I. COMMERCIAL OVERVIEW EXECUTIVE SUMMARY The Dutch market continues to be an outstanding business arena for American firms, both as an end market and as a means of entry into the rest of Europe (including Eastern Europe and the CIS). The Dutch and European markets are receptive to a very wide range of American products. American industrial goods, as well as consumer goods, are popular and possess a reputation for quality. Over 50% of American exports into the Netherlands are transhipped into the rest of Europe and beyond, which can be explained by the fact that the Netherlands is the single most important European distribution center as well as a nation of traders. With 15 million people living in an area about the size of the State of Maryland, the Netherlands is one of the most densely populated (and affluent) countries in the world. Despite its relatively small size, the Netherlands is our 9th largest export market and during recent years we have had our largest bilateral trade surplus with the Dutch ($6.8 billion in 1993). The Dutch, at first glance, are surprisingly similar to the Americans. They welcome Americans as business persons and tourists. They are the most English speaking population in Continental Europe and the most multilingual speaking people in the world. The country's strategic location combined with the relative ease of doing business in the Netherlands (which boasts a world class and user friendly transportation and distribution infrastructure as well as a full menu of business services) makes it an ideal European operations location for many American companies. Currently, the American Chamber of Commerce in the Netherlands lists about 1,100 American and American affiliated companies in its directory. There is plenty of room in the Netherlands for more American companies to ultimately locate their centralized operations here. Companies may want to start by taking advantage of the state-of-the-art Dutch distribution system which includes "value added logistical" (VAL) services, such as product adaption to the European market. The bottom line: an American company that has a quality product with a strong sales performance in the United States, a price that is competitive, and a firm commitment to exporting should do well in the Netherlands. Companies which have developed or are likely to develop market inroads into the rest of Europe should take a close look at the Netherlands as a possible European distribution and/or marketing and sales center. If you are interested in doing business in the Netherlands, the American Embassy should be your first point of contact. If we do not know the answer to your questions, we know who knows. Please direct your inquiries to the Commercial Section (Tel: (31) (70) 310- 9417; Fax: (31) (70) 363-2985). Dutch Import Market Overview The Netherlands is our 9th largest export market and during recent years we have had our largest bilateral trade surplus with the Dutch ($6.8 billion in 1993). These figures, however, mask the fact that over 50% of American exports into the Netherlands are transhipped into the rest of Europe and beyond. The country's advanced transport and logistical infrastructure is second to none in Europe. Dutch firms own one third of the cross border European Union freight carrying vehicles and over 50 percent of the European river barges. Over one fifth of Europe's Regional Distribution Centers are based in Holland. Rotterdam is the largest seaport in the world and Amsterdam Schiphol airport is the fourth busiest cargo airport in Europe. Over half of the Dutch GDP is exported. The Dutch and European markets are receptive to a very wide range of American products (see "Best Prospects Sectors" below). American industrial goods, as well as consumer goods, are popular and possess a reputation for quality. The decision of whether or not to become involved in the Dutch market can often be made by heeding the prevailing wisdom that an American manufacturer or supplier of a well-designed product with strong sales in the U.S. can generally expect to do well in the Netherlands. Commercial Environment The commercial and economic environment in the Netherlands presents special opportunities and challenges and for American companies. Our bilateral trade and investment relations with the Dutch are long, solid and more important today than ever before. The U.S. is the largest foreign investor in the Netherlands, and Dutch investments in the U.S. rank third. Dutch leisure and business travelers contribute almost $1 billion annually to the U.S. economy, which makes the Netherlands our 13th largest source of travel and tourism revenue. The Dutch market thus continues to be an outstanding business arena for American firms, both as an end market and as a means of entry into the rest of Europe. Holland's strategic location is unique. Over 160 million consumers (half the population of the European Union) live within a 300 mile radius of Rotterdam. Very wide spread use of the English language and historic ties to the U.S. provide a highly receptive market for American goods and services coming to and through the country. An estimated 7,000 U.S. companies have appointed Dutch agents and distributors in the Netherlands. They are usually granted exclusive rights for the country due to its small size (about the size of the State of Maryland). Many American companies locate their agents in the Netherlands through participation in a broad range of well established trade events attracting country- wide and international attendees, and through using the individualized services of the U.S. and Foreign Commercial Service (US&FCS) designed to support the matchmaking process. Host Country Business Attitude Toward the U.S. Dutch business culture closely parallels the American business culture. The Dutch seek to get down to business quickly. They can be very direct, blunt, and honest, and also very practical. A handshake can seal an agreement. Dutch business persons can be tough negotiators, but once a deal is made, it almost always is kept, preferably on a long-term basis under "win-win" conditions for them and their business partners. They are generally conservative business partners seeking to develop a close, personal business relationship on a gradual basis. Major Business Opportunities In addition to the "Best Prospect Sectors" listed below, there will be opportunities for American companies which provide products and services which meet the needs of planned Dutch infrastructure development projects, including: the Rotterdam Port and City Development Plan (the "Havenplan 2010"), the Schiphol (Amsterdam) Airport Development Plan (the "Masterplan 2003"), the construction of a new all-freight rail line between Rotterdam and Germany (The "Betuwelijn"), and the construction of a high speed passenger rail line to Germany and France using the French TGV. Selected niches in the defense market will also continue to be of interest to American suppliers. Major Roadblocks to Doing Business in the Netherlands Relatively few trade complaints are registered by American firms against Dutch firms. The Dutch tendency to support a level playing field in trade matters and their depth of experience in trade positions them as genuine "neutral" traders of Europe. American companies locating in the Netherlands, however, will come up against a complex business culture, in which companies, trade unions, government bodies and industry associations engage in constant and close consultations. This comes, in part, from the traditional Dutch emphasis on achieving consensus and avoiding conflict in this small and densely populated country. There is also a growing trend, particularly in larger government procurements, to "buy European" if not Dutch. This has been especially true in recent defense procurements where there has been true Dutch or European competition. The Dutch consider themselves to be good Europeans and, from a practical point of view, they see political advantages in buying European, especially when all else is relatively equal in a bid competition. In this regard, local representation is almost essential for American companies hoping to have a real chance to win major government contracts. A joint venture with a Dutch or European partner may, in some cases, improve the U.S. company's competitive position. Companies looking to compete on Dutch government procurements should contact the Commercial section at the Embassy early on in the process for guidance, particularly if there are political or "level playing field" issues which might arise. Nature of Local and Third Country Competition Due to geographic proximity and logistical connections as well as established historical trading ties, it is no surprise that Germany is the number one exporter to the Netherlands, followed by Belgium/Luxembourg and the United Kingdom. The U.S. comes in fourth followed by France and Japan (see Appendix I). Dutch industry itself is varied in terms of both size of companies and breadth of sectors. Multinationals which employ thousands worldwide such as Philips, Unilever, and Akzo are headquartered in the Netherlands. Many other companies of all sizes, down to one-person shops, not only focus on selling their wares on the local Dutch market, they also (in true Dutch trader fashion) compete in the Benelux and European markets and beyond. Dutch companies which produce for export often have high quality and locally competitive products. American companies facing local Dutch or third country competition need to offer better price and/or performance of their products or services to be successful here. Although the Dutch household or business/industrial consumer will go after the best deal, having a strong local after-sales presence in the market is also essential in many industry sectors. In this regard, the need to set up a solid local sales and service representation in the Netherlands cannot be overemphasized.