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Netherlands (10/04)For the most current version of this Note, see Background Notes A-Z.
PROFILE OFFICIAL NAME: Geography People Government HISTORY Julius Caesar found the region which is now the Netherlands inhabited by Germanic tribes in the first century B.C. The western portion was inhabited by the Batavians and became part of a Roman province; the eastern portion was inhabited by the Frisians. Between the fourth and eighth centuries A.D., most of both portions were conquered by the Franks. The area later passed into the hands of the House of Burgundy and the Austrian Habsburgs. Falling under harsh Spanish rule in the 16th century, the Dutch revolted in 1558 under the leadership of Willem of Orange. By virtue of the Union of Utrecht in 1579, the seven northern Dutch provinces became the Republic of the United Netherlands.
During the 17th century, considered its "golden era," the Netherlands became a great sea and colonial power. Among other achievements, this period saw the emergence of some of painting's "Old Masters," including Rembrandt and Hals, whose works--along with those of later artists such as Mondriaan and Van Gogh--are today on display in museums throughout the Netherlands and the world.
The country's importance declined, however, with the gradual loss of Dutch technological superiority and after wars with Spain, France, and England in the 18th century. The Dutch United Provinces supported the Americans in the Revolutionary War. In 1795, French troops ousted Willem V of Orange, the Stadhouder under the Dutch Republic and head of the House of Orange.
Following Napoleon's defeat in 1813, the Netherlands and Belgium became the "Kingdom of the United Netherlands" under King Willem I, son of Willem V of Orange. The Belgians withdrew from the union in 1830 to form their own kingdom. King Willem II was largely responsible for the liberalizing revision of the constitution in 1848.
The Netherlands prospered during the long reign of Willem III (1849-90). At the time of his death, his daughter Wilhelmina was 10 years old. Her mother, Queen Emma, reigned as regent until 1898, when Wilhelmina reached the age of 18 and became the monarch.
The Netherlands proclaimed neutrality at the start of both world wars. Although it escaped occupation in World War I, German troops overran the country in May 1940. Queen Wilhelmina fled to London and established a government-in-exile. Shortly after the Netherlands was liberated in May 1945, the Queen returned. Crown Princess Juliana acceded to the throne in 1948 upon her mother's abdication. In April 1980, Queen Juliana abdicated in favor of her daughter, now Queen Beatrix. Crown Prince Willem Alexander was born in 1967.
Elements of the Netherlands' once far-flung empire were granted either full independence or nearly complete autonomy after World War II. Indonesia formally gained its independence in 1949, and Suriname became independent in 1975. The five islands of the Netherlands Antilles (Curacao, Bonaire, Saba, St. Eustatius, and a part of St. Maarten) and Aruba are integral parts of the Netherlands realm but enjoy a large degree of autonomy.
Government Structure The Monarch. The monarch is the titular head of state. The Queen's function is largely ceremonial, but she does have some influence deriving from the traditional veneration of the House of Orange, from which Dutch monarchs for more than three centuries have been chosen. Her influence also derives from her personal qualities as Queen and her power to appoint the “formateur,” who forms the Council of Ministers following elections.
The Council of Ministers plans and implements government policy. The Monarch and the Council of Ministers together are called the Crown. Most ministers also head government ministries, although ministers-without-portfolio exist. The ministers, collectively and individually, are responsible to the States General (parliament). Unlike the British system, Dutch ministers cannot simultaneously be members of parliament.
The Council of State is a constitutionally established advisory body to the government that consists of members of the royal family and Crown-appointed members generally having political, commercial, diplomatic, or military experience. The Council of State must be consulted by the cabinet on proposed legislation before a law is submitted to the parliament. The Council of State also serves as a channel of appeal for citizens against executive branch decisions.
States General (parliament). The Dutch parliament consists of two houses, the First Chamber and the Second Chamber. Historically, Dutch governments have been based on the support of a majority in both houses of parliament. The Second Chamber is by far the more important of the two houses. It alone has the right to initiate legislation and amend bills submitted by the Council of Ministers. It shares with the First Chamber the right to question ministers and state secretaries.
The Second Chamber consists of 150 members, elected directly for a 4-year term--unless the government falls prematurely--on the basis of a nationwide system of proportional representation. This system means that members represent the whole country--rather than individual districts as in the United States--and are normally elected on a party slate, not on a personal basis. There is no threshold for small-party representation. Campaigns are relatively short, lasting usually about a month, and the election budgets of each party tend to be less than $1 million. The electoral system makes a coalition government almost inevitable. The last election of the Second Chamber was in January 2003.
The First Chamber is composed of 75 members elected for 4-year terms by the 12 provincial legislatures. It cannot initiate or amend legislation, but its approval of bills passed by the Second Chamber is required before bills become law. The First Chamber generally meets only once a week, and its members usually have other full-time jobs. The current First Chamber was elected following provincial elections in May 2003.
Courts. The judiciary comprises 62 cantonal courts, 19 district courts, five courts of appeal, and a Supreme Court that has 24 justices. All judicial appointments are made by the Crown. Judges nominally are appointed for life but actually are retired at age 70.
Local government. The first-level administrative divisions are the 12 provinces, each governed by a locally elected provincial council and a provincial executive appointed by members of the provincial council. The province is formally headed by a queen's commissioner appointed by the Crown. Current Government. The current government, formed in May 2003, is a coalition of the center-right Christian Democratic (CDA), conservative Liberal (VVD) and left-of-center Liberal Democrats 66 (D66) parties headed by CDA Prime Minister Jan Peter Balkenende. The coalition parties hold 78 of the 150 seats in the Second Chamber of Parliament. The opposition includes the Labor (PvdA) party with 42 seats and 5 other parties, each with less than 10 seats. Given the consensus-based nature of the Dutch Government, elections do not usually result in any drastic change in foreign or domestic policy. Descriptions of the four main parties follow.
The Christian Democratic Appeal was formed from the merger of the Catholic People's Party and two Protestant parties, the Anti-Revolutionary Party and the Christian-Historical Union. The merger process, begun in the early 1970s to try to stem the tide of losses suffered by religiously based parties, was completed in 1980. The CDA supports free enterprise and holds to the principle that government activity should supplement but not supplant communal action by citizens. On the political spectrum, the CDA sees its philosophy as standing between the "individualism" of the Liberals and the "statism" of the Labor Party. CDA has 44 seats in the current Second Chamber, which makes it the largest party.
The Labor Party (PvdA), a classic European Social Democratic party, is left of center. It currently has 42 seats in the Second Chamber. Labor's program is based on greater social, political, and economic equality for all citizens, although in recent years the party has begun to debate the role of central government in that process. Although called the Labor Party, it has no formal links to the trade unions.
The Liberal Party is "liberal" in the European, rather than American, sense of the word. It thus attaches great importance to private enterprise and the freedom of the individual in political, social, and economic affairs. The VVD is generally seen as the most conservative of the major parties. It currently has 28 seats in the Second Chamber. The VVD has previously been the junior partner in two governing coalitions with the CDA from 1982-89.
The Liberal Democrats 66 (D66) party was founded in 1966 primarily for the purpose of promoting a drastic reform of the rigid, antiquated Dutch political system. Political reform still is its principal driving force. The party’s electoral fortunes have fluctuated widely. For a long time, its success was closely tied to the popularity of D66 founder, leader and former Foreign Minister Hans van Mierlo, who retired in 1998. Since then, the party steadily lost electoral support. In January 2003 elections, it only won six seats. Despite its relatively small size, D66 has invariably been a reliable, intellectually sound partner in successive coalition governments. D66 is a staunch advocate of a strong European Union, although it also subscribes to the importance of NATO and the transatlantic relationship in Dutch foreign policy.
Domestic Drug Policy The Dutch Opium Act punishes possession, commercial distribution, production, import, and export of all illicit drugs. Drug use, however, is not an offense. The act distinguishes between “hard” drugs that have “unacceptable” risks (e.g., heroin, cocaine, Ecstasy), and “soft” drugs (cannabis products). One of the main aims of this policy is to separate the markets for soft and hard drugs so that soft drug users are less likely to come into contact with hard drugs. The sale of a small quantity (under five grams) of soft drugs in “coffeeshops” is tolerated, albeit under strict conditions and controls. The United States continues to disagree with this aspect of Dutch drug policy. Overall, drug policy is coordinated by the Health Ministry, while the Ministry of Justice is responsible for law enforcement. Matters relating to local government and the police are the responsibility of the Ministry of Interior. At the municipal level, policy is coordinated in tripartite consultations among the mayor, the chief public prosecutor, and the police.
The Netherlands has a wide variety of demand-reduction and “harm”-reduction programs reaching about 80% of the country’s 26,000-30,000 opiate addicts. The number of opiate addicts has stabilized over the past few years, with the average age rising to 40, and the number of overdose deaths related to opiates stabilizing at between 30 and 50 per year.
Counterterrorism/Homeland Security Shortly after 9/11, the Dutch government adopted a 43-point Anti-Terrorism Plan of Action and in Nov. 2002 submitted legislation to Parliament to enhance law enforcement efforts against terrorism. In the summer of 2003, additional anti-terrorist measures were submitted to Parliament. These bills are still pending. Although several suspected terrorists have been arrested, either Dutch prosecutors have failed to pursue the cases or the courts have failed to convict the suspects, citing insufficient evidence. The pending bills attempt to remedy some of these problems. The Dutch have taken a leading role, particularly in the European Union, to establish financial protocols to combat terrorism. They have also donated to the IMF to provide assistance to countries that lack the wherewithal to implement some of these measures immediately. They have taken steps to freeze the assets of individuals and groups included on the UNSCR 1267 Sanctions Committee’s consolidated list.
The Netherlands is an active participant in the Container Security Initiative at Rotterdam, one of Europe’s busiest ports. The Dutch have also installed radiological portal monitors at Rotterdam, in partnership with the Department of Energy’s Megaport initiative. The government also agreed to allow U.S. Immigration officers at Schiphol Airport to work on joint security, migration and air transport operations.
Principal Government Officials The Netherlands' ECONOMY After the center-right previous cabinet fell in October 2002, general elections in May 2003 resulted in a new coalition government consisting of CDA, VVD, and D66. The government program for its four-year term in office stresses the need for reforms and more spending on security, healthcare, education, and transport infrastructure, while maintaining budget discipline and expanding the labor market. The two main challenges that are facing the Dutch government during its four-year term in office are to increase the economic growth potential by boosting employment and productivity growth and by keeping public finances on a sustainable path. The government recognizes the need for further structural reforms emphasizing product market flexibility and the creation of more dynamic and deregulated capital and financial services markets, which would help boost the seriously eroded Dutch competitive position on European Union (EU) and world markets. After several years of sustained non-inflationary growth and low unemployment, the macroeconomic performance of the Dutch economy has deteriorated markedly. In 2003, a slowdown in the global economy and erosion of the Dutch competitive position dampened foreign demand and investment, while bearish stock markets and layoffs announced by many multinationals resulted in a sharp drop in household and business confidence. The global growth slowdown affected all effective demand components, and led GDP growth in 2003 to drop by 0.8 percent after slumping to just 0.2 percent in 2002. Despite an expected recovery of world trade growth in the latter part of 2004, the outlook for the Dutch economy remains tepid. Further loss of Dutch competitive position resulting from appreciation of the euro vis-à-vis the dollar is expected to dampen exports and reduce output. The Organization for Economic Cooperation and Development in Europe (OECD) predicts Dutch GDP growth to recover to one percent in 2004 and accelerate to 2.0 percent in 2005. The official (Bureau of Economic Policy Analysis CPB) forecast expects economic growth in 2004 to recover by 1.25%, followed by 1.5% expansion in 2005. The CPB expects a sharp drop of consumer confidence (to the lowest level since the 1980s), and erosion of real disposable incomes to choke consumer spending as a major growth engine. Poor macroeconomic demand and worsening price competitiveness are at the root of deteriorating profit margins and a forecast drop in non-residential investment. A strong recovery of foreign demand (up close to seven percent in 2004 and 2005) will have to compensate for sluggish domestic demand (and sharply lower public spending) and pull the economy out of current recession in the latter part of 2004.
Reflecting the economic downturn, employment growth has come to a grinding standstill, while the number of redundancies is growing. These unfavorable labor market developments are expected to raise the level of unemployment to well over 6% of the labor force in 2004. After peaking at close to 5% in 2001, inflation eased to 2.1% in 2003, and is expected to soften further to 1.25% in 2004 and 0.75% in 2005. Current price and wage developments show no indications of an imminent deflation risk.
The Netherlands was one of the first EU member states to qualify for the Economic and Monetary Union (EMU). Fiscal policy aims to strike a balance between further reducing public spending and lowering taxes and social security contributions. The unexpected sharp economic downturn has tipped the fiscal balance and catapulted the nominal deficit from 1.6% of GDP in 2002 to 3.3% in 2003. Since the level of public debt has exceeded the debt criteria, the center-right coalition government has committed itself to budget measures that will have to move the fiscal deficit back to the deficit ceiling mandated by the EMU’s Growth and Stability Pact in 2005. The stock of public debt is forecast to fall from a high of 63.1 percent of GDP in 1999, to 58.1 percent in 2004.
The Netherlands is the largest net contributor to the European Union with total contribution to the EU growing to well over 3 billion euro (0.57 percent of GDP) in 2003. Per capita contribution to the EU in 2003 grew to close to 200 euro.
Government Role Trade and Investment Sectors of the Economy Although Dutch crude oil production is small, the Netherlands ranks among the largest producers and distributors of natural gas. The Slochteren gasfields in Groningen Province in the North are among the world's largest-producing natural gas fields. Total proven reserves of natural gas situated on the mainland currently amount to about 2 trillion cubic meters. Roughly 80% is accounted for by reserves on the mainland, the remaining 20% accounted for by relatively small deposits on the North Sea continental shelf. Current gas production is running at an annual average of close to 80 billion cubic meters, roughly half of which is exported to EU member countries. General government revenues from royalties on the production of gas and oil totaled about $ 2.6 billion (0.5 % of GDP) in 2003.
Environmental Policy The National Environmental Policy Plan (NMP) sets out Dutch environmental policy. The first version was published in 1989, followed by second and third versions in 1993 and 1998, respectively. NMP-4, laying out government environmental policy over the next few years, was published in 2001. Under the NMP, the government seeks to cut back on all forms of pollution by 80%-90% within one generation, meaning that by 2010, the present generation should be able to pass on a clean environment to the next one.
Although the environmental quality in the Netherlands has improved significantly, some important targets, particularly with respect to nitrogen oxide and ammonia emissions, climate change, and noise reduction, will not be realized within the timeframe set in the NMPs. The main reasons for this are increasing mobility, energy use, and intensive agriculture. The NMP-3, therefore, proposes drastic measures in order to be able to meet the targets.
The Dutch Government works closely with industry and nongovernmental organizations on implementation of environmental policy. To be able to reach environmental targets, the government has signed agreements with the private sector and other relevant organizations. In order to meet the Kyoto target of reducing greenhouse gas emissions by 6 percent in the 2008-2012 period from 1990 levels, the government reached an agreement with industry and the energy sector on emission rights trading. The sectors have been allocated 112 million tons of CO2 for the 2005-2007 period. The European emissions trading system will start operating in 2005.
The Netherlands generally pursues its foreign policy interests within the framework of multilateral organizations. The Netherlands is an active and responsible participant in the United Nations as well as other multilateral organizations such as the Organization for Security and Cooperation in Europe (OSCE), the OECD, the WTO, and the International Monetary Fund. A centuries-old tradition of legal scholarship has made the Netherlands the home of the International Court of Justice; the Yugoslavia and Rwanda War Crimes Tribunals; the European police organization Europol; the Organization for the Prohibition of Chemical Weapons; and International Criminal Court. Dutch security policy is based primarily on membership in NATO, which the Netherlands joined as a charter member in 1949.
The Dutch are strong advocates of European integration, and most aspects of their foreign, economic, and trade policies are coordinated through the European Union. The Netherlands’ post-war Customs Union with Belgium and Luxembourg (the Benelux group) paved the way for the formation of the European Community (precursor to the EU). Likewise, the Benelux abolition of internal border controls was a model for the wider Schengen accord, which today has 15 European signatories, including the Netherlands, pledged to common visa policies and free movement of people and goods across common borders.
The Dutch were key proponents of the 1992 Maastricht Treaty and were the architects of the 1998 Treaty of Amsterdam. They have embraced the introduction of both new member states and the common currency (euro). The Netherlands holds the EU presidency through the end of the second half of 2004.
Foreign Aid Dutch development strategy is anchored in the Millennium Development Goals and as such focuses on poverty reduction. The priority programmatic areas for Dutch assistance are education, the environment and water, AIDS, and reproductive health care.
In 2004, the Netherlands introduced a new, more focused development aid strategy, under which a number of smaller aid programs in wealthier developing countries were phased out. The number of countries in which the Dutch operate bilateral assistance programs was thus cut from 49 to 36 and the number of sectors in which the Dutch will be active in each country was limited to two to three. Roughly half of Dutch aid is earmarked for Africa. In addition, the Dutch introduced a new policy instrument, the Stability Fund, which pushes the bounds of traditional development assistance by funding programs and activities, such as police training, that aim to create a security environment in which development can proceed. The Stability Fund, to be managed jointly by the Minister for Development Cooperation and the Minister for Foreign Affairs, will be budgeted initially at approximately EUR 70 million in 2004.
The Dutch are the top donor of unearmarked assistance to UN humanitarian programs. In Afghanistan, the Netherlands pledged EUR 35 million to the Afghan Reconstruction Trust Fund (ARTF) in 2003 and an additional EUR 10 million for humanitarian relief and the conduct of elections. For 2004-06, the Dutch have pledged EUR 75 million for the ARTF and additional EUR 25 million in humanitarian aid. For Iraq, the Dutch pledged EUR 10 million in humanitarian assistance at the October 2003 Iraq donors’ conference in Madrid. The Dutch maintain their close relationship with Indonesia, supporting good governance, environmental protection, and poverty reduction programs at EUR 70 million in 2002. The Netherlands has traditionally been a strong supporter of programs to help Palestinians in the Occupied Territories. The Balkans are another major recipient of Dutch assistance. The Dutch fund programs in Bosnia and Macedonia in the areas of education, good governance, and economic reform.
Despite their commitment to ODA, the Netherlands also champions the role of trade and private enterprise for their contributions to development. In recent years, the government has devised new programs to support private sector development in developing countries.
In April 2003 Foreign Policy Magazine, in conjunction with the Carnegie Endowment for International Peace and the Center for Global Development ranked the Netherlands number one for the quality of their aid program.
International Drug-Trafficking Control The United States and the Netherlands often have similar positions on issues and work together both bilaterally and multilaterally in such institutions as the United Nations and NATO. The Dutch have worked with the United States at the WTO, in the OECD, as well as within the EU to advance the shared U.S. goal of a more open, honest, and market-led economy. The Dutch, like the United States, were firmly in favor of the recent EU eastward expansion.
The United States and the Netherlands joined NATO as charter members in 1949 and have been close allies ever since. The Dutch fought alongside the United States in the Korean War and the first Gulf War and have been active in global peacekeeping efforts in the former Yugoslavia. The Netherlands played a leading role in the 1999 Kosovo air campaign. They currently are contributing to NATO peacekeeping forces in Bosnia. They have been active participants in Afghanistan and also have led peacekeeping efforts in that country. During the recent Iraq conflict, they deployed Patriot missiles to protect NATO ally, Turkey, and have deployed a battalion of troops to Iraq to participate in stabilization operations.
Principal U.S. Embassy Officials The U.S. Embassy is located at Lange Voorhout 102, 2514 EJ The Hague; tel: 31-70-310-9209; fax: 31-70-361-4688. The Consulate General is at Museumplein 13, 1071 DJ Amsterdam; tel: 31-20-575-5309; fax: 31-20-575-5310. |
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