World Trade and World Production Mike Berends-Ballast Jan van Laaden

Problem Merchandise export figures are only weakly linked to economic activity in the Netherlands Merchandise production overstates economic activity in the Netherlands Both growing problems because of globalisation

Merchandise exports - scope Include: –Exports of domestically produced goods –Re-exports (imported goods exported after some processing) Exclude: –Goods in transit –Quasi-transit (like re-exports but no change of ownership) –Transito trade (merchanting?)

Exports and Re-Exports (Billion €) Domestic Exports Re-exportsRe-exports / Total Exports

Trade problems (1) Export – import – re-export –Drugs in bulk from A, sent to B for packaging, imported and subsequently re-exported. –Double counting – twice in imports and twice in exports T

Trade problems (2) Contract processing –Country A sends goods to country B for processing. Country A supervises the processing and retains ownership –The processing enterprise may be an affiliate or it may be an independent firm –Included in country A’s exports even though almost all the value added occurred abroad

Trade problems (3) Distribution centres –Goods – e.g. cars – imported into Netherlands and owned by the distribution centre. The cars are subsequently exported to other countries –Overstatement of Netherlands exports –The car producer decides to retain ownership of the cars while in the distribution centre –The cars now become quasi-transit and should be excluded from trade statistics

Production problems Contract processing –When country A sends goods to country B for processing, retaining control of the work and ownership of the goods, the value of the processing work appears as production in both countries –Netherlands production is 10% overstated

Recommendations Exports –Separate re-exports and exports from domestic production –Record both total value and value added of re-exports –Record quasi-transit trade Production –Record separately sales of goods made under contract abroad –Distinguish between intra-firm and extra-firm processing abroad

World Re-exports and production abroad Billion US$ Minimum estimate of re- exports Maximum estimate of re- exports Production abroad European Union World

Comments Ownership not relevant for international trade statistics (ITMS 1998). Quasi transit not a problem! What is value-added? Increase in value or national accounts definition? Use “net exports” for goods typically re- exported – chemicals, transport and other machinery.