Press Release

Geneva, 17 June 2003

Seeing the Whole ‘Elephant’
Globalisation and measuring economic activities of multinationals

When multinational enterprises locate plants in low wage jurisdictions abroad what is the impact on domestic wages, employment and production? Are decisions by multinationals to locate abroad primarily a low-wage-seeking outsourcing, or primarily a strategy to improve access to foreign markets? What role do multinationals play in international financial crises, in the international transfer of technology, in environmental degradation? Answering these questions requires an integrated overview of each multinational ‘elephant’. However, the international statistical system is currently at the stage of describing the individual parts.

At its annual plenary meeting in Geneva the Conference of European Statisticians considered how to improve the statistical basis for responding to these and related questions about the important worldwide process of “globalisation”. The importance of this topic was highlighted by growth of worldwide sales by foreign affiliates from about 125% of exports in 1990 to over 200%, or $19 trillion, by 2001.

Globalisation is driven by multinationals, but other players also play a role in this internationalisation not only of production processes and of markets for goods and services, but also of financial markets, competition, investment, and technology transfer. While it is basically an economic process, social, cultural, political and institutional aspects are also considered important.

Official statistics can currently illuminate some questions about globalisation, but a variety of challenges to being able to more fully understand the process are being discussed:

• Trade among geographically dispersed units of multinationals, at prices set to shift profits to lower tax jurisdictions, is of concern because of the distortion to prices and its impact on the accurate measurement of inflation, profits, and exports and imports.
  
• Similarly, sharing the benefits of intellectual and other capital (e.g. software) across the geographical boundaries spanned by multinationals, regardless of the country of origin of the initial investment, has implications for the measurement of capital stock, productivity, depreciation, and gross domestic product in all the countries concerned.
  
• The role of “intangible assets” and e-commerce raises questions as to whether the statistical system can track the proliferation of smaller suppliers e-commerce has engendered.

The need to see the multinational as a whole emerged forcefully. With few exceptions national statistical offices currently survey only that portion of a multinational that resides in their country. As a consequence a coherent worldwide statistical picture of the multinational is lacking. Building such a picture requires close collaboration among national and international statistical offices of the world, and multinationals. The Conference of European Statisticians considered several mechanisms for enhancing collaboration aimed at seeing the whole elephant, at obtaining a fuller understanding of the behaviour of multinationals.

All papers from the Seminar session are available at the web site: