what globalisation means for manufacturing – jennifer ribarsky
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Presentation from https://storify.com/ONS/changing-shape-of-manufacturing-in-the-ukTRANSCRIPT
WHAT GLOBALISATION MEANS
FOR MANUFACTURING
Jennifer Ribarsky
National Accounts Division, OECD
The changing shape of UK manufacturing
conference
22 October 2014
Introduction
• Short general overview of the phenomenon
of globalisation
• Overview of global value/production chains
• What is manufacturing?
• Future work
2
Increasing globalisation apparel, cars,
toys, planes, electronics…
3
Escape slides: Air Cruisers (USA)
Horizontal Stabiliser:
Alenia Aeronautica (Italy)
Centre fuselage: Alenia Aeronautica (Italy)
Final assembly: BoeingCommercial Airplanes (USA)
Vertical Stabiliser: Boeing
Commercial Airplanes (USA)
Landing gear: Messier-Dowti (France)
Electric brakes: Messier-Bugatti (France)
Tires: Bridgestone Tires (Japan)
Doors & windows:
Zodiac Aerospace (USA)
PPG Aerospace (USA)
Tools/Software: Dassault Systemes (France)
Navigation: Honeywell (USA)
Pilot control system: Rockwell Colins (USA)
Wiring: Safran (France)
Centre wing box:
Fuji Heavy Industries (Japan)
Engines: GE Engines (USA),
Rolls Royce (UK)
Wing box: Mitsubishi Heavy Industries (Japan)
Wing ice protection: GKN Aerospace (UK)
Engine nacelles: Goodrich (USA)Aux. power unit: Hamilton
Sundstrand (USA)
Flight deck seats:
Ipeco (UK)
Lavatories:
Jamco (Japan)
Cargo doors: Saab (Sweden)
Forward fuselage:
Kawasaki Heavy Industries (Japan)
Spirit Aerosystems (USA)
Raked wing tips: Korean Airlines
Aerospace division (Korea)
Passenger doors:
Latécoère Aéroservices (France)
Prepreg composites:
Toray (Japan)
Rear fuselage:
Boeing South Carolina (USA)
Source: Rivoli (2005), WTO (1998), Feenstra (1998), www.newairplane.com, Linden et al. (2009)
Industry’s share of total value added
4 Source: OECD, Factbook, 2014
• Global value chains
• Fragmentation of production across borders
• Initiated by lead entity, the principal
• Principal exerts a certain amount of control over
the process
• Tasks may be performed by an enterprise’s own
affiliates or through independent contractors
Global production arrangements
5
Simple global value chain
6
FIGURE 1 Illustration of a simple supply chain
Source: U.S. International Trade Commission compilation
Su
pp
ly c
hai
n m
anag
emen
t ac
tiv
ity
Global production (1)
Principal (domestic economy)
Processor (abroad)
Material inputs
Material outputs
= information = products
turnover production cost
= money
Processing fee
Manufacturing services on physical
inputs owned by others
Global production (2)
Principal (domestic economy)
Processor (abroad)
Material inputs Material outputs
= information = products
turnover production cost
= money
Processing fee
Manufacturing services on physical
inputs owned by others
Global production (3)
Principal (domestic economy)
Contract producer
(abroad) Material inputs
Material outputs
Blueprints of production
= information = products
turnover production cost
production cost
= money
Global production (3)
Principal (domestic economy)
Contract producer
(abroad) Material inputs
Material outputs
Blueprints of production
= information = products
turnover production cost
production cost
fee or purchase of products?
economic ownership of material inputs?
= money
Trader or Manufacturer?
Industrial Classification
• Industrial classification not designed to capture the global
manufacturing model very well
• Industrial Classification (ISIC rev. 4 and NACE rev 2)
provides guidance on outsourcing
• Manufacturers can outsource part of or fully the
physical transformation process
• However, if they outsource fully the physical
transformation process they are classified to
manufacturing if and only if they own the raw material
inputs.
What’s included in Manufacturing
Sector?
• Traditional view…
• Units engaged in the mechanical, physical, or chemical
transformation of materials, substances, or components
into new products. Often described as plants, factories,
or mills…
• When we eliminate ‘smokestacks’ and
‘production workers’ as classification
characteristics units appear to have similar
characteristics of Wholesale/Retail Trade.
• ISIC defines wholesalers and retailers as buying
and selling goods without transformation of the
goods
• But are FGPs really traders?
View From 30,000 feet:
Factoryless goods producer
13
iPhone Study
14
Future work for classification
• UNECE Task Force on Global Production (TFGP)
recommends that…
– Factoryless Good Producers (FGPs) be classified as
manufacturers
– Reviewed by Advisory Expert Group on National
Accounts (agreed that FGPs should not be classified
as traders; should be identified as a separate subset
of manufacturers)
– However, not consistent with current ISIC guidelines
– Recommend at least Flagging FGPs within trade so
that we can better track these activities
15
UK Jobs in “Manufacturing”?
(millions)
16
A ‘vertical’ view of UK manufacturing?
17
Expert Group on Extended SU tables
• To create an integrated economic accounting framework for globalisation
• More detailed SU tables:
– Imports
• With all products at fob and separate column for residents expenditure abroad
• Broken down by firm characteristics – and used to inform import flow tables
– Industries
• More heterogeneity: Foreign/Domestic, Export/non-export, S/M/L
– Exports
• Broken down by firm characteristic
– In the export column but also as an ‘of-which’ of output
• With non-residents expenditure and re-exports separately identified
– With transparent adjustments for some non-observed items (e.g. own account agricultural production)
– Jobs by industry row
– Emissions by industry row
– With new rows for property income flows: interest, distributed income of corporations, reinvested earnings on FDI
– And, for BEPS: current taxes on income, wealth etc
18
Use Table
19
ExporterNon-
ExporterExporter
Non-
ExporterExporter
Non-
ExporterExporter
Non-
Exporter
Exporter
Non-Exporter
Exporter
Non-Exporter
Exporter
Non-Exporter
Exporter
Non-Exporter
Taxes on Products
Subididies on Products
Total Domestic intermediate
Consumption
Total imports
Total intermediate
Consumption
Value-Added
of which
Mixed Income
Compensation of Employees
Gross Operating Surplus
Other Taxes on Production
Other Subsidies on Production
Total Output
of which
own-account production of software
own-account prodduction of R&D
other own-account production
of which -
non-
residents
expenditure
Industry 1 Industry 2
Foreign Domestic Foreign DomesticHHFC GGFC GFCF
Changes
in
Inventori
es
Vauables Exportsof which
re-exports
Industry
1
Industry
2
Foreign
Domestic
Foreign
Domestic
With exports broken down,
ideally, by destination (main
partner countries/regions)
Import Use table
20
ExporterNon-
ExporterExporter
Non-
ExporterExporter
Non-
ExporterExporter
Non-
Exporter
Industry 1
Industry 2
Total imports
Taxes/Subsidies on Imports
Industry 1 Industry 2
Foreign Domestic Foreign DomesticHHFC GGFC GFCF
Changes in
InventoriesVauables Exports
of which:
Residents
expenditure
abroad
With separate tables made available broken down by main
country or region of origin ‘groupings’
Supply Table
21
ExporterNon-
ExporterExporter
Non-
ExporterExporter
Non-
ExporterExporter
Non-
Exporter
Exporter
Non-Exporter
Exporter
Non-Exporter
Exporter
Non-Exporter
Exporter
Non-Exporter
Total
of which
own-account production of software
own-account prodduction of R&D
other own-account production
Memorandum item
Industry 1 Industry 2
Foreign Domestic Foreign Domestic
Total
Domestic
Supply at Basic
Prices
Imports
F.O.B
Taxes and
Subsidies
on Products
Total Supply
of which
import taxes
/ subsidies
Industry
1
Industry
2
Foreign
Domestic
Foreign
Domestic
Extensions?
22
ExporterNon-
ExporterExporter
Non-
ExporterExporter
Non-
ExporterExporter
Non-
Exporter
Property income payments - to abraod
of which
Interest
Distributed Income of Corporations
Reinvested Earnings on FDI
Investment Income Disbursements
Property Income payments - to abroad
of which
Interest
Distributed Income of Corporations
Reinvested Earnings on FDI
Investment Income Disbursements
Current taxes on income and wealth
Employment
Employees
Hours worked
Co2 emissions
Industry 1 Industry 2
Foreign Domestic Foreign Domestic
Property income receipts – from abroad
Thank you for your attention!
23
Increasing globalisation
Significant value-added is generated by foreign affiliates, with a large
share of value-added repatriated to parents as property income:
24
Increasing globalisation
25 Source: OECD, Science, Technology and Industry Scoreboard, 2013
Jobs in the business sector (ISIC Rev.3, 10 – 74) sustained by
foreign final demand
As a % of total business sector employment