BPM5 BPM6 / Global production: processing and merchanting

1. Norway’s experience so far Per Øivind Grindalen Tore Halvorsen / Trude Nygård Evensen Nordic meeting for Trade in Goods and Services/BoPFaroe Island sept 2014 BPM5 BPM6 / Global production: processing and merchanting

2. Processing Balance of Payments Manual 5 (BPM5 - 1993) Goods for processing treated on a gross basis (physical cross-border flows) Goods for processing specified under merchandise Balance of Payments Manual 6 (BPM6 - 2009) Goods for processing treated on net basis (ownership principle) Manufacturing services on physical inputs owned by other (processing) to specified under services

3. Merchanting Balance of Payments Manual 5 (BPM5 - 1993) Merchanting treated on net basis and specified under services (exports only) Balance of Payments Manual 6 (BPM6 - 2009) Merchanting treated on semi-gross basis Goods acquired under merchanting as negative exports Goods sold under merchanting as (positive) exports

4. Experiences so far - BPM5 Norway have not been able to follow the BPM5 recommendations, because: Goods for processing are included in merchandise, but not specified Merchanting is not specified.

5. Preparing for BPM6 Statistics Norway internal working group on global production (2011): Global production and the definition of the national economy Study of theoretical implication of both old and new treatments of processing and merchanting Summary and assessment bases on available information on global production Conclusions of the working group: The measurement of exports and imports of processing influence on the measurement of total production and intermediate consumption To measure exports and imports of processing and merchanting according to international recommendations, more and better information is needed

6. Implications of the revised recommendations External trade in goods figures have to be adjusted before use in the national accounts Exports and imports of goods for processing according to the External trade statistics must be deleted Costs related to inputs due to goods processed abroad must be added to imports of goods Direct sale of processed goods abroad to non-residents must be added to exports of goods Exports and imports of processing services must be identified and surveyed Purchase and sale of goods under merchanting must be identified and surveyed

7. Sources: What do we know? Structural business statistics: Covers income and costs from production abroad, but no information on exports and imports ProdCom (production output in manufacturing by type of product): More than 10 per cent of production income of Norwegian enterprises are income from physical production abroad External trade in goods statistics: Cover goods for processing (procedure code), but high degree of uncertainty in figures so no figures have been given External trade in services: Exports and imports of processing fees included in Contract work and other manufacturing services Structural Business Statistics, of this: The copy of the standard financial reports that the tax authorities collect from the enterprises (the Standard Industry Form).

8. Challenges How to identify processing and merchanting (criteria), and distiguish between different models of global production (processing, merchanting and factoryless goods producers (FGPs): Processing: ownership to material inputs in production abroad, otherwise merchanting or output by factoryless goods producers Information needed Imports and exports of processing services Exports and imports of input goods under processing Exports and imports of finished goods after processing Purchase of goods under merchanting Sale of goods under merchanting How to collect data? Which sources? Trade in goods statistics? Trade in services statistics? Structural business statistics? Prodcom and other surveys? Future fusion of Trade statistics and Structural Business Statistics? Big enterprise group?

9. Introduction of the new principles Still no final solution on how to capture processing and merchanting in BoP and NA according to the revised principles in SNA and BPM Transactions according to inward processing are recorded according to the new principles, but regarding outward processing and merchanting the available data are not sufficient enough Establish a big enterprise group in Statistics Norway? (like in many other countries) Towards a micro level method International co-operation and development EUROSTAT Task Force on processing UN/EC Task Force on global production 2014 main revision of national accounts and balance of payments

10. Thankyou!!