OECD - WGGS
Merchanting
Michael Connolly – National Accounts, CSO Ireland
October 2010
Outline of Presentation
Group of Experts on Globalisation Merchanting – scale of activity Merchanting - explanation SNA 93 & BPM5 SNA 2008 & BPM6 (IMTS2010,para. 1.20) Merchanting of Services Conclusion
Oct 20102 OECD WGGS
International Merchanting Activity 2004 – 2008 Index 2004 = 100
Oct 2010OECD WGGS 3
April 20, 2023National Accounts Income4
€millions 2004 2005 2006 2007 2008 European Union 25,543 34,223 41,453 52,329 56,145 of which: Belgium 1,233 1,469 1,408 4,580 4,251 Denmark : 1,286 1,544 1,707 1,907 Germany 4,284 5,301 10,156 9,714 8,771 Ireland 2,480 4,018 5,301 8,816 9,817 France 3,323 5,864 6,213 5,631 8,220 Italy 140 141 164 132 106 Cyprus 319 404 468 369 627 Luxembourg 270 305 353 345 801 Hungary 988 1,234 1,157 1,235 1,317 Malta 35 61 80 51 82 Netherlands 1,020 1,059 1,143 1,196 1240* Austria 1,406 2,029 2,273 2,538 2,773 Slovenia 1 58 111 168 189 Slovakia : -8 -24 -15 -22 Finland 4,337 4,493 4,929 5020* 5100* Sweden 3,459 3,936 4,866 6,669 7,392 United Kingdom 690 1,261 361 1,549 1,341
Other Countries:
Switzerland 2,949 3,787 5,602 6,523 9,100 United States : : : : : Japan : : : : :
TOTAL 28,492 38,009 47,055 58,852 65,245
Merchanting - definition
the purchase of a good by a resident (of the compiling economy) from a non-resident and the subsequent resale of the good to another non-resident;
during this process the good does not enter or leave the compiling economy
Source IMF BPM5In addition no transformation of the good has
taken place - if so, then goods for processing
Merchanting
Germanyexporter/seller
USAimporter/buyer
IrelandMerchant
Value of exports = 80 Value of imports =100
Value of services exports = 20
Change in ownershipCash settlement
Ireland Germany USAGoods Exports -80 Imports 100
Services Exports -20 ImportsCash Payments -80 -100 Receipts 100 80
Total 0 0 0
Merchanting
So what is the problem with merchanting?
In the trade data for countries Germany and USA the exports and imports are included
How do we treat the transactions in the accounts of Ireland?
Merchanting – BPM5, SNA 93
The solution to this difficulty centred around the treatment for the change of ownership.
Change in ownership would normally require that we record exports from Germany to Ireland
and record exports from Ireland to USA
Merchanting
This difficulty was simplified by imputing no change in ownership involving the
merchant and therefore
recording the merchant’s margin as the net export of a service in Ireland
and record the exports /imports of goods between
Germany and USA
Merchanting
Solution agreed in BPM5/SNA’93 solved one problem and created others
Goods account does not add up Difference between the value of imports and
exports is the merchants surplus Recorded under Services
Merchanting
SNA Rev.1 and BPM 6
Merchanting BPM 6 & SNA 2008
Current treatment causes asymetries in Goods account (no services)
Inconsistencies in recommended treatment and impact on inventories and balance sheets
Inconsistencies with Supply and Use tables Valuation in Cross Border transactions
Merchanting BPM6 & SNA 2008
New proposals apply to the merchanting of goods only - no mention of merchanted services
Acquisition of goods by merchant to be recorded as negative exports of merchant’s economy
Similarly sale of goods by merchant recorded as a positive export
Difference between sales and purchases of merchanted goods is recorded under :
“Net exports of goods under merchanting”
Merchanting Proposals BPM6 & SNA 2008
In Supply and Use Tables the difference between sales and purchases to be shown as production of a service
In general Merchanting activities to be recorded in Goods account rather than the Services account
Merchanting – BPM6, SNA 2008
Oct 2010OECD WGGS 16
Germanyexporter/seller
South Africaimporter/buyer
IrelandMerchant
Movement of goods/services
Change in ownershipCash settlement
Merchanting
MerchantingImpact of New Proposals
Resolves the difficulty with asymmetric recording
Resolves the issues with inventories and holding gains
Valuation principles are consistent Recording of transactions in BOP still an issue
Merchanting – Activities Included
Commodity Trading International Wholesale Retail Global Manufacturing
and Interaffiliate transactions in Goods and
Services Outsourcing of Services (abroad)
Merchanting Global Manufacturing
Country Bowner of goods
Country Dimporter/buyer
Country AGroup Company
Movement of goods/services
Change in ownership Cash settlement
Country CProcessor/exporter
Goods for processing
Merchanting of Services
Not addressed in the current manuals Was mentioned as far back as 1961
“the compiling country’s residents may carry out international transactions in goods and services that are entered only on a net basis. Such transactions involve the purchase of goods or services in one foreign country and the sale or granting of them to another foreign country”
Edition of the Manual Required recording Classified in the BPM
Methodology
BPM 1st Edition - 1948 Record net under
Merchandise
Other Transactions in
Merchandise
BPM 2nd Edition - 1950 Record gross under
Merchandise
Other Transactions in
Merchandise
BPM 3rd Edition - 1961 Record net under
Merchandise
Merchandise transactions
abroad
BPM 4th Edition - 1977 Record net under Other
Goods Services and
Income
Other Goods Services and
Income
BPM 5th Edition - 1993 Record net under
Services
Business Services
Merchanting, CSO Treatment
Impact of Globalisation on services Inclusion of transactions in services Potential for statistical distortion arising from large
transactions in goods and services sourced and delivered abroad
Outsourced services Third era of Globalisation
Merchanting of Goods and Services 2009
Oct 2010OECD WGGS
Merchanting Goods & Services
Country IEowner of goods
Country DEProducer Goods
Market EMEAMany customers
Country USDirect Investor
Country FRProducer services
100% 100%
Merchanting of Services
Does not consider or address the merchanting of services major aspect of Globalisation falls within the definition of merchanting Transformation - how to determine if service has
been transformed?
MerchantingConclusions
Merchanting of services needs serious consideration
Revised treatment for Merchanting of goods is now adequate
Separate recommendations are required for Merchanting of Services similar to BPM5 i.e. separate item in Services Account
Any questions?