Trade Data by Level of Processing International Trade Conference September 2008 Ken Smart

A new classifcation for trade data The New Zealand Standard Trade Classification – Level of Processing …or LOP

Overview Why LOP was developed How it was developed The theory behind the classification Consultation What we’ve done with it What we’d like to do with it What others might do with it…

Why LOP was developed In 2006, interest was expressed in trade data by ‘level of processing’ Client was aware of the Australian Trade Exports Classification (TREC) and wanted the same available for NZ trade data… …something that everybody could use

Why LOP was developed - TREC TREC is published by the Australian Department of Foreign Affairs and Trade (DFAT). TREC groups commodities by ‘level of processing’. In 2001 Statistics NZ published an experimental NZ version of TREC. In 2006, a consultation reviewed the merits of TREC and the Standard International Trade Classification (SITC). SITC was preferred to TREC (and is now published in our monthly HOTP information release) However, it was clear the theory of TREC had a lot to offer and there was still considerable interest in data of this sort

How LOP was developed Use SITC to develop an alternative to TREC? Multiple benefits: –SITC is an international standard – allows for international comparability –minimal maintenance –SITC already has simple ‘level of processing’ implications –detail, but not too much detail – LOP development would be more manageable –starting from scratch allowed Statistics NZ to adopt a theory and structure that allowed the arbitrary nature of ‘level of processing’ assignments to be minimised Problems?

How LOP was developed - cont Using SITC as base classification for LOP limits size and complexity – but also limits detail and flexibility. There are limitations in the HS to SITC aggregations. Any ‘level of processing’ classification requires arbitrary decisions and definitions. Groupings used in SITC and HS became a tool for use in LOP (e.g. meat Vs meat preparations, found in different HS chapters – 02 & 16). Arbitrary definitions are not a significant problem if they are consistently applied.

How LOP was developed - Structure SITC has a ‘natural’ top level split which matches TREC – Primary Products Vs Manufactures. Added validity from a standardised classification producing the same numbers at the top level. Following TREC: –‘unprocesssed’ and ‘processed primary products’ –‘simply’ and ‘elaborately transformed manufactures’ Anything more than a two-way split problematic. SITC provided direction regarding the divisions but consistent criteria necessary.

LOP Structure - cont A hierarchical classification of five levels Level one has 3 categories Level two has 5 categories Level three has 20 categories Level four has 59 categories Level five has 208 categories – excluding residual categories Which looks like….

The theory behind LOP Primary Products – unprocessed or processed: Unprocessed primary products – simply preserved or worked: simply preserved - fresh, chilled, frozen, dried or otherwise simply preserved simply worked - cut, sliced, trimmed, ground or rolled, but of a composition the same as the original product Processed primary products: processed beyond simple preservation or working

The theory behind LOP – cont Manufactures – simply or elaborately transformed: Simply transformed: bulk; unidentified on the world market Elaborately transformed: complex product; brandable product identifiable on the world market

LOP – consultation Consultation was of two sorts (although there was overlap!): Potential users – what was wanted Technical advice – what was possible

LOP – user consultation Consultation started with SITC / TREC option When LOP development began, we had already been speaking to most of our main stakeholders Key stakeholders – CMA, MFAT, MED, Treasury, RBNZ, FoRST, NZTE, DFAT (owners of TREC), etc. Overlap into technical consultation…

LOP – technical consultation Stats NZ classifications and standards department – ensured we followed best practice CMA (an industry expert) DFAT (owners of TREC) Fed back into user consultation…

What we’ve done with LOP Initially a customised job / experimental series But, created using best practice Involvement and sponsorship from Stats NZ classifications and standards department Made it possible for LOP to be put forward as a NZ standard classification One of the initial goals was to have something everyone could use…. …..LOP as a standard makes this possible

What we’ve done with LOP – dissemination LOP is prepared and disseminated quarterly List of (stakeholders and) interested parties is growing slowly, but growing Added to INFOS (to 4-digit level) Full details of LOP are available on Stats NZ website Referenced in our monthly release Article on Stats NZ website – “Ways of looking at New Zealand merchandise trade data using different economic classifications” – HS, BEC, ANZSIC, SITC, LOP

What we’d like to do with LOP Very simple really – we want to continue promoting it so that people use it The simplicity means that everyone can use it The detail means it can be relevant to various different sections of the economy

What others might do with LOP Domestically, we want people to use it – for it to become the common source of Level of Processing trade data Internationally, we’d like people to use it – country specific at 6-digit but internationally comparable / adaptable for usage at 4-digit (or even 3-digit) levels

Benefits of LOP LOP – limited detail and functionality? Yes but.... …for detailed commodity information, clients should always use HS LOP provides a simple look at a very complicated subject LOP ties in with SITC LOP provides a single tool for common usage LOP allows international comparability (and is intended to be internationally adaptable)