Goods sent abroad for processing and merchanting in the Norwegian national accounts Jeanette Øynes

Principles – Goods for processing Goods sent for processing abroad from country A Domestic production in country A equals total sales value of the goods, The service fee from the foreign supplier recorded as intermediate consumption in A (service) Export from A: The goods sent abroad for processing are not recorded in the trade data until they are “finally” exported (change ownership) Import to A: Service fee

Principles - Merchanting According to the new recommendations: Both purchases and sales of merchanted goods are recorded under exports Purchases are shown as negative exports of goods Sales are shown as exports of goods Net export is not affected in current prices (compared to the “old” recommendations), only the recording of goods and services respectively In the production account output should be equal to “trade margins” (and equal to net exports of the goods)

Sources Structural business statistics PRODCOM Main source for output, value added etc. in manufacturing indistries and most service industries in the NA Based on data from administrative registres and some additional information from questionnaires PRODCOM Annual survey on production and use of certian commodities Includes a question about production abroad Statistics on external trade of goods Statistics on external trade of services

Statistics on external trade of goods Based on customs declarations – Goods have to cross border Includes procedure codes that are supposed to be used for goods sent abroad for processing and for reimported goods Procedures not always followed: not reliable data

Statistics on external trade of services Based on a quarterly survey of domestic non-financial enterprises Imports and exports by type of service Includes exports/imports of processing fees, but difficult to identify

Analysing microdata Conclusions Selected units: Units in the manufacturing industry, that in PRODCOM reports the largest values related to production abroad A couple of units previously in the manufacturing industry before the production was sourced out A few examples of global service providers Conclusions Imbalance between domestic output and exports Processing or merchanting?

Conclusion Outward processing Merchanting Inward processing Data too incomplete and unreliable to Make estimations of import of processing services Make corrections on export and import of goods Merchanting Lack of relevant data makes it difficult to implement the new recommendations (gross recording) Inward processing Data not reliable