UNECE – Group of Experts on National Accounts, 8 May 2014, Item 7: Global Production

1. Guide toMeasuring Global Production - State of play - UNECE – Group of Experts on National Accounts, 8 May 2014, Item 7: Global Production Mark de Haan (editor)

2. Two consultations: main findings • Factorlessgoods producers (FGPs)Task Force consultation on FGPs: • Defining output of FGPs; • The transaction between supplier and principal; • Branding. • Preliminary review of the GuideMain feedback coming from a global consultation based on a first (almost) complete version of the Guide.

3. 1. TF consultation on FGPs FGP, main features: • Outsourcing physical transformation to a contract producer (similar to outward processing); • Contract producer purchases material inputs (different from processing); • FGP provides the blueprints of production and owns the underlying intellectual property products (IPPs), or obtained the rights to IPP use; • Controls the output of the production process and manages the production chain; • Controls customer relationships.

4. 1. TF consultation on FGPs Recording principles agreed so far: • Conclusion of the TF is that FGPs differ fundamentally from traders/distributers; • Alternatively FGPs should be classified as a special case of manufacturers; • This point of view is supported by the Advisory Expert Group on national accounts; • Implications for ISIC need to be further considered by the UN Classifications Expert Group.

5. 1. TF consultation on FGPs Open issues: • Is the output of a FGP a good? TF: yes • Should the international transactions be recorded under general merchandise or merchanting? TF (large majority): general merchandise • What is the nature of the transaction between the contractor and the FGP, a service or a good? TF (large majority): a goodThis point may require further clarification

6. 1. TF consultation on FGPs Open issues (continued): • What is the nature of the transaction between the contractor and the FGP, a service or a good?Two options: • The GFP purchases an intermediate good excluding the IPP content: • The FGP is the economic owner of the produced good from the start. • Option (2) implies FGP is a special case of processing leading to the purchase of a processing service.

7. 1. TF consultation on FGPs Open issues (continued): • How does Brandingrelate to FGP? Branding: principal purchases goods for resale under the entity’s brand name and may spend substantial amounts on marketing assets. • Key considerations: • Branding is often part of FGP type of activities • marketing assets are according to 2008 SNA not fixed assets (and thus not IPPs) (cf. SNA research agenda) • Differentiating FGPs from traders (TF conclusion):FGP are substantive IPP investors, more than 50% of value added originates from activities such as innovation, supply chain management and market research and marketing

8. Guide to Measuring Global Production 2. Global consultation • February – March 2014; • Based on a preliminary version excluding text on the open FGP issues; • Comment form with questions on e.g. usefulness of guidance, recommendations, coverage, areas for future work and chapter specific issues; • 35 responses; • Generally responses were quite positive; • Nevertheless a range of suggestions for further improvement were made.

9. 2. Global consultation, main issues • Following up on FGPs: classification and recording of transactions. • Data issues: extension of surveys and response burden; new ways of collecting data; confidentiality issues and data exchange; international co-ordination. • Principles of economic ownership: Could more be done in the area of IPP holding special purpose entities and economic (in contrast to legal) ownership of the IPPs? • Adaption to country specific needs: e.g. link of agriculture and fishing to global value chains. • The goods/services distinction: probably an issue for future work (beyond scope of the TFGP). • More guidance, more case studies…..?

10. Thank you! mark.dehaan@cbs.nl