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Measuring “Factoryless”

ManufacturingEvidence from U.S. Surveys

Brent Moulton (with Fariha Kamal, Jennifer Ribarsky)BEA Advisory CommitteeMay 10, 2013

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Importance of Contract Manufacturing

▪ Globalization has affected global manufacturing arrangements: Traditional, integrated manufacturer Manufacturing service provider Factoryless goods producer

▪ Concerns in measuring international transactions: Re-exports Merchanting Manufacturing services on goods owned by others Free trade and other special zones

▪ Changes in classification and international guidelines

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U.S. Classification Guidance on Factoryless Goods Producers

▪ Explicit guidance to classify factoryless goods producers in the manufacturing sector Report the value of final product produced Report purchases of CMS

▪ Manufacturing service providers are also classified in manufacturing sector Report receipts from CMS

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International Standards: BPM6 and SNA 2008

▪ New treatment of “goods-for-processing”▪ When ownership does not change and

goods are returned after processing Gross merchandise trade flows are excluded Value of the processing service included as

services trade measured by the processing fee No impact on overall trade balance but it shifts

the balance between goods and services Impacts input-output accounts

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Contract Manufacturing Services

▪ CMS is a key element in identifying the relationship between firms that outsource the fabrication of products—while still controlling the production process— and firms that do the processing May help classify units to appropriate

industry May help identify the “goods-for-

processing” international trade flows

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Surveys with CMS Questions

▪ BEA Surveys 2009 Benchmark Survey of U.S. Direct

Investment Abroad (BE-10) 2011 Benchmark Survey of Transactions in

Selected Services and Intellectual Property Products with Foreign Persons (BE-120)

▪ Census Bureau Surveys 2007 Economic Census 2011 Report of Organization Survey (COS) 2012 Economic Census

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BE-10 CMS Responses

U.S. Parents Who Purchased CMS, 2009

  Number of RespondentsPercent of

RespondentsYes 888 23%No 2,860 75%

No response 82 2%

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U.S. Parents Who Performed CMS for Foreigners, 2009

 Number of

RespondentsPercent of

RespondentsYes 324 8%No 3,423 89%

No response 83 2%U.S. Parents Who Purchased CMS, by Sector, 2009

Manufacturing

Wholesale

Information

Professional, Scientific,

Technical ServicesOther

72% 13% 5% 1% 9%

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Distribution of U.S. Parents WhoPurchased CMS, 2009

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 U.S. parents who purchased CMS

888

of which:  U.S. parents owned materials used by contract manufacturers who are located inside the U.S. 579U.S. parents owned materials used by contract manufacturers who are located outside the U.S. 330 U.S. parents did not own materials used by contract manufacturers who are located inside the U.S. 369U.S. parents did not own materials used by contract manufacturers who are located outside the U.S. 323

• Can respond “yes” to more than one type of arrangement

• 10 percent of U.S. parents that purchased CMS responded “yes” to all four types of arrangements

• Of the U.S. parents that reported purchasing CMS from outside the U.S., nearly half of the respondents answered “yes” to both owning the material inputs and not owning the material inputs used by the contract manufacturer

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Conclusions

▪ Responses from BEA and Census surveys indicate: Domestic purchases of CMS more prevalent Firms that purchased CMS from their

affiliates are larger than other firms purchasing CMS outside the U.S.

For U.S. parents who purchased CMS outside the U.S., they were just as likely to own as to not own the material inputs

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