WEST EUROPEAN ECONOMIC/POLITICAL BACKGROUND PAPERS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000303090001-1
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 18
• Document Creation Date: December 22, 2016
• Document Release Date: November 23, 2009
• Sequence Number: 1
• Publication Date: July 5, 1985
• Content Type: MEMO

STAT
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'90
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Central Intelligence Agency
301
5 July 1985
MEMORANDUM FOR: Mr. Robert G. Adam
Office of Policy Planning
and International Affairs
Federal Maritime Commission
SUBJECT West European Economic/Political Background
Papers
call me
Attached are the background papers that you requested on
West Germany, France, the United Kingdom, Italy, and The
Netherlands. As you suggested, we use the same format as in the
set of country papers we sent you in 1982. If you have any
further questions or if we can be of further assistance, please
STAT
STAT
Deputy Chief
Western Europe Division
Office of European Analysis
Attachments:
As Stated.
EURA M85-10120
UNCLASSIFIED
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UNCLASSIFIED
WEST GERMANY
The Political Scene
Two issues have dominated the West German political
landscape over the last month: the outcome of the North Rhine-
Westphalia election and SDI. In the former, Chancellor Kohl's
Christian Democrats suffered a decisive defeat -- their worst
showing ever in that state. Blame for the defeat has been placed
largely with the government in Bonn, and polls show Kohl's
popularity lower than for any previous West German Chancellor.
Free Democratic and Christian Social Union leaders are arguing
for the government to address unemployment and assuage the fears
of pensioners that budget balancing is coming largely at their
expense -- the two primary reasons for CDU losses -- and
Christian Democratic leaders generally rally behind Finance
Minister Stoltenberg's firm stand on budget austerity. A series
of meetings is planned for the summer and fall to discuss social
and economic policy -- clearly with an eye to next year's state
elections in Bavaria and Lower Saxony, as well as the federal
contest in 1987.
Coalition differences also exist over West German
participation in the Strategic Defense Initiative. Foreign
Minister Hans Dietrich Genscher and his Free Democratic Party
have maintained a more skeptical view of the project's
feasibility and the possible technological pay-off for West
German industry. They are also concerned that SDI might prove to
be another blow to arms control and detente. As a result, they
lean towards the Fench research proposal -- known as EUREKA --
which many in West Germany believe will correspond more closely
to the country's need to advance its industrial technology. Many
of the proponents of EUREKA suspect that the United States will
control access to the technology developed too strictly, and some
doubt that any civilian technologies will spin off from SDI.
Even avowed supporters of SDI such as Chancellor Kohl and
numerous Christian Democrats also find EUREKA attractive because
it promotes the kind of West European economic and political
cooperation that has long been a goal of Bonn's policy. But at
the same time, they are unwilling to renounce possible support
for private West German participation -- or even direct
government involvement -- in SDI, particularly when EUREKA
remains in the conceptual stage. Kohl and the Christian
Democrats are also unwilling to directly oppose a project of
great importance to West Germany's key ally and the leader of
NATO. The Bonn government consequently will work towards a
coordinated European response to both projects, recognizing that
they are not necessarily mutually exclusive.
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Economic Outlook
West Germany enjoyed the best GNP growth performance -- 2.6
percent -- among the major West European economies in 1984, and
similar growth is likely this year. Exports have been the
driving force behind growth as West German manufacturers take
advantage of the strong dollar to expand foreign market shares.
The traditional export sectors -- steel, chemicals, autos,
machinery, and engineering -- are all benefiting. Foreign demand
will remain the main source of growth in 1985, although export
volume will not match the 8-percent increase of last year.
Private investment in plant and equipment is proceeding at a
strong 8-percent annual rate in real terms, as firms push
modernization and industrial restructuring. Other components of
the economy, however, are not faring as well. Private
consumption has remained weak due to slack labor market
conditions and higher taxes, while Bonn's devotion to budget-
balancing has restrained public spending for both consumption and
investment.
Consumer price increases this year will fall within the 2-
to 3-percent range, continuing evidence of Bonn's success in
taming inflation. Unemployment remains the most intractable
problem; the 10.4-percent unemployment rate recorded in first
quarter 1985 was inflated by unusually harsh weather, but the
rate probably will remain stuck above 9 percent -- an alarming
statistic by historical standards. The expected moderate rate of
economic growth will not generate many new jobs, while high labor
costs will continue causing German firms to adopt more capital-
intensive production techniques. At present the Kohl government
has no comprehensive plan to deal with the unemployment problem.
Foreign Trade _
Exports of goods and services account for one-third of West
German GNP, the highest share in the Big Seven. In the most
important industrial sectors -- machine building, automotive
manufacturing, chemicals, and electrical engineering -- export-
to-output ratios range up to 55 percent. West Germany's annual
trade surplus broke all records last year, hitting $18.7
billion. Exports rose 13 percent in value, led by a 43-percent
surge in exports to the United States. The strong dollar has
been a boon for West German exporters and a stimulus for the
economy as a whole.
Manufactured goods, especially machinery and vehicles,
account for 85 percent of West German exports; foodstuffs, raw
materials, and fuels make up the remaining 15 percent. On the
import side, manufactured products account for 55 percent of the
total. Fuels -- primarily petroleum and petroleum products --
represent 21 percent.
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West Germany: Foreign Trade, 1984
Billion US $
Total
United States
Exports
171.7
16.4
Imports
153.0
11.0
Balance
18.7
Relations with the United States
Economic relations between the two countries are good,
although Bonn is again concerned about protectionist sentiment in
the United States. The West Germans are annoyed by toughened US
restrictions on steel imports -- particularly for pipes and tubes
-- but are resigned to the need for continued limititations on EC
steel shipments to the US. Bonn backs the US call for a new GATT
round, but probably will resist efforts to liberalize
agricultural trade. West German farmers, a significant voting
block for the conservative parties, need the protection afforded
by the EC's Common Agricultural Policy.
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The Political Scene
Next spring France will have its first legislative elections
since the Socialists came to power four years ago, and economic
issues are likely to be paramount. President Mitterrand and the
Socialists will be presenting themselves as pragmatic and
successful economic managers who have made the tough decision to
pursue short-term austerity in an effort to promote long-term
growth and modernization. The 1986 budget, to be proposed this
fall, is likely to continue the austerity program. On the other
hand, the conservative opposition will contend that austerity was
necessary only because of initial Socialist excesses, and that
the policy has not been as effective as the Socialists
promised. The opposition's program is calling for a major effort
to stimulate the economy by reducing taxes, spending, and
government controls.
Public opinion polls indicate that the conservatives will
win the 1986 elections handily, but Mitterrand's term runs until
1988. Under the present constitution, introduced in 1958, the
president has extensive powers, but he has always had a
legislative majority to support him. If the opposition does gain
control of parliament, it is not clear where the ultimate
authority would lie, and the French government could well bog
down in internal debates until the situation is sorted out.
Important legislation on economic and defense policy could get
tied up in the confusion.
Economic Outlook
French economic growth this year probably will pick up only
slightly from the 1.6-percent rate recorded in 1984 --
insufficient to reduce the unemployment rate which is now above
10 percent. The slight drop in unemployment over the last three
months is probably only temporary; in fact, the French Economics
and Statistical Institute (INSEE) projects unemployment as high
as 11.5 percent by yearend. French officials do not believe they
can stimulate the economy without reigniting inflation and
creating balance of payment difficulties, particularly given the
counterproductive results of their first attempt at stimulation
in 1981. Instead, they are likely to stick to the austerity
program they have been pursuing for nearly three years -- at
least through the National Assembly elections next spring.
Although austerity has meant slow growth for France, it has
lowered inflation and brought the current account into balance.
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UNCLASSIFIED
The inflation rate has fallen from over 13 percent in 1981 to 7.7
percent last year, and it could fall to about 6.5 percent in 1985
-- even though the annual rate for the first three months of this
year has been above 8 percent. France has also managed to reduce
its current account deficit from over $12 billion in 1981 to
near-balance last year. Further rapid improvement is not likely
this year, but recent downward movement in the dollar could
produce a significant short term benefit.
During the past two years, the Socialists have faced up to
some of the long-term structural problems of the economy. They
have authorized employment reductions in steel, automobiles,
shipbuilding, and mining, as well as in many other industries.
They have also emphasized that the first priority of nationalized
firms is to make profits, or at least to avoid losses, rather
than to provide employment. By reducing taxes and other social
charges, the government has helped firms restore profit margins
that were badly eroded when the Socialists first came to power.
The outlook for fixed non-residential investment has improved
significantly in the past two years thanks not only to improved
profits and falling interest rates, but also to an improvement in
business confidence -- resulting from the perception that the
Socialist government can behave sensibly after all and the belief
that the right will sweep back into power next year.
Foreign Trade
Real exports of goods and services, which increased by
nearly 10 percent between 1982 and 1984, have been the main
source of growth in the French economy. Over the same period
real imports of goods and services rose by only 2.2 percent. In
1984 the trade deficit reached its lowest level since the second
oil shock in 1979.
In France, as in most other industrial countries, the energy
sector is the main source of weakness in the trade balance,
although France has an ambitious nuclear program that has reduced
its energy dependence dramatically since 1973. The French
traditionally have trade surpluses in industrial goods and
agriculture, but the deficit on maritime shipping has been near
$400 million for the last two years. Perhaps the most worrisome
structural aspect of French trade is that bilateral surpluses
occur mainly in trade with less developed countries -- the only
developed country with which France has a consistent trade
surplus is Switzerland.
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French: Foreign Trade, 1984
Billion US $
Total
United States
Exports
97.6
7.5
Imports
103.7
8.0
Balance
-6.2
Relations with the United States
France traditionally has had a trade deficit with the United
States. Slow growth in France coupled with rapid US growth and
the appreciating dollar reduced the deficit to less than $0.5
billion last year on an FOB-CIF basis; on an FOB-FOB basis the
trade balance probably was in surplus. French exports to the US
have grown much more rapidly over the past two years on both a
real and nominal basis than exports to the rest of the world,
while imports from the US have grown less rapidly. Real exports
to the US grew by 56 percent'from 1982 to 1984 and have doubled
since 1980.
Agricultural trade and policy probably is the most
contentious issue between France the United States, with trade in
cereals, corn gluten feed, soybeans, citrus fruits, and wine
being particular areas of concern. France suspects that
Washington is out to destroy the EC's Common Agricultural Policy
and fears a trade war may be brewing. The French particularly
resent recent US subsidies on agricultural exports to Algeria and
Egypt -- markets France views as its domain. They are also
concerned about what they see as growing protectionism,
especially in steel and textiles.
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UNITED KINGDOM
Political Scene
Despite sharpened criticism of her economic policies, Prime
Minister Thatcher appears to be as self-assured as ever and
remains committed to reforming the British economy and changing
long-held social attitudes. She is convinced that she has forced
voters to recognize and accept the limitations of government's
role in the economy. Furthermore, she can point to her success
during the miners' strike as evidence that rank-and-file workers
are no longer willing to follow leftwing leaders blindly and that
British trade unions are not the dominant force they once were.
During the next 12 months or so, she will concentrate on pushing
through as many of her controversial policies as possible --
including reform of the social welfare system, further
denationalization of industry, and implementation of the Trident
modernization program -- in order to assure that any successor
government would have a difficult time changing the course she
has set. By the middle of 1986, however, pressure to go slow on
controversial policies is likely to increase, as the Tories
become preoccupied with the next general election, due by June
1988.
The Labor Party and the Social Democratic-Liberal Alliance
have made notable gains in recent municipal and county elections,
but do not as yet represent a serious threat to Thatcher. The
primary factors in Labor's improved standing are public anxiety
over growing unemployment, the absence of hoped-for tax cuts in
the March budget, and continued high interest rates on
mortgages. Labor leader Neil Kinnock is using these issues to
divert attention from his party's extreme leftwing platform on
defense issues, which include support for unilateral nuclear
disarmament and outright rejection of SDI participation.
Alliance leaders -- who still have not articulated a clear policy
platform -- are counting on divisions in the Labor Party and on
increasing dissatisfaction among Tories to make the Alliance the
"best" alternative by the time of the next general election.
Economic Outlook
The British economy is enjoying its fourth consecutive year
of economic recovery, with most forecasters calling for real GNP
growth of 3.5 to 4.0 percent in 1985, compared with only 1.6
percent last year. The economy is bouncing back from the nearly
year-long coalminers' strike -- which reduced growth by an
estimated 1.2 percentage points in 1984 -- and is benefiting from
a healthy export performance as well as increased domestic
demand. Consumer spending, influenced by higher real personal
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income, is expected to increase faster than last year, at about
2.5 percent, while growth in fixed investment most likely will
slow from 7.6 percent in 1984 to between 2 and 4 percent,
depending on trends in interest rates. Despite London's plans to
reduce the budget deficit from more than $10 billion in the
fiscal year ending this March to $7.7 billion in the current
fiscal year, government spending will probably increase in 1985
due to a variety of factors, including higher than projected
inflation and political pressures to combat rising unemployment.
The Thatcher government has had generally good success in
controlling inflation since 1981 -- consumer price inflation was
down to 4.8 percent at the end of 1984, compared with 11.9
percent in 1981. This year, the strong depreciation of the pound
and a rise in mortgage rates caused inflation to bulge to 6.9
percent as of the end of April. The rate will probably peak at
between 7 and 7.5 percent during the summer months and then
gradually fall, provided that the government lowers interest
rates somewhat and that the pound does not weaken.
In recent months, Thatcher has come under increasing
criticisim -- even from a group of Tory backbenchers -- for not
dealing effectively with high unemployment, which stood at 13.1
percent at the end of May and probably will continue to rise.
The economic recovery has not created enough new jobs to
compensate for the increasing size of the labor force. Moreover,
long-term joblessness has increased even faster than overall
unemployment because young people lack appropriate training and
older workers possess skills no longer in demand. Critics of the
government's laissez-faire approach believe that London should
help alleviate the problem by undertaking more job creation
schemes and increasing public investment.
Foreign Trade
Exports rose more than 2 percent last year in dollar terms
(16 percent in pounds), due to strong world demand and the
increased competitiveness of British goods as the pound
depreciated. Strong growth in non-oil imports, in combination
with rising coal and oil imports -- a result of the miners'
strike -- pushed the trade deficit to $5.7 billion in 1984,
following a $1.8 billion shortfall a year earlier. Reflecting
this, the current account was near balance last year, compared
with a $3.8 billion surplus in 1983. The trade account should
improve somewhat this year because of the end of the miners'
strike and because the pound is still relatively weak.
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United Kingdom: Foreign Trade, 1984
Billion US $
Total
United States
Exports
94.0
13.6
Imports
99.7
12.5
Balance
-5.7
Britain's major exports are manufactured goods -- primarily
machinery and transport equipment, chemicals, and semi-finished
goods -- and oil and oil products. Manufactured goods also
occupy first place in the United Kingdom's imports, followed by
petroleum and petroleum products, and food. Among the
manufactured imports, machinery, semi-finished goods,
transportation equipment, and consumer goods are all important.
Last year the United States was Britain's largest export
market ($13.6 billion or 14.6 percent of total exports) and the
second-largest source of imports ($12.6 billion or 12.6 percent
of total imports), following West Germany. Manufactured goods
account for 55 percent of exports to the United States followed
by fuels at 28 percent; three-fifths of the manufactured goods
consist of machinery. Seventy-five percent of imports from the
United States are manufactured goods with machinery accounting
for more than half of that total.
Relations with the United States
Prime Minister Thatcher takes great pride in her "special
relationship" with President Reagan, which is based in large part
on their similar ideological approaches to most economic,
political and strategic issues. She counts on this friendship as
a way of making British concerns known in Washington. At the
same time, however, she must contend with charges from her
opposition that she is too close to the President and blindly
follows his will. Thatcher has supported the President on a
number of important issues this year, including his SDI proposal,
call for a new trade round, and criticism of Japan for failure to
import more US and West European goods.
Nevertheless, there are areas of friction in the
relationship. While the United Kingdom generally supports the
goal of restricting high-technology exports to the Soviet Bloc,
it would prefer a narrower, more enforceable list of controlled
dual-use items than the United States. The United Kingdom also
is generally opposed to Washington's use of trade sanctions as a
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means of achieving political ends. Finally, the British would
prefer that Washington did not take unilateral action in
international affairs without consultations with the NATO allies.
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The Political Scene
The Socialist-led government's victories over the Communists
in the 12 May regional and administrative elections and in the 9
June referendum on the national wage indexation program have
strengthened Prime Minister Craxi's hand following several months
of tension. The Craxi government made it over another hurdle on
24 June when the Parliament selected Francesco Cossiga, a
Christian Democrat, to succeed President Pertini.
Craxi now seems destined to remain in office at least
through the end of the year and he may now be in a position to
take advantage of the opportunity offered by the Communists'
recent setbacks to press ahead with much-needed economic and
institutional reform. In both areas, however, Craxi can expect
difficult negotiations with his governing partners. On economic
matters, for example, the coalition is split between those who
favor tough enforcement of tax laws and a significant reduction
of the burgeoning state deficit, and those who worry that
pressure in these areas will hurt the coalition in the next
election. On institutional reform, the small parties -- the
Social Democrats, Republicans, and Liberals -- worry that
proposals limiting recourse to the secret ballot would weaken
their hand in Parliament; suggestions that parties should be
required to win 5 percent of the vote to enter Parliament
threaten to keep them out altogether.
Economic Outlook
Italy continues to enjoy the economic expansion which began
in mid-1983. Strong export growth, and a jump in investment
spending during the second half of the year, led to a real GDP
increase of 2.6 percent in 1984. Rising corporate profits,
increasing capacity utilization, and the need to modernize plant
and equipment are likely to keep investment expenditures strong
in 1985. Because of anticipated tax increases, however,
consumption spending probably will be subdued. In addition, the
slowing world economy will moderate export expansion, keeping
real GDP gorwth to about 2.2 percent this year.
The government's principal economic objective has been to
control the inflation rate. Cuts in Italy's automatic wage
indexation system in the first half of 1984, and limits placed on
administered price increases, helped bring the annual inflation
rate down to 8.6 percent in the first quarter of 1985.
Nevertheless, prices in Italy continue to rise at twice the rate
of those in other developed countries, seriously eroding Italy's
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export competitiveness. Disputes over new wage contracts and a
revision of value-added tax rates are likely to keep inflation
running around 9 percent for the rest of the year, well above the
government's 7-percent target.
Rome also faces the need to curb its budget deficit -- at
14.8 percent of GDP in 1984, one of the highest in the developed
world. The government, however, lacks the political power to
control spending or to broaden the tax base, and as a result the
budget deficit in 1985 may surpass 17 percent of GDP.
Unemployment continues to rise in Italy despite the upturn
in the economy. Growth has not translated into increased
manufacturing jobs largely because industrial profits are being
invested in new, labor-saving equipment. Although increased
employment in the services sector has offset declines in industry
and agriculture, it has been insufficient to cover the expansion
in the labor force. Industrial employment probably will contiue
to decline, pushing the unemployment rate to an average of 10.8
percent this year, up from 10.4 percent in 1984.
Foreign Trade
Italy recorded a $3.1-billion current account deficit in
1984 due to a doubling of the trade deficit. Although exports
were strong throughout 1984, domestic growth spurred an even
larger increase in imports. The government's inability to
control inflation and the slowing world economy will result in a
tapering-off of export growth this year. In 1984, 86 percent of
Italy's exports were manufactured goods; clothing, footwear,
steel, and office machinery are some of the exports that would be
hurt by continued price increases. On the other side, more than
half of Italy's imports consist of crude oil, petroleum products,
and natural gas, and it is doubtful that Italy can reduce this
energy dependence in the near term. These energy purchases and
the strong import demand for investment goods are likely to cause
the trade balance to worsen further this year.
Italy:
Foreign Trade,
Billion US $
1984
Exports
73.4
8.0
Imports
84.3
5.1
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Relations with the United States
The United States is Italy's third-largest trading partner
behind West Germany and France. Reflecting the strong US economy
and the appreciation of the dollar, exports to the United States
nearly doubled in 1984 and accounted for 10.9 percent of total
exports. Thirty percent of the US sales were consumer goods such
as jewelry, footwear, and clothing. Semi-finished goods and
machinery were also important trade items, in particular steel
and automotive parts. Imports from the United States fell
slightly in 1984 and accounted for 6 percent of total imports;
aircraft, coal, computers, soybeans, and office equipment headed
the list. US direct investment in Italy appears to have slowed
in recent years, although portfolio investment remains strong.
Trade disputes with Italy appear to be on the rise. The
Italian government has registered a strong protest over the
raising by the United States of tariffs on pasta imports in
retaliation for EC inaction on the GATT citrus panel ruling.
Italy claims the action is unfair since it effectively focusses
on only one member of the EC, even though the Italians have been
the most persistent opponent of US proposals. The Craxi
government also opposes the recent USITC recommendation to impose
quotas on non-rubber footwear. Since Italian shoe exports to the
United States have not increased in recent years, Craxi argues
that the US should focus its restrictions on low-priced footwear
and not limit Italy's more expensive shoe exports. Italy has
implied that the US actions could hamper other bilateral
negotiations. Rome is also concerned that the new US wheat
export enhancement program will hurt Italian farmers. Although
Italy does not sell wheat abroad, the government fears the US
program will undercut French wheat exports to non-EC countries,
and a surplus of EC wheat would mean extra costs to Italy for
storing the excess grain.
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The Political Scene
The Netherlands is currently governed by a center-right
coalition of Christian.Democrats (CDA) and Liberals (VVD). The
coalition has been pursuing an austere fiscal policy that has
cost it significant support. Polls show that the coalition would
lose its majority (now 79 seats) in the 150-member Second Chamber
of Parliament if an election were held today. The CDA, the
senior partner in the government, has benefited from the
popularity of Prime Minister Ruud Lubbers, but the VVD is down
significantly from its record-high showing in the last national
election in 1982. The opposition Labor Party, traditionally
Holland's largest party, is the principal beneficiary of the
downturn in the government's fortunes.
Although the next general election is not due until May
1986, political maneuvering is already under way. The main focus
is on the CDA, which is likely to remain a pivotal force in any
post-election government. The CDA is attempting to maintain
unity by publicizing its platform early and calling on the rank
and file to unite behind it. On economic issues, the Christian
Democrats are calling for more budget cutting, though with
somewhat less emphasis on social welfare cuts, and are pledging
greater job creation efforts. This policy is flexible enough to
permit the party to continue working with the Liberals on their
right, or to put together a coalition with Labor. Security
issues -- particularly the question of allowing INF deployment on
Dutch soil -- will be more difficult to resolve. The Christian
Democrats are tenuously maintaining a united position supporting
the government's June formula, which ties a positive decision on
INF to Soviet deployments and maintains the link between INF'
deployment and reducing other Dutch nuclear tasks in NATO. The
Labor Party, on the other hand, is a vociferous opponent of INF.
Economic Outlook
The upturn in the Dutch economy that began in 1983 is
continuing: real GNP growth should be in the 2- to 3-percent
range this year. The economy grew 2 percent in 1984, fueled by
increases in investment, stock building, and the foreign trade
surplus. Manufacturing output expanded.6 percent, led by the
chemical and basic metals industries. Real private consumption,
however, fell 1 percent due to austerity measures -- including
wage restraints, reduced income transfers, and general public
sector retrenchment -- implemented to reduce the spiraling budget
deficit. Consumption is likely to pick up somewhat in 1985 when
a combination of tax relief, very low inflation -- only 3 percent
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in 1984 -- and some moderate wage increases will permit real
after-tax wage incomes to rise for the first time in several
years.
An uncomfortably high level of unemployment remains the most
critical economic problem facing The Netherlands. Unemployment
jumped from 6 percent of the labor force in 1980 to over 14
percent at the end of 1984. Among contributing factors have been
faster labor force growth since 1979, rigid wage structures, and
an incompatibility between the skills of those entering the labor
force and the available employment possibilities. Youth
unemployment is especially serious (more than 30 percent of
workers under 23 are jobless) and there is growing concern about
its long-term effect on the nation's social fabric. Despite a
variety of government-supported job training and subsidy
programs, unemployment is expected to edge higher in 1985.
Foreign Trade
Foreign trade is of crucial importance for the Netherlands,
as imports and exports each amount to over 50 percent of GNP.
The trade surplus widened to $5.4 billion last year, up from $4.3
billion in 1983. Despite a small deterioration in invisible
earnings, the current account surplus improved by $1.5 billion in
1984, to $4.9 billion.
Manufactured goods account for almost 85 percent of Dutch
exports and are concentrated in metals, chemical products, food
and tobacco, and oil products. Minerals (mainly natural gas) and
raw agricultural goods make up the remaining 15 percent of Dutch
export revenues. In contrast, raw materials and semi-finished
products comprise more than 60 percent of Dutch imports, followed
by consumer and investment goods.
Netherlands: Foreign Trade, 1984
Billion US $
Total
United States
Exports
65.7
3.3
Imports
60.3
5.5
Balance
5.4
Relations with the United States
In 1984, the United States accounted for 5 percent of total
Dutch exports, taking $3.3 billion worth of goods. On the other
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side, the Netherlands is the third-largest market for US exports
in Western Europe and the seventh-largest in the world. In the
agricultural sector, the Netherlands represents the third-largest
market (after Japan and the Soviet Union) for US commodities.
Direct investment both ways deepens the economic
relationship. At the end of 1984, the over 1,000 US firms
operating in Holland showed a book value of direct investment of
$8.8 billion, making the United States the largest foreign
investor in the country. The Netherlands has also long been a
major source of direct investment in the United States -- with a
total of more than $28 billion at the end of 1983.
On bilateral political issues, INF is of primary concern. A
decision is due by November and will ultimately depend on the
Lubbers government's perception of public support and of the
chances for keeping the Christian Democrats united. While The
Netherlands is a loyal member of NATO, a new generation of voters
is more skeptical of the United States, particularly Washington's
policies in Central America. The Dutch government has not yet
taken a definitive position on participation in SDI research or
on the initiative itself, which has been receiving a great deal
of public attention and criticism in the Netherlands. The
Lubbers government is leaning towards participation, but is
mainly interested in reaping technological and economic benefits.
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