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Measuring “Factoryless” Manufacturing

Measuring “Factoryless” Manufacturing. Evidence from U.S. Surveys. Brent Moulton (with Fariha Kamal, Jennifer Ribarsky). BEA Advisory Committee May 10, 2013. Importance of Contract Manufacturing. Globalization has affected global manufacturing arrangements:

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Measuring “Factoryless” Manufacturing

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  1. Measuring “Factoryless” Manufacturing Evidence from U.S. Surveys Brent Moulton (with Fariha Kamal, Jennifer Ribarsky) BEA Advisory Committee May 10, 2013

  2. Importance of Contract Manufacturing • Globalization has affected global manufacturing arrangements: • Traditional, integrated manufacturer • Manufacturing service provider • Factoryless goods producer • Concerns in measuring international transactions: • Re-exports • Merchanting • Manufacturing services on goods owned by others • Free trade and other special zones • Changes in classification and international guidelines

  3. U.S. Classification Guidance on Factoryless Goods Producers • Explicit guidance to classify factoryless goods producers in the manufacturing sector • Report the value of final product produced • Report purchases of CMS • Manufacturing service providers are also classified in manufacturing sector • Report receipts from CMS

  4. International Standards: BPM6 and SNA 2008 • New treatment of “goods-for-processing” • When ownership does not change and goods are returned after processing • Gross merchandise trade flows are excluded • Value of the processing service included as services trade measured by the processing fee • No impact on overall trade balance but it shifts the balance between goods and services • Impacts input-output accounts

  5. Contract Manufacturing Services • CMS is a key element in identifying the relationship between firms that outsource the fabrication of products—while still controlling the production process— and firms that do the processing • May help classify units to appropriate industry • May help identify the “goods-for-processing” international trade flows

  6. Surveys with CMS Questions • BEA Surveys • 2009 Benchmark Survey of U.S. Direct Investment Abroad (BE-10) • 2011 Benchmark Survey of Transactions in Selected Services and Intellectual Property Products with Foreign Persons (BE-120) • Census Bureau Surveys • 2007 Economic Census • 2011 Report of Organization Survey (COS) • 2012 Economic Census

  7. BE-10 CMS Responses

  8. Distribution of U.S. Parents WhoPurchased CMS, 2009 • Can respond “yes” to more than one type of arrangement • 10 percent of U.S. parents that purchased CMS responded “yes” to all four types of arrangements • Of the U.S. parents that reported purchasing CMS from outside the U.S., nearly half of the respondents answered “yes” to both owning the material inputs and not owning the material inputs used by the contract manufacturer

  9. Conclusions • Responses from BEA and Census surveys indicate: • Domestic purchases of CMS more prevalent • Firms that purchased CMS from their affiliates are larger than other firms purchasing CMS outside the U.S. • For U.S. parents who purchased CMS outside the U.S., they were just as likely to own as to not own the material inputs

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