Trade between China and The Netherlands: a case study of trade in tasks

Published date30 September 2013
Date30 September 2013
AuthorFrank Den Butter,Raphie Hayat
Subject MatterEconomics,International economics
Trade between China and
The Netherlands: a case study
of trade in tasks
Frank Den Butter and Raphie Hayat
Department of Economics, VU University Amsterdam,
Amsterdam, The Netherlands
Purpose – This paper argues that the recent rise in China Dutch trade is a typical example of
two nations trading tasks rather than goods.
Design/methodology/approach – China Dutch trade growth between 1996 and 2010 is compared
with China’s trade growth with its main partners. In addition, the composition of China Dutch trade
(based on level 1 and level 3 standard international trade classification (SITC)) between 1996 and
2010 is evaluated and three short case studies are discussed.
Findings – China Dutch trade has been growing too fast and too high tech to be explained by
Ricardian trade theory. Instead the data fit neatly to the recently proposed theory of trade in tasks.
It seems the Dutch have outsourced tasks such as assembly and production to China and other Asian
countries, while China has been outsourcing distribution and trade management activities to
The Netherlands.
Research limitations/implications – This paper uses sound reasoning and some empirical
evidence but no formal model or regression. The arguments of this paper could be strengthened
further by using for example gravity equations of Dutch China trade.
Social implications The governments of China and The Netherlands should invest in
strengthening their respective comparative advantages in tasks. Currently, there is too much focus
on R&D. Instead, the Chinese Government should invest more in their innovation capability and
the working conditions of assembly workers. The Dutch should focus more on knowledge and skill in
the orchestration of production and distribution.
Originality/value – This paper proposes a very different view on trade and provides a recent and
typical example of two nations exchanging tasks.
Keywords Asset specificity,Offshoring, Organizationof production, Trade in tasks, Transactioncosts
Paper type Case study
I. Introduction
Trade between China and The Netherlands provides a topical example of the recent
trend of globalization. China’s economy has been growing prodigiously with about
10 per cent per year in the last three decades[1]. This growth has benefited much from
the world wide fragmentation of production where parts of the production chain have
been moved to low cost countries. The Netherlands, as medium sized open economy,
has a long tradition as a trading nation and, in that respect, acts as a gateway to
Europe (Den Butter, 2012). The two different but complementary economies provide a
good example of the increase in trade flows that cannot be explained by traditional
trade theories. In this paper, we explain this trade flow trough comparative advantages
in keeping transaction costs low. Transaction costs are all costs necessary to induce
a transaction, including search, contracting and monitoring costs (Den Butter, 2012;
The current issue and full text archive of this journal is available at
Received 28 March 2012
Revised 18 June 2013
Accepted 20 June 2013
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 6 No. 3, 2013
pp. 178-191
qEmerald Group Publishing Limited
DOI 10.1108/JCEFTS-03-2012-0004

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