Issues and challenges for measuring intra-firm trade

1
Issues and challenges for measuring intra-firm
trade
Rainer Lanz and Sébastien Miroudot OECD Trade and
Agriculture
Working Party on International Trade in Goods and
Trade in Services Statistics 6 October 2010
2
Trade Committee reportson trade and activities
of MNEs

1. Vertical trade, trade costs and FDI
   TAD/TC/WP(2008)23/FINAL
2. Trade in intermediate goods and services
   TAD/TC/WP(2009)1/FINAL
3. Intra-firm trade a work in progress
   TAD/TC/WP(2010)27
4. Trade in tasks a scoping paper TAD/TC/WP(2010)

3
Data used to analyse intra-firm trade

• Activities of Multinational Enterprises (AMNE)
  Statistics
• OECD Activities of Foreign Affiliates (AFA)
  Database 7 countries
• Firm level data
• ORBIS Dataset (Bureau Van Dijk) 43 countries
• Goods Trade Statistics from Customs Authorities
• Related party database from the US Census Bureau
• Services Trade Statistics from Balance of
  Payments
• US cross-border trade

• Do other countries collect intra-firm trade data
  in their goods or services statistics?

4
AMNE statistics vs. US goods trade statistics

• Ownership thresholds
• AMNE statistics 50
• US goods trade statistics 10 for exports and 6
  for imports
• Identification of the parent and affiliate firm
• Inward AMNE Trade of domestic affiliates (with
  foreign parents)
• Outward AMNE Trade of domestic parents (with
  foreign affiliates)
• US goods trade statistics do not identify whether
  the US firm or the foreign firm is the parent
• Industry versus product classification
• Coverage survey versus entire population

5
Coverage of intra-firm trade according to inward
AMNE statistics in the OECD AFA database

• Very few countries report data on intra-firm
  trade
• Partner and industry coverage is limited
• Trade in services is not covered

6
Share of intra-firm and affiliate exports in
total exportsfor 7 OECD economies
Notes Data are for the year 2007 for the US,
Japan, Italy and Poland 2006 for Finland 2002
for Sweden and the Netherlands 1994 for Canada.
Data for Poland refer to the manufacturing sector
only. Source OECD AFA Database, Statistics
Finland.
7
Total US goods trade and share of intra-firm
trade(Bill. USD, 2002-2009)
Source US Census Bureau, Related Party Database
8
Share of intra-firm exports in private services
exports for the US
Source US Bureau of Economic Analysis
9
Estimating intra-firm trade using firm level data
from the ORBIS dataset?

• Methodology follows Alfaro and Charlton (2009)
• Idea Intra-firm trade occurs in the case of
  vertical FDI, i.e. the foreign affiliate produces
  an input for the parent
• Identify foreign affiliates and their parents in
  ORBIS
• Parent company global ultimate owner (gt50 of
  equity along the ownership chain)
• Categorise parent-affiliate linkages as
  horizontal, vertical or complex FDI
• Compare 6-digit NAICS industry codes of parent
  and affiliate
• Use input-linkages from detailed US input-output
  table to determine vertical relationship
• Use sales of vertical affiliates as estimate for
  intra-firm trade between the affiliate and the
  parent

10
Motivation for FDI (and expected intra-firm trade)
Type of FDI Identification in the dataset Intra-firm trade
Horizontal The foreign-owned subsidiary and the parent company share at least one identical 6-digit NAICS code. No
Vertical The foreign-owned subsidiary has at least one 6-digit NAICS code which is an input for the industry of the parent company (according to the input-output matrix). Additionally, there is no domestic ultimate owner with a vertical link. Yes (exports from the subsidiary to the parent company)
Complex There is both a horizontal and a vertical link (at least one identical 6-digit NAICS code and one that corresponds to an upstream industry). Partly, but cannot be measured (ignored)
Neither None of the previous connections. No
11
Evidence from firm-level data (ORBIS)
Intra-firm (Mil.USD) Intra-firm (Mil.USD) of total trade of total trade
    Low High Low High
Australia 4 397 9 187 3 7
Austria 51 011 59 850 38 45
Belgium 5 846 7 719 2 2
Canada 4 472 10 359 1 3
Chile 42 502 0 1
Czech Republic 516 518 1 1
Denmark 9 396 11 648 11 14
Finland 4 785 15 460 7 22
France 47 094 85 099 9 16
Germany 92 673 131 129 10 14
Greece 167 514 0 1
Hungary 89 89 0 0
Iceland 810 956 14 16
Ireland 3 830 18 273 5 24
Italy 9 816 25 951 2 6
Japan 371 514 0 0
Korea 916 2 505 0 1
Mexico 249 2 177 0 1
Netherlands 17 659 38 485 5 12
New Zealand - 1 702 0 6
Norway 7 736 9 751 12 15
Poland 529 530 0 0
Portugal 2 645 4 743 4 7
Spain 50 786 52 097 15 16
Sweden 20 099 26 846 16 21
Switzerland 43 127 57 554 30 41
Turkey 49 74 0 0
United Kingdom 64 082 199 509 11 33
United States 166 425 408 570 9 21
Total OECD members 690 975 1 267 819 8 15
Rough estimates
Number of subsidiaries Percent
Goods    
Horizontal 5 602 13,7
Vertical 7 338 17,9
Complex 1 769 4,3
Neither/not identified 26 296 64,1
Total 41 005 100,0
Services    
Horizontal 8 815 9,3
Vertical 18 350 19,4
Complex 2 428 2,6
Neither/not identified 65 081 68,7
Total 94 674 100,0
12
Comparison with US BEA data
13
Intra-firm trade why is it relevant?

• Protectionism in the context of intra-firm trade
  Beggar Thy Neighbour is Beggar Thyself
• Impact on the political economy of trade policy
  Optimal tariff lower when there is trade with
  domestically-owned affiliates
• New issue in trade policy making the
  buyer-supplier relationship
• Impact on growth additional productivity gains
  with the fragmentation of production and vertical
  specialisation
• Impact on labour markets relocation of
  production and shift in value-added
• Impact on tax policy transfer pricing
• Macro-economic impact role of MNEs in the
  transmission of macro-economic shocks

14
To conclude a question for discussion

• Analysing intra-firm trade helps to understand
  operations of MNEs and is of great importance to
  policymakers
• Only few data are available
• What are the prospects for more data on
  intra-firm trade and where could these data come
  from?
• AMNE statistics
• Goods trade statistics (customs)
• Balance of payments
• Micro-data