1. Final expenditure
Leo Hiemstra

2. Final expenditure Exports and imports (foreign trade)
Consumption of households
Consumption of government and NPISH
Gross capital formation

3. Final expenditure - Imports (M) - Consumption (C) GDP= C + I + (E-M)
- Exports (E)
- GFCF (I)
GDP= C + I + (E-M)

4. Final expenditure in the Netherlands
% GDP
Export of goods and services 83,6
Import of goods and services 74,7
Consumption of households and NPISH 45,0
Consumption of government 27,9
Gross capital formation ,1

5. Foreign trade: definition
Transactions in goods and services between residents and non-residents.
Criterion:
Goods: change of ownership between a resident and a non resident
Services: services rendered by a resident to a non-resident unit
Not: crossing the border of goods
Not: the country where the service is delivered

6. Foreign trade: changes in ESA 2010
In both ESA1995 and ESA 2010 the criterion for foreign trade in goods is : change of ownership of goods between a resident and a non- resident unit.
In most cases “change of ownership” of goods coincides with “crossing the border” of those goods. But not always!

7. Foreign trade: changes in ESA 2010
Examples of cases in which change of ownership / crossing the border do not coincide:
Processing: goods cross the border (to be processed), but the owner remains the same
This also applies to Maintanance and repair of goods in another country and Multinationals: intercompany trade
Merchanting: There is a change of ownership, but goods do not cross the border

8. Foreign trade: changes in ESA 2010
Both ESA1995 and ESA 2010 use the change of ownership- criterion for foreign trade in goods, but there is a difference:
In ESA1995 all cases were ‘crossing the border and change of ownership of goods did not coincide an exception to the change of ownership-criterion was made. This means that in practice ‘crossing the border’ is the actual criterion
In ESA 2010 all the exceptions have been eliminated
What does this mean for foreign trade? Some examples

9. Foreign trade: changes in ESA 2010
Example 1: Processing
Country A sends goods (value 20) to country B to be processed (value of processing by B 5); after processing the goods return to country A.
ESA 1995:
ESA 2010:
Gross registration of IT in goods vs Net registration of IT in services

10. Foreign trade: changes in ESA 2010
Example 2: Merchanting
Country A buys goods (value 20) from country B and sells it to country C (for 25). The goods do not cross the border of country A.
ESA 1995:
ESA 2010:
Net registration of IT in services vs Gross registration of IT in goods

11. Foreign trade: changes in ESA 2010
Consequences of the new ESA 2010 for foreign trade:
Shift between trade in goods and trade in services
Some transactions will be recorded gross instead of net or vice versa
In theory no change in GDP
Although conceptually better, measurement is an major problem within (and also outside) the EU, since the regulation for foreign trade statistics (FTS) will not change; crossing the border remains the criterion for FTS

12. Foreign trade: services
Examples: processing services, repair and maintenance, passenger transportation, licence fees and royalties, financial services
Foreign trade versus local production:
local branch, production on a significant scale
one year or more
pysicial presence
availabilitiy separate accounts
examples: construction, transport, fishing and consulting

13. Foreign trade in goods: valuation
Free on board (fob) = price paid by the importer at the exporter’s frontier after payment of export taxes and receipt of any tax rebates
Cost insurance and freight (cif) = price of a good delivered at the frontier of the importing country
Total export and imports are valued at fob-prices
Detailed imports (in SUT) are valued at cif-prices

14. Final expenditure Exports and imports (foreign trade)
Consumption of households
Consumption of government and NPISH
Gross capital formation

15. Consumption of households: definition
Goods and services
Consumption of own production
Barter
Second hand purchases
Unincorporated enterprises: intermediate versus final consumption
Tourism: domestic versus national concept

16. Consumption of households: sources
Retailtrade survey (RTS)
all larger firms included
compulsory participation
turnovers by product group, excl. VAT
sales specification by branch (Nace)
Household budget survey (HBS)
small sample size, only households
voluntary participation
non response and underreporting
detailed product specification, incl. VAT
weak coverage of services
detailed specification by type of outlet

17. Consumption of households: methods
Reconciliation of RTS and HBS make population and valuation consistent
- turnovers from RTS
- market shares from HBS (specification by type of outlet)
Paid for by households directly of indirectly
- examples: housing, financial and medical services
Many consumption items based on mixture of sources
- examples: utilities, energy, transport, cultural & social services

18. Consumption of government and NPISH
production = sum of costs
consumption = production
-/- market output (sales)
-/- own account capital formation
= consumption of own production
+/+ social benefits in kind
Government consumption
individual consumption (education, health, social benefits in kind)
collective consumption (public administration and defence)

19. Actual final consumption
2011, in bln
Household actual final consumption 374,1
Household consumption expenditure 265,9
Government individual consumption ,9
NPISH consumption ,3
Government actual final consumption 65,2
Government collective consumption ,2

20. Excercise

21. Gross capital formation
Gross fixed capital formation
Fixed assets: used repeatedly or continuously in the production process for more than one year
Examples: buildings, machinery, computer software, R&D
Changes in inventories
Acquisition less disposals of valuables
Points of attention:
- Net registration: acquisition less disposals of fixed assets
- Delineation with intermediate consumption: small tools, repair & maintenance
- Excluded: financial assets, exceptional losses