EU and the Economic Development of Holland Essay

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global in nature. Economies, businesses and even individuals are now becoming more interconnected. What once were isolated events in a foreign country now have a rippling effect throughout the world. The recent financial crisis of 2008, indicates how countries are now becoming more dependent on each. Holland is no different in this regard. As a burgeoning economy, Holland boasts strong catalysts for future economic growth.

A strong incentive for investment in the Netherlands is its market economy. As a member of the EU the Netherlands has an average tariff rate of 1%. This bodes well for Holland as goods and services can freely and easily matriculate through the region. With low tariffs industries with comparable advantages will be better able to import or export their goods. The top two main exports from Holland are very price sensitive as it relates to international competition. Table 1 below presents the top four exports from Holland.

Table 1.

Export

Dollar Amount

Percentage of Total Exports

Machines, Engines, Pumps

$80 Billion

14.1%

Oil

$74 Billion

13.1%

Electronic Equipment

$74 Billion

13.1%

Pharmaceuticals

$28 Billion

5%

Notice that the top products are highly sensitive to economic circumstances and price. Engines and machines are very price elastic as are electronics. Oil and Pharmaceuticals however are very price inelastic as they are often purchased in the same quantities irrespective of price over the short run. In addition, the recent weakness in the Euro relative to other nations has made exports particularly cheap. For instance, the U.S. dollar has appreciated relative to the Euro since the financial crisis. The economic climate is particular beneficial for exports as the stronger dollar makes European made goods cheaper. Items such as electronics, machines, pumps, and oil therefore can become more competitive as the dollar continues its strength relative to the Euro and the rest of the world.

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Chart 1, below provides graphical proof of the devaluation of the Euro relative to the Dollar since 2005.

Chart 1

Machines and technology are also very important for their residual and spillover effects on the broader economy. The Dutch agricultural sector, for example, is highly mechanized, and has a strong focus on international exports. Due to strong advances, the agricultural sector only employs about 4% of the Dutch labor force but produces large surpluses each year. The Netherlands has, at some time in recent history, supplied one quarter of all of the world's exported tomatoes, and trade of one-third of the world's exports of chilies, tomatoes and cucumbers goes through the country. The Netherlands also exports one-fifteenth of the world's apples. This creates a strong incentive to export the excess being produced, making the country wealthier in the process. As a free market economic system, Holland is partially dependent on its natural resources. Natural resources are critical to any economy as they provide a means for further growth and economic development. For instance, Venezuela derives a vast majority of its wealth from oil and petroleum-based products. The recent decline in oil prices has places a lot of pressure on the country as it does not have another major natural resource to rely on. With rapid oil declines, the country has experienced recession like economic symptoms. Unemployment is high, inflation is high, crime is high, and growth is stagnant. Holland, is better insulated against this occurrence because it has a diverse array of natural resources that it can trade and use to enhance the quality of life for society. In addition to natural gas, and petroleum-based products, the country also has large amounts of peat, limestone, salt, sand, and gravel. Each of which has its own unique and distinct characteristics. Gravel and.....

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