Brexit weakens the Rotterdam effect

The Rotterdam-effect describes the large effect on the balance of trade caused by non-community goods that are exported to other countries via Rotterdam - the gateway to Europe. Because little value is added to the goods that are only unloaded from one ship and reloaded onto another in a relatively short space of time, the calculations for the total size of import and export becomes distorted.

This Rotterdam-effect plays an important role for countries with large seaports, such as the Netherlands and Belgium, and, as a result, the volume of trade between the UK and the EU is likely to be strongly exaggerated. This means that a hard Brexit will be less severe than the remain-camp claims: the loss will be 8-9 percent lower than they estimated.

The Rotterdam-effect distorts the balance of trade the most because of the large volume of re-exports. Re-exports are goods which enter the Dutch economy and to which value can be added. As such, they distinguish themselves from goods in transit because these re-export goods enter the Dutch production cycle and thus form part of the balance of trade. Nevertheless, the largest part of value is added to these goods outside of the Netherlands: every euro of re-exports produces an average value added of 7 or 8 cents, while Dutch export goods produce an average value added of 60 cents. However, to put it in perspective, goods in transit produce only an average value added of 1.5 cents.

The Netherlands conducts a large of all re-exports within Europe. This is due to the favourable position and the quality of the mainport of Rotterdam. The total economic impact of the mainport on the Dutch economy was 45.6 billion euro in 2017. Of this amount, 14.8 billion euro is value added through re-exports. Furthermore, a third of all jobs that fall under the responsibility of the mainport have to do with re-exports. As such, it can be stated that re-exports are of great importance for the Dutch economy. 

However, since 2017 the volume of re-exports is structurally flattening. When the Brexit will come about, this volume could rapidly decline and this can have severe consequences for the growth of the mainport of Rotterdam and for its employment. A hard Brexit will require a reordering of the re-exports and extra administrative formalities and import taxes in the EU will make Rotterdam less attractive as a point for central European distribution. 

Assistant professor
More information

Read the entire article (in Dutch) on ESB, 20 March 2019