Merchanting and other traderelated services
SNA Chapter 14 (external
transactions)
Merchanting - definition
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Purchase of a good by a resident (of the
compiling economy) from a non-resident and
the subsequent resale of the good to another
non-resident (without the good entering or
leaving the merchant’s economy)
The difference between the value of goods
when acquired and value when sold is
recorded as value of merchanting services
provided
Merchanting- recording
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A sells goods to C (value 80)
B sells services to C (value 20)
C imports goods from A value (100)
Global mismatch on goods by value
No imports of merchanting ever recorded
Inconsistent with normal wholesale and retail
margins
The classification of the transaction varies
according to whether the goods pass through
the merchant’s economy or not.
Merchanting –recording cont
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Problem of timing, merchants buys in
period 1, sells in period 2
Imports into compiling country in period
1 (not physically entering)
Negative imports from compiling
country in period 2
Brokerage
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Wholesale trading on behalf of others
on a fee or commission basis treated as
other trade related services (included
with merchanting in standard heading)
Why change?
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The key points are:
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The existing methodology does not apply the
change of ownership to these transactions.
Merchanting as presently defined captures more
than one type of activity.
Problems with holding gains and losses – should
not be included in services
This issue was discussed at the July AEG and
since then further consultation has taken
place.
What exactly is included?
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Global manufacturing
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Global wholesaling/retailing
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Such activities aim to make profits from
production of goods and the international
transactions of goods take place as a process of
such production activities.
Such activities aim to obtain margin (or fee,
commission) from buying and selling goods.
Commodity dealing
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Such activities aim to obtain profits from trading
and, particularly risk taking, in commodities
Global manufacturing
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Treat as trade in goods
Record on change of ownership basis, avoids
exceptional treatment
Consistency with goods for processing
Like GFP need to track values of physical
movements of goods (merchandise trade) as
well as imports of goods on BOP basis
Avoids negative imports
Global wholesaling and
retailing
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Treat as goods unless done on a fee
basis when services (brokerage)
Treat on a change of ownership basis
Still need to distinguish physical
movement and BOP consequences
Avoids negative imports
Data collection issues
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There may be some data collection and
reconciliation problems with treating
merchanting on gross basis
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E.g. risk of double counting trade from
customs and that collected by other means
such as business surveys
Risk of increased bilateral asymmetries in
practice
And analytical consequences
Alternative
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Keep to status quo; treat only on a net
basis as a service
Treats all cross country sourcing as
brokerage
Commodity dealing
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Either hedging or speculation
Mostly done via derivatives (futures and
option) so in the financial account
Commodity markets concerned with price
setting and risk trading
For LME perhaps 95% of transactions settled
in cash based on contract price
Transactions in commodities should be at
market price on change of ownership basis
Questions for the AEGGlobal manufacturing
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Should transactions in goods resulting from
global manufacturing be recorded as trade in
goods (under a separate heading) rather than
services (as now)?
In other words, should such transactions be
recorded on a gross basis, following the
change in ownership principle, as for goods
for processing?
Global wholesaling and
retailing
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Should global wholesaling/retailing when
trading in goods be recorded as trade in
goods (under a separate heading) or trade in
services (as now)?
If it is to be recorded as trade in goods,
should this be gross basis when there is a
change in ownership?
Or should it be recorded on a net basis as
services (as now)?
Commodity dealing
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Make clear most commodity dealing
transactions are transactions in financial
derivatives?
When accounts are settled in commodities,
that is there is an actual flow of goods,
should these transactions be recorded on a
change of ownership basis, gross in goods
(under a separate heading), or a net basis as
services (as now)?