How Important is the European Union to the Netherlands?

November 10, 2018

 

The Netherlands was one of the six founders of the European Coal and Steel Community (ECSC) and the European Economic Community (EEC) in the post-war reconstruction years. One of the objectives of the EEC was to create a common internal market with free movement of goods, services, capital and labour. In July 1968, the Member States of what had meanwhile become the European Community (EC) had reduced their bilateral import tariffs to zero. They also came to a common external tariff on imports from outside the EC. With this they had realized a so-called customs union. Other mutual barriers to trade continued to exist.

 

In the 1980s the number of EC member states rose to 12, but European cooperation stagnated at first. Due to all kinds of trade barriers, there was still no real internal market. That is why the European Act launched an ambitious program to clear a large number of trade barriers by the end of 1992 in order to achieve the internal market. After the fall of the Berlin Wall in 1989, the reunification of East and West Germany took place in 1990 and in 1991, the Soviet Union disbanded. The Maastricht Treaty which was agreed in the same year laid the foundation for Economic and Monetary Union (EMU), and with it came the birth of the Euro.

 

The EC is now called the European Union (EU) and currently has 28 member states with a few more countries hoping to join. The former Dutch enthusiasm for the European project has decreased considerably and the Britain's exit (Brexit) doesn't seem to help the matter at all.

 

 

So what are the advantages of EU membership for the Netherlands?

 

The advantages of the EU internal market are theoretically:

  • Lower costs due to the disappearance of border formalities and all kinds of specific national regulations.

  • Opening up the various national markets ensures that the participating countries can benefit from the efficiency gains that foreign trade entails

  • A larger market offers more opportunities for specialisation, variation and utilisation of economies of scale.

  • Companies are exposed to more foreign competition. This is an incentive to increase efficiency and limit prices.

  • The larger market can also provide incentives to do more in research and development

  • Better functioning of the labor market as companies can more easily attract suitable personnel from abroad.

One of the main disadvantages of the common market is that facilitating trade within the EU makes trade with countries outside the EU relatively more difficult. Against a positive trade-creating effect within the EU there is a negative trade-shifting effect whereby trade with countries outside the EU is shifted to countries within the EU, while (in the absence of discrimination against countries outside the EU) it can sometimes be economically more efficient for certain states to trade with countries outside the EU.

 

The main advantage of the euro is that the costs of currency exchange and the associated risks have been eliminated, which is beneficial for trade. When the euro was introduced, the idea was that it would bring more price stability and lower interest rates for countries within the EU. In addition to the dollar, the euro would also become an international reserve currency.

 

The biggest theoretical disadvantage of the euro is that there are still considerable economic differences between the participating countries, while they can no longer adjust their exchange rate to their own specific circumstances.

 

The Netherlands and the European Union

 

The EU has brought prosperity to the Netherlands and has created an attractive investment and business climate. In addition, it has contributed to a long lasting peace in Europe. On the other hand, the Netherlands pays a lot of money to the EU and can no longer decide independently on certain issues, such as migration, trade, environmental measures etc. Some powers have been transferred to the EU and this is often times the reason why some Dutch politicians see the EU as "undemocratic". What they seem to forget is that the Netherlands has her fair share of representatives in Brussels. Every five years, all EU citizens are entitled to vote for their preferred members of the European Parliament.

 

Every citizen votes for candidates from their own country. These national MEPs work together on important issues affecting Europe with colleagues from other parts of Europe. In many cases, MEPs also look at the interests of their country when making decisions.

 

The Decreasing Enthusiasm for the EU in the Netherlands.

 

Criticism:

 

The enthusiasm for the European Union and further integration has greatly diminished since the beginning of the nineties. In 2005, the Dutch population voted against the European Constitution through a referendum. The 'no' vote had a number of causes. For example, there was dissatisfaction about, among other things, the increased prices after the introduction of the euro and the inadequate way in which the Dutch government informed the country about the then European Constitution. There was also criticism of the rapid expansion of the EU with the Netherlands having to open her borders to some countries they didn't see as "suitable" to join the European Union.

 

Moreover, since the 1990s the Netherlands has become a net payer in the European Union instead of a net recipient. These net payments also seem to be increasing. The referendum was also used to express dissatisfaction with other matters than the European Constitution itself, such as government policy. Recently, the issue of migration in Europe and the Syrian refugee crisis has seen an increase in the number of Dutch nationals who are strongly against the Netherlands being a member of the EU.

 

Furthermore,

Global problems such as climate change and terrorism underline the need for cross-border cooperation. For example, climate change can only be combated with joint regulations to achieve CO2 reduction. Especially as a small country, it can be more effective for the Netherlands to join forces with other countries in achieving this. The average Dutch citizen encourages cooperation in these areas. This indicates that, despite the critical attitude of recent years, the Dutch still see the value of European cooperation.

 

More advantages of the EU to the Netherlands are;

 

  1. Increased prosperity due to the disappearance of internal borders, which the Netherlands benefits from as a trading country. In 2009, the Netherlands Bureau for Economic Policy Analysis (CPB) calculated that the national income of the Netherlands was 6 to 8 percent higher than in 1970 thanks to agreements on freer trade made within the European Union and the World Trade Organisation. In 2016, the Netherlands Bureau for Economic Policy Analysis calculated that reintroducing internal border controls in Europe would damage the European economy. According to the CPB, the reintroduction of border controls would amount to a decrease of Dutch GDP by 1.3 percent in 2020 which would be a loss of approximately 9 billion euros.

  2. A more attractive investment and business climate. Due to the disappearance of internal borders, global companies wishing to establish themselves in the Netherlands have a view of a reach of more than 500 million consumers, because they can offer their goods and services on the entire European market.

  3. Together with other European countries, the Netherlands is able to deal with cross-border and global problems, such as criminality within Europe, smuggling but also issues such as food safety, authorisation of medicines, safety at the workplace, better salaries for workers within EU, innovation in the fields of science and research, sustainable energy supply, better education and (financially) supporting member states in their time of need.

  4. Practical advantages, such as being able to travel, live, work and study freely in Europe. This reduces the bureaucratic burden (such as applying for a visa and waiting at the border) and transaction costs (having to convert data, getting permits to work or study and exchange money). Europeans can also use the internet, call and text messages in another EU country at no additional cost.

 

To those who call for the Netherlands from exit the EU, you must not forget how the Netherlands suffered during the 1st and 2nd World Wars. One of the greatest achievements of the European Union has been preventing armed conflicts in Europe and that has contributed in providing a safe and peaceful environment for the Netherlands and other European countries to grow and develop. Countries build up wealth through trade and trade can only take place in a peaceful environment. Is the EU perfect? Definitely not! But it is a body can be improved and made to work better. The Netherlands was one of its founding members and has the potential to be one of those countries that can improve it and make it work better for them and all member states. 

 

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