the importance of, and pitfalls in, measuring globalization j. steven landefeld and obie g. whichard...
TRANSCRIPT
The Importance of, and Pitfalls in, Measuring Globalization
J. Steven Landefeld and Obie G. Whichard
Conference of European Statisticians/OECD National Accounts MeetingGeneva, April 25-28, 2006
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Measuring Globalization
Importance of globalization and Cross-Border Trade
Globalization, offshoring, and Lou Dobbs
Indian Software Services
“Dark Matter” Over or underestimate of current account
deficit
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GDP and Employment
95
100
105
110
115
120
01:IV 02:I 02:II 02:III 02:IV 03:I 03:II 03:III 03:IV 04:I 04:II 04:III 04:IV 05:I 05:II 05:III 05:IV
[Indexed to trough of the recession (01:IV = 100)]
Real GDP
Total nonfarm employment
Source: BEA and BLS (CES data).
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U.S. and Indian Data on Trade in BPT Services
Source: BEA, NASCOMM, Reserve Bank of India (RBI), and BEA estimates based on RBI data.* BEA unaffiliated trade with India increased by the ratio of total unaffiliated trade to total unaffiliated and affiliated trade in computer and information services.
Business, Professional, and Technical Services, 2002
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
BEA unafiliated trade
BEA estimate adjusted toinclude rough
estimate of affiliated trade *
Reserve Bank of India adjustedto IMF reporting rules
India (NASCOMM)
[Millions of U.S. dollars]
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Measuring Globalization
Dark Matter: The problem of distentangling services trade from financial transactions.
Higher returns on USDIA than FDIUS Result of implicit exports of U.S. knowledge capital that
raise U.S. profits and or lower IIP?
Result of transfer pricing that lowers USDIA?
Host of other factors controlling returns and asset prices:
Currency risk, country political risk, country cyclical risk, relative effective tax rates, relative interest rates/opportunity costs, historical investment pattern, and capital gains and losses.
Very difficult – and risky - to impute to services.
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International Transactions and Alternative Measures
Source: BEA.
-700
-600
-500
-400
-300
-200
-100
0
100
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
[Billions of dollars]
Existing balance on goods and services Adjusted balance on goods and services
Existing balance on income Adjusted balance on income
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Potential Volatility Involved in Measuring Intangibles
Source: FRB Flow of Funds (L.102 and B.102) release March 9, 2006. Data based on nonfarm nonfinancial corporate business.Note: A number of analysts attributed the large difference between equity values and the replacement value of plant and equipment to intangibles during the market run-up in the late 1990s.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
96:I 96:III 97:I 97:III 98:I 98:III 99:I 99:III 00:I 00:III 01:I 01:III 02:I 02:III 03:I 03:III 04:I 04:III
Market value of equities Tangible assets
[Billions of dollars]
Implicit value of intangibles: $7 trillion (2000:I)
Implicit value of intangibles: -$2 trillion (2002:III)
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Measuring Globalization
Pitfalls in (and techniques for) estimating cross-border services Importance of detailed estimates Uses of counter-party data “Joint-products” Estimating financial services Globalization and incomplete reporting by large
companies The rise in direct transactions and small-firms in
international trade
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Measuring Globalization
Pitfalls in (and techniques for) estimating cross-border services (continued) Travel and passenger surveys Global competition and differential pricing
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Measuring Globalization
MNC Operations Data (Foreign Affiliated Trade and Other Data) key in presenting baseline facts for offshoring: US MNC’s employment, sales, spending in the
U.S. vs. abroad. US MNC’s overseas sales to local area vs. other
regions, and the U.S. U.S. MNC investments in large in growing
markets vs. low wage countries.
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Measuring Globalization
MNC Operations Data Issues: Increasing use of holding companies
1982 – Holding companies accounted for 9% of USDIA; by 2004 this share had risen to 34%
Increasing problems for industry and geographic data Industry of parent vs. industry of subsidiary BOP vs. Ultimate beneficial owner (other treatments)
Increasing incidence of inversions
Similar issues (to India) relating to bilateral data Increasing importance of publicizing and
explaining MNC data.
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China Statistics Comparison
Source: UN, World Investment Report 2005.
FDI Flows to China, 2000-2002 Total Flows
0
10
20
30
40
50
60
70
80
90
100
UK Germany France Japan US Netherlands Malaysia Thailand
[Percent of figures reported by China]
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Possible Causes of a Change in the Domestic (U.S.) Share of Employment
by a U.S. MNC