Domestic services depend much more on exports than commonly thought, as Dutch services represent a significant input to manufacturing. As a result, the often-used economic distinction between a tradeable manufacturing industry and a non-tradeable services sector does not paint an accurate picture of advanced economies.
Services are an important input to goods exports
Standard exports statistics show the euro value of exports by sector. They provide no insight into how much money the Dutch economy actually earns from these exports. The use of input-output tables allows for a breakdown of the production process, which makes it possible to determine which sectors actually contribute to Dutch GDP and, indirectly, to employment.
The value added in Dutch exports is calculated as the difference between the exports value and the value of raw materials and intermediate goods used in the production process. For example, the valued added to the Dutch economy by a Dutch tyre manufacturer exporting to Germany is different from the value of tyre exports. That is because tyre production requires the input of imported rubber. Therefore, the contribution of this tyre manufacturer’s exports to GDP is the difference between the value of tyre exports and its rubber imports.
Within a country, production chains are also split, which means that not all value added generated within the Netherlands should be assigned to the exporting sector. For example, if the tyre manufacturer uses many Dutch services – for example, financial, logistical or marketing services – to export the tyres, part of the value added needs to be allocated to other sectors.
Measured in terms of value added, services are the driving force behind Dutch exports
In order to break down into sectors the valued added in exports, we used the OECD-WTO Trade in Value Added database (TiVA), which provides information about four broad sectors: agriculture and mining, manufacturing, services and other. The “other” category consists of the construction sector and utilities.
Figure 1a shows that the Dutch manufacturing sector accounts for more than 63% of the value of domestically produced exports. [note 1] Services and agriculture and mining follow at considerable distance, accounting for 24% and 11%, respectively. [note 2] These figures relate to the most recent year included in the TiVA database, which is 2009. However, it is important to note that there are no large year-to-year changes in these percentages. The above percentages might imply that manufacturing stands to gain most from exports of Dutch goods and services. In terms of value added, however, the services sector is by far the most important sector, accounting for almost 50% of total value added in exports (Figure 1b). Manufacturing and agriculture and mining follow at considerable distance, with shares of 33% and 15%, respectively.