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Issues and challenges for measuring intra-firm trade

Issues and challenges for measuring intra-firm trade. Rainer Lanz and Sébastien Miroudot OECD Trade and Agriculture. Working Party on International Trade in Goods and Trade in Services Statistics 6 October 2010. Trade Committee reports on trade and activities of MNEs.

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Issues and challenges for measuring intra-firm trade

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  1. Issues and challenges for measuring intra-firm trade Rainer Lanz and Sébastien Miroudot OECD Trade and Agriculture Working Party on International Trade in Goods and Trade in Services Statistics 6 October 2010

  2. Trade Committee reportson trade and activities of MNEs • Vertical trade, trade costs and FDI [TAD/TC/WP(2008)23/FINAL] • Trade in intermediate goods and services [TAD/TC/WP(2009)1/FINAL] • Intra-firm trade: a work in progress [TAD/TC/WP(2010)27] • Trade in tasks: a scoping paper [TAD/TC/WP(2010)]

  3. Data used to analyse intra-firm trade • Activities of Multinational Enterprises (AMNE) Statistics • OECD Activities of Foreign Affiliates (AFA) Database – 7 countries • Firm level data • ORBIS Dataset (Bureau Van Dijk) – 43 countries • Goods Trade Statistics from Customs Authorities • Related party database from the US Census Bureau • Services Trade Statistics from Balance of Payments • US cross-border trade • Do other countries collectintra-firm tradedata in theirgoodsorservicesstatistics?

  4. AMNE statistics vs. US goodstradestatistics • Ownership thresholds • AMNE statistics: 50% • US goods trade statistics: 10% for exports and 6% for imports • Identification of the parent and affiliate firm • Inward AMNE: Trade of domestic affiliates (with foreign parents) • Outward AMNE: Trade of domestic parents (with foreign affiliates) • US goods trade statistics do not identify whether the US firm or the foreign firm is the parent • Industry versus product classification • Coverage: survey versus entire population

  5. Coverage of intra-firm trade according to inward AMNE statistics in the OECD AFA database • Very few countries report data on intra-firm trade • Partner and industry coverage is limited • Trade in services is not covered

  6. Share of intra-firm and affiliate exports in total exportsfor 7 OECD economies Notes: Data are for the year 2007 for the US, Japan, Italy and Poland; 2006 for Finland; 2002 for Sweden and the Netherlands; 1994 for Canada. Data for Poland refer to the manufacturing sector only. Source: OECD AFA Database, Statistics Finland.

  7. Total US goods trade and share of intra-firm trade(Bill. USD, 2002-2009) Source: US Census Bureau, Related Party Database

  8. Share of intra-firm exports in private services exports for the US Source: US Bureau of Economic Analysis

  9. Estimating intra-firm trade using firm level data from the ORBIS dataset? Methodologyfollows Alfaro and Charlton (2009) Idea: Intra-firm tradeoccurs in thecase of vertical FDI, i.e. theforeignaffiliateproduces an inputfortheparent • Identifyforeignaffiliatesandtheirparents in ORBIS • Parent company = global ultimateowner (>50% of equityalongtheownershipchain) • Categoriseparent-affiliatelinkagesas horizontal, verticalorcomplex FDI • Compare 6-digit NAICS industrycodes of parentandaffiliate • Useinput-linkagesfromdetailed US input-outputtabletodetermineverticalrelationship • Usesales of verticalaffiliatesasestimateforintra-firm tradebetweentheaffiliateandtheparent

  10. Motivation for FDI (and expected intra-firm trade)

  11. Evidence from firm-level data (ORBIS) ‘Rough’ estimates

  12. Comparison with US BEA data

  13. Intra-firm trade: why is it relevant? • Protectionism in the context of intra-firm trade: “Beggar Thy Neighbour is Beggar Thyself” • Impact on the political economy of trade policy: Optimal tariff lower when there is trade with domestically-owned affiliates • New issue in trade policy making: the buyer-supplier relationship • Impact on growth: additional productivity gains with the fragmentation of production and vertical specialisation • Impact on labour markets: relocation of production and shift in value-added • Impact on tax policy: transfer pricing • Macro-economic impact: role of MNEs in the transmission of macro-economic shocks

  14. Toconclude: a questionfordiscussion • Analysing intra-firm trade helps to understand operations of MNEs and is of great importance to policymakers • Only few data are available • What are the prospects for more data on intra-firm trade and where could these data come from? • AMNE statistics • Goods trade statistics (customs) • Balance of payments • Micro-data

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