On 6 April 2005, the European Central Bank (ECB) received a request from the Council of the European Union for an opinion on a proposal for a regulation of the European Parliament and of the Council on Community statistics on the structure and activity of foreign affiliates. Overall, the ECB welcomes the proposed Regulation. It believes that by defining a common framework, the proposed regulation should improve the comparability of data on foreign affiliates throughout the EU, thereby making them more suitable for aggregation at the EU and/or euro area level and more reliable for all users. Data on foreign affiliates are currently compiled by national statistical institutes (usually inward FATS) and central banks (usually outward FATS) of the Member States. The compilation methods used are in line with the proposed regulation and such data should also assist the ECB in assessing economic developments relating to the activity of large corporations and their foreign affiliates inside and outside the euro area. Specifically, these data are considered valuable for investigating both trends in euro area trade and price-setting behaviour, as well as for understanding the economic impact of foreign direct investment on, for instance, competitiveness or employment.
In this context, the ECB would take the opportunity to comment on certain specific provisions of the proposed regulation. It notes that the proposed regulation does not make the provision of outward FATS mandatory with immediate effect. Only after a period of three years will it be possible to assess the results of the pilot studies to be conducted in some Member States. The ECB regrets that although the data flows provided for balance of payments statistics in Section 2 of Annex I to Regulation 184/2005/EC on Community statistics concerning balance of payments, international trade in services and foreign direct investment indicate separate categories for goods and services, goods and services are not categorised separately in this way in the proposed regulation. If such data are not categorised separately, their value for analysis will be reduced and it will be harder to compare them with data published in the countries that are the euro area's main counterparts.
Moreover, another issue is the deadline of 20 months from the end of the reference year for Member States to transmit inward FATS currently provided for in Section 5 of Annex I to the proposed regulation. This would appear to be the maximum possible time limit for ensuring a regular assessment of economic developments involving (frequent) changes in the structure of large corporations and the number, size, and sector of economic activity of their affiliates. The ECB therefore encourages the Parliament and the Council to consider the possibility, after an evaluation of pilot studies, of reducing the proposed deadline in the medium term, at least for aggregated data (e.g. ‘Level 1’, as referred to in the proposed regulation).
This would bring it more in line with the timeliness for reporting aggregated data on foreign direct investment laid down in Regulation 184/2005/EC, which provides for a deadline of nine months.
Lastly, following a more detailed assessment of Annexes I to III to the proposed regulation the ECB notes that Section 6 of Annex I to Regulation 184/2005/EC entitled ‘Geographical breakdown levels’ includes an additional item entitled ‘U4 Extra-euro-zone’ alongside other EU-wide items. The ECB considers that in order to produce the euro area aggregate, it would be useful to include a similar reference to the ‘Extra-euro area’ in Annex III to the proposed regulation as an additional geographical breakdown level under the heading ‘Level 1’. Finally, the Explanatory Memorandum refers to ‘EU-15’ (and alternatively ‘EU15-Member States’); the ECB proposes that it should refer instead to the current ‘EU-25’ or ‘EU-25 Member States’.