During the HCSS Draghi Report Series, a range of experts working at The Hague Centre for Strategic Studies have provided a deep dive into the much anticipated “Draghi-report”, published in September this year. This has resulted in a series of discussions on a range of Sectorial Policies of the Report’s B section, covering sectors which are direct research areas of HCSS.
For this final installment of the series, Ron Stoop and Berend Kwak recap these sectorial deep dives and cross-reference those to the new Dutch coalition agreement, published four days after the Draghi report. What is the capacity of the new Dutch government to facilitate in reaching Draghi’s goals? Can we think of specific ways forward, taking into account the input from our experts in the HCSS Draghi Report Series?
Semiconductors
The Dutch government wants to strengthen key positions in high-value supply chains like semiconductors, biotech, and agrifood through targeted industrial and innovation policies. Semiconductors are rightly part of the Dutch government strategy, as it would be strategically valuable to build and maintain a competitive position in the global developments of semiconductor innovation. Yet, as Benedetta Girardi mentioned, we should be realistic in the potential that the EU has for this. It could be more effective to focus on capacity building in legacy chips, or “fabless” production rather than advanced semiconductors, as the EU is cut out of the market already on the latter. Europe should pick specific areas for investments to be as effective as possible. The Netherlands can take a leading position in this, with its sizeable position in the semiconductor value chain. Setting up European innovation clusters for semiconductor manufacturing as a part of a Dutch semiconductor strategy could be a way of strengthening its position in this value chain.
Automotive
The Dutch government wants to introduce an ‘Action Plan for Cars’ this year, focusing on advances like the rise of electric and autonomous vehicles. They also want to redistribute the costs of driving between electric and fuel-powered cars. To this end, in early 2025 a reform plan for car taxes and mobility policy will be presented, including stopping new EV purchase subsidies by 2025 and introducing a new partial road tax discount for emission-free cars in 2026.
However, the policies proposed by the government do not support the swift adoption of electric vehicles in the Netherlands and in the EU. In fact, the proposed legislation risks delaying the mobility transition by stopping EV purchase subsidies and increasing the tax burden on EV ownership. This is risky according to Ron Stoop, as incentives for EVs have shown to increase EV sales and can accelerate the energy transition and thus bring the EU climate goals closer.
The government should rather try to accelerate the adoption of electric vehicles. Through this the Netherlands can help bolstering the business case for car and battery production in the EU, whilst also accelerating the energy transition.
Defence
The government prioritises a strong industrial base and secure production and supply in the defence sector. Nationally, this focus includes the National Technology Strategy and defence industry programs. They support an active defence industry policy to quickly boost production and supply security, with the government acting as a constructive EU partner. To scale the armed forces during conflicts, more personnel with diverse contracts are needed, supported by improved personnel policies and veteran care.
The government frees up funds for the development of the defence sector. To maximise the efficiency of these investments the focus should be on cooperating with other EU countries in terms of materials, operations and R&D. As Tim Sweijs noted, the European defence sector is too fragmented, which leads to issues with efficiency and interoperability between EU nations in times of conflict. This can be solved by pooling demand at the EU level. Frank Bekkers added that civil industries should be included in the Defence innovation sphere in order to leverage their solutions for the Defence industry.
Critical Raw Materials
The government aims to reduce dependence on other countries for energy and critical raw materials. To mitigate risks, the government is starting a process to build reserves of critical raw materials, exploring a European system under the Critical Raw Materials Act, while also boosting supply security through the National Raw Materials Strategy and promoting circularity through the National Circular Economy Program. Michel Rademaker discussed how the EU should think about using reserves of tailings as part of a circularity strategy. But next to recycling, mining production should be expanded in the EU as well. Nevertheless, the EU is currently the only continent in the world where more mines are closed than opened. The Dutch government could convey its focus on securing critical raw materials to the European level, which would inform an EU-wide strategy. If member states will go at it alone, it will be very hard to achieve what according to our experts are already very ambitious goals.
In this case the coalition agreement suffers from the same deficiencies as highlighted in the Draghi report. The importance of critical raw materials is stressed, but no concrete action plan or incentive structure is proposed. As Irina Patrahau mentioned, the EU “needs to focus on the existing legislation and act on it.” The coalition agreement mentions a the stockpiling plan, which could increase the raw materials resilience in the Netherlands and the EU, as the one exception to this rule. Concrete action such as this could be a good first step in securing supply.
Energy
The government wants to tackle strategic risks in energy supply chains while seizing economic opportunities from the climate and energy transition in Europe. Global challenges of today will drive tomorrow’s growth markets, so the government wants to ensure green growth and energy independence. They want to achieve this by ‘clear policies and stable government’.
The problem here is that the goals of tackling strategic risks and seizing opportunities in the energy sector require additional investment. However, the government program does not offer such financial room. Additionally, the government has no clear plans for the integration of energy markets across the EU. This risks slowing down the energy transition. Lucia van Geuns agrees with the suggestion in the Draghi report for a more integrated European energy market, focusing on industries like automotive and wind turbines while conceding that competing with China in solar panels may be unrealistic. Jilles van den Beukel supports Draghi’s proposals to reduce net congestion and implement power purchase agreements, but is sceptical about the benefits of collective gas procurement, stressing the EU’s ongoing dependency on imported fossil fuels and the need to reduce energy taxes.
Clean Technologies and Energy-intensive industries
The government is focusing on protecting advanced technologies, knowledge, and critical infrastructure to ensure economic security and strategic autonomy. Additionally, the government is addressing the risks of strategic dependencies, particularly in sectors like digital and energy supply chains. It is a good thing to have an (economic) security focus for the Netherlands, especially seeing our large and hard-to-regulate economic zone in the North Sea. As Berend Kwak mentioned, such a focus on security aspects should become essential in building our new energy system. The International Energy Agency recently showed in their ‘Renewables 2024 Analysis’ that an increasing number of countries are using ‘non-price’ criteria in solar PV and wind tenders. India is even limiting its tenders to domestic producers. If the EU were to engage in protecting and investing in domestic industry as well, the Netherlands should be prepared to cooperate in this, since we have a big industrial cluster and large critical infrastructure network, something Lucia van Geuns highlighted.
Additionally, the coalition agreement acknowledges how entrepreneurs face challenges like limited space, labour shortages, and regulatory burdens. To keep the Netherlands a hub for innovation, tailored agreements with key industries should be explored. As Lucia van Geuns and Berend Kwak argued, we indeed need to give the industries that we want to prioritise, the regulatory space they need to capitalise on the EU’s investments. The government should not only research the possibilities it has to engage in tailored agreements with the companies or industries that are or could become our champions – it should become a more prominent part of government budgeting through for example an increased National Growth Fund. This fund, which one had a budget of €20 billion, has been winded down, however. Another fund, Invest-NL, has seen recent increases in budget. This fund is meant for innovations in for example clean technologies, meaning this could serve a promising role if investments are well-aimed.
The Dutch government wants to prioritise achieving societal goals by working towards a high-tech, innovative economy. Part should be the realisation that we must decide which type of industries we want to keep as the EU, as Ron Stoop discussed. What do we as the Netherlands want to focus on, and how can we safeguard a facilitating and contributing role to further European competitiveness? Central in this discussion should be the current economic structure of the Netherlands and the type of activities that can increase competitiveness and economic security.
Artificial Intelligence
The government program does not contain a detailed or comprehensive plan for dealing with AI. The Dutch government is betting on the revolutionary potential of generative artificial intelligence (AI) in healthcare in order to increase efficiency and fight labour shortages in the healthcare sector.
The government program clearly lacks a coordinated and comprehensive approach to the risks and opportunities presented by Artificial Intelligence. Jesse Kommandeur supports Draghi’s call to harmonise AI Sandbox regimes across EU member states, as this would foster innovation by allowing developers to experiment freely, boosting the EU’s competitiveness in AI against the US and China. He also emphasises the need for simplified AI regulations, especially for SMEs, to help the EU achieve broader AI adoption and avoid overly restrictive rules that could stifle innovation. Sofia Romansky highlights the strong link between AI and the necessary computing infrastructure, also stressing the importance of developing mandatory EU rules for sensitive cloud services to ensure security and strategic autonomy. She also advocates for enhancing EU computing infrastructure through public-private collaboration to help the region catch up in AI capabilities.
Space
The Dutch government mentions the space domain only briefly in their government program. They want to enhance digital infrastructure in space through investments in European satellite systems via programs from the European Space Agency (ESA). Apart from this, the governing program does not mention space as a policy area.
Patrick Bolder argues that fragmented governance and national structures currently hinder progress, and better alignment would help the EU compete globally, particularly in an increasingly contested space arena. The EU’s space strategy lacks a clear focus on where it should excel globally in comparison to other major space nations like the US, China, and Russia. He also emphasises the need for cooperation with other spacefaring nations to address security challenges and prevent competition over favourable orbits, as well as a strategy for protecting European assets in space.
Conclusion
Even though the coalition agreement touches on several of Draghi’s sectorial policies, it does not fully act in the spirit laid out by the Draghi Report. By stating that it is not supporting the idea of shared public debt as part of the EU fiscal instruments, the Dutch government will hamper Draghi’s (and ultimately its own) goals. It goes without saying that if every member state of the EU takes this position, it will limit the capacity to act on Draghi’s goal of investing a much needed €800 billion a year. The Dutch government will be less able to contribute to fostering EU competitiveness if it limits the possibilities for collective funding on the EU-level.
In order to maximally achieve the goals in the Draghi Report, the Netherlands should adopt a European approach. In fact, every member state should start thinking on a European scale when it comes to industries, critical infrastructure, and strategic dependencies. As Irina Patrahau concluded, European countries need to be strategic and act together to maximise their opportunities. This is the core message of Draghi’s report. What’s currently lacking is the political will to take the required steps to make this a reality, also in the Netherlands.