OECD Working Party on International Trade in Goods

Overview • Bo. P covers resident to non-resident activity • From this perspective, trade

Overview (continued) • Service providers can and do establish overseas presence • The WTO’s

ABS Studies • Australian Outward Finance and Insurance Foreign Affiliate Trade, 200910 (5485. 0)

SOFI FATS • Survey of Outward Finance and Insurance Foreign Affiliate Trade in Services

SOFI FATS (continued) • Run in respect of the 2009 -10 reference period –

SOFI FATS (continued) • Only affiliates that were controlled by Australian resident enterprises were

SOFI FATS (continued) • Survey collected data on: – Number of affiliates – Employment,

SOFI FATS (continued) • Processing was done using IPS and Microsoft EXCEL • Confidentiality

The Form • Very detailed • Large provider burden • Asked for Balance sheet

The Form (continued) • Original plan to send to affiliates, but feedback indicated that

Results • 30 Australian enterprises with 1, 245 finance and insurance affiliates • 70

Results (continued) • 75, 919 staff employed – $6. 7 billion in wages and

Results (continued) • • $39 b in finance & insurance sales FISIM high proportion

Global Financial Crisis Impacts • • GFC likely to have impacted profits. Return on

Global Financial Crisis Impacts (continued) • Americas only $99 million profit. • Rates of

2002 -03 2009 -10 Comparison • Number of affiliates rose from 463 to 1245

Conclusion • Unlikely for a survey like this to be run in near future

Discussion points • Experience of other countries • Managing expectations from a client -funded

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OECD Working Party on International Trade in Goods and Trade in Services Statistics November 2011 Australian Bureau of Statistics Foreign Affiliate Trade in Services

Overview • Bo. P covers resident to non-resident activity • From this perspective, trade by foreign affiliates is considered nonresident • Trade by foreign affiliates important for trade negotiations and understanding reach of an economy

Overview (continued) • Service providers can and do establish overseas presence • The WTO’s General Agreement on Trade in Services (GATS) identifies four “modes of supply” • Wider definition than Bo. P

Modes of Supply

ABS Studies • Australian Outward Finance and Insurance Foreign Affiliate Trade, 200910 (5485. 0) • Australian Outward Foreign Affiliate Trade, 2002 -03 (5495. 0) • Economic Activity of Foreign Owned Businesses in Australia, 2000 -01 (5494. 0)

SOFI FATS • Survey of Outward Finance and Insurance Foreign Affiliate Trade in Services (SOFI FATS) • Survey funded by the Australian Department of Foreign Affairs and Trade (DFAT) • Limited Resources • No funding for inwards equivalent

SOFI FATS (continued) • Run in respect of the 2009 -10 reference period – only for OUTWARD trade – only for the finance and insurance industry • Survey in 2002 -03 identified finance and insurance industry as the largest services industry • Sent to ALL Australian enterprises who may have affiliates overseas that primarily trade in finance and/or insurance

SOFI FATS (continued) • Only affiliates that were controlled by Australian resident enterprises were included (i. e. greater than 50% ownership) • Frame created from a question about direct investment in the International Investment survey. • Direct investment includes all investment where the investor owns 10% or more of total equity capital.

SOFI FATS (continued) • Survey collected data on: – Number of affiliates – Employment, wages and salaries – Sales and purchases of services – Equity and profit • FISIM and GVA data were derived from the data collected

SOFI FATS (continued) • Processing was done using IPS and Microsoft EXCEL • Confidentiality – ABS confidentiality rules – Perturbation – Collapsing cells

The Form • Very detailed • Large provider burden • Asked for Balance sheet information, and detailed profit/loss statements • Electronic and utilised macros • Split between resident/non-resident was key

The Form (continued) • Original plan to send to affiliates, but feedback indicated that parents wished to complete themselves

Results • 30 Australian enterprises with 1, 245 finance and insurance affiliates • 70 Countries Other Europe (incl Africa) 13, 3% United States 22, 7% United Kingdom 17, 0% Other Amercias 12, 6% Other Asia-Pacific 15, 3% Singapore 4, 6% New Zealand 14, 1%

Results (continued) • 75, 919 staff employed – $6. 7 billion in wages and salaries paid. • $71. 1 billion in Australian equity • $6. 5 billion in profit • New Zealand, United Kingdom and the United States dominated data.

Results (continued) • • $39 b in finance & insurance sales FISIM high proportion of total sales 96% of sales (mode of supply 3) Shows most activity in host country

Global Financial Crisis Impacts • • GFC likely to have impacted profits. Return on equity 6. 8% Difficult to measure impact Ratio of income earned to stock down. % 7, 0 6, 0 5, 0 4, 0 3, 0 2, 0 1, 0 00 -01 01 -02 02 -03 03 -04 Ratio 04 -05 05 -06 06 -07 07 -08 Ratio - 10 year average 08 -09 09 -10

Global Financial Crisis Impacts (continued) • Americas only $99 million profit. • Rates of return on equity for each region: – Americas -0. 1% – Europe 2. 7% – Asia-Pacific 13. 2%

2002 -03 2009 -10 Comparison • Number of affiliates rose from 463 to 1245 (169%) • Sales (excl. FISIM) rose 11% • Purchases (excl. FISIM) rose 150%

Conclusion • Unlikely for a survey like this to be run in near future • Prefer to cover all industries • Prefer to collect both inward and outward • OECD provided useful comments which will be used in future studies

Discussion points • Experience of other countries • Managing expectations from a client -funded survey • Impact of confidentiality • Testing data collection from nonresidents • The challenge of presenting asymmetrical views of data