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Breaking out of Benelux

Ian Sclater looks at the economic benefits of Benelux and finds out that three’s good company


The name ‘Benelux’ – a compression of the three ‘member’ countries, Belgium, the Netherlands and Luxembourg – first appeared in 1944, when the governments in exile in London signed a treaty to form the Benelux Customs Union, which went into force in 1947. This in effect created what we would today call a ‘single market’, allowing the free flow of persons, goods and services, but not an ‘economic union’ as such.

The Benelux Customs Union was replaced in 1960 by the Benelux Economic Union, formed to give the three small states more weight in the European integration process. Today, all new EU regulation automatically overrides any existing agreement in the same area between the Benelux countries, although they continue to cooperate on ‘internal’ policy on such subjects as justice, policing and immigration.

The economies of Belgium and  Luxembourg have been unified since 1921 by the Convention of Economic Union, distinct from both the Benelux Customs Union and the EU.

Belgium relies particularly heavily on export earnings; 70 per cent of GDP is exported, one of the highest proportions in the world. Manufactured goods and machinery are the largest export sectors.

Successive Belgian governments have been keen proponents of European integration, including the introduction of a single European currency, which Belgium adopted upon its inception in 1999.

If any city can lay claim to being the ‘capital of Europe’, it is Brussels. Seat of numerous institutions, including the European Commission, European Council, Economic and Social Committee of the European Parliament and NATO, it also hosts some 1,600 multinationals representing 150 different nationalities.

Over 70 international airlines serve Brussels International Airport, and there are also international airports at Liege and Charleroi. Express train services and an excellent, toll-free highway network link it with most major European cities.

For centuries, the Dutch have had an international outlook and openness to foreign investment. Many multi-nationals recognise the Netherlands’ strategic location and pro-business environment, while a superior logistics and technology infrastructure and an educated, multi-lingual workforce enhance its lure as a business base.

Along with ICT (the Netherlands is one of the most ‘wired’ countries in the world), sectors which perform particularly well include biotechnology, chemicals, agri-food, pharmaceuticals, distribution and medical technology.

Over 20 airports in the UK and Ireland offer flights to Holland, mostly to Amsterdam’s Schiphol Airport , where 20 per cent of the traffic is from or to the UK). Easy access to the rest of the world makes Schiphol one of Europe’s key business hubs. Holland also benefits from excellent road and rail links with the rest of Europe, while Rotterdam is the world’s largest seaport.

The Netherlands compactness is another business benefit. The area comprising Schiphol, Amsterdam, Utrecht, The Hague and Rotterdam is no bigger than the area within the M25.

The Dutch are also extraordinarily practical in business and are legendary in their keenness to ‘do the deal’. It also helps that most of them speak better English than most of us.

The smallest country of the trio packs a mighty economic punch, with its financial sector housing more banks per capita than almost any other country in the world. The liberal legal framework provides not only banking secrecy, but also an advantageous taxation system which taxes profits, not turnover.

The financial sector is also populated by some 15,000 holding companies and 12,000 investment funds. As a result, the overall net assets of Luxembourg-managed financial institutions exceeded €1500b in 2005, compared with a GDP of some €29bn.

Arcelor, Luxembourg’s steel company, is the biggest in the world (2005 turnover: €32.6b), the ASTRA satellites, which bring hundreds of TV channels and radio stations to millions of households across Europe, are owned and controlled by Luxembourg and Goodyear’s technical research centre has long been based in the Grand Duchy. More recently, AOL has moved its European headquarters there.

Luxembourg has excellent communications to the rest of the world, including 10 daily UK connections, and a multi-lingual workforce with a history of peaceful employee relations.

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