Belgium, a highly developed market economy, belongs to the Organization for Economic Cooperation and Development (OECD), a group of leading industrialized democracies. In recent years, with a geographic area about equal to that of Maryland, and a population of just over 10 million, Belgium ranks seventh in per capita GDP worldwide. In 2002, the per capita income was $21,865. For 2002, the federal government presented a budget that was almost in equilibrium (0.2% of GDP deficit). GDP growth remains moderate at 1.1%.

Densely populated Belgium is located at the heart of one of the world's most highly industrialized regions. The first country to undergo an industrial revolution on the continent of Europe in the early 1800s, Belgium developed an excellent transportation infrastructure of ports, canals, railways, and highways to integrate its industry with that of its neighbors. One of the founding members of the European Community (EC), Belgium strongly supports deepening the powers of the present-day European Union to integrate European economies.

With exports equivalent to about two-thirds of GNP, Belgium depends heavily on world trade. Belgium exports twice as much per capita as Germany and five times as much as Japan. Belgium's trade advantages are derived from its central geographic location, and a highly skilled, multilingual, and productive work force.

The Belgian industrial sector can be compared to a complex processing machine: It imports raw materials and semi-finished goods that are further processed and re-exported. Except for its coal, which is no longer economical to exploit, Belgium has virtually no natural resources. Nonetheless, most traditional industrial sectors are represented in the economy, including steel, textiles, refining, chemicals, food processing, pharmaceuticals, automobiles, electronics, and machinery fabrication. Despite the heavy industrial component, services account for 74.6% of GDP. Agriculture accounts for only 1.4% of the GDP.

Belgian Economy in the 20th Century
For 200 years through World War I, French-speaking Wallonia was a technically advanced, industrial region, while Dutch-speaking Flanders was predominantly agricultural. This disparity began to fade during the interwar period. As Belgium emerged from World War II with its industrial infrastructure relatively undamaged, the stage was set for a period of rapid development, particularly in Flanders. The postwar boom years, enhanced by the establishment of the EU and NATO headquarters in Brussels, contributed to the rapid expansion of light industry throughout most of Flanders, particularly along a corridor stretching between Brussels and Antwerp (now the second-largest port in Europe after Rotterdam), where a major concentration of petrochemical industries developed.

The older, traditional industries of Wallonia, particularly steelmaking, began to lose their competitive edge during this period, but the general growth of world prosperity masked this deterioration until the 1973 and 1979 oil price shocks sent the economy into a period of prolonged recession. In the 1980s and 1990s, the economic center of the country continued to shift northward to Flanders.

Foreign Investment
Foreign investment contributed significantly to Belgian economic growth in the 1960s. In particular, U.S. firms played a leading role in the expansion of light industrial and petrochemical industries in the 1960s and 1970s. The Belgian Government encourages new foreign investment as a means to promote employment. With regional devolution, Flanders, Brussels, and Wallonia are now courting potential foreign investors and offer a host of incentives and benefits.

More than 1,400 U.S. firms invested over $24 billion in Belgium by 2001. U.S. and other foreign companies in Belgium account for approximately 11% of the total work force, with the U.S. share at about 6%. U.S. companies are heavily represented in chemical, automotive assembly, and petroleum refining. A number of U.S. service industries followed in the wake of these investments--banks, law firms, public relations, accounting, and executive search firms. The resident American community in Belgium now exceeds 20,000. Attracted by the EU 1992 single-market program, many U.S. law firms and lawyers have settled in Brussels since 1989. Other foreign firms, particularly French ones, have invested locally for the same reason.

Monetary
On May 1, 1998, Belgium became a first-tier member of the European Monetary Union. Belgium shifted away from the use of the Belgium franc (BF) to the use of the Euro as its currency after January 1, 2002.

Trade
About 74% of Belgium's trade is with fellow EU member states. Given this high percentage, Belgium seeks to diversify and expand trade opportunities with non-EC countries. Belgium ranks as the 10th-largest market for the export of U.S. goods and services. If goods in transit to other European countries are excluded, Belgium still ranks as the 12th-largest market for U.S. goods.

Bilaterally, there are few points of friction with the U.S. in the trade and economic area. The Belgian authorities are, as a rule, anti-protectionist and try to maintain a hospitable and open trade and investment climate. As a result, the U.S. Government focuses its market-opening efforts on the EC Commission and larger member states. Moreover, the Commission negotiates on trade issues for all member states, which, in turn lessens bilateral trade disputes with Belgium.

Employment
The social security system, which expanded rapidly during the prosperous 1950s and 1960s, includes a medical system, unemployment insurance coverage, child allowances, invalid benefits, and other benefits and pensions. With the onset of a recession in the 1970s, this system became an increasing burden on the economy and accounted for much of the government budget deficits. The national unemployment figures mask considerable differences between Flanders and Wallonia. Unemployment in Wallonia is mainly structural, while in Flanders it is cyclical. Flanders' unemployment level equals only half that of Wallonia. In general sunset industries (mainly coal and steel) dominate in Wallonia and sunrise industries (chemicals, high-tech, and services) in Flanders.

Belgium's unemployment rate has declined since 1999, falling to from 8% to 6.9% in 2002. A total of 4.4 million people make up Belgium's labor force. The majority of these people (73%) work in the service sector. Belgian industry claims 25% of the labor force and agriculture only 2%. As in other industrialized nations, pension and other social security programs have become a major concern as the "baby boom" generation approaches retirement.

Budget
Although Belgium is a wealthy country, it overspent income and undercollected taxes for years. The Belgian Government reacted with poor macroeconomic policies to the 1973 and 1979 oil price hikes: hiring the redundant work force into the public sector, and subsidized ailing industries like coal, steel, textiles, glass, and shipbuilding in order to prop up the economy. As a result, cumulative government debt reached 121% by the end of the 1980s. However, thanks to Belgium's high personal savings rate, the Belgian Government financed the deficit from mainly domestic savings, minimizing the deleterious effects on the overall economy.

In order to meet one of the five criteria for membership into the first-tier group of Economic and Monetary Union (EMU) under the Maastricht treaty, the Belgian Government had to attain a budget deficit of 3% by the end of 1997, a goal that was successfully attained. Historically, Belgium has done relatively better on its budget in times of cyclical downswings. The total budget deficit in 2001 (federal, regional, plus social security) amounted to 0.2% of GDP. This represents a substantial decrease from the 7.1% deficit recorded in 1992, as well as a significant difference from the expected figure of 2%, well within the Maastricht criterion. Belgium cannot possibly bring its accumulated debt down from the current 2003 level of 101% of GDP to the Maastricht target of 60% within the required time period. In order to meet the "substantial progress" criterion" for its debt, Belgium has run a substantial primary surplus.