Netherlands; U.S. slump in this market expected to end in 1985

NETHERLANDS

U.S. Slump In This Market Expected To End In 1985

U.S. exports to the Netherlands in 1984 totaled about $7.5 billion, nearly 3 percent lower than the 1983 figure of $7.8 billion. Much of the decrease in export sales can be attributed to the comparatively high price tag U.S. goods carry because of the strong dollar and to the slow growth of demand in the Dutch market. In 1985, U.S. export performance should improve somewhat.

This estimate is based on several considerations, including a stable or slightly weakened dollar, falling interest rates in the United States, moderate expansion of the Dutch economy, and the belief that U.S. exporters will be more ingenious and aggressive in their marketing efforts in the Netherlands. The Dutch market will remain among the top six worldwide for the United States and will account for a high volume of U.S. exports again this year.

U.S. exports 1984--$7,554.4 million

U.S. imports 1984--$4,329.5 million

The first signs of recovery of the Dutch economy, after three years of recession and stagnation, appeared in late 1983 and were confirmed by last year's modest economic expansion. After barely noticeable GNP growth in 1983, the Dutch economy grew by close to 2 percent in real terms last year. Foreign demand for Dutch goods fueled the recovery and accounted for $65 billion in Dutch exports through August 1984, a 14 percent increase compared to the same period a year earlier. The impact of higher export sales on the domestic economy was quite noticeable. Output volume in the manufacturing sector in the first three quarters rose 7 percent above the 1983 period. Strongest growth was registered by the chemicals and basic metals industries, whose production rose 9.5 and 24 percent, respectively. Some overall weakness, though, and perhaps an interruption of the recovery, was evident during the last quarter of 1984. Still, official forecasts for this year indicate that the economy will repeat the 2 percent GNP gain of 1984.

Last year's recovery was derived from basic improvements in the competitive position of Dutch exports, and expectations for GNP growth this year are based heavily on the continued health of foreign markets and the Dutch competitive position. Last year, the consumer price index was up just 3 percent through October. In 1985, inflation will be even more subdued, as consumer prices increase less than 2 percent. Government-imposed wage moderation of 1981 and 1982 has given way to voluntary management-labor accords. As a result, average industrial wages and benefits rose only 2 percent last year. Strong gains in labor productivity have enabled the Dutch to outperform their trading partners in cutting unit labor costs.

These elements have contributed to the return of corporate profitability, most noticeably in the construction sector, where return on equity rose from a negative level in 1980 to more than 10 percent in 1983. This, in turn, has enabled Dutch firms to make much needed investments. Investment in industrial plant and equipment is expected to have risen 15 percent, the first increase in five years. This year should witness even further growth of investment expenditures.

Domestic consumption, however, still remains weighted down by the effects of national budget cuts, wage restraint, and non-wage income reductions. Disposable income will continue the downward slide of the past three-four years, albeit at a slower rate. Unemployment remains a serious problem. The jobless rate still exceeds 17 percent and could edge higher in 1985. This year, the number of new jobs created will be more than offset by school graduates and married women entering the labor force. The most serious aspect of the problem will continue to be youth unemployment. The number of jobless among workers under 23 years old is almost twice the overall figure.

The outlook for U.S. exports in 1985 reflects these strengths and weaknesses in the Dutch economy. A variety of product sectors hold promise for firms attuned to the Dutch market. Among those sectors identified by the Department of Commerce's Foreign Commercial Service staff in the Netherlands as having the best sales prospects are: avionics and related parts and equipment; telecommunications equipment; analytical and scientific instrumentation; business and office equipment; computers/peripherals/software; process control instrumentation; and security equipment.

The Commerce Department will assist market promotion efforts of U.S. firms by facilitating their participation in Dutch-based trade shows for the following products in 1985: automotive equipment (March), packaging equipment (May), computer software/hardware (May), instrumentation (August), security equipment (September), and port handling equipment (November). For participation or other marketing information, contact the Netherlands Desk Officer at (202) 377-5401.

COPYRIGHT 1985 U.S. Government Printing Office
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