Globalisation and national accounts Robin Lynch UK Office for National Statistics

Globalisation and Globalisation and national accountsnational accounts

Robin LynchRobin Lynch

UK Office for National StatisticsUK Office for National Statistics

Globalisation and national accountsGlobalisation and national accounts

National National accounts aim to measure the accounts aim to measure the economic activities of a economic activities of a nationnation

Multi-nationMulti-nation activities are a measurement activities are a measurement problem for problem for nationalnational accountants accountants


Once upon a timeOnce upon a time

People lived in a villagePeople lived in a village

People worked in the villagePeople worked in the village

The whole production process was in the villageThe whole production process was in the village

Output was sold in the villageOutput was sold in the village

Villagers bought local produceVillagers bought local produce



People have second homesPeople have second homes

People live and work abroad but retain a centre People live and work abroad but retain a centre of economic interest in their home countryof economic interest in their home country

People holiday and spend a lot of money abroadPeople holiday and spend a lot of money abroad



People work abroad People work abroad

People work in many different places in People work in many different places in the worldthe world



Multinational companies organise themselves across the world to Multinational companies organise themselves across the world to produce efficiently, and minimise global tax burdenproduce efficiently, and minimise global tax burden

Design centre in UKDesign centre in UK Production in Thailand and MexicoProduction in Thailand and Mexico Marketing in United StatesMarketing in United States Financial centre in the NetherlandsFinancial centre in the Netherlands

Can we produce national accounts from observation of this global Can we produce national accounts from observation of this global process?process?

Measuring production across Measuring production across national boundariesnational boundaries

Toll-processing – no charge for goods, no change of Toll-processing – no charge for goods, no change of legal ownershiplegal ownership

Merchanting – an agent provides goods from one Merchanting – an agent provides goods from one country to another, without the goods ever crossing the country to another, without the goods ever crossing the agent’s country borderagent’s country border

Export of capital services from intellectual property such Export of capital services from intellectual property such as design – are they captured?as design – are they captured?

Multi-nationals organise on ownership principles, not Multi-nationals organise on ownership principles, not territory, so measuring territories (nations) is difficultterritory, so measuring territories (nations) is difficult

Example Multinational InsuranceExample Multinational Insurance

A multi national corporation has a A multi national corporation has a computer centre in Canada, a help call-computer centre in Canada, a help call-centre in India and sales in the UK.centre in India and sales in the UK.

Multi National Production accountMulti National Production account

UsesUses

Material Material costscosts

5050

Computer Computer servicesservices

xx

Call-centre Call-centre servicesservices

yy

WagesWages 100100

ProfitsProfits 5050

ResourcesResources

SalesSales 200200


xx


yy


Let the value of the computer services to Let the value of the computer services to the rest of the group be 10, 5 to the sales the rest of the group be 10, 5 to the sales activity in the UK and 5 to the call-centre activity in the UK and 5 to the call-centre activity in India.activity in India.

Let the value of the call-centre services to Let the value of the call-centre services to the UK sales activity be 20the UK sales activity be 20

UK Production accountUK Production account

UsesUses


4040


55


2020

WagesWages 8080

ProfitsProfits 5555

ResourcesResources

SalesSales 200200

Canada Production accountCanada Production account

UsesUses


55

WagesWages 1515

ProfitsProfits -10-10

ResourcesResources


1010

India Production AccountIndia Production Account

UsesUses


55


55

WagesWages 55

ProfitsProfits 55

ResourcesResources


2020


Now suppose the computer services to the Now suppose the computer services to the rest of the group are re-valued at 50, 25 rest of the group are re-valued at 50, 25 to the sales activity in the UK and 25 to the to the sales activity in the UK and 25 to the call-centre activity in India.call-centre activity in India.

UK Production accountUK Production account

UsesUses


4040


25 (5)25 (5)


2020

WagesWages 8080

ProfitsProfits 35 (55)35 (55)

ResourcesResources

SalesSales 200200

Canada Production accountCanada Production account

UsesUses


55

WagesWages 1515

ProfitsProfits 30 (-10)30 (-10)

ResourcesResources


50 (10)50 (10)

India Production AccountIndia Production Account

UsesUses


55


25 (5)25 (5)

WagesWages 55

ProfitsProfits -15 (5)-15 (5)

ResourcesResources


2020


So the profits spread has changed fromSo the profits spread has changed from

UKUK 55 55CanadaCanada -10-10IndiaIndia 5 5

ToTo

UKUK 35 35CanadaCanada 30 30IndiaIndia -15-15


Once upon a timeOnce upon a time








Output is sold abroadOutput is sold abroad

Output is sold on the world wide webOutput is sold on the world wide web



We buy from abroadWe buy from abroad

We buy as we travel abroadWe buy as we travel abroad

We buy on the internetWe buy on the internet


This day concentrates on the This day concentrates on the measurement of productionmeasurement of production

The first paper from Canada describes The first paper from Canada describes how a register can meet the demands of how a register can meet the demands of national measurements in global national measurements in global production process. Presented by Michel production process. Presented by Michel Girard, Director of Industry Accounts Girard, Director of Industry Accounts Division in Statistics CanadaDivision in Statistics Canada


Second paper is presented by Nico van Second paper is presented by Nico van Stokrum from the Netherlands, and sets Stokrum from the Netherlands, and sets out a practical approach to measuring out a practical approach to measuring national production as part of global national production as part of global activitiesactivities


After the morning break, Steve Landefeld, After the morning break, Steve Landefeld, Director of Economic Statistics in the US Director of Economic Statistics in the US Bureau of Economic Analysis will present Bureau of Economic Analysis will present a very wide ranging paper on measuring a very wide ranging paper on measuring globalisation. This will be followed by globalisation. This will be followed by discussion and then we break for lunch.discussion and then we break for lunch.


After lunch, Dave Hobbs of the UK will After lunch, Dave Hobbs of the UK will present a pragmatic approach adopted by present a pragmatic approach adopted by the UK in measuring firms in the UK who the UK in measuring firms in the UK who are part of a global toll-processing set-up.are part of a global toll-processing set-up.

Then before the afternoon break, Soly Then before the afternoon break, Soly Pelig will present a paper on the Pelig will present a paper on the measurement of cross-border transactions measurement of cross-border transactions with particular attention to intellectual with particular attention to intellectual propertyproperty


Finally, Carol Carson, Project Manager of Finally, Carol Carson, Project Manager of the Updating SNA process, will present the Updating SNA process, will present current plans on how this issue will be current plans on how this issue will be addressed in the updated SNA.addressed in the updated SNA.

The session is wound up with a discussion The session is wound up with a discussion with authors providing a panel to answer with authors providing a panel to answer questions from the floor.questions from the floor.


Does it matter?Does it matter?

ECB paper Dec 2005ECB paper Dec 2005

Asymmetries between the Euro area and Asymmetries between the Euro area and UKUK


Euro Euro bnbn UK imports EU exports discrepancy UK exports Euro Z imports discrepancy

from Euro z to UK to Euro Z from UK

Goods 04 184 202 -18 147 142 5

Services 03 56 93 -37 51 69 -18

FDI 03 230 482 -252 618 882 -264


net UK net Euro Z discrepancy

to Euro Z to UK

-37 -60 23

-5 -24 19

388 400 -12


UK and Netherlands will exchange data on UK and Netherlands will exchange data on a confidential and bilateral basisa confidential and bilateral basis

Article 8 (3) of EU regulation No 184 / Article 8 (3) of EU regulation No 184 / 2005 allows this exchange in order to 2005 allows this exchange in order to improve EU statisticsimprove EU statistics

What will the businesses think?What will the businesses think?


Eurolinks and Eurogroups RegisterEurolinks and Eurogroups Register

European registers of multi-national European registers of multi-national companies will keep data on ownership companies will keep data on ownership and links of control between legal units in and links of control between legal units in the EUthe EU

A Community register of multi-nationals A Community register of multi-nationals will be introduced from 2008will be introduced from 2008

Documents

Globalisation and national accounts Robin Lynch UK Office for National Statistics