative sense: in 2021 we exported to our second export partner, Belgium, for around 63 billion, to the British for around 38 billion euros.
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Fourth import partner
Conversely, we also import the necessary from Germany: in 2021 for over 92 billion euros. The top 5 consists of road transport vehicles, household appliances, specialized machines, medicines and pharmaceuticals, and miscellaneous machines. This makes us the fourth largest importer of German goods. The largest remain the United States with almost 122 billion euros, followed by China (103.6 billion) and France (102 billion).
What else comes to us from Germany: food and live animals, beverages and tobacco, raw materials, mineral fuels, animal and vegetable oils and numerous chemicals. In short, pretty much everything that makes a country work.
Services
Both Germany and the Netherlands have an important service sector. Important? Both countries earn about 70 percent of their gross domestic product. Think of the banking sector, insurance companies and transport and logistics companies, services that are also exported. In 2020, we exported 27.5 billion euros of services to Germany and imported 22.2 billion euros. This includes transportation services, telecommunications and information technology services, industrial services, travel, construction services and financial services.
Border
We share a border of approximately 576 kilometers with the Germans. There is free movement of goods, services, capital and people, and we have a common currency. The economic potential of this border region is therefore great.
The Netherlands borders the two German states of Lower Saxony and North Rhine-Westphalia, the Netherlands’ most important trading partner, where more than 70,000 Dutch people live. Together with the states of Baden-Württemberg, Lower Saxony and Bavaria, North Rhine-Westphalia accounts for more than 85% of Dutch-German trade.
Apart from mutual permanent residence (there are more than 150,000 compatriots living throughout Germany, around 77,000 Germans find refuge with us), around 52,000 Dutch and Germans are so-called cross-border workers who respectively work and live on the other side of the border.
Sources consulted: Netherlands Enterprise Agency, CBS, Chamber of Commerce, website of the German Embassy in The Hague and Consulate General in Amsterdam, World Happiness Report, World Intellectual Property Organization, World Bank, International Institute for Management Development, Han de Jong .
Document: Commercial data-Germany-July-2022.pdf
Document: Internationalization Monitor Germany 2020.pdf
Document: Global Innovation Index Netherlands.pdf
Document: IMD Country Profile Germany.pdf
Document: IMD Global Competitiveness Brochure 2022.pdf