Contact: nadim.ahmad@oecd.org Agenda item 6 International Trade in IPPs Group of Experts in National Accounts Geneva, April 26-29, 2010 Contact: nadim.ahmad@oecd.org

Chapter 7 – International Trade in IPPs Tackles two key issues Trade in IPPs between non-affiliates Trade in IPPs between affiliates

Background Research and development (new to 2008 SNA Mineral exploration and evaluation; Computer software and databases; Entertainment, literary and artistic originals; and Other IPPs.

Trade between non-affiliates Transactions typically observable but Until EBOPS 2010 some transactions were recorded as ‘other royalties’ category; meaning that GDP may have been under/over recorded. GFCF estimates however almost certainly affected due to considerable use of supply-based approaches to estimation.

Trade between non-affiliates – EBOPS 2010

Trade between affiliates Generally not explicitly identifiable with an IPP and often recorded as property income, when it should be a transaction in goods/services. Misallocation, means that estimates of GDP, GFCF etc are affected. Second problem relates to the fact that transactions, even if observable, between affiliates do not necessarily align with SNA perspective.

Trade between affiliates: recommendations Bottom line – better information needed but this will take time. Also need to recognise that transactions between affiliates may not always align with SNA, either in concept or value.

Further research Paper suggests a pragmatic approach, to form the basis of further research, that minimises impact on GDP: i.e. Creates greater international consistency.

Further research The approach argues that trade in IPPs between affiliates should always reflect trade in pre-existing assets –as parts of originals (licenses to reproduce), not entire originals, copies, or services provided by the original. Observable transactions recorded as trade in services (between affiliates) should be rerouted to property income – reflecting the earlier acquisition/sale of part of the original.

Further research Trade in pre-existing IPPs also needed but recognised that this may not be simple and for convenience (and in the interim) it may be better to ignore these flows: But attempts should be made to value assets within affiliates, (via revaluations and OVC).

Finally The paper includes an extract of a prototype survey developed by the OECD TF on R&D. The aim is not to advocate that the survey should be used but merely to provide pointers to countries in developing their own surveys. Do delegates think this is useful?