20 Feb 2018
The Netherlands: Market Profile
Major Economic Indicators
- As the Netherlands is a member of the European Union (EU), its trade relations with Hong Kong/the Chinese mainland are affected by EU’s common external trade policy and measures. As a euro-zone member, it adopted the euro as its legal tender on 1 January 2002.
- The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment.
- A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters.
- Hong Kong’s total exports to the Netherlands rose by 12% to US$8.2 billion in 2017, while its imports from the Netherlands decreased by 1% to US$2.6 billion.
- As one of the most popular investment destinations, the inflows of foreign direct investment (FDI) to the Netherlands amounted to US$92.0 billion in 2016, with China’s contributing US$1.2 billion. As of the end of 2016, China’s total stock of FDI in the Netherlands was US$20.6 billion, up from US$138.8 million in 2007. As the country’s 4th-largest Asian investor, behind only Japan, the Chinese mainland and Singapore, Hong Kong had a FDI stock of US$17.8 billion in the Netherlands as at the end of 2016.
- With a competitive corporate income tax rate in Europe – 20% on the first €200,000 and 25% for taxable profits exceeding €200,000 – as well as a number of attractive incentive programs including specific R&D tax incentives to stimulate innovation, the Netherlands is keen to provide a stellar business climate to attract investment into key sectors such as agri-food, IT, chemicals, life sciences, creative, energy and aerospace industries. More information on the investment environment and the relevant regulations can be found at Netherlands Foreign Investment Agency (NFIA).
- Alongside the Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) effective since 24 October 2011, Hong Kong also signed an Investment Promotion and Protection Agreement (IPPA) with the Netherlands in September 1993.
Current Economic Situation
Steady improvement in the labour market and rebound in asset prices have greatly encouraged domestic consumption, while soft energy prices, lower financing costs and higher corporate savings have underpinned investment in machinery and construction. Exports have also benefitted from a weak euro, although the potential impact is capped by the slow pace of EU recovery. Looking forward, business sentiment will remain largely positive, given the competitive euro and the modest increase in EU demand. Nonetheless, with the fading out of the knock-on effects from previous stimulus programmes, the Dutch economy will likely see slower pace of growth in 2018.
The Netherlands is a member of the EU, and it follows EU's common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002. As it now stands, a total of 19 EU members, namely Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, has adopted the euro as their legal tender.
No quotas are imposed on textiles and clothing exports, as well as non-textile products exports from Hong Kong and the Chinese mainland at present.
Scheme of Generalised Tariff Preferences
The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of the countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since 1 May 1998.
The EU has initiated anti-dumping (AD) proceedings against certain mainland-origin products. Currently, there are a number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters. As at end-December 2017, the EU did not apply any AD measures on imports from Hong Kong.
To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.
For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.
On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006. On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive.
The recast RoHS Directive was published on 1 July 2011 and entered into force on 2 January 2013. The new Directive continues to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. Nonetheless, the new Directive will widen, as from 22 July 2019, the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.
Another important law for Hong Kong companies to grapple with concerns waste EEE, i.e., the WEEE Directive. With the formal approval on 7 June 2012, the recast WEEE Directive entered into force on 13 August 2012, while Member States have until 14 February 2014 to transpose the new directive into national law. In brief, the recast WEEE Directive will see Member States subject to higher collection/recycling targets (i.e. 45% collection rate as of 2016 and 65% as of 2019) and a wider scope of measure covering essentially all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs.
On the heels of the recast RoHS and WEEE Directives, the EU’s new framework Directive for setting eco-design requirements for energy-related product (ErP) is now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product, or EuP, Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.
Moreover, REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.
Following the entry into force of the new Toy Safety Directive (Directive 2009/48/EC) on 20 July 2011, the Official Journal of the EU published on 11 August 2011 references to two important safety standards concerning electric toys (EN 62115:2005 and its amendment EN 62115:2005/A2:2011) and two previous standards on the mechanical and physical properties of toys and a standard on the flammability of toys.
Hong Kong's Trade with the Netherlands 
Hong Kong’s total exports to the Netherlands rose by 12% to US$8.2 billion in 2017, after increasing by 10% to US$7.4 billion in 2016. Major export items in 2017 included telecommunications equipment & parts (shared 50% of the total), computers (14%), semi-conductors, electronic valves & tubes (5%), parts & accessories of office machines/computers (4%), articles of apparel, of textile fabrics (3%), electrical apparatus for electrical circuits (2%) and electrical machinery & apparatus (2%).
On the other hand, Hong Kong’s imports from the Netherlands decreased by 1% to US$2.6 billion in 2017, after dropping by 9% to US$2.7 billion in 2016. Major import items in 2017 included milk and cream and milk products other than butter or cheese (shared 27% of the total), telecommunications equipment & parts (8%), fresh, chilled or frozen meat & edible meat offal (7%), perfumery, cosmetics or toilet preparations (excluding soaps) (7%), medicinal & pharmaceutical products, other than medicaments (3%), chocolate and other food preparations containing cocoa (3%), parts & accessories of office machines/computers (3%), semi-conductors, electronics valves & tubes (3%) and edible products and preparations (3%).
Dutch Involvement in the Hong Kong Economy
The Netherlands is the 4th-largest source of foreign investment in Hong Kong, following British Virgin Islands, the Chinese mainland and Cayman Islands. According to the latest available figures from the Census and Statistics Department, the total stock of direct investment from the Netherlands amounted to US$102.6 billion (or HK$795.3 billion) as at the end of 2016.
Apart from bilateral trade, the Netherlands also has a notable presence in finance, trading, transportation, wholesaling/retailing, and other sectors of the Hong Kong economy. Currently, there are some 250 Dutch firms in Hong Kong. They include ABN AMRO, ING and Rabobank (finance), KLM Royal Dutch Airlines, Martinair and P&O Nedlloyd (transportation), Philips (electronics), Shell (petroleum), Endemol (media), TNT (logistics), Princess (kitchen appliances), Heineken (beer distribution), Vendex KBB and Mexx (fashion retailing) and Macintosh Retail Group (non-food consumer goods).
As of June 2017, there were 27 Dutch companies with regional headquarters in Hong Kong, while another 59 had regional offices in the territory. Reflecting the Netherlands’ widespread interests locally, there were about 2,500 Dutch nationals resided in Hong Kong as at the end of 2017.
 Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.