vrije Universiteit amsterdam 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

vrije Universiteit amsterdam Enhanced welfare (more growth) through Increase in labour participation Higher productivity

vrije Universiteit amsterdam 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)

vrije Universiteit amsterdam 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!

vrije Universiteit amsterdam 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

vrije Universiteit amsterdam Trade flows in 2001

vrije Universiteit amsterdam 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 )

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

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

vrije Universiteit amsterdam 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

vrije Universiteit amsterdam 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

vrije Universiteit amsterdam 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

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