Data Collection on Factoryless Goods Producers and Global Production

1. Data Collection on Factoryless Goods Producers and Global Production Brent Moulton (with Maria Borga) Group of Experts on National Accounts – UNECE Geneva May 9, 2014

2. Globalization • Globalization has affected global manufacturing arrangements: • Traditional, integrated manufacturer • Manufacturing service provider • Factoryless goods producer • International guidelines and manuals: • System of National Accounts 2008 • Balance of Payments and International Investment Position Manual, 6th edition • The Impact of Globalization on National Accounts

3. International Standards: BPM6 and SNA 2008 • New treatment of “goods-for-processing” • When ownership does not change and goods are returned after processing • Gross merchandise trade flows are excluded • Value of the processing service included as services trade measured by the processing fee • No impact on overall trade balance but it shifts the balance between goods and services • Impacts input-output accounts

4. U.S. Classification Guidance on Factoryless Goods Producers • Explicit guidance to classify factoryless goods producers (FGP) in the manufacturing sector • Report the value of final product produced • Report purchases of contract manufacturing services (CMS) • Manufacturing service providers are also classified in manufacturing sector • Report receipts from CMS

5. Contract Manufacturing Services • CMS is a key element in identifying the relationship between firms that outsource the fabrication of products—while still controlling the production process— and firms that do the processing • May help classify units to appropriate industry • May help identify the “goods-for-processing” international trade flows

6. Surveys with CMS Questions • BEA Surveys • 2009 Benchmark Survey of U.S. Direct Investment Abroad (BE-10) • 2011 Benchmark Survey of Transactions in Selected Services and Intellectual Property Products with Foreign Persons (BE-120) • Census Bureau Surveys • 2007 Economic Census • 2011 Report of Organization Survey (COS) • 2012 Economic Census

7. Responses on CMS from BE-10 Survey • 23% of US parents reported purchasing CMS

8. Responses on CMS from BE-10 Survey • Within manufacturing, 24% of parents that purchased CMS were in computers and electronic products manufacturing • Other prominent industries included machinery, chemicals, medical equipment, transportation • US manufacturing parents that purchased CMS accounted for • 39% of value added for all manufacturing parents • 36% of value added for all wholesale parents

9. Conclusions • Responses from BEA and Census surveys indicate: • Domestic purchases of CMS more prevalent • Firms that purchased CMS from their affiliates are larger than other firms purchasing CMS outside the U.S. • For U.S. parents who purchased CMS outside the U.S., they were just as likely to own as to not own the material inputs

10. Next steps • Analyze adequacy of data from Census, BEA, and other sources • Special inquiry questions were added to 2012 Economic Census. These questions should help identify FGP activity

11. Next steps • Research project will combine BEA data on multinational enterprises and trade in services with Census Bureau foreign trade data • Product detail and special inquiries to identify firms that purchased CMS from foreign firms • Also identify US firms that provided manufacturing services to foreign firms • Output of research will be a report that • Assesses the state of current data collections for FGP • Recommends any additional data collection that may be needed