Published on

overview of US-Belgian economic relations

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide


  1. 1. ECONOMIC RELATIONSHIP BETWEEN THE UNITED STATES AND BELGIUMIntroductionBelgium is well known in the United States for its excellent cuisine. Its chocolate,waffles, beer and restaurants continue to impress many Americans. Others are familiarwith Belgium’s diamond industry. These products and services illustrate a Belgiantradition of quality, innovation, and craftsmanship. Belgium stands for the creation ofhigh value products and services by highly skilled employees.The Belgian-U.S. economic relationship is heavily focused on modern, high value goodsand services as well. The leading Belgian sectors for U.S. export and investment includeaerospace, automotive, chemicals, energy, environmental technologies, biotechnology,information and communicating technology, green building, pharmaceuticals, medicaland dental equipment, safety and security, and logistics.Belgium is an excellent test market for U.S. companies. The cosmopolitan nature ofBelgium and its mix of Germanic and Latin cultures make it an ideal European testmarket for American products and services. The Belgian market is small enough that ahuge European-wide commitment to a new product is not necessary, yet diverse andcompetitive enough that it offers a representative sample of potential buyers andcompetitors governed by the same legal system. Belgium may be only the size ofMaryland, but it is the 20th economy in the world with more than 10 million people.Belgium’s central location in the wealthy region of Europe makes the country an idealgateway for U.S. exports to Europe. As a result, Belgian-U.S. trade relations have alwaysbeen well developed. The Belgian American Chamber of Commerce in the United States,for example, was formed in 1918 in response to the growing commerce betweenBelgium and the U.S., making it one of the oldest and most established chambers in the
  2. 2. U.S. At the same time, U.S. companies in Belgium are members of AmCham Belgium andAmChamEU, two separate “sister” organizations, focusing on their individualmemberships and goals. The two Chambers collaborate closely and especially onbusiness issues that interrelate Belgium and the European Union. While AmChamBelgium focuses on improving business and investment opportunities for the US-Belgianbusiness community through lobbying, networking and knowledge sharing, AmCham EUacts to inform and lobby the European institutions on behalf of American companiesthroughout Europe.Within a radius of 300 miles from Belgium, 140 million EU consumers can be reached(almost 50% of the U.S. population) representing 60% of Europe’s purchasing power.About 80% of Belgium’s GDP is exported. Study after study have shown that Belgium isthe ideal hub for European transit and distribution, and the country continues to be amagnet for many North American companies desiring to establish a presence in Europe.Currently, more than 1500 U.S. companies are located in Belgium.Belgium is also widely known in the U.S. for its capital, Brussels, and the significant rolethe city plays as host to the EU institutions and NATO. Brussels has become the secondcity in the world for diplomats, behind New York, and the second city for foreignjournalists, after Washington DC. It is the place to be in Europe for U.S. companiesseeking to influence EU decisions and regulations. Belgium also offers specific businessopportunities for U.S. companies servicing the international organizations locallypresent. Attracted by the EU 1992 single market program, many U.S. law firms andlawyers have settled in Brussels since the early 1990s.Brussels’s diplomatic role and the large presence of U.S. companies in Belgium ensurethat a large number of U.S. political and business leaders stay frequently in Belgium.The resident American community in Belgium now exceeds 20,000. It is rare toencounter U.S. business leaders or officials who have not spent some time in Brussels in
  3. 3. the recent past. This wealth of experience and international contacts, in turn, often leadto even deeper economic ties between the two countries.
  4. 4. TradeThe trade relationship between Belgium and the United States is important for bothcountries, and it is by no means a one way street.Belgium is one of the countries with which the U.S. has a substantial trade surplus.According to the U.S. Census Bureau, bilateral U.S.-Belgian trade was worth $ 41 billion(2010). This makes Belgium a more important trading partner for the U.S. than India,Australia, Russia, or Spain. Container ships carrying over 4000 containers a day makeAntwerp the most important port in the world for transport of goods to and from theUnited States.The U.S. is the number one trading partner for Belgium outside the EU, and the 5thtrading partner overall. It is also the 5th export market for Belgium (figure 1 and 2). figure 1-Belgian Export Destinations (01-09/2010) 20 18 16 14 12 10 % 8 6 4 2 0 x y n ly UK a . L e a .S an Lu ai nc N di in I ta U Sp Ch In m a Fr er G figure 2- Belgian Suppliers (01-09/2010) 20 18 16 14 12 10 % 8 6 4 2 0 y ia n K na ly e . NL E .S an nc pa U IR ss Ita hi U m a Ja Ru C Fr er G
  5. 5. Main Belgian exports to the U.S. include chemicals products, machines and equipment,precious stones and metals, transport equipment, and mineral products (figure 3). TheU.S. has a particular strong position for trade in services. According to the BelgianAgency for Foreign Trade, almost 3,000 Belgian companies currently export to the figure 3- Belgian Main Exports to the U.S. (%, 2009) 5 5.2 chemical products 5.2 machines & equipment 9.7 transport equipment mineral products 63.3 precious stones & metalsBelgium is the 18th trading partner for the United States. U.S. exports to Belgiumequaled $25.5 billion in 2010, i.e. almost 30% of U.S. exports to China. ThroughNovember 2010, Belgium ranked as the 14th largest market for the export of U.S. goods.Main exports from the U.S. to Belgium include chemical products, machines andequipment, optical instruments, plastics and minerals (figure 4). In states like Texas,Pennsylvania, Georgia and South Carolina, Belgium is among the top 10 exportdestinations. Belgium is among the top 5 European export markets in more than half theU.S. states, including California, New York, Illinois, and Texas.
  6. 6. figure 4-Belgian Main Imports From the U.S. (%, 2009) 5.6 chemical products 9.1 machines & equipment 37.5 optical instruments 12.3 plastics minerals 16.4The Belgian contribution to the U.S. economy perhaps started with the invention bySolvay brothers Ernest and Alfred of a new process for producing sodium carbonate,which revolutionized how Americans with little access to yeast on the frontier madetheir bread. Sodium carbonate imported into the U.S. was turned into sodiumbicarbonate, baking soda. From those humble beginnings was born the Solvay Group,with companies worldwide. Baking soda is found today in every American home.Later on, thousands of Belgians settled in the Midwest and founded new communitieswhich they named after their Belgian hometowns like Antwerp, Ohio and Namur,Wisconsin. The settlers also brought with them their skills and talents and wereresponsible for building the glass industry in the U.S.Today, Belgian companies and business leaders continue to be very active on the As of 2010, Belgians held senior management positions at the highest levelswith companies like Xerox, Johnson & Johnson, Boeing, Nike, Cargill and Procter &Gamble. The fact that Belgian researchers recently received prestigious Americanscientific awards like the Ernesto Orlando Lawrence Award (U.S. Department of Energy),the NIH Pioneer Award, and the Paul Janssen Award for Biomedical Research, illustrate
  7. 7. Belgian American scientific links. Scientific ties between the U.S. and Belgium areenhanced by the Belgian American Educational Foundation (BAEF), the leadingindependent philanthropy in the support of exchanging university students, scientistsand scholars between the United States and Belgium.Belgian products and services have now increasingly become part of life in the UnitedStates. Beyond beer and chocolates, these products in the U.S. are Belgian too: • House of Anubis, the popular series on the Nickelodeon Channel in the U.S. • a variety of drugs, such as epilepsy, allergy and HIV medications • miniaturized transmitters/receivers for patient motion tracking during radiotherapy • a cargo inspection system designed to automatically detect nuclear threats in the U.S. • the processing of US mail in an effort to specifically guard against exposure to anthrax • audiovisual screens for the American corporate jets, large display walls for the Command Centers of the US Coast Guard, large scoring boards and entertainment screens during US basketball games • non-polluting buses on fuel cells, providing public transportation buses for many US metropolitan areas, including Washington DC, and San Francisco. • sports playing field surfaces for NFL teams like the Pittsburgh Steelers, the Denver Broncos, the Philadelphia Eagles and the Green Bay Packers • a free software package that allows an individual or a community of users to easily publish, manage and organize a wide variety of content on a website, used by the White HouseEconomic links between the countries are being forged at the state level as well. In2010, the California High-Speed Rail Authority signed a memorandum of understanding
  8. 8. (MOU) with Belgium to continue sharing high-speed rail planning and developmentinformation. And BioNJ, New Jersey’s biotech industry organization, signed amemorandum of understanding (MOU) with FlandersBio, the regional umbrellaorganization for the life sciences and biotechnology sector in Flanders, to solidifyinternational ties between the clusters.As stated above, Belgium offers specific business opportunities for U.S. companiesservicing the EU and NATO. Most tenders from European public contracting authoritiesfor public supplies, whose value is above the agreed thresholds, are open to U.S.-basedcompanies by virtue of the WTO Government Procurement Agreement (GPA). The GPAallows U.S. firms to bid on all supplies and services, and some construction workscontracts, above thresholds contracted by EU central public contracting authorities.However, there are restrictions for U.S. suppliers in the utilities sector, both in the EUutilities directive and in the EU coverage of the GPA. These restrictions are only appliedwhen no reciprocal access for EU companies in the U.S. market is offered.The website of the U.S. Mission to the EU has a database of all European publicprocurement tenders open to U.S.-based firms by virtue of the GPA.Belgium is also an excellent location to access NATO’s Security and Investment Programthrough NATO’s acquisition agencies. Both agencies procure goods and services throughpreferred suppliers and International Competitive Bidding (ICB) for larger projects. Theinvestments cover communications and information systems, radar, militaryheadquarters, airfields, fuel pipelines and storage, harbors, and navigational aids. It alsoincludes Peace Support Operations such as SFOR and KFOR including Communications,Information Systems, Local Headquarters Facilities, Power Systems, and Repairs toAirfields, Rail, and Roads.
  9. 9. InvestmentForeign investment has contributed significantly to Belgian economic growth since the1960s. In particular, U.S. firms played a leading role in the expansion of light industrialand petrochemical industries in the 1960s and 1970s. Today, the U.S. is Belgium’s thirdlargest foreign investor, and the value of foreign investment between the U.S. andBelgium exceeds $100 billion. In fact, U.S. investment stakes in Belgium at the end of2009 (figure 5) were on par with the combined U.S. investment position in China andIndia. Over the last decade, Belgium has been the 11th overseas market for U.S. foreigninvestment. figure 5- U.S. investment in Belgium (total value) 80 70 60 50 $ billion 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Today, U.S. companies in Belgium account for approximately 6% of the total work force.They are heavily represented in the chemical sector, automotive assembly, petroleumrefining, and pharmaceutical sectors (figure 6). A number of U.S. service industriesfollowed in the wake of these investments, such as banks, law firms, public relations,accounting, and executive search firms. Overall, most of the U.S. investment has been inthe finance and insurance sector, and in chemical manufacturing. But investment in theservice industry, including law firms, accounting firms, advertising agencies, andcomputer and management services, has more than tripled since 2000.
  10. 10. figure 6- U.S. Investment in Belgium by Sector (as of 2009) 23% finance & insurance chemical manuf. 45% wholesale trade 2% holdings 4% services 8% other 18%U.S. foreign direct investment (stock) in Belgium totaled about $ 70 billion (cumulative)in 2009, which is almost 50% more than U.S. investments in China. Since 2005, the U.Shas consistently been the origin of the most foreign investment projects throughout theregions of Flanders, Brussels and Wallonia. US Direct Investment (USDI) flows to Belgiumhave increased rapidly after a steep decline during the economic crisis. Inflows intoBelgium have been on the rise again since mid-2009 to reach $9.1 billion in 2010,compared to about $5 billion in 2008-2009. The 2010 level exceeded the pre-crisis levelof $7.5 billion in 2007. U.S. firms invested more capital in Belgium ($7.9 billion) thaneither Brazil, China, or India in the first nine months of 2010.As of 2008, U.S. companies employed 129,000 in Belgium, making the U.S. the secondmost important foreign employer in Belgium. Almost half the employment was inmanufacturing, particularly in the chemical and transport industries. Investment in R&Dby Belgian affiliates of U.S. companies represented 19% of total R&D investment bybusinesses in Belgium.For their part, Belgian companies have invested about $39 billion in the U.S. as of 2009.Overall, Belgium is the 15th investor in the United States (figure 7). Belgian investmentsupports some 180.000 jobs in the U.S., which makes Belgium the 7th supporter ofEuropean jobs in the U.S. (figure 8).
  11. 11. figure 7-Belgian Investment in the U.S. (total value) 45 40 35 30 $ billion 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 figure 8- U.S. Employment by European country origin (2008) 1000 957.4 800 614.2 600 550.2thousands 394.4 371.5 400 200 181.5 179.3 86.5 66.8 66.2 0 UK D F CH NL SE B ITA ES IREBelgian companies are present in the U.S. in a wide range of industries frompetrochemicals to quality food and textiles, from luxury buses and steel products topharmaceuticals and energy production, and from diamond cutting tools and industrialmachinery to graphic design and display systems and complex software products.At the state level, Belgium is among the top 10 foreign investors in Georgia, Ohio,Pennsylvania and South Carolina. In Georgia alone, 76 Belgian companies are present,employing about 5800 people. In Ohio, Belgian-owned companies employ over 6600people. In Pennsylvania, there are 111 Belgian-owned companies. Even in the remotecorners of Wyoming, the 4th largest foreign company is from Belgium.Geographically spread over 41 of the 50 U.S. states, operations of Belgian companies areconcentrated in the Southeast, especially in Georgia, Florida and the Carolinas, the
  12. 12. Midwest and the New York-New Jersey area. Texas and California are well representedtoo.
  13. 13. TaxationTrade and investment between the United States and Belgium will benefit from the newtax treaty between the two countries, in effect since 2008. Belgium has a very extensivenetwork of double taxation treaties. Currently, more than 80 double taxation treatiesare in effect, covering the most important jurisdictions.A new tax treaty between the United States and Belgium went into effect on December28, 2007. Together with the Notional Interest Deduction and the Patent IncomeDeduction, two innovative tax measures presented in more detail elsewhere in thispublication, the treaty makes direct loans and direct investments between the U.S. andBelgium very attractive.The Belgium-U.S. tax treaty contains some very interesting tax features for U.S.companies with business plans in Europe.  0% withholding tax on dividend payments from a Belgian subsidiary to its U.S. parent provided the U.S. parent owns 10% or more of the Belgian company. This 10% ownership threshold is significantly lower than the threshold in other treaties recently concluded by the U.S. Combined with other general features of Belgium’s domestic tax system for holding companies, this is of interest to holding companies for holding the shares of U.S. affiliates  The exemption from withholding tax also applies to pension funds, provided the dividends are not the result of business activities by the fund  0 % withholding tax on interest. Together with the Notional Interest Deduction, this makes direct loans between the U.S. and Belgian affiliated companies more attractive, and increases possibilities for companies in Belgium to finance U.S. affiliates.
  14. 14.  New categories of taxpayers such as qualified charities or pension trusts will now be able to claim benefits, and strengthened anti-abuse provisions designed to deny inappropriate use of the treaty will bring them into closer conformity with current U.S. treaty policy  The Convention extends the benefits to companies owned by so-called “equivalent beneficiaries”, which may provide opportunities for multinational groups that are based in the EU, Switzerland or NAFTAOther changes in the new Treaty include a more tax friendly treatment of pensionplan contributions and an extended information exchange provision between taxadministrations.