The future of trade and services The Netherlands as a trading nation Frank den Butter (VU/ ex-WRR)

1. The future of trade and services The Netherlands as a trading nation Frank den Butter (VU/ ex-WRR) Club of Amsterdam, February 23, 2005, PWC, Amsterdam

2. Enhanced welfare (more growth) through • Increase in labour participation • Higher productivity

3. Productivity growth?: • Better products: product innovation; high tech (let’s make things better) • Less transaction costs: innovation in orchasrating and trade function (let’s trade things better)

4. Let us exploit our strength as a trading nation • The Netherlands has for over 4 centuries been a trading nation. That’s where our economic power is. Let us use and extend that power in a globalising world where ict brings about rapid change: be innovative in trade and acquire and use knowledge in order to reduce transaction costs!

5. Welfare = Division of labour • Division of labour is restricted by co-ordination costs = transaction costs; • Innovations which reduce transaction costs : more division of labour and welfare: more “trade”; • Trade: exchange of property rights; • Both within companies (multinationals, hierarchy) and between companies (MSB, market); • Efficient split-up of production chain: outsourcing, offshoring, global sourcing; services

6. Trade flows in 2001

7. Which transaction costs? • Costs of transport (incl. logistics) • Taxes, tariffs, import quota • Administrative burden; “red tape” • Costs of negotiating, monitoring, bonding of contracts, legal infrastructure • Network buiding: reputation and trust (part of “goodwill”) • Information costs (e.g. marketing)

8. Who works in the transaction sector?Brokers, salesmen, purchasers, auditors administrators, lawyers, transporters, financial advisers, ICT-professionals, organizers, staff managers, entrepreneurs

9. Question:What part of your working time do you spend on the transaction function (co-ordination)?

10. Which knowledge is needed in future for trade and services? • Organizing production: invest in trust with clients, suppliers and subcontractors; networks • Financial innovations, uniform standards • Maintain orchestrating function • Value creation: design and marketing

11. Role of services • Specific knowledge on coordination in production chain • Knowledge of cultural diversity and of how to reduce informal trade barriers • Provision of standards and quality guarantees, e.g with respect to information on internet (portal function) • Financial intermediation, legal advise, design, marketing • Knowledge intensive parts of production (R&D) • Trade function is not restricted to service sector

12. Amsterdam Trade University • International knowledge institute for trade following the Amsterdam tradition • Combines available knowledge and existing courses (virtual institute) • Education program: summer courses, master classes, post graduate and master courses, both for Dutch students and highpo’s of trading partners • Good alumni policy: use of cultural tradition • Research program: network function of ATU in research conducted by experts in companies on their own research questions • Data base and network function for sharing of knowledge

13. Rembrandt’s “staalmeesters” symbolizes the tradition of trade and reduction of transaction costs in the Netherlands by setting quality standards