In a world where such trade relations are increasingly used as geopolitical pressure tools, merely focusing on efficiency and openness is no longer sufficient. Economic power must be explicitly considered in policy decisions, even if it comes at the expense of other welfare aspects. This is important to make the Netherlands economically resilient, according to Gaastra.
From cooperation to competition for power
Where open global trade brought prosperity and stability for decades, economic dependencies today increasingly pose risks. International relations have shifted, and economic dependencies are increasingly used as geopolitical pressure tools. Especially digital technologies and critical raw materials strengthen the economic dependencies of major powers like the United States and China. This has made the position of the Netherlands more vulnerable, precisely as one of the most open trading economies in the world.
However, this does not mean the era of globalization is over: world trade continues to grow and recently reached a record high. For the Netherlands, where exports account for about 35% of the gross domestic product, open global trade remains crucial for our prosperity.
Economic power as a collective good
The entire society benefits if the Netherlands is better protected against economic pressure from outside. This can be achieved by improving our own economic power position and balancing mutual relations. This economic power mainly stems from business decisions but has broader societal effects. This creates a market failure, requiring a more active government role to make the Netherlands resilient. This calls for offensive policies aimed at strengthening our strategic positions and defensive policies that limit risky dependencies. Both inevitably have costs for citizens, businesses, and government.
Strategic economic position
Above all, a strong economy remains essential as a buffer if the EU – and the Netherlands – are affected by geopolitical developments. According to Gaastra, however, this is not enough. To increase Dutch and European resilience, he sees 3 targeted policy choices that are crucial:
- Offensive technology policy: to remain strategically relevant on the world stage, it is important to focus on strategic technologies in which the Netherlands can build strong positions. This requires strengthening the ecosystems around these technologies.
- Collectively stronger European Union: to leverage the geopolitical weight of the EU, larger joint investments and further harmonization of the internal market are needed. This requires a different attitude from the Netherlands within the EU. It is necessary to relinquish national resources and competencies to increase our collective resilience.
- New strategic collaborations: finally, Gaastra advocates active cooperation and trade agreements with emerging economies to diversify dependencies. This mainly refers to emerging economies in the Global South. This reduces dependencies on a limited group of countries and simultaneously promotes open global trade.
In this way, the Dutch economy becomes resilient to the new geopolitical reality.
Read the full New Years article in Economisch Statistische Berichten (ESB)