How To Know The Impact Of A Corporation On The Environment

Transcription

1 Cnference f Eurpean Statisticians Glbalizatin Seminar, Geneva June 12, 2003 Glbalizatin and Multinatinal Cmpanies: What Are the Questins, and Hw Well Are We Ding in Answering Them? J. Steven Landefeld, Directr Ralph Kzlw, Assciate Directr fr Internatinal Ecnmics U.S. Bureau f Ecnmic Analysis

2 Glbalizatin and Multinatinal Cmpanies: What Are the Questins, and Hw Well Are We Ding in Answering Them? I. Intrductin Glbalizatin has placed new demands n statistical agencies t prvide the infrmatin necessary t infrm plicy in tday s increasingly interdependent wrld ecnmy. This glbalizatin has manifested itself in the interdependence f financial markets, the increasing rle f multinatinal crpratins (MNC s), the transfer f technlgy, the increasing dependence f dmestic markets n freign trade, and the necessary interdependence f mnetary, fiscal, and regulatry plicy. Indeed, this interdependence in plicy has led t increased demands fr harmnizatin in wrld statistical standards. These include wrk t harmnize, standardize, and update the System f Natinal Accunts (SNA) and the Balance f Payments Manual (BPM); the develpment f internatinal data disseminatin standards; and develpment and issuance f a series f handbks ranging frm Internatinal Trade in Services t Turism. Much f this wrk has invlved filling gaps in cverage required by changes in the ecnmy using cnventinal data cllectin methds and the existing structure f the natinal accunts. Prviding the infrmatin needed fr evaluating the ecnmic impact f MNC s, hwever, nrmally requires the develpment f direct surveys f cmpanies that capture data n the verseas activities f their freign affiliates, and the develpment and/r use f alternative accunting structures. Despite the cst t statistical agencies and the burden impsed n business respndents by these surveys and alternative structures, the sheer size, grwth, and 1

3 impact f multinatinal cmpanies have mtivated a number f cuntries t develp, r cnsider develping, such data. A leading example is the United States, which is bth the wrld's largest direct investr and the hst f the wrld's largest stck f inward direct investments. At yearend 2001, the value f the U.S. direct investment psitin abrad was $1.6 trillin, and the value f the freign direct investment psitin in the United States was $1.5 trillin. In 2000, U.S. exprts and imprts f gds assciated with MNC s headquartered r investing in the United States ttaled nearly $1.3 trillin and accunted fr ver half f U.S. imprts and nearly three-furths f U.S. exprts. U.S. parent cmpanies, their freign affiliates, and U.S. affiliates f freign cmpanies tgether emplyed abut 37 millin peple in the United States and abrad in that year (28 millin were in the United States, f a ttal wrkfrce f abut 130 millin). The cmbined grss prduct f U.S. parents and U.S. affiliates accunted fr ne-furth f the U.S. grss dmestic prduct. Althugh sme cuntries d nt maintain data n direct investment, recent estimates by the United Natins illustrate the significance f MNC s wrldwide. 1 It estimates wrldwide sales by freign affiliates in 2001 at $19 trillin, r mre than duble the size f wrld exprts in (In cmparisn, in 1990, sales by freign affiliates were nly abut 25 percent larger than wrld exprts.) Over the perid , the wrld stck f utward direct investment increased an average f 13 percent per year, frm $1.7 trillin t $6.6 trillin, cmpared t an annual grwth rate f wrld current-dllar GDP f 3.5 percent. In 2001, freign affiliates accunted fr ne-third f wrld exprts. 1 United Natins Cnference n Trade and Develpment (2002), Wrld Investment Reprt 2002: Transnatinal Crpratins and Exprt Cmpetitiveness, United Natins, New Yrk and Geneva. 2

4 By any measure, it is clear that MNC s are large and imprtant, and that their rle and influence has expanded as they have rapidly grwn in recent years. Cincidental with this grwth, the questins that peple are asking abut MNC s have als becme mre numerus and varied. In respnse t these questins, ver the years, the U.S. Cngress has prvided funds t develp the direct surveys and accunting structures t try t answer these questins. As a result, the United States has ne f the mst extensive statistical prgrams in the wrld fr tracking direct investment. This paper lks at the U.S. experience and uses it as a benchmark fr identifying the key questins that are being asked abut the rle and influence f MNC s and the types f statistics that are required t answer thse questins. The paper ges n t assess whether the U.S. statistics that are nw available are adequate t help us answer thse questins. Finally, it identifies steps that might be cnsidered t address data weaknesses and t help plicy makers and ther data users -- bth in the United States and abrad -- better answer the imprtant questins that they nw are asking abut the impact f freign direct investment. II. What Questins Are Being Asked Abut MNC s? The fllwing summary attempts t lay ut the key questins, prvide the answers yielded by U.S. data n direct investment, and identify sme f the remaining unanswered questins and the additinal data that may be needed. The questins are largely drawn frm academic research and plicy studies perfrmed in the United States. It is f curse impssible t develp a cmplete list f all questins that peple are asking abut MNC s, but it is pssible t identify key questins that are being asked in the United States and abrad by leading plicymakers, researchers, and thers wh have extensive knwledge and experience with issues cncerning MNC s r glbalizatin issues mre generally. 3

5 A. A Brief Histry Befre attempting t evaluate hw well we may be ding in answering the key questins, it may be infrmative t put current U.S. data cllectin effrts and studies in an histrical cntext. Sme infrmatin n direct investment was cllected by the U.S. Gvernment in the early 1900's, but systematic data cllectin did nt begin until arund At that time, sme data n the verall peratins f parent cmpanies and affiliates began t be cllected, but the fcus was n the data needed t cmpile the U.S. balance f payments accunts; the verall peratins data tended t be viewed as supplements t the balance f payments data and were used mainly t analyze the balance-f-payments effects f direct investment, such as the extent t which prductin abrad by the freign affiliates f U.S. cmpanies substituted fr r was cmplementary t U.S. exprts. Until abut the mid-1970's, much greater emphasis was placed n the data fr U.S. direct investment abrad (utward investment), which, at the time, was far greater than freign direct investment in the United States (inward investment). With the cntinued grwth in utward investment and with the acceleratin in the grwth f inward investment in the 1970's and 1980's, interest in the nn-balance-f-payments aspects f direct investment such as its effects n emplyment, technlgy transfer, and dmestic prductin increased crrespndingly, and equal emphasis came t be placed n cllecting data n investment in bth directins. In respnse, BEA expanded its data n the verall peratins f U.S. parent cmpanies and their freign affiliates and instituted new surveys t cllect data n the verall peratins f the U.S. affiliates f freign cmpanies. As cncern ver the rapid grwth in inward investment increased during the late 1980's, Cngress and the general public demanded mre infrmatin t assess the impact f inward investment in particular industries and States. This call led t effrts t link BEA s 4

6 enterprise-level data n direct investment t establishment-level data frm the Census Bureau and Bureau f Labr Statistics, t btain thse agencies mre detailed data by industry and State fr the freign-wned U.S. cmpanies that reprt t BEA. This prject represented ne f a number f imprvements that have been made simply by better utilizing existing data, withut impsing additinal reprting burdens n the business cmmunity. (Other majr data imprvement prjects that did nt impse additinal respndent burden were the develpment f estimates f affiliate grss prduct; the develpment f the supplemental, wnership-based framewrk f the current accunt; and BEA s revaluatins f direct investment frm histrical cst, r bk value, t estimates based n current market prices.) Mre recently, BEA has cnducted significant methdlgical and cnceptual wrk, which has led t the cllectin f additinal data items and the imprvement f cncepts. In additin, BEA has been actively invlved in wrk thrughut the wrld, in clarifying cncepts, and explring the brderline between direct investment and ther types f investment, inter alia. Fr example, staff have actively cntributed t the develpment f the Balance f Payments Manual, the Manual f Statistics n Internatinal Trade in Services, and the SNA. In additin, they actively participate in varius OECD and ther wrkgrups, examining such issues as direct investment, nnperfrming lans, the measurement f sftware trade, the measurement f insurance services, and varius ther measurement and statistical issues. In these ways, BEA has respnded t the need fr mre relevant infrmatin fr use in analyzing and understanding the rle f MNC s in the glbalizatin prcess. Thrughut the histry f its data cllectin prgram, BEA has als taken steps t try t imprve the accuracy and timeliness f its data. Hwever, in this era f glbalizatin, wrking t imprve the accuracy, timeliness, r relevance f direct investment data is n lnger sufficient. Cmparability f the data, bth t data n the dmestic ecnmy and t the direct investment data f ther cuntries, is als necessary. (One majr recent effrt that is facilitating greater 5

7 cmparability f the United States data with data prduced by Canada and Mexic was the release in 1997 f the Nrth American Industry Classificatin System.) Als, t minimize respndent burden and enhance data utility, it is essential t rganize and enhance the data that are btained. 2 In recent years, BEA, its cunterpart agencies in ther cuntries, and internatinal rganizatins alike have paid increasing attentin t imprving the cmparability f direct investment statistics acrss cuntries and, fr a given cuntry, t data fr the dmestic ecnmy t which the direct investment data might be cmpared. B. What are the questins, and hw well are we answering them? The United States has made majr strides in prviding infrmatin that has been used t answer many f the key questins being asked abut glbalizatin. Sme f these key questins are: Hw d MNC s affect utput, incmes, and emplyment in hme and hst ecnmies? D multinatinals exprt jbs? Hw d they affect wages? A frequently expressed fear is that multinatinal cmpanies will shift prductin ffshre t lwer wage cuntries thereby exprting jbs and exerting dwnward pressure n wages back hme. Yet evidence frm the United States suggests that multinatinals invest abrad fr access t markets rather than lw wages and that the share f their activities cnducted abrad has nt increased appreciably ver time. Accrding t BEA data: Wrldwide prductin, capital expenditures, and emplyment f U.S. MNC s remained cncentrated in the United States in 2000; U.S. parents accunt fr abut 2 A discussin f hw the U.S. Bureau f Ecnmic Analysis has rganized and enhanced data it btains frm MNC s is cntained in Measuring Glbalizatin: The Experience f the United States f America, Obie G. Whichard, prepared fr the 22 nd CEIES Seminar, Cpenhagen, Denmark, June

8 three-furths, and MOFA s fr abut ne-furth, f their cmbined grss prduct f $2,695.3 billin, capital expenditures f $519.6 billin, and emplyment f 31.2 millin. These shares were essentially unchanged frm (In the abve, MOFA s is an acrnym fr majrity-wned freign affiliates. ) Cnsiderable evidence als exists that wage rates in the investr s hme cuntry are nt significantly affected by wage rates in the freign hst cuntry. In additin, utput in bth the hme and hst cuntries is psitively crrelated with new direct investments (and much evidence suggests that a dllar f new inward freign direct investment leads t higher utput than an additinal dllar f new dmestic investment). The impact n hst and hme cuntry emplyment frm new direct investments is unclear. 4 Hwever, this lack f clarity has less t d with absence f data n emplyment than it des with disentangling the impact f new direct investment n emplyment frm verall macrecnmic and industry specific impacts. What determines the lcatin f prductin by multinatinals? BEA s data n freign direct investment has helped refute ne f the majr fallacies abut multinatinals, which is that the mst imprtant determinant f the lcatin f their verseas investment is access t lw wage labr. Indeed, the mst imprtant determinant seems t be access t large and prsperus markets. Cmpanies tend t invest fr purpses f selling gds and services rather than fr gaining access t lw-cst labr and ther resurces fr prducing gds and services. Over three-furths f U.S. freign direct 3 U.S. Multinatinal Cmpanies: Operatins in 2000, by Raymnd Matalni, Jr., Survey f Current Business, December 2002, p Data cllected by the U.S. Gvernment wuld ptentially permit a study f the impact f freign takevers (and f hw freign takevers cmpare with takevers mre generally) n U.S. emplyment levels and wage rates, but (partly due t unreslved interagency data sharing questins) these data sets have nt yet been utilized fr this purpse. 7

9 investment is in develped cuntries. Interestingly, in manufacturing, 80 percent f verseas affiliates prductin is in high-wage, develped cuntries, where investment is stimulated by a number f nn-wage factrs, including access t markets; prductin f prducts designed fr the lcal market; lcal service, supprt, and sales and advertising activities; tax incentives; r reduced transprt csts. Hw d MNC s respnd t barriers t trade and investment; t tax and investment incentives? As suggested abve, until recently the majr determinant f freign direct investment was seen t be access t develped ecnmies with large and grwing markets. Tax laws and investment incentives were fund t be f secndary imprtance. Mre recently, the prliferatin f investment incentives and changes in U.S. tax law may have increased the imprtance f tax laws and investment incentives. 5 Hw d MNC s cntribute t crss-brder transfers f technlgy? One f the majr cncerns expressed abut multinatinals is that they erde the U.S. technlgical advantage either by U.S. cmpanies transferring technlgy t their verseas investment partners r by freign cmpanies buying U.S. high-tech cmpanies t gain access t U.S. technlgy and knw hw. Unfrtunately, technlgy transfers are very hard t define and measure. Technlgy transfer may ccur simply by an emplyee traveling t an verseas affiliate and discussing technlgy r thrugh a series f s rather than thrugh an explicit ryalty r licensing payment that wuld shw up in cmpanies financial accunting statements r freign direct investment peratins reprts. 5 Chains f Ownership, Reginal Tax Cmpetitin, and Freign Direct Investment, by Mihir A. Desai, C. Fritz Fley, and James R. Hines, Jr., in Freign Direct Investment in the Real and Financial Sectr f Industrial Cuntries, Heinz Herrman and Rbert Lipsey, editrs; Springer-Verlage,

10 By default, research has tended t fcus n identifying and categrizing the industries in which freign cmpanies invest and hw much they spend n research and develpment. As it turns ut, they mainly invest in the same industries as their parents, and their investments are nly slightly mre cncentrated in high-technlgy industries than thse f all U.S. cmpanies cmbined. 6 Research and develpment activity has grwn faster within freign-wned firms than in all U.S. firms, but this may simply reflect the prpensity f these firms like U.S. multinatinals t invest in mre cncentrated, mre capital intensive, higher prductivity, higher wage, and higher technlgy industries. Additinal data develpment wrk by the Natinal Science Fundatin, the U.S. Census Bureau, and the Bureau f Ecnmic Analysis may shed additinal light n this tpic. Hw d multinatinals affect trade flws and trade balances? Althugh multinatinals trade accunted fr mre than ne-half f U.S. imprts and fr nearly three-furths f U.S. exprts, it is nt clear what the impact f verseas investment by multinatinals is n ttal U.S. trade r the U.S. trade balance. Many wuld suggest that verseas investment expands the verall vlume f trade and prductin rather than substituting freign fr dmestic prductin. Indeed, the share f U.S. multinatinals ttal prductin ccurring abrad shws n upward trend. BEA studies d, hwever, shw that, fr sme freign parent cuntries, sales by U.S. affiliates in certain industries have a very high imprt cntent. Yet, the imprt cntent f mst U.S. affiliates f freign cmpanies in mst industries was nt unusually high relative t thse f U.S. parent cmpanies. 7 In additin, sme f the industries in which U.S. affiliate imprt cntent is highest basically represent whlesaling peratins, in which affiliates were established t facilitate the distributin f gds prduced 6 Freign Direct Investment in the United States, An Update, U.S. Department f Cmmerce, 1993 and William J Zeile, Merchandise Trade f U.S. Affiliates f Freign Cmpanies, Survey f Current Business, Octber

11 by their freign parent cmpanies. In several cases, such affiliates have subsequently been replaced by manufacturing affiliates, which ver time may prgressively rely mre n their wn value added and n lcally prcured intermediate inputs, and less n imprts frm their freign parents. The cntributin f multinatinals t the U.S. ecnmy perhaps can best be seen by lking at BEA s supplemental wnership-based measures f the U.S. current accunt. These measures highlight the large verseas sales f U.S. and freign cmpanies and their relatin t U.S. trade and investment incme. 8 D MNC s invest abrad mainly t achieve efficiency in vertical integratin, by lcating different stages f prductin in different cuntries, r des their internatinal expansin tend t be mre hrizntal in nature, with essentially identical prcesses replicated in multiple cuntries? Several studies have cncluded that the bulk f multinatinals investment is hrizntal in nature. Once again, it is access t large and grwing markets rather than access t lw wage labr fr labr intensive stages f the prductin prcess r n-site access t raw materials fr initial prcessing that is driving freign direct investment. By lcating duplicate facilities in each cuntry r regin, cmpanies can prvide integrated sales, advertising, 8 J. Steven Landefeld, Obie G. Whichard, and Jeffrey H. Lwe, Alternative Framewrks fr U.S. Internatinal Transactins, Survey, December Jeffrey H. Lwe, An Ownership-Based Framewrk f the U.S. Current Accunt, , Survey, January, The wnership-based framewrk grups direct investment incme generated by sales thrugh affiliates with crss-brder trade in gds and services, t recgnize the active rle f parent cmpanies in managing and crdinating their affiliates peratins. (Such incme differs fundamentally frm incme n ther types f investments, and might be regarded as a kind f implicit management fee that cmpensates the parent cmpany fr undertaking an active rle in affiliate peratins.) The framewrk als prvides much mre detailed infrmatin n trade within MNC s than des the traditinal framewrk. 10

12 prductin, inventry cntrl, and delivery f their prduct tailred t the needs f the individual markets. Hw d freign-wned cmpanies differ frm dmestically wned cmpanies? At ne time, especially during the wave f Japanese investment in the early 1990s, there was cncern abut freign cmpanies perating practices, especially n the part f rganized labr. Wuld the U.S. affiliates f these cmpanies pay lwer wages, hire lwer-skilled wrkers, r use their freign peratins as a cnduit, investing less in capital equipment and perfrming less research and develpment, leaving thse functins fr the hme ffice verseas? BEA s data shw that freign-wned U.S. cmpanies actually tend t pay higher than average wages, but after cntrlling fr differences in industry mix, they pay rughly the same wages as U.S. firms in the same industries. Freign investrs als tend t invest in U.S. industries that are relatively capital intensive and t perfrm and cnsume large amunts f research and develpment. Hw much f a particular dmestic industry is wned by freign cmpanies? BEA and the Bureau f the Census have linked BEA s enterprise-level data n freign direct investment in the United States t the Census Bureau s data n all U.S. establishments, and this data set has resulted in detailed estimates shwing the prprtin f dmestic industries that are wned by freign cmpanies. 9 Als, in a parallel prject, BEA data were linked t 9 Mre specifically, t date, BEA and the Census Bureau have published data fr 1987, 1992, and 1997 n the number, emplyment, payrll, and value f shipments f bth freign-wned manufacturing and nnmanufacturing establishments. In additin, data fr these and ther items fr freign-wned manufacturing establishments fr were published based n data frm the Census Bureau s Annual Survey f Manufactures. 11

13 data f the Bureau f Labr Statistics fr 1989 and 1990 cvering a number f emplymentrelated variables, including data n the ccupatinal structure f freign-wned U.S. manufacturing establishments. Partly based n these linked data sets, studies perfrmed by BEA staff and thers have shwn the share f each dmestic industry (at a detailed level f industry classificatin) that is wned by freign cmpanies. These are but a few f the many questins that have been psed abut freign direct investment. As can be seen, the existing data have been useful in answering these questins t a significant extent. Hwever, as detailed belw, there als are many questins that have nt been as fully r clearly answered. Sme questins that will require future research t fully answer are: D multinatinals cntribute t, r help mitigate, internatinal financial crises, such as currency crises? Is intra-firm trade cnducted at arm s length prices, r are prices set t shift prfits and avid taxes? Althugh these tw areas have been extensively studied, n cnsensus pinin has been reached. Research must cntinue, and additinal data prbably must be cllected, befre a cnsensus can be reached. What is the rle f multinatinals in internatinal financial flws? The answer t this questin is nt entirely clear. Althugh financial flws that affect the U.S. balance f payments accunts are generally well tracked, many factrs (including the use f cmplex rganizatinal structures, unusual types f financial arrangements, and a 12

14 decentralized data cllectin netwrk) have made it impssible t islate the flws that pertain just t multinatinals. Hw d multinatinals affect majr dmestic aggregates, such as GDP, prductivity, inflatin, and crprate prfits? As nted earlier, evidence shws that utput in bth the hme and hst cuntries is psitively crrelated with new direct investments, and much evidence suggests that a dllar f new inward freign direct investment leads t higher utput than an additinal dllar f new dmestic investment. Nnetheless, further research is necessary t fully understand the impact f multinatinals n dmestic aggregates. In regard t the envirnment, is there a race t the bttm where gvernments cmpeting fr increased investment are willing t accept very lw (r lwered) envirnmental standards? Sme studies have lked at the impact f MNC s n envirnmental quality, and evidence suggests that, in general, MNC s are nt detrimental t envirnmental quality; indeed, there is sme evidence that, particularly in less develped cuntries, the ppsite culd be the case. Hwever, there als are examples f MNC s that cntribute t increased air r water pllutin. Further data cllectin and research wuld be needed t examine this questin mre fully. At present, there is very little data cllected directly frm MNC s that can be used t address this questin. C. Althugh we can answer many f the key questins, there nnetheless remains substantial additinal wrk 13

15 It is clear that several f the questins psed earlier can be at least partly addressed utilizing data currently available in the United States. Hwever, there are reasns fr nt accepting these research findings as definitive. Fr ne, it is unclear that U.S. experiences are applicable t ther cuntries, where tax rules, laws, labr frce attributes, stage f develpment, etc., may be substantially different. Furthermre, even in the United States, the answers t questins may change as direct investment cntinues t expand, as we mve thrugh different phases f the business cycle, and as tax laws change. It is ntewrthy that there are large bilateral asymmetries in data that purprt t measure the same r similar psitins r transactins. The answers t sme questins culd change, as mre cmplete r mre accurate data are btained. Unfrtunately, sme f the bserved differences in bilateral estimates are likely t be the result f estimatin errrs. Partly in recgnitin f this prspect, the Internatinal Mnetary Fund and thers have mved aggressively t imprve wrld statistical data quality, but this is a mnumental task that will take cnsiderable time and resurces t accmplish. Other bilateral asymmetries are prbably attributable t differences in the definitins and cncepts that individual cuntries emply in prducing estimates r in designing survey questinnaires. As mentined earlier, in this era f glbalizatin, cmparability f data -- bth t data n the dmestic ecnmy and t data f ther cuntries -- is an imprtant gal T wrk tward attaining that gal, the United States recently identified numerus brderline cases between direct investment and ther types f investment, where there were n bradly accepted treatments r definitins. The fllwing types f investment were amng thse identified: Mutual funds; trusts; shell cmpanies; psitins between financial intermediaries and affiliated enterprises nt principally engaged in financial intermediatin; ffices that prvide public-relatins-type services; manufacturers sales ffices; turism and business prmtin ffices; news bureaus; statins, ticket ffices, and terminal r prt facilities f an airline r ship peratr. A primary purpse f identifying these brderline situatins was t prmte internatinal cnsistency f treatment, by infrming thers f the treatments fllwed by the United States, and prviding justificatins fr thse treatments where they may be unclear. See Ralph Kzlw, Explring 14

16 While addressing current challenges, we need t be mindful f new and emerging issues. The frces f glbalizatin are prbably serving t wrsen difficulties that cmpilers are encuntering with the accunts, as new types f business arrangements (such as crprate inversins), the grwth f high technlgy industries, the increasing imprtance f services (and the related questins f hw t define and measure services activities), and new ways f financing peratins r hedging expsures, are being intrduced. Innvatins prmpted by the frces f glbalizatin may lead t gaps and imbalances in the accunts. Fr example, sme businesses may lck in exchange rates thrugh the use f derivative instruments, and this may lead t imbalances in the accunts if the tw entries (in the trade data and in financial accunt f the balance f payments) d nt exactly ffset. Als, manufacturers may cease t perate in the cnventinal way -- by taking title t the gds that they prcess -- and instead becme agents that receive fees fr prcessing gds that they never wn; this culd lead t measurement and classificatin challenges. These are but a few examples f challenges that we must meet if we are t cntinue t satisfy the needs f ur users adequately. IV. What shuld BEA r ther statistical rganizatins be ding, t prvide mre and better data t ur users? There are many different steps that we, as statistical rganizatins, shuld cnsider undertaking, t imprve the accuracy, cnsistency, and quality f ur data. Fr example, data cnsistency acrss cuntries wuld be imprved if internatinal statistical data standards were updated and expanded, s that key categries f psitins and transactins were defined in ways that are apprpriate fr data users and that are practical. (Practicality refers t the ease in which transactrs r survey respndents may be able t reprt the data, r the ease f estimating data that are nt directly reprted.) As mentined earlier, a recent example f a way the Brderline Between Direct Investment and Other Types f Investment: The U.S. Treatment, (BOPCOM- 02/35), paper presented at the Octber 2002 meeting f the IMF s Cmmittee n Balance f Payments Statistics, Canberra, Australia. 15

17 that BEA has wrked t help establish mre unifrm internatinal standards is its authrship f a discussin paper identifying key brderline direct investment areas. This wrk was prmpted by the IMF s annuncement f its intentin t update the Balance f Payments Manual. The plan t update t the United Natins System f Natinal Accunts prvides anther mtivatin, and an pprtunity, fr develping and updating methdlgical standards and classificatin systems. Data wuld be augmented and imprved if statistical rganizatins undertk additinal cllabrative prjects, t imprve data accuracy and t increase the utility f their data. Bilateral data cmparisns can result in substantial data imprvements, and it is clear that mre f these culd and shuld be undertaken. 11 In additin, data utput wuld be enhanced if statistical rganizatins made fuller use f the data that they already cllect. Fr example, as mentined earlier, BEA has integrated MNC financial and perating data with its balance f payments data, by peridically issuing a supplemental, wnership-based framewrk f the U.S. current accunt. In additin, BEA it has used data cllected n varius charges against prductin (cmpensatin f emplyees, depreciatin, etc.) t derive estimates f grss prduct (value added) f MNC s. Finally, BEA cnducts a variety f research and analytical activities in supprt f its data n MNC s. Research is cnducted t interpret the data and place it in cntext, and t develp new methdlgies and measures. Nnetheless, BEA recgnizes that there is mre wrk still t 11 One example f a successful data recnciliatin prject is the annual United States-Canada current accunt recnciliatin. This prject - which has been perfrmed annually since demnstrates the benefits that ensue frm carefully cnducted detailed bilateral data recnciliatins. Hwever, this prject als has shwn that high quality recnciliatin prjects may be resurce intensive. Viewed frm a practical perspective, the bilateral recnciliatin prjects that are undertaken between cuntries prbably must be limited t thse where significant gains are expected, r that d nt unduly burden statistical agency resurces. Perhaps partly in recgnitin f this cnsideratin, internatinal rganizatins including the IMF and Eurstat have been playing increasing imprtant rles in facilitating recent data cmparisn and recnciliatin prjects. 16

18 perfrm than it has cmpleted, and it cntinues t explre pprtunities t enhance the usefulness f the data it has already cllected. Als, statistical agencies shuld wrk aggressively tward clsing gaps in cverage, bth in their cverage f crss brder transactins and in their cverage f affiliate financial and perating data. Fr example, BEA currently cllects very little infrmatin that might be used t assess the impact f MNC s n envirnmental quality. 12 Speaking mre bradly, there are prbably many ther ways that statistical rganizatins may imprve utput and help assure that the needs f data users are being met, nt just in regard t data abut multinatinal cmpanies and glbalizatin indicatrs, but mre generally as well. Sme f these may include cnducting custmer satisfactin surveys; regularly eliciting feedback frm data users; develping and regularly updating strategic plans fr imprving agency utputs and peratins; and frmulating external advisry grups cmprised f experts wh prvide suggestins and feedback t the statistical rganizatin. These steps can build n ne anther, and help t assure that statistical agencies are meeting the needs f plicymakers, researchers, emplyees, and their ther stakehlders. V. Cnclusin Althugh BEA and statistical rganizatins thrughut the wrld have accmplished a great deal, the bligatin f statistical rganizatins is t keep pace with changes in the wrld ecnmy. T cver MNC peratins effectively, we believe that direct surveys t cllect the essential data must be cnducted, and this is nt a small undertaking fr statistical rganizatins. 12 BEA als has data gaps in areas f the accunts that are nt specifically MNC-related. Fr example, BEA has virtually n data n derivative financial instruments, and many f its surveys f unaffiliated services transactins are cnducted nly annually. Effrts t clse data gaps n MNC s need t be part f a brader effrt by statistical agencies, t identify and wrk n clsing all majr data gaps, whether in cverage f crss-brder transactins r f MNC financial and perating data. 17

19 Yet the frces f glbalizatin have resulted in the wrld changing at an accelerating pace, and statistical agencies can meet the demands fr relevant data nly by cnducting surveys f MNC s that cllect up-t-date and relevant infrmatin. It is critical that they d s, because these data are crucial fr answering bjectively the many hard questins being asked abut the rle and impact f MNC s. 18