Results — Evaluation of the international trade and investment policy of the Netherlands
IOB has evaluated the Dutch trade and investment policy issues and positions for the period 2013-2019. The evaluation provides insights on how these were integrated in the European and international trade and investment policies.
The report presents an in-depth analysis of the policy issues concerning:
trade defence instruments;
sustainable development chapters in free trade agreements;
the Trade in Services Agreement;
investor protection, investor duties, and dispute settlement;
and Economic Partnership Agreements with African countries.
The Netherlands has benefited greatly from free trade, and foreign direct investments account for a large share of the Dutch economy. Private trade and investment flows are influenced by government policy and European and international rules. There are many external factors that influence trade and investment policy making, both economic and social or geopolitical factors. Moreover the Netherlands does not set trade policy – and investment policy to a large extent – by itself. Trade is an exclusive EU competence, where the European Commission (EC) prepares proposals and negotiating positions and speaks on behalf of the European Union (EU), including the Netherlands, in the World Trade Organization (WTO) and in negotiations on free trade and investment agreements with third countries.
In 2013, a new Dutch policy for aid, trade and investment was introduced, with three aims: (1) the eradication of extreme poverty; (2) sustainable, inclusive growth all over the world; and (3) success for Dutch companies abroad. Topics such as gender equality and responsible business conduct were identified as cross-cutting priorities. For trade and investment policy, four specific objectives were set: (1) concluding EU free trade agreements; (2) the internationalisation of the Dutch private sector; (3) attracting foreign direct investment to the Netherlands; and (4) the protection of Dutch investments abroad.
This study reviews trade and investment policy from 2013 until 2019, complemented with important developments that have taken place since 2019. It assesses:
which policy issues the Netherlands prioritised and why;
how policy positions were established;
and whether and how the Netherlands contributed to the international agenda and to decision making on trade and investment agreements, in the context of the EU and WTO.
Additionally, IOB has commissioned Ecorys to conduct a research on the external developments and factors that influence trade and investment policy making.
General conclusions and recommendations
Besides the individual conclusions and recommendations identified in the case studies, the case studies, policy reconstruction and interviews also identified three specific, overarching observations and areas for improvement. These overarching observations relate to policy coherence, Dutch policy success in the EU, and capacity, and are the following:
Overall, Dutch policy on trade and investment has not been sufficiently elaborated, nor systematically operationalised in concrete policy positions and instructions. It was not clear what the desired results, indicators and red lines were for current priority issues. Findings from the desk research and interviews did not show a (consistent) engagement in conducting stakeholder analyses, identifying what coalitions to build, and drafting a strategy to promote major interests. There is no up-to-date assessment framework to weigh conflicting interests in Dutch trade and investment, development cooperation, or foreign policy more generally The current framework on non-trade concerns was not found to be used actively, and dates form 2009. A range of non-state actors, including business and non-governmental organisations, are consulted on a regular basis to comment on policy proposals, which helps taking different views into account.
We recommend policy makers to select and operationalise major policy priorities in a systematic manner, integrating them into all instructions and documents.
We suggest updating the assessment framework on trade and non-trade concerns, to help policymakers come to a balanced position when there are conflicting interests.
We recommend policy makers to draft framework instructions. These should delineate red lines, but moreover allow for some flexibility and adjusting Dutch positions to changing circumstances.
Although on some specific files, the Netherlands indeed took an active approach and had a vocal stance, the Netherlands generally took a rather reactive approach to Commission proposals on trade and investment files. In those cases, it seemed to lack a clear vision and strategy on the direction and policy of the European Commission. Where the Netherlands took a more pro-active stance, it clearly contributed to the EU agenda and position, mostly in agenda setting and formulating EU positions. For example, it advocated effective trade and sustainable development chapters in free trade agreements, and helped put gender and responsible business conduct on the agenda. However, success beyond agenda setting was limited (thus far). The Netherlands did successfully advocate transparency by the European Commission as well as consultation of stakeholders.
We recommend Dutch policy makers to do stakeholder analyses for priority negotiations, identify what coalitions to build, and draft a strategy to promote Dutch interests. We suggest that they adjust such strategies on a regular basis.
We also recommend Dutch representatives to keep engaging closely with the European Commission to enhance Dutch policy success. We encourage them to keep holding the European Commission to account.
The number of dedicated staff fore and investment policy at the Ministry of Foreign Affairs and the permanent missions to the EU and WTO is limited, given the multitude of trade and investment topics. Other (and sometimes even smaller) EU member states have significantly more staff at their permanent representations to the EU. While Dutch policy officers do travel to Brussels on a regular basis, informal contacts can be easier for diplomats based there.
We recommend the Ministry to enhance the staff capacity available. We encourage Dutch representatives to continue to invest in informal contacts with other member states and the Commission.
We advise Dutch policy makers to make creative use of existing expertise and knowledge, considering, for instance, seconded experts and other Dutch diplomats abroad.
Findings from the five case studies
The case studies have shown mixed results regarding the level of success of the Netherlands. On some (intermediate) policy issues the Netherlands successfully contributed to the agenda, and sometimes even policy making. However, there were also policy issues where the Netherlands was not successful in setting the agenda and/or policy making. Additionally, some successes have not yet been put in practice or were achieved together with other member states, and are therefore difficult to fully attribute to the Netherlands.
Trade defence instruments, such as anti-dumping or anti-subsidy measures, can be used in response to unfair trade practices. The Netherlands favoured the European Commission’s initiative to reform the EU’s trade defence policy. However, the Netherlands also strongly opposed some of the aspects of the proposals. It was particularly critical about the suggested non-application of the ‘lesser duty rule’ (LDR). Together with some other liberal EU member states, the Netherlands believed that the proposed adjustments to the LDR might facilitate abuse of anti-dumping measures.
The review shows that success of the Netherlands was achieved in holding the Commission to account, demanding transparency and evidence to justify the measures proposed. Room for improvement can be found in continuously weighing the costs and benefits of holding on to the initial position in policy development and implementation, and deciding when to become more flexible. As shown from the evidence, good communication with the permanent representation in Brussels is key.
Since 2011, trade and sustainable development (TSD) chapters have become an integral part of EU FTAs with third countries. By including social and environmental provisions, the EC tried to (re)commit their trading partners to implement their existing obligations in relevant labour and environmental agreements and conventions, and aimed to create a level playing field. The Netherlands has been a front runner in this context: from the start, it was a big proponent of TSD chapters in all agreements, also stressing the importance of their enforcement. The Netherlands was thus very active, but had mixed success.
For example, in the Transatlantic Trade and Investment Partnership (TTIP) negotiations, the Netherlands and the UK had mixed success in steering the Commission’s negotiating agenda on TSD chapters. In the EU agreement with Japan, the Netherlands managed to get animal welfare included, but not whaling specifically, which was an important issue. On gender, success had been modest in free trade agreements concluded in 2013-2019: none of the finalised Trade and Sustainable Development chapters contained provisions on gender (yet).
In 2013, a select group of WTO members started negotiations on an agreement on trade in services (TiSA). The Netherlands attached great importance to the TiSA because of the Dutch comparative advantage in services, including digital services, and thus actively engaged in the plurilateral discussions. It wanted ambitious liberalisation, not excluding any sector from opening up in advance. It also wanted to protect the interests of developing countries (in case the agreement would become a multilateral (WTO) one).
The Netherlands cooperated on this topic with a group of likeminded member states, advocating for more liberal positions. However, since the Commission’s and Dutch positions were similar and the TiSA negotiations have been stalled since 2016, we cannot attribute a particular policy success to the Netherlands.
Investment agreements, which promote investment protection, need to balance the rights and duties of investors. As developing countries grew stronger, and more disputes started to occur between investing companies and states, dispute settlement has become more important. The international system for such dispute settlement, however, needed to improve. The Netherlands – which has many bilateral investment treaties – was one of the most active member states promoting the establishment of an investment court system (ICS) to replace the old system (investor to state dispute settlement, ISDS).
The proposal of the Commission to reform the system was in line with the proposals of the Netherlands. The Dutch effort was very visible, but since the Commission always had similar views to the Netherlands, and other members too, this result cannot be attributed to the Dutch efforts alone.
The Netherlands also drafted a new Model Bilateral Investment Treaty in 2018. It organised an inclusive and extensive consultation process. The model text aims to make direct investments more sustainable, to promote fair treatment of foreign investors, and it includes a modern system for dispute settlement.
It has not been put into practice yet, mostly because negotiations on new Dutch bilateral investment agreements stalled (due to the COVID-19 pandemic).
In 2001, the EU started negotiations with groupings of African countries on WTO-compatible economic partnership agreements (EPAs). The negotiations progressed slowly. In 2013, the Minister for for Foreign Trade and Development Cooperation offered to facilitate the negotiations with the Southern African Development Community (SADC), West Africa, and the East African Community (EAC) regions. Taking on the role as ‘honest broker’, the minister aimed to help speed up the negotiations. Actual impact was modest considering that there were some negative side effects, and since other member states and think tanks also had an influence. Moreover, the Netherlands – as a member of the EU – could not be fully impartial.
As to the EU’s success as a whole, while some negotiations with the African regions have moved forward, others largely or partially failed. We conclude that negotiations of the EU with African regions as a whole should not be too ambitious: where EPAs can add value, will differ per country.
This evaluation of trade and investment policy is a building block for the policy review of the BHOS budget article 1, on Dutch aid and trade policies more broadly. The policy review (in Dutch) can he found here.