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Feature Article - ANZSIC and TREC - Two views of trade
Industry based statistics
Broad economic category statistics
8. As a signatory to the Harmonized System Convention, Australia is obliged to collect and publish merchandise trade statistics according to all codes of the HS. The ABS also follows the UN guidelines on the use of the SITC Rev3, with additional codes to take account of Australia's treatment of gold coin, whether or not legal tender, and other legal tender coin, and confidential items. This is an extension of, not a deviation from, the international standard. The ABS usage of BEC also conforms to UN recommendations. Where the ABS does not follow exactly the internationally-recognised classifications for merchandise trade, it differs only where the international classification is inappropriate for local conditions and requirements. In developing ANZSIC greater emphasis was placed on alignment with the international standards than had been the case with the previous classification, the Australian Standard Industrial Classification (ASIC). To achieve this, ISIC Rev3, was used as the international standard for reference purposes. ABS MERCHANDISE TRADE STATISTICS BY INDUSTRY OF ORIGIN 9. The ABS, since December quarter 1993, has produced international merchandise trade statistics classified by industry of origin according to ANZSIC. This classification replaced the ASIC and the New Zealand Standard Industrial Classification (NZSIC). ANZSIC was developed to improve the alignment with ISIC Rev3 and to reflect the significant changes that have taken place in the world economy over the past three decades. The international merchandise trade statistics published by the ABS using ANZSIC are not, however, directly comparable with the previously published ASIC based series. To assist users in overcoming the discontinuities created by the change, historical series, classified by ANZSIC, were recompiled back to 1988. Derivation of industry of origin statistics 10. Most of the ABS statistical collections which produce data by industry do so by determining the industry class to which individual reporting units belong and surveying those units. International merchandise trade statistics, however, are compiled indirectly as a by-product of commodity information submitted by exporters and importers or their agents to the ACS. International merchandise trade statistics by industry are compiled by allocating statistical items of the AHECC and HTISC to the ANZSIC with which the production of the commodities is primarily associated. 11. The application of ANZSIC to international merchandise trade statistics involves some practical issues requiring special rules. These rules relate to commodities which cannot be primarily associated with a particular industry. For example, the commodities included in HS code 9508 Roundabouts, swings, shooting galleries and other fairground amusements; travelling circuses, travelling menageries and travelling theatres, are produced by a number of industries, with no single industry predominating. For commodities such as these, a special ANZSIC class, 9889 Sum of items not readily classified, was created. 12. In addition, commodities which have confidentiality restrictions imposed upon them are not allocated to a specific industry. Instead they are allocated to ANZSIC class 9899 Sum of confidential items not more specifically classified. Commodities concorded to ANZSIC classes 9889 and 9899 comprise the 'Other Industries' category of the industry of origin tables for international merchandise trade statistics.
Interpretation and use of industry of origin statistics 13. As in any system of presentation involving some method of classification, the underlying framework of the structure has to be understood as do the limitations inherent within that structure before an analysis of the data can be attempted. Clients seeking to analyse international merchandise trade statistics on an industry of origin basis, should be aware of the method used to derive the data and the limitations of this mode of presentation. 14. International merchandise trade statistics by industry of origin are published at the 2-digit (Subdivision) level for three Divisions of the goods producing industries: Divisions A, Agriculture, Forestry and Fishing; B, Mining; and C, Manufacturing. Trade in commodities which are not allocated to a specific industry are grouped in the residual category described as Other Industries. (See Table A.) 15. Each of the HS codes are linked to the appropriate class within ANZSIC to provide an indication of the industry in which the commodity typically originates, and to which the activity of producing the commodity is designated as primary. For example, exports of commodity HS 080610, Fresh grapes, are classified for industry of origin purposes to ANZSIC class 0114, Grape growing, under the division of Agriculture, Forestry and Fishing. 16. In practice, commodities may be produced by industries to which their production is not primary. Other statistics presented using ANZSIC incorporate the value of any secondary production activities undertaken by the establishments involved, while the commodity concordances applied to international merchandise trade data only assign items to the industry in which they are primarily classified. This may not necessarily be the industry in which the items are actually produced. For example, a business primarily concerned with the production of fresh grapes, classified under the Agricultural, Forestry and Fishing Division, may also produce a small quantity of wine for export. So, for merchandise exports statistics the wine would be classified to ANZSIC 2183, the wine manufacturing industry, even though the wine may have been produced by a unit in the grape growing industry, ANZSIC 0114. The recorded value of merchandise exports for a particular ANZSIC class may, therefore, be overstated or understated in comparison to the value of domestic production if the bulk of that commodity has been produced as a secondary activity and is included with another ANZSIC industry. 17. The presentation of international merchandise trade statistics using the ANZSIC industry of origin system has meant that, of the three divisions of the ANZSIC for which statistics are shown in International Merchandise Trade, Australia (Cat. No. 5422.0), the largest value of exports and imports is represented by goods which are primary to the Manufacturing Division. This characteristic of the industry of origin statistics, particularly where exports are concerned, may seem at odds with other representations of international merchandise trade and Australia's history as a primary producer, but it is a direct result of the way the ANZSIC classification is used to present international merchandise trade data. While some analysts may question the validity of classifying a product such as canned tomatoes as a 'manufactured' export, the rationale for producing international merchandise trade statistics on an industry of origin basis, is to give an indication of which industry is most likely to have produced the final item either imported or exported. The use of a different classification, such as SITC or TREC to present the same data, will inevitably yield a different result. THE DFAT TREC SYSTEM 18. DFAT produces statistics on Australia's international merchandise trade using the Trade Exports Classification (TREC). TREC was developed by the former Commonwealth Department of Trade in 1978 to classify merchandise exports according to their degree of processing. TREC was derived from the 7-digit Australian Exports Commodity Classification (AECC), the Australian expansion of the 5-digit SITC Rev 2. With the move from AECC to AHECC in 1988, the TREC codes were concorded to the new system so that TREC data were available in time series from July 1977. 19. Under the UN's SITC Rev 2, all commodities in Sections 0-4 are broadly defined as 'Primary Products' and in Sections 5-8 are broadly defined as 'Manufactures'. In developing TREC, the Department used SITC Rev 2 as a starting point and then applied the UN's BEC classification - which classifies commodities according to their main or end use - to further break down items according to their degree of processing. 20. Manufactures were divided into Simply Transformed Manufactures (STMs) and Elaborately Transformed Manufactures (ETMs). In broad terms, the scope of ETMs was designed to cover finished goods with a high degree of manufacturing value added. This definition facilitates the identification of goods deemed to be promotable in overseas markets. Simply Transformed Manufactures (STMs) comprise the residual of Australia's manufactures exports. 21. At a broad level, there is a concordance between TREC and SITC Rev3. This concordance allows comparisons of TREC data for Australia's major trading partners. Globally, ETMs comprise the major component of world merchandise trade. 22. In 1994 DFAT recognised an emerging demand for the presentation and analysis of imports data using TREC. However, as the TREC is based on AHECC the presentation of imports data could only be done using higher level concordance based on SITC Rev 2 data at the 3-digit level. This concordance only provides publication quality detail at the level shown in Tables C and E. A future revision of TREC will address this deficiency to present a fully comparable detailed presentation of TREC for both exports and imports. ANZSIC AND TREC - A COMPARISON 23. The main difference between TREC and ANZSIC statistics is that TREC is a commodity classification, while ANZSIC is an industry classification. When merchandise exports and imports statistics are presented according to the TREC, goods are grouped according to the degree of processing or transformation they have undergone. In contrast, when they are presented according to ANZSIC, commodities are grouped according to their 'industry of origin', that is the industry with which the goods are most closely associated: in the case of exports, this is the industry which is most likely to produce those goods; and in the case of imports, this is the domestic industry which is most likely to have produced goods equivalent to those imported. Therefore, it is not valid to compare detailed data out of the two systems of classification. The differences are clearly illustrated in Tables B and C. The tables show that while both ANZSIC industry of origin statistics and TREC use the same basic trade data collected by the ABS, the aims and results of each are different. For exports of manufactured goods, for example, TREC statistics show manufactured products originating in any industry, and ANZSIC statistics show all products typically originating in the manufacturing industry. 24. Tables D and E present international merchandise trade statistics for the period 1989/90 to 1995/96 using the ANZSIC and TREC classifications at a broader level of aggregation than was shown in Tables B and C. This method of presentation can be used by analysts interested in changes over time to merchandise exports and imports on an industry basis using ANZSIC or the extent of processing using TREC. 25. International merchandise trade statistics on an ANZSIC basis provide a broad overview of Australia's exports and imports at the industry level. They can be used to compare information on the total value of production of an industry group or class and estimates of the percentage of goods exported from that same industry, and how that proportion may have changed over time. Similarly, details of imports classified by ANZSIC can be used to identify and compare changes over time in the industry groups or classes which are subject to the highest level of import competition, providing an indication as to where efforts at import substitution might be aimed. 26. These 'industry based' statistics, however, do not relate to the commodity origin. Commodities classified by ANZSIC may have come in the first instance from the primary sector of the economy, but may be classified as 'manufactured' because they underwent a minor manufacturing process. Exports and imports classified by ANZSIC are most effectively used as a guide to the industries most likely to have produced the commodities, and are therefore suited mainly to broad level analyses of international merchandise trade. However, ANZSIC information is also available on a country or state of origin and regional basis. 27. Focusing mainly on exports, TREC was designed in part to overcome the limitations of industry-based classifications, and to assist the analysis of Australia's trade performance from a different perspective. The main purpose of TREC was to distinguish between commodities according to their level of processing - this led to the categories of 'unprocessed' and 'processed' within primary products, and 'simply transformed' and 'elaborately transformed' within manufactures. Classification of commodities within these categories is done by assessing the degree of manufacturing value added in the final export value of each commodity. Although this process is somewhat subjective, the resulting TREC estimates do provide users with an additional basis for measuring Australia's success in increasing the sophistication of its exports. 28. The TREC uses an appreciably narrower definition of manufacturing in comparison to that used in ABS industry of origin statistics. As a result, a number of commodities classed as primary products in the TREC (e.g. meat and cheese) are classified to the manufacturing division in ANZSIC industry of origin statistics. This is because these commodities undergo some manufacturing or treatment processes which result in a transformation of the product. While at times these instances may seem at variance with the way one would expect these commodities to be treated, their classification under ANZSIC to the manufacturing industry conforms with international standards, specifically the ISIC. 29. The ANZSIC industry of origin and TREC systems of classification allow two different views of Australia's merchandise trade. These classifications provide different, though not conflicting perspectives. The trade data used by DFAT is compiled and published by the ABS, and DFAT recompiles this data using TREC. The statistics that result are presented using an Australian specific, not an international standard, classification. REVISIONS TO TREC 30. DFAT has proposed changes to TREC which would result in the inclusion of a third manufactures category - 'moderately transformed manufactures' (MTMs). The resulting 'manufactures' will align much more closely with the definition of 'manufacturing' in ANZSIC. In particular, the revised TREC will expand the Primary Products category to show a distinction between manufactured commodities (e.g. flour) and non-manufactured commodities (e.g. wheat). As a result the overall TREC definition of 'manufactures' will include all commodities which have undergone any significant transformation process. The categorisation of Primary Product Manufactures (formerly Processed Primary Products) into STMs, MTMs and ETMs will provide a more detailed basis for analysing changes in the manufacturing value-added content of all of Australia's merchandise exports. 31. Once DFAT completes its revision of TREC and begins publication using the revised TREC the ABS will review the inclusion of TREC tables in International Merchandise Trade, Australia (Cat. No. 5422.0). Users would then be able to analyse and interpret international merchandise trade data according to both ANZSIC and TREC. CONCLUSION 32. The above discussion briefly highlights the differences between the ANZSIC and TREC systems of presenting international merchandise trade statistics. It summarises the basis of the two classifications and it describes some types of analysis which may be more appropriately undertaken using one or other of these classifications. The different presentations by each agency are complementary and designed to serve different purposes. 33. Clients who require more information about any of the ABS international trade classifications should contact Jan Gatenby on (02) 6252 5310 and clients who require more information about TREC should contact Neil Batty on (02) 6261 2231. REFERENCES ABS, A Guide to Major ABS Classifications (1291.0) ABS and Statistics New Zealand, Australian and New Zealand Standard Industrial Classification (1292.0) DFAT, Composition of Trade, Australia 1994-95 DFAT, Exports of Primary and Manufactured Products, Australia 1994-95 United Nations, International Trade Statistics, Concepts and Definitions, Statistical Papers, Series M, No. 52, Rev. 1
Source: ABS; DFAT. (a) Includes commodities subject to a 'No Commodity Details' restriction.
Source: ABS; DFAT. (a) Includes commodities subject to a 'No Commodity Details' restriction.
Source: ABS; DFAT. (a) Includes commodities subject to a 'No Commodity Details' restriction.
Source: ABS, DFAT. (a) Includes commodities subject to a 'No Commodity Details' restriction. Document Selection These documents will be presented in a new window.
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