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Prague, May 28, 2013

Prague, May 28, 2013. Foreign trade in National accounts and Balance of payment. Tereza Košťákova Marek Rojíček Jaroslav Sixta. Content. Foreign trade and its measuring (estimation) Foreign merchants and Single market of the EU

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Prague, May 28, 2013

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  1. Prague, May 28, 2013 Foreign trade in National accounts and Balance of payment Tereza KošťákovaMarek RojíčekJaroslav Sixta

  2. Content Foreign trade and its measuring (estimation) Foreign merchants and Single market of the EU Examples – recording of trade by non-EU merchants in the EU aggregates Impact on EU aggregates of foreign trade and on Member States Czech approach – national concept ESA 2010 Challenges

  3. Foreign traDE and its measuring Definition of foreign trade trading between residents with non-residents (change of ownership – money flows expected) Measuring of foreign trade • Movements of goods across the borders = approximation to the foreign trade • Single market of the EU and the globalization break the link between cross-border movements and the trade => Impact both on EU-aggregates of foreign trade and on national statistics (difference between cross-border movements and ownership change is increasing)

  4. Main Data sources for foreign trade IMTS: Intrastat and Extrastat • Traditional data source • Physical movements of goods across the borders • Based on (former) custom statistics • Cannot record trade with non-residents within the borders • Do not comply with ownership (and money flows) VAT declarations by non-residents • Additional data source • Covers trading by non-residents within the borders of the Member States and between the Member States

  5. Single market in the EU Any merchant (EU-resident, non-EU-resident) can take advantage from the Single market and do trade in any member state • Obligation to register for VAT in the MS • Data suppliers to Intrastat for all units registered for VAT above national threshold => foreign merchants report to Intrastat (and Extrastat) => the value of cross-border movements of goods by non-residents included in the IMTS figures => over-estimation of balance of trade

  6. Examples: Recording of foreign trade of non-EU-residents‘ trading EU foreign trade: Trading of EU-residents with non-EU-residents Non-EU-residents trading within the EU: • Transactions between Member States • Transactions within one Member State • Transactions between EU and non-EU countries At the national level the issue is even broader as non-residents are also from other Member States.

  7. Example 1: trade between member states • EU aggregates - IMTS • EU exports = 0 • EU imports = 0 • EU balance = 0 EU aggregates – NA, BoP EU exports = 100 EU imports = 150 EU balance = -50 Czech Republic- IMTS CZ exports = 150 CZ imports = 0 CZ balance = +150 Czech Republic- NA, BoP CZ exports = 100 CZ imports = 0 CZ balance = +100

  8. Example 1: territory breakdown – Balance of payment

  9. Example 2: Tradewithin one member state • EU aggregates - IMTS • EU exports = 0 • EU imports = 0 • EU balance = 0 EU aggregates – NA, BoP EU exports = 100 EU imports = 150 EU balance = -50 Czech Republic- IMTS CZ exports = 0 CZ imports = 0 CZ balance = 0 Czech Republic- NA, BoP CZ exports = 100 CZ imports = 150 CZ balance = -50

  10. Example 2: territory breakdown – Balance of payment

  11. Example 3:Trade with non-EU country • EU aggregates - IMTS • EU exports = 0 • EU imports = 100 • EU balance = -100 EU aggregates – NA, BoP EU exports = 0 EU imports = 150 EU balance = -150 Czech Republic- IMTS CZ exports = 0 CZ imports = 100 CZ balance = -100 Czech Republic- NA, BoP CZ exports = 0 CZ imports = 150 CZ balance = -150

  12. Example 3: territory breakdown – Balance of payment

  13. EU aggregates – ownership principle Imports into the EU =imports by EU-residents (Extrastat) + sales by non-EU-residents within the EU (VAT) Exports from the EU = exports by EU-residents (Extrastat) + purchases by non-EU-residents within the EU (VAT) Rotterdam effect is only a specific case of more general phenomena = of non-residents trading in the internal market (of the EU or Member State)

  14. Impact of using physical movements of goods for EU-aggregates Over-estimation of the balance of trade Imbalance between current account and financial account (Balance of Payment - BoP) Imbalance between resources and uses (Supply and Use Tables - SUT) Incorrect territorial breakdown of BoP The impact even more significant at the national level due to • non-residents that are residents in other Member States • quasi-transit with other Member States

  15. Approach for EU-aggregates Intrastat and Extrastat data should be adjusted by other data sources Taking into account change of ownership<= non-EU merchants trading in the Single market <= EU-residents trading with non-EU-residents Consolidation at EU level <= each MS considers EU-residents from other MS as non-residents All MS affected but at different extent: CZ, BE, HU, SK, AT, NL…

  16. national conceptin the Czech Republic After accession to the EU in 2004 => increasing imbalance in the BoP and in the NA (over-estimation of balance of trade and both value of imports and exports in certain commodities) New national concept of foreign trade developed => Exclusion of cross-border movements reported by non-residents to Intrastat and Extrastat => Inclusion of their purchases and sales in the Czech market => Used in NA and BoP (ownership principle)

  17. Impact in the Czech Republic Balance of trade is significantly over-estimated according to the cross-border statistics (CIF/FOB)

  18. Globalization leads to Increasing difference between trade and movements The trade between residents and non-residents is often not accompanied by reported cross-border movements of goods and vice versa System of data collection of cross-border movements is affected by globalized world that brings e.g. • Transfer pricing across different countries • Tax optimalization • Costs optimalization

  19. ESA 2010 challenges ESA 2010 follows absolute change of ownership approach for foreign trade, e.g. new recording of • Goods sent abroad for processing • Quasi-transit and non-residents trading within the borders • Merchanting => As the globalization affects increasingly any economy detailed data sources are needed, especially for reliable identification of all transactions across the borders withoutany change of ownership between residents and non-residents

  20. Summary Intrastat and Extrastat are not sufficient for estimate of EU-aggregates of foreign trade, neither at the national level If non-EU merchants in the Single market are not taken into account, EU-balance of trade is over-estimated Impact is at the EU level as well as at the national level Purchases/Sales by non-residents in the internal market (national/EU) must be considered as exports and imports (instead of cross-border movements) Foreign traders affect all Member States (but at different extent)

  21. Thank you for your attention

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