Archive:Globalisation patterns in trade and investment - introductory chapters

This article has been archived. For further statistics on globalisation see: the online publication in Statistics Explained or the pdf version of the publication.

Foreword

Globalisation patterns in EU trade and investment focuses on one of the most important issues connected to globalisation, the growing trade and financial flows between the European Union and the rest of the world.

This publication presents a broad range of statistics on the balance of payments, international trade and business in a globalised world. It highlights recent patterns in trade, investment and also in industrial organisation.

The first part is devoted to the role played by the European Union in global trade and investment as compared to other trade partners.

In part two, the publication focuses on the international trade in goods and services, foreign direct investment, and the structure and conduct of foreign affiliates within the EU.

A balanced and progressive trade policy aiming to harness globalisation is high on the priorities list of the European Commission led by President Jean-Claude Juncker.

This Eurostat publication aims to present EU citizens, policymakers and businesses with more information about globalised trade and investment.

I hope that you will find it useful for making better and more informed decisions and I wish you an enjoyable reading experience,

Mariana Kotzeva

Acting Director-General, Eurostat

Abstract

Globalisation patterns in EU trade and investment provides information to describe patterns of ‘economic globalisation’: it focuses on developments for international trade and investment in the European Union (EU) and its 28 Member States from a business perspective, analysing exchanges between traders and patterns of behaviour within and between enterprises.

This online publication provides a starting point for those who wish to explore the wide range of data covering the globalisation phenomenon that are freely available on Eurostat’s website at: http:/ec.europa.eu/eurostat.

Editorial team

Helene Strandell and Pascal Wolff
Eurostat, Unit B4 — Digital dissemination

Contact details

Eurostat
Bâtiment Joseph Bech
5, rue Alphonse Weicker
2721 Luxembourg
E-mail: estat-user-support@ec.europa.eu

Production

This publication was produced by Giovanni Albertone, Simon Allen and Andrew Redpath — INFORMA s.à r.l.

For more information please consult

Eurostat website: http://ec.europa.eu/eurostat
Statistics Explained: http://ec.europa.eu/eurostat/statistics-explained

Acknowledgements

The editors of this online publication would like to thank the Eurostat colleagues who were involved in its preparation, in particular, Philippe Bautier and Louise Corselli-Nordblad (both from Eurostat, Unit B4 — Digital dissemination), Ales Capek, Matthias Ludwig, Olaf Nowak and Iliyana Savova (all from Eurostat, Unit C5 — Integrated global accounts and balance of payments), Axel Behrens, Pekka Alajaasko, Liliana Apostol, Eleni Giannopoulou, Karin Isaksson, Radoslav Istatkov, Riina Kerner, Irene Madsen and Jean-Francois Yattien-Amiguet (all from Eurostat, Unit G2 — Structural business statistics and global value chains), and Sophie Limpach, Anne Berthomieu-Cristallo and Anton Roodhuijzen (all from Eurostat, Unit G5 — Goods — production and international trade).

1. Global developments in trade and investment

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

This chapter provides an overview of global developments in international trade and investment, detailing economic links between some of the world’s largest economies. It focuses on data for the EU-28 and compares this with the recent trade and investment performance of 15 other global economies, including China, Japan and the United States. The data presented in this chapter draws on information from the European Statistical System (ESS) and the European System of Central Banks (ESCB), as well as a range of official international sources — the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN) and the World Trade Organisation (WTO). It uses data from a range of different statistical domains, principally: national accounts, the balance of payments and international trade in goods.

Main statistical findings

• Global trade in goods accounted for more than three quarters (76.6 %) of the world’s total exports of goods and services in 2016.
• The EU-28 had the highest share (17.9 %) of global exports of goods and services in 2016, while the United States recorded the highest share (16.8 %) of imports.
• The EU-28 accounted for around 15 % of the world’s trade in goods in 2016.
• There was a rapid increase in China’s share of global exports of goods from 11.0 % in 2006 to 17.0 % by 2016.
• Many developed world economies have experienced a relative stagnation in the value of their trade in goods since 2012, part of which may be linked to the impact of changes in oil prices.
• The EU-28 leads the world in terms of the value of its international trade in services; it accounted for 23.9% of global exports in 2016 and was particularly specialised in exporting other business services (which include management consultancy, legal or marketing services).
• In 2015, the EU-28 accounted for more than one third (37.4 %) of the world’s outward investment flows.
• The stock of foreign direct investment in China more than quadrupled between 2008 and 2015.

Statistics on international trade and investment

Statistics in this chapter are presented for the EU-28 and a fixed set of 15 countries (subject to availability) that include some of the world’s leading trading nations — they are: Australia, Brazil, Canada, China (excluding Hong Kong), Hong Kong, India, Japan, Mexico, Russia, Singapore, South Africa, South Korea, Turkey, the United Arab Emirates and the United States.

Note that the EU-28 statistics in this publication consider the EU as a single market, with all trade and investment flows presented in relation to non-member countries (often referred to as extra-EU flows). As such, the data shown exclude intra-EU stocks and flows (for example, trade or investment flowing from France to Germany or vice-versa). These flows may, in some cases, be considerable; however, for the purpose of this chapter they have been excluded — note too that they have also been omitted from any global totals and global shares.

The data are generally presented for the most recent decade for which they are available, often covering the period 2006-2016.

Setting the scene: the EU-28 accounted for almost one fifth of the world’s GDP in 2015

Figure 1: GDP, selected countries, 2005, 2010 and 2015
(% of world total)
Source: Eurostat (nama_10_gdp) and United Nations Statistics Division (National Accounts Main Aggregates Database)

Gross domestic product (GDP) is an indicator that provides a basic measure of the overall size of an economy (region, country or economic area); it represents the overall economic output (as measured by gross value added) of resident institutional units engaged in production, plus any taxes on products and minus any subsidies on products. In 2015, according to the United Nations, the economic output of the world was valued at EUR 66.9 trillion. The EU-28 accounted for around one fifth (19.9 %) of the global total, while the share of the United States was somewhat higher (at 24.3 %); note the relative shares shown in Figure 1 are based on current price series, reflecting market exchange rates.

An analysis over time reveals that the Chinese share of global GDP rose from 4.9 % in 2005 to 15.0 % by 2015. During this period, China moved ahead of Japan to become the world’s third largest economy. India’s share of global output also grew at a relatively fast pace between 2005 and 2015, rising from 1.7 % to 2.9 %. By contrast, the relative shares of global GDP accounted for by the EU-28, Japan and the United States each declined.

Fluctuating commodity prices impact upon global economic fortunes …

Figure 2: Indices of average commodity prices, 2006-2016
(2006 = 100)
Source: Eurostat (nama_10_gdp)Source: International Monetary Fund (Primary Commodity Prices)

Globalisation has seen the prices of basic commodities increasingly driven by international forces, rather than conditions in domestic markets. This is apparent from Figure 2 which presents price indices for some key basic commodities. Their price developments are clearly linked to economic shocks, for example, there was a considerable reduction in commodity prices as a result of global financial and economic crisis. This was followed by an upswing in the price of most commodities which was widely attributed to sustained economic growth across a range of emerging markets, particularly China. Thereafter, the price of some commodities fell, for example: there was a reduction in the price of metals, linked to a slowdown in global demand and a realignment of the Chinese economy away from export-led manufacturing activities towards higher levels of domestic consumption; and there was a dramatic fall in the price of oil from mid-2014, which may be linked to slowing economic growth in several emerging economies at the same time as the supply of oil (and substitutes) was expanding.

Such changes in commodity prices may have an important impact on aggregate figures at a macroeconomic level, for example: the overall value of international trade can fall as a result of falling commodity prices; lower commodity prices have the potential to dampen international investment flows as expected returns on capital expenditure are reduced; or corporate profits may be affected. Alternatively, falling commodity prices can boost demand for manufactured goods, as the fall in the price of inputs works its way downstream leading to lower prices for intermediate and consumer goods and consequently higher sales.

… while exchange rate developments may also play a pivotal role

Figure 3: Indices of average exchange rates, euro, 2006-2016
(2006 = 100)
Source: Eurostat (ert_bil_eur_a)

In a globalised world, international trade in goods and services has become commonplace. Exchange rates play an important role: a weaker domestic currency generally results in import prices rising alongside increased demand for exports, whereas a stronger domestic currency may reduce the price of foreign goods but weaken demand for exports.

Currency markets usually reflect underlying fundamentals, such as expected growth in domestic and foreign markets, changes in commodity prices, or country-specific shocks. Countries with relatively weak growth prospects are likely to be affected by global adjustments, in the form of currency depreciation and a worsening of their terms of trade (in other words, being able to buy a smaller volume of goods for the same amount of currency). Note also that the price of some commodities is denominated in dollar terms (for example, oil) and that changes in commodity prices may be further amplified if commodity prices and exchange rates move in the same direction.

Figure 3 shows the development of bilateral exchange rates between the euro and six other global currencies. While the Russian rouble and the British pound sterling both lost value against the euro between 2006 and 2016, the value of the remaining currencies appreciated.

Further information on international trade in goods by invoicing currency is presented in Subchapter 2.7.

Source data for figures (MS Excel)

Global developments in trade and investment: figures

2. International trade in goods for the EU

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

While the first chapter of this publication provided a set of international comparisons for trade and investment flows, the focus of subsequent chapters is the EU and its individual Member States.

Main statistical findings

• In 2016, the main three destinations for goods exported from the EU‑28 were the United States, China and Switzerland.
• China was the origin of more than one fifth (20.2 %) of the goods imported into the EU-28 in 2016.
• Since the global financial and economic crisis, the value of the exported goods leaving the EU-28 has risen at a faster pace than the value of EU-28 imported goods.
• Machinery and transport equipment accounted for more than two fifths of all goods exported from the EU-28 in 2016 and for the EU-28’s highest trade surplus (EUR 192 billion), while the EU-28’s biggest trade deficit was recorded for mineral fuels (EUR 190 billion).
• In 2016, Germany had the highest trade surplus for goods (EUR 257 billion) among the EU Member States.
• Malta and the United Kingdom were the only EU Member States that had a slight majority of their trade in goods with non-member countries in 2016.
• Sea transport accounted for just over half of the total value of goods imported into the EU-28 in 2016.
• Around 70 % of the imports that entered the EU-28 did so at zero or reduced tariff.
• There were 17 EU Member States that invoiced a majority of their exports to non-member countries in euros, while 20 EU Member States reported more than half of their imports from non-member countries were denominated in US dollars.

This chapter provides information on international trade in goods: at its most basic level international trade in goods may be viewed as being beneficial, without it only the French could drive a Renault and the Germans a BMW, while only the Italians could drink a glass of prosecco and the Scots a dram of single malt whisky. There are nevertheless contrasting views between those who adhere to the belief that higher levels of international trade in goods should be advantageous for all (a so-called ‘win-win’ situation) and those who feel that increased levels of international trade in goods may ‘crowd-out’ domestic production and lead to the closure of certain industries, as these are unable to remain profitable in the face of global competition.

3. International trade in services for the EU

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

Most developed economies have moved along a well-trodden path from a subsistence economy based on agriculture, through an industrial economy, to a post-industrial economy dominated by service activities. According to the United Nations, the share of service activities in the world’s gross domestic product (GDP) reached 69.1 % in 2015, while the corresponding figure for the EU-28 was even higher at 73.8 %.

An efficient tertiary sector, as well as the increased availability of services, may boost economic growth and enhance industrial performance, as intricate global production networks increasingly rely on services to help move goods and capital. Indeed, the efficiency of services has become paramount to multinational enterprises and to the competitiveness of domestic economies, as services including finance, insurance, transport, logistics, communications and a host of business services provide key intermediate inputs to other parts of the economy. As such, the relative weight of services in value added or international trade is likely to be understated when based on an analysis of gross figures, as many services are ‘embedded’ in other products (goods or other services).

Main statistical findings

• Having grown at a rapid pace since the financial and economic crises, EU-28 trade in services stagnated in 2016.
• The EU-28’s trade in services with non-member countries rose between 2010 and 2016 at a slightly faster pace than trade in services between EU Member States.
• More than one quarter (27.2 %) of the EU-28’s exports of services in 2015 were destined for the United States.
• In 2015, the EU-28’s largest trade surplus for services was recorded with Switzerland (EUR 44 billion).
• The highest share of EU-28 trade in services in 2016 was accounted for by other business services (which includes, among others, management consultancy, architectural, engineering and scientific services, or real estate services).
• The EU-28 ran a trade surplus for 11 out of the 12 main service categories in 2016; the exception was charges for the use of intellectual property.
• Among the EU Member States, the United Kingdom had the highest value of services exports in 2016, while Germany had the highest value of services imports.
• Ireland accounted for a high share of the EU-28’s services imports in 2016 — a large proportion of this trade was with offshore financial centres  and the United States.

This chapter focuses on trade patterns and developments for the international trade in services; its focus is on the EU-28 and the individual EU Member States (international comparisons may be found in Subchapter 1.3). As with the previous chapter on international trade in goods, the information presented here is divided into a general introduction for the main developments before a more profound analysis is presented in relation to trade by partner and trade for different types of services.

4. Foreign direct investment

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

In a world where political, economic and technological barriers are rapidly disappearing, there is increasing competition between countries to attract foreign investment. Modern-day business relationships nowadays extend well beyond the traditional exchange of goods and services, as witnessed by the increasing reliance of enterprises to engage in mergers, partnerships, joint ventures, licensing agreements, and other forms of cooperation.

This chapter focuses on one such alternative economic strategy, namely, foreign direct investment (FDI). FDI is carried out by enterprises that decide to invest abroad by establishing new plant/offices, or alternatively, through purchasing the assets of an existing foreign enterprise. As such, FDI activities may complement international trade flows, as they allow enterprises to produce (and often sell) goods and/or services in countries beyond where they were first established.

Main statistical findings

• The share of the EU-28’s outward and inward stocks of FDI relative to GDP consistently rose during the period 2008-2015.
• There were sizeable disinvestments in the EU-28 during 2014, followed by a sharp rebound in 2015, driven by an upturn in mergers and acquisitions activity.
• In 2015, the United States was the EU-28’s principal partner for both inward and outward FDI stocks.
• Financial and insurance activities accounted for almost three quarters of the inward FDI positions held in the EU in 2015.
• The importance of FDI was very high in the relatively small economies of Luxembourg, Cyprus and Ireland, where high capital flows may be linked to the activities of special purpose entities.

Does foreign direct investment benefit all?

FDI can potentially generate a wide range of benefits for both sides of the relationship. Outward investors may, among others: reduce transport costs by locating plant in close proximity of new markets; avoid tariffs and/or quotas by producing directly in foreign markets; employ cheaper and/or skilled labour; spread their risk through diversification; generate income (both as profits and dividends). Those countries receiving inward investment may also benefit, for example, through: an increase in gross domestic product (GDP) and productive capacity; higher employment rates; a transfer of technology; lower levels of imports; a stimulus being given to their domestic economy through foreign investment.

That said, there is a growing volume of literature surrounding the activities of multinational enterprises and their motivations for engaging in FDI. Some of the principal concerns centre around the role of offshore financial centres  and special purpose entities (SPEs) (see Chapter 4 for more information) which account for a growing share of global investments. Using entities such as these, multinational enterprises may take advantage of tax rate differentials and legislative differences between different jurisdictions, carrying out a range of intra-firm financial operations and holding activities.

Statistics on foreign direct investment

Foreign direct investment (FDI) is a category of investment that reflects the objective of a resident enterprise (the direct investor) in one economy establishing a lasting interest in another enterprise (the direct investment enterprise) which is resident in a different economy to that of the direct investor. The lasting interest or effective voice implies the existence of a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence on the management of the direct investment enterprise, which is deemed to exist if the investor acquires at least 10 % of the ordinary shares/voting rights of the direct investment enterprise.

Definitions for FDI statistics are based on the IMF’s sixth balance of payments and international investment position manual (BPM6). Four kinds of FDI are identified: the creation of productive assets (so-called ‘greenfield investments’); the purchase of existing assets (for example, through acquisitions, mergers or takeovers); the extension of capital which relates to additional new investments as an expansion of an established business (conceptually and in terms of economic impact, this is similar to greenfield investments); and financial restructuring which refers to investment for debt repayment or loss reduction.

FDI is classified primarily on a directional basis: resident direct investment abroad (or outward direct investment) and non-resident investment in the reporting economy (or inward direct investment). Statistics on FDI include not only the initial flow/acquisition of equity capital, but also subsequent capital transactions between the direct investor and the direct investment enterprise. As such, through flows of FDI, an enterprise/country may build-up its international investment position, or stock of FDI, which may differ from accumulated flows due to revaluations (changes in prices or exchange rates) and other adjustments like rescheduling, the cancellation of loans or debt-equity swaps.

For the purpose of this publication, the rate of return (as shown at the end of Subchapter 4.4) is calculated as: net income on FDI divided by the net investment position (as measured by the stock of FDI).

Future statistical developments

FDI statistics for the EU are currently only collected according to the immediate counterpart country, for either the host country (inward FDI) or investing country (outward FDI); this follows the approach adopted for the compilation of balance of payments statistics. However, an investor can, for various reasons, choose to pass investments through a special purpose entity (SPE) located in a third country thereby distorting or skewing FDI statistics based on the immediate counterpart.

To address this issue, the European Parliament and the Council adopted Regulation (EU) 2016/1013 in June 2016 amending Regulation (EC) No 184/2005 on Community statistics concerning balance of payments, international trade in services and foreign direct investment. The amendment obliges EU Member States to collect annual FDI statistics based on the ultimate ownership concept. In addition, it also requires Member States to collect statistics distinguishing between the creation of productive assets (greenfield investments) and the purchase of existing assets (takeovers). Together with the Member States, Eurostat is currently working on the development of a framework and methodology for the collection of these FDI statistics — with the aim that they should be published for the first time in 2020.

5. Foreign affiliates

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

The previous chapter on foreign direct investment (FDI) provided information relating to the total amount of capital that was invested abroad by EU-28 enterprises, as well as the value of inward investment that was made in the EU. This chapter looks in more detail at the impact of these foreign investments through an analysis of the establishment of foreign affiliates (FATS).

Main statistical findings

• In 2014, foreign-controlled enterprises accounted for just 1.2 % of the total enterprise population in the EU-28’s non-financial business economy.
• More than half of the total value added by tobacco products and pharmaceuticals manufacturing in the EU-28 was generated by foreign-controlled enterprises in 2014.
• Slovenia and the United Kingdom were the only EU Member States in 2014 where more than half of all foreign-controlled enterprises were controlled by non-member countries.
• Manufacturing activities accounted for a high share (almost 40 %) of the total sales made by EU affiliates in the rest of the world in 2014.
• Almost 60 % of persons employed in EU foreign affiliates abroad in 2014 were located in countries outside the EU.

Multinational enterprises contribute to the globalisation process as active rather than passive participants: the potential benefits they may bring to domestic economies lead many governments to make significant efforts in the pursuit of attracting foreign investment, be this generally across the whole economy or more specifically in strategic sectors or specific regions. In the long run, foreign affiliates should normally be expected to improve the economic welfare of both the host and parent economies. For example, the establishment of foreign affiliates in the EU may lead to, among others: the creation of new jobs; a transfer of technology and skills; higher levels of productivity; an increase in competition; or an increase in international trade. In a similar manner, foreign affiliates that are established abroad by European enterprises may have a considerable impact on the global economy.

Further information on global value chains is presented in Subchapter 6.3).

Box1 — EuroGroups Register

The EuroGroups Register is a network of business registers developed for statistical purpose in EU Member States and EFTA countries; it is focused on multinational enterprise groups and is coordinated by Eurostat. It is expected to become a single platform to support the production of statistics on globalisation through an EU-wide register of multinational enterprise groups and their affiliates. It contains microdata on enterprise groups and their constituent enterprises: the register stores information on the structure of each group and its enterprise characteristics, such as their principal economic activity (based on the statistical classification of economic activities in the European Community, NACE), employment, turnover or global decision centre.

The EuroGroups Register is designed to provide a unique survey frame for microdata on globalisation and to serve as a tool for improving these statistics. Its data are accessible to the national statistical offices and central banks of the EU Member States and EFTA countries for compiling statistics; they are not available for public use.

6. Enterprise statistics — pilot surveys and future statistical developments

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

Over the last few decades there has been a rapid change in how enterprises operate. One of the main changes has been the introduction of production systems that are based on complex networks of suppliers and service providers. These changes in business models have led to increasing demands for new statistical measures in order to promote a better understanding of such developments. This final chapter provides information on a number of statistical pilot studies that have been designed to measure changes in the behaviour of enterprises that participate in globalised markets.

Main statistical findings

• A higher proportion of the EU’s industrial (rather than services) enterprises made use of international sourcing.
• EU enterprises tend to outsource support (rather than core) business functions.
• Apart from other EU Member States, China and India were the most common destinations for EU enterprises with international sourcing relationships.
• More than half the world’s trade was accounted for by trade in intermediate products.
• A growing share of the EU’s value added may be attributed to imports of intermediate goods.

Annex

Main data sources

Balance of payments and international trade in services

The balance of payments summarises economic transactions between residents and non-residents of an individual country (for example, a European Union (EU) Member State) or economic area (for example, the EU-28). It provides harmonised information on international transactions which are part of the current account (trade in goods, trade in services, primary and secondary income), as well as on transactions which fall in the capital and financial accounts.

The balance of payments provides information on: i) the total value of exports (sometimes referred to as credits), imports (sometimes referred to as debits), and the balance (exports minus imports) of transactions; ii) the net acquisition of financial assets and net incurrence of liabilities for each balancing item, as well as the net transactions (net acquisition of financial assets minus net incurrence of liabilities). These are presented for a range of partner countries or economic areas. The balance of payments also provides information pertaining to international investment positions, in other words, the value of financial assets owned outside an economy and indebtedness of that economy to the rest of the world.

The methodological framework for balance of payments statistics and for data on international trade in services includes:

• the International Monetary Fund’s (IMF’s) Balance of Payments and International Investment Position Manual (BPM6);
• the IMF’s Balance of Payments and International Investment Position Compilation Guide (BPM6 CG);
• the balance of payments services classification (EBOPS 2010).

In the EU, changes to international statistical standards have been translated into new data requirements via the adoption of new EU legal acts regarding statistical reporting requirements for external statistics as well as balance of payments, international trade in services and foreign direct investment statistics.

The concept of residence in the BPM6 is identical to that used in the United Nations’ system of national accounts (SNA) and the European system of national and regional accounts (ESA2010). It is not based on nationality or legal criteria; rather, on the notion of a centre of economic interest. More specifically, an institutional unit (such as a company) is a resident unit when it has a centre of economic interest in the economic territory of a country for a period of at least one year.

International trade in goods

According to the United Nations (2010), the aim of statistics on international trade in goods is ‘to record all goods which add to or subtract from the stock of material resources of a country by entering (imports) or leaving (exports) its economic territory’. International trade in goods statistics are an important source of information for many public and private sector decision-makers nationally and internationally; they also constitute an essential source for the compilation of balance of payments and national accounts statistics.

International trade in goods statistics cover both extra- and intra-EU trade: the former covers the trading of goods between European Union (EU) Member States on one hand and non-member countries on the other, while the latter concerns trade that is exclusively between EU Member States. Extra-EU imports and exports are recorded in the Member State where the goods are placed under customs procedures; as such, these statistics do not record goods in transit, goods placed into customs warehouses, or goods for temporary admission. These statistics are provided by traders on the basis of their customs (extra-EU) and Intrastat (intra-EU) declarations. They are compiled for a variety of different product classifications, among which, the fourth version of the standard international trade classification (SITC) of the United Nations, which allows for comparisons on a worldwide basis.

For more information, refer to:User guide on European statistics on international trade in goods and Compilers guide on European statistics on international trade in goods, available from a dedicated section on the Eurostat website, under the heading of Manuals and guidelines.

Foreign direct investment

Foreign direct investment (FDI) is an international investment recorded within the balance of payments. It concerns an investment whereby a resident entity in one economy seeks to obtain a lasting interest in an enterprise that is resident in another; this implies the existence of a long-term relationship between the direct investor and the enterprise. A direct investment enterprise is one in which a direct investor owns 10 % or more of the ordinary shares or voting rights (for an incorporated enterprise) or the equivalent (for an unincorporated enterprise). Through FDI flows, an investor may build up FDI stocks (also known as FDI positions) that have an impact on an economy’s international investment position. FDI stocks differ from accumulated flows because of revaluations (changes in prices or exchange rates) and other adjustments.

The methodological framework for defining FDI statistics is provided by the fourth edition of the OECD’sBenchmark definition of foreign direct investment (BD4). Eurostat’s data requirements within this domain are aligned with international standards (BPM6 and BD4), as stipulated in Commission Regulation (EU) No 555/2012 amending Regulation (EC) No 184/2005 of the European Parliament and of the Council, which establishes a common framework for reporting of balance of payments, international trade in services and foreign direct investment data.

FDI statistics in the European Union (EU) are currently collected according to the immediate direct investor or immediate direct investment company (immediate counterparts). Regulation (EU) 2016/1013 aims at developing FDI statistics based on the ultimate ownership concept and FDI statistics distinguishing between the creation of new, productive assets by foreigners (so-called greenfield investments) and the purchase of existing assets by foreigners (FDI resulting from takeovers). FDI statistics include all types of enterprise, including those enterprises with very little or no economic activity, whose core business function is to finance group activities or to hold assets/liabilities — these may be referred to as holding companies, shell companies, financing subsidiaries or conduits.

The switch to BPM6 brought about a number of important methodological changes to FDI statistics, such that data from 2013 onwards are not directly comparable with those published for earlier reference periods other than for some major aggregates, most notably in relation to reverse investment and the introduction of a ‘gross’ assets/liabilities concept.

Foreign affiliate statistics

Foreign affiliate statistics (FATS) measure the commercial presence of affiliates in foreign markets, as defined by theGeneral Agreement on Trade in Services (GATS). Foreign affiliate statistics deal with enterprises that control enterprises abroad (outward FATS) or enterprises that are controlled by foreign enterprises (inward FATS).

The FATS recommendations manual lays down Eurostat’s detailed guidelines for the methodology, collection and compilation of statistics within the European Union (EU). FATS data should be compiled according to the ultimate controlling institutional (UCI) unit concept; the ultimate controlling institutional unit is the unit which, proceeding up a foreign affiliate’s chain of control, is not controlled by another institutional unit. Control is defined as the ability to determine the general policy of the affiliate, if necessary, by appointing appropriate managers. It is often difficult to determine the ultimate controlling institutional unit and, in practice, share ownership is sometimes used as a proxy for control. Thus, FATS focus on affiliates that are majority-owned (more than 50 % of the ordinary shares or voting power) by a single investor or by a group of associated investors who act together.

International sourcing

Statistics on international sourcing are designed to measure the relocation of domestic production of goods/services to producers who are located abroad as a result of a decision taken by a resident producer to stop production or the use of core and/or business support functions. One example is the potential outsourcing of business functions that are currently performed in-house by a resident enterprise to an external supplier who is located either domestically (national sourcing) or abroad (international sourcing). By contrast, backsourcing and reshoring occurs when an enterprise decides to move its business functions (core or support) back into the domestic economy, after they had been previously been moved out of the country. These statistics on international sourcing were collected by means of a statistical survey.