Issues and challenges for measuring intra firm trade
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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. Trade Committee reports on trade and activities of MNEs.

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Issues and challenges for measuring intra-firm trade

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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

Trade Committee reportson trade and activities of MNEs

  • Vertical trade, trade costs and FDI [TAD/TC/WP(2008)23/FINAL]

  • Trade in intermediate goods and services [TAD/TC/WP(2009)1/FINAL]

  • Intra-firm trade: a work in progress [TAD/TC/WP(2010)27]

  • Trade in tasks: a scoping paper [TAD/TC/WP(2010)]

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 collectintra-firm tradedata in theirgoodsorservicesstatistics?

AMNE statistics vs. US goodstradestatistics

  • 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

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

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.

Total US goods trade and share of intra-firm trade(Bill. USD, 2002-2009)

Source: US Census Bureau, Related Party Database

Share of intra-firm exports in private services exports for the US

Source: US Bureau of Economic Analysis

Estimating intra-firm trade using firm level data from the ORBIS dataset?

Methodologyfollows Alfaro and Charlton (2009)

Idea: Intra-firm tradeoccurs in thecase of vertical FDI, i.e. theforeignaffiliateproduces an inputfortheparent

  • Identifyforeignaffiliatesandtheirparents in ORBIS

    • Parent company = global ultimateowner (>50% of equityalongtheownershipchain)

  • Categoriseparent-affiliatelinkagesas horizontal, verticalorcomplex FDI

    • Compare 6-digit NAICS industrycodes of parentandaffiliate

    • Useinput-linkagesfromdetailed US input-outputtabletodetermineverticalrelationship

  • Usesales of verticalaffiliatesasestimateforintra-firm tradebetweentheaffiliateandtheparent

Motivation for FDI (and expected intra-firm trade)

Evidence from firm-level data (ORBIS)

‘Rough’ estimates

Comparison with US BEA data

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

Toconclude: a questionfordiscussion

  • 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

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