Global Production

Mark de Haan

Global Production 2

Content presentation

1. Background

2. Changes 2008 SNA

3. Discussion points

a. Conceptual

b. Measurement related

4. Way forward

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1. Background

• Changes 2008 SNA• Globalisation guide• Global manufacturing (or production more

generally) as cross cutting issue (chapter 8)

• Further investigation of unsolved issues

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2. Key changes 2008 SNA and BPM6

• No exceptions to recording transactions on basis of economic ownership

• Implications recording of processing, merchanting, intra-company trade

• ..

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2. Key changes 2008 SNA and BPM6

Principal

Principal

Processor

1993 SNA recording (‘gross’):

2008 SNA recording (‘net’):

(G) 50

(G) 80

Processor

(S) 30

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2. Key changes 2008 SNA and BPM6

• No exceptions to recording transactions on basis of economic ownership

• Implications recording of processing, merchanting, intra-company trade

• R&D capitalization→ Capital flows→ Capital services flows

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3a. Conceptual discussion points

• Categorisation of global production arrangements

• Factory-less producers • ..

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3. Conceptual issues

Principal(domestic economy)

Processor (abroad)

Production abroad

Material inputs

Material outputs

= information= products

turnover productioncost

= money

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3. Conceptual issues

Principal(domestic economy)

Processor (abroad)

Production abroad

Material inputs Material outputs

= information= products

turnover productioncost

= money

Process fee

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3. Conceptual issues

Principal(domestic economy)

Contractproducer

(abroad)

Production abroad

Material inputs

Material outputs

Blueprints ofproduction

= information= products

turnover productioncost

productioncost

= money

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3. Conceptual issues

Principal(domestic economy)

Contractproducer(abroad)

Production abroad

Material inputs

Material outputs

Blueprints ofproduction

= information= products

turnover productioncost

productioncost

fee or purchase of products?

economic ownership of material inputs?

= money

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3. Conceptual issues

Principal(domestic economy)

Contractproducer(abroad)

Production abroad

Material inputs

Material outputs

Blueprints ofproduction

= information= products

turnover productioncost

productioncost

fee or purchase of products?

economic ownership of material inputs?

= money

Trader or Manufacturer?

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3a. Conceptual discussion points

• Categorisation of global production arrangements

• Factory-less producers • Identifying economic ownership within the

multinational• Multi-territory enterprises (pro-rating)

such as construction companies and project vendors

• Recording intra company R&D flows

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3b. Measurement issues

• Merchant trade statistics based on cross border registration (processing, merchanting)

• Measuring inventories abroad (idem) • Asymmetry outward processing• ..

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Principal-processor relationships in the Netherlands of 35 selected companies, turn over in billion €

Increase(passive)

Decrease(active)

Total

Domestic + 1.4 - 7.8 - 6.5

Abroad + 4.8 -6.9 - 2.0

Total + 6.2 -14.7 - 8.5

3b. Measurement issues

Remark: the -6,5 billion € production value adjustment shouldnot show up in macro totals

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3b. Measurement issues

• Merchant trade statistics based on cross border registration (processing, merchanting)

• Measuring inventories abroad (idem) • Asymmetry outward processing• Intellectual property (legal versus economic

ownership)• Big and complex cases units (…, Ireland,

Netherlands, Norway, Sweden, …): determining the domestic economic activities of multinationals

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Current and further work in this area

• Eurostat taskforce on goods for processingbuilding on the globalisation guide

• CES working group global production (to be expected)

• ESSnet project on measuring global value chains (a micro level research)

• IARIW Conference 2012 session (8a) – ‘How to capture multinationals in national accounts?’

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Thank you!