Globalisation and national statistics

Robin Lynch

UK Office for National Statistics

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Globalisation and national statistics

• Why is globalisation happening?

• Transport is easier

• Barriers are lower

• Information is accessible (Internet)

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Globalisation and national statistics

• Transport is easier

• Bigger ships

• More flights

• Cheaper tickets

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Globalisation and national statistics

• Barriers are lower

• Less trade taxes

• Shared regulations (WTO)

• Information access allows management at a distance

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Globalisation and national statistics

• What effect does it have?

• More international transactions

• Global business

• Vertical as well as horizontal business structures

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Globalisation and national statistics

• International firms take advantage

• Organised to make good use of labour markets

• Capital markets

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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

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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

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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

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Globalisation and national accounts

• People worked in the country

But now

• People work abroad

• People send back money

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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

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Globalisation and national accounts

• Output was sold in the country

But now

• Output is sold abroad more

• Output is sold to foreign tourists

• Output is sold on the world wide web

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Globalisation and national accounts

• consumers bought local produce

But now

• We buy from abroad more

• We buy as we travel abroad

• We buy on the internet

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Globalisation and national statistics

• Some statistics are affected

• Population – migration statistics (EU)• Income – workers’ remittances• Expenditure – Household spending• GDP – value added• Profits• Return on capital

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Globalisation and national statistics

• There is a single market for economic activity

• Policy issues

• Multinationals use least cost options

• Can move production base quickly, according to cost

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Globalisation and national accounts

• Intellectual property – a special challenge

• Created on site

• Shared amongst many

• Can we measure a capital service between countries?

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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?

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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

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Globalisation and national accounts

Are we attempting the impossible?

• Do national production functions mean anything?

• Can we measure productivity for national economic activity?

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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?

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Globalisation and national accounts

• What’s 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”

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Globalisation and national accounts

• GDP through expenditures

• Reduce business surveys and use consumer surveys and other demand sources

• Make more use of administrative sources (often tax sources)

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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

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Globalisation and national accounts

• In the mean time, what can be done?

• Large business units

• International cooperation

• Focus on business profit centres

• Transfer pricing – standard methods

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Globalisation and national statistics

The message

• Globalisation is a challenge for national statistics

• We may have to accept lower quality national pictures

• National statistics are a part of a global picture