Michael Connolly CSO, Ireland Geneva May 2009 UNECE/EUROSTAT/OECD GGNA Agenda item 4 Issue paper 5 Merchanting Michael Connolly CSO, Ireland Geneva May 2009

Merchanting How in practice do we identify merchanting operations? Multinationals trading activities in or out? New recommendations - review Merchanting of services – some observations

Merchanting the purchase of a good by a resident (of the compiling economy) from a non-resident and the subsequent resale of the good to another non-resident; during this process the good does not enter or leave the compiling economy Source IMF BPM5

Movement of goods/services Merchanting Movement of goods/services CountryB exporter/seller Country C importer/buyer Change in ownership Cash settlement Country A Merchant In Country A the Merchant is Orchestrating these transactions

Merchanting How in practice do we identify merchanting operations?

Merchanting -Identification Identification when a stand alone entity Ratio analysis using Business Register Identification when part of a MNC having other activities – Survey questions

Merchanting Multinationals trading activities in or out?

Merchanting Merchanting as part of international manufacturing activities by MNCs is within the scope of the statistical treatment proposed for merchanting

Merchanting New recommendations - review

Merchanting SNA 2008 and BPM 6

Merchanting Proposals BPM6 & SNA 2008 Acquisition of goods by merchant to be recorded as negative exports of merchant’s economy Similarly sale of goods by merchant recorded as a positive export Difference between sales and purchases of merchanted goods is recorded under : “Net exports of goods under merchanting”

Merchanting Impact of New Proposals Resolves the difficulty with asymmetric recording Resolves the issues with inventories and holding gains Valuation principles are consistent Recording of transactions in BOP still an issue

Merchanting Merchanting of services – some observations

Merchanting Summary New Proposals Revised treatment for Merchanting of goods is now adequate IMF proposal in par. 10.160 of BPM6 recognises the potential significance of merchanting of services Unfortunately deferred any specific treatment until next revision of the manual Discussed this matter with Rob Dippelsman of IMF. He accepts that this is an issue for some countries, however they are not ready to include the matter in the current manual. Issue surrounding transformation - if it occurs not merchanting. How can we guage this in practice. - how can transformation occur with a service.

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