Globalisation and the Dutch economy; a case study to the influence of the emergence of China and Eastern Europe on Dutch international trade

This paper investigates the impact of the emergence of China and Eastern Europe as increasingly important players on the world market for a small open economy such as the Netherlands. We describe and compare in detail revealed comparative advantages across the different country groups. This allows us to characterize the sectors in the Dutch economy that are most likely to experience enhanced competition in the face of globalization. This analysis is complemented with a gravity analysis that adds a second dimension to the competitive impact, viz. the extent to which markets are localized as opposed to global. We conclude that the overlap in revealed comparative advantages between China and the Netherlands is limited. The major impact of the emergence of China for Dutch trade is that it is likely to foster the position of the Netherlands as a gateway to Europe. Furthermore, we show that the overlap in comparative advantage between China and Eastern Europe is relatively large, implying that competition from Eastern Europe are likely to be stronger than from China.