OECD Globalisation Indicators

1. OECD Globalisation Indicators Agenda Item 10c OECD report

2. Background • The OECD has established a solid track record in the field of globalisation statistics and indicators • Historically, OECD has put together a set of guidelines to compile foreign direct investment statistics in the early 80s published in the OECD Benchmark Definition of Foreign Direct Investment • The OECD Handbook on Economic Globalisation Indicators (HEGI) in 2005 laid the foundation for the … • Subsequent – sometimes parallel – development of OECD Economic Globalisation Indicators (EGI), also published in 2005.

3. The Handbook on Economic Globalisation Indicators • Recognizing the multidimensional nature of globalisation, the former Secretary-General of the OECD, Donald J. Johnston, recommended that the work be undertaken collaboratively with other OECD groups with expertise in • foreign direct investment • international trade and technology • Groups include • the Investment Committee’s Workshop on International Investment Statistics (WSII) serviced by the Directorate for Financial and Enterprise Affairs (DAF); • the International Trade Statistics Expert Group and the OECD-Eurostat Experts in Trade in Services Statistics (underlining by author) served by the Statistics Directorate (STD); • and the Working Party of the Trade Committee serviced by the Trade Directorate. • Among groups serviced by the Directorate for Science, Technology and Industry, the Committee for Scientific and Technological Policy (CSTP) and its working parties, the Working Party of National Experts on Science and Technology Indicators (NESTI) and the Working Party on Technology and Innovation Policy (TIP), also participated in the preparation of the Handbook

4. The Handbook on Economic Globalisation Indicators and the Economic Globalisation Indicators Publication • The OECD Economic Globalisation Indicators publication represented a first attempt to develop the main indicators proposed in the OECD Handbook for the purpose of measuring the scope and magnitude of the globalisation process through its main vectors, which are: • Capital movements and foreign direct investment. • The economic activity of multinational firms. • The internationalization of technology. • International trade.

5. The EGI Indicators • Part I. International Transactions of OECD Countries • A. International trade and investment flows • B. Foreign direct investment. • Part II. The Economic Activity of Multinationals • C. The activity of multinationals in the manufacturing sector • D. The activity of multinationals in the services • E. Comparison between the activity of foreign affiliates in the manufacturing sector and in the services sector • F. The contribution of multinationals to value added and labour productivity in the manufacturing and services sectors

6. The EGI Indicators • Part III. The Internationalization of Technology • G. The internationalization of industrial R&D • H. The international diffusion of technology • Part IV. Aspects of Trade Globalisation • I. Trends in international trade in goods and services • J. Intra-firm trade of multinational enterprises

7. The challenge now • The challenge OECD is facing now is how to expand the range of indicators in response to identified needs, but taking into account the limitations of statistical systems at national and also international level.

8. The challenge now Indicators corresponding to economic globalisation should ideally respond to the following policy questions: • To what extent can the intensity of the globalisation process be measured? • How can the impact of globalisation on economic performance be evaluated? • How can we measure the impact of structural policy reforms designed to get national economies to benefit more from globalisation? • However, it is fully recognized in the Handbook itself that it covers measures concerning almost exclusively the first question that corresponds to the extent and intensity of globalisation.

9. The need to move forward • Challenges are manifold and there are certainly different views what they are and in which priority order they should be seen; • But it may be useful to outline some first directions • By no means the following is meant to be directive or a complete list; it is merely a stocktaking of some aspects which have been identified from a statistical point of view:

10. The need to move forward: what next? • Develop impact measures (see remarks above). Measuring outcomes instead of outputs gains is gaining in importance since it relates causes to effects (e.g. comparing export growth to growth in employment); • How to translate policy questions into statistically operational concepts, measurable and – ideally – internationally comparable?; • How to adapt the statistical reporting systems to the fact that production activities have no national borders, that a flatter vertical integration of the production process makes it more difficult to correctly asses that share of a good which can be attributed to “domestic” production. There is growing evidence that the increasing share of re-imports and re-exports biases traditional trade performance indicators and “inflates” trade growth rates.

11. A new look at globalisation is necessary – e.g. trade • The real problem today is that statistical systems have been “overtaken” by the speed of globalisation obliging national reporting systems and structures to align to this paradigm shift. • In fact, the interpretation of trade statistics needs to be seen in connection with global production networks. A high export intensity may not mean anymore that the country has developed a comparative advantage in a given sector, but rather that it is integrated in a global production chain. • Re-interpreting trade statistics also requires establishing connections with other statistical information, such as R&D, innovation, labour skills, etc.. • In other words, “national” concepts need to incorporate the international dimension to adequately reflect the reality of today’s production process

12. A new look at globalisation is necessary –e.g. SNA • Concerning SNA there seems a need to “repair” the accounts • A special Working Group will prepare a Report with recommendations/best practices on how to deal with the distortions in the accounts due to globalisation The report will: • Identify the areas of national accounts most affected by the impact of globalisation • Put forward proposals to improve the surveying, the subsequent processing and the integration of statistical data • Put forward proposals to arrive at an internationally consistent recording of transactions in national accounts and related source statistics • Put forward proposals to improve relevant international guidelines for national accounts • Put forward proposals to create some kind of medium (e.g. website, electronic discussion groups, etc.) to exchange best practices.

13. A new look at globalisation is necessary – e.g. SBS-Trade Linking of business statistics and trade. • Global economies require data on who is trading and what are the characteristics of trade operators. This question requires establishing a direct relation between foreign trade and industrial statistics. But these two statistical domains are based upon different concepts (products versus economic activities) and use different classifications (SITC, HS, ISIC, and CPC). • A central issue of such an analysis is to try to classify trade operators according to enterprise characteristics. Eurostat and OECD are working together in this field to develop comparable and consistent data. • Another City Group, called 20th International Roundtable on Business Survey Frames– Wiesbaden Group on Business Registers. Such a group takes the necessary comprehensive, national and international perspective to elaborate better statistical tools and frameworks. • In response to more integrated world markets, growing competition and structural changes, the European Union is tackling the necessary modernisation of community statistics in a program, called MEETS (Modernisation of European Enterprise and Trade Statistics).

14. A new look at globalisation is necessary – e.g. integrated BR and statistical IDs • A corollary of this “integration of statistical subject matters”, hitherto separated and operating with specifically own concepts and classifications, is the imperative need to develop common identifiers of statistical units at national level. • The interoperability between the trade register and business register, but also administrative records gains in importance. • A related issue is the role of the distributive trading sector in exports (so-called distributive services) that may distort the picture of export activities at the enterprise level.

15. A new look at globalisation is necessary – e.g. Enterprise Groups and MNEs • The economic picture of a country crucially depends on the degree of inclusion or exclusion of statistical unit’s operating internationally. • As decision making body, the economic actor acts nowadays according to economic parameters, and not according to territorial ones. • France has launched in 2005 a major high-level project of re-designing its enterprise statistics system. This was largely in response to new information needs due to globalisation => see agenda item 10 (f) • The EG (or sub-group of it) seems to be the relevant unit of analysis and users want to analyse market realities, not hierarchical structures within EGs.

16. A new look at globalisation is necessary – e.g. trade in goods and in services • Concerning Trade in Good s and Trade in Services there is a need to review and amend the roles of the international Task Forces dealing separately with them • Conceptual differences between international flows of goods and services in a number of cases are reduced due to the shift from "trade in goods" to "trade in tasks". • Old concept of competitive (or comparative) advantage need to be reviewed in response to changes in actual business practices of international firms and the fact that the different stages of the production process of single merchandise may be distributed across various countries. • The revision of major statistical frameworks) need reconciled and harmonised approaches wherever possible and feasible. • Prominent examples are the recent reviews of the statistical treatment of goods for processingand merchanting in the context of the SNA and BPM revisions • Because the borderline between goods and services in modern business practices is now somewhat blurred, it is clear that operational definitions and tools have to be designed in such a way that they satisfy needs of their respective users and also of those of other statistical frameworks to the maximum extent possible

17. A new look at globalisation is necessary – e.g. expanding the scope of analysis to impacts • International production and re-imports and re-exports bias the picture of trade flows and growth rates. • High trade growth rates may overstate the real picture. The use of Input-Output tables might help to better allocate factors • A high import content of exports means that for a country such as Germany strong export growth can not translate into commensurate employment growth. • Hence, the labour market characteristics, employment and migration flows all belong to a better appreciation of globalisation. • Wage differentials play a determining role and, in the end, globalisation strategies of firms are always a function of expected productivity gains. Hence, productivity indicators may constitute a very useful addition to existing indicators. • Much needs to be done and further developed!

18. Delegates are invited to prepare comments and suggestions for discussion under agenda item 10 (g)Thank you for your attention! Andreas.lindner@oecd.org