GOODS FOR PROCESSING The treatment of goods sent abroad for processing Agenda item 3 Issue paper 4 GOODS FOR PROCESSING The treatment of goods sent abroad for processing in the context of the Input-Output framework Michel Girard Presented by Art Ridgeway Director General, System of National Accounts May 11, 2009

Overview Paper is update of paper presented last year Incorporates comments from last year Adds illustrative examples Industry and commodity dimensions before and after standards change Impact of evolving organization of production Looks further at measurement challenges

Example 1 Industry account - current standard Contractor (Country B) Principal (Country A) Gross output Goods (manufacturing) 160 100 Services (wholesaling) 80 Intermediate inputs Goods for processing All other goods 20 50 Processing fees services 60 All other services 10 Value added 30

Example 1 Industry account - new standard Contractor (Country B) Principal (Country A) Gross Output: Goods 160+100: 260 Services 60 20 Intermediate inputs Goods for processing All other goods 50+100: 150 Processing fees services All other services 10 Value added 30 50

Commodity account - current standard Country B Supply Use Production Imports Intermediate inputs Exports Inventories Other final demand Before Goods for processing 100 Goods Processed 160 Processing fees NA After 60

Commodity account - new standard Country A Supply Use Production Imports Intermediate inputs Exports Inventories Other final demand Before Goods for processing 100 Goods Processed 160 X Y Z Processing fees 60 After

Impact of new standards Will alter our view of the economy's structure Trade in goods and services Structure of industries Output ratios Productivity? Communication with users will be essential

Mixing traditional producers with contractors Industry Period Traditional producer #1 t #2 Traditional producers t+1 Contractor type Total Gross output 125 75 200 100 50 150 Intermediate inputs 78 47 62.5 12.5 Value added 28 37.5 IO coefficient 62.4% 62.7% 62.5% 50.0%

Mix of Organizations Affecting Data Realigning production by some producers can significantly alter the perception of an industry May see firms reclassified to other industries changing the perception of both industries Will change the results of analysis using I-O models under new presentation Focus on industries or commodities E.g. tax analysis may be better served with this commodity presentation

Data Collection Issues Trade Data – as the IMF paper notes only 61 countries report currently on processing Sample surveys – mix of organizational types within an industry raises stratification issues Do register identify them separately What size criteria is being used Turnover Employment Are survey questions clear for respondents on these issues

Questions