National Accounts, Globalisation and Business Surveys

1
National Accounts, Globalisation and Business
Surveys

• Robin Lynch
• UK Office for National Statistics

2
Globalisation and national accounts

• National accounts aim to measure the economic
  activities of a nation
• Multi-national activities are a measurement
  problem for national accountants

3
Globalisation and national accounts

• Once upon a time
• People lived in a sovereign country a country
• People worked in the country
• All of production was in the country
• Output was sold mostly in the country
• people bought domestic produce

4
Globalisation and national accounts

• People lived in a country
• But now
• People leave their country (migration)
• People have second homes (residency)
• People live abroad some of the time
• People holiday and spend a lot of money abroad

5
Globalisation and national accounts

• People worked in the country
• But now
• People work abroad
• People work in many places in the world

6
Globalisation and national accounts

• All of production was in the country
• But now
• Multinational companies span the world
• Design centre in UK
• Production in Eastern Europe
• Marketing in United States
• Financial centre in The Netherlands

7
Globalisation and national accounts

• Output was sold in the country
• But now
• Output is sold abroad
• Output is sold to foreign tourists
• Output is sold on the world wide web

8
Globalisation and national accounts

• consumers bought local produce
• But now
• We buy from abroad
• We buy as we travel abroad
• We buy on the internet

9
Globalisation and national accounts

• Intellectual property
• Created on site
• Shared amongst many
• Can we measure a capital service between
  countries?

10
Globalisation and national accounts

• The EU is different
• Economic statistics are used for fiscal targets
• Accuracy more important than appropriate
• Market transactions are measurable

11
Globalisation and national accounts

• New SNA update globalisation challenges
• Goods for processing
• R D generates intellectual property assets
• 20 - 10 ownership rule for FDI

12
Example Multinational Insurance

• So the profits centre values have changed from
• Old New
• UK 55 35
• Canada -10 30
• India 5 -15

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Example Multinational Insurance

• And the GDP values have changed from
• Old New
• UK 135 115
• Canada 5 45
• India 10 -10

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Globalisation and national accounts

• National business surveys can no longer collect
  market sales and costs
• Transfer pricing to minimise global tax burden
  undermines traditional methods
• How can we retain the status quo?

15
Globalisation and national accounts

• Ask firms to estimate an arms-length value for
  non-marketed internationally traded goods and
  services within the multinational
• Use these values to produce a traditional
  production accounts for the national activity

16
Globalisation and national accounts

• OR
• Change the mind-set step outside the box
• Are we attempting the impossible?
• Do national production functions mean anything?
• Can we measure productivity for national economic
  activity?

17
Globalisation and national accounts

• Can we collect the necessary data?
• Will multi-nationals cooperate (and so reveal
  their tax engineering activities)?
• Even if they wanted to, how can they estimate the
  value of non-market transactions?

18
Globalisation and national accounts

• Whats the alternative?
• Use the income approach
• Measure the employment income of the activity
• Estimate the operating surplus as the sum of
  returns to capital assets plus the
  entrepreneurial turn

19
Globalisation and national accounts

• Can we measure return to capital within national
  boundaries?
• How do we estimate entrepreneurial turn?
• How do you estimate national return on capital
  for intellectual property accessed across
  national borders
• No answers but worth exploring these issues

20
Globalisation and national accounts

• GDP through expenditures
• Reduce business surveys and bump up consumer
  surveys and other demand sources
• Make more use of administrative sources (often
  tax sources)

21
Globalisation and national accounts

• The way ahead for business statistics
• Use multi-national supply-use frameworks to
  ensure consistency
• Cut this up to get country pictures, rather than
  building the international picture like a jigsaw
  of country estimates

22
Globalisation and national accounts

• The defence
• Large business units
• International cooperation
• Profit centres
• Transfer pricing standard methods

23
Globalisation and national accounts

• For national accounts, business surveys less
  important in the future
• Concentrate on income and spending (good old
  days)
• Try harder on tax sources