B

Canvass of Data Users

Although many of its members are experienced users of foreign trade data, the panel considered it essential to consult with a broad spectrum of data users. It wanted to learn from them what kinds of foreign trade data they use; how they use the data; their evaluation of the quality, cost, and accessibility of the data; their unmet needs; their anticipated future needs; and their suggestions for improving foreign trade statistics. Thus, the panel undertook a canvass of the users of foreign trade statistics.

CANVASS METHOD

The best way to find out how well a program is serving its clients —if the client population is well defined, accessible, and large—is to conduct a formal survey of clients, using probability sampling. There have been numerous attempts, some more successful than others, to survey users of the statistics produced by federal agencies (see, for example, a recent Bureau of Labor Statistics survey of users of Consumer Price Index data [Kamalich and Kwiecinski, 1989]).

The panel examined carefully and then rejected the idea of conducting a formal survey of users of foreign trade data for three main reasons. First, there are so many different sources of foreign trade data that it would be virtually impossible to develop a comprehensive, unduplicated list of users. Second, the development



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BEHIND THE NUMBERS: U.S. Trade in the World Economy B Canvass of Data Users Although many of its members are experienced users of foreign trade data, the panel considered it essential to consult with a broad spectrum of data users. It wanted to learn from them what kinds of foreign trade data they use; how they use the data; their evaluation of the quality, cost, and accessibility of the data; their unmet needs; their anticipated future needs; and their suggestions for improving foreign trade statistics. Thus, the panel undertook a canvass of the users of foreign trade statistics. CANVASS METHOD The best way to find out how well a program is serving its clients —if the client population is well defined, accessible, and large—is to conduct a formal survey of clients, using probability sampling. There have been numerous attempts, some more successful than others, to survey users of the statistics produced by federal agencies (see, for example, a recent Bureau of Labor Statistics survey of users of Consumer Price Index data [Kamalich and Kwiecinski, 1989]). The panel examined carefully and then rejected the idea of conducting a formal survey of users of foreign trade data for three main reasons. First, there are so many different sources of foreign trade data that it would be virtually impossible to develop a comprehensive, unduplicated list of users. Second, the development

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BEHIND THE NUMBERS: U.S. Trade in the World Economy of a structured questionnaire that would adequately cover all kinds of users and uses of foreign trade data proved to be extremely difficult. Panel members concluded that a highly structured questionnaire with predetermined response categories would not elicit the detailed and explicit information about user views needed. Third, the panel did not have the resources to conduct a formal user survey whose design and execution would meet generally accepted standards for high-quality survey research. Fortunately, there were other options available. The panel used three methods of collecting information from users of foreign trade statistics: presentations by users at its meetings, on-site interviews of users by panel members, and solicitation of written statements. (See the invitation letter and the protocol for the interviews at the end of the appendix.) For descriptive purposes, the users and types of responses have been divided into four groups. Group 1 is recognized key users of foreign trade data, most of them from U.S. federal agencies and international organizations; they were invited to make oral presentations at panel meetings or to submit written statements. Many of the presenters also submitted written statements; for those who did not, the minutes of the meetings served as documentation of their views. (This group does not include any of the agency representatives who made presentations solely as primary producers of foreign trade statistics, who were not considered to be part of the user population.) Group 2 is data users from several types of organizations who were interviewed on-site, singly or in groups, by members on the panel. Some of the interviews followed a protocol designed to ensure coverage of all relevant aspects of the subject (see end of the appendix). The documentation for these interviews consisted of notes prepared by the interviewers and, in a few instances, written postinterview statements submitted by the person interviewed. Group 3 is subscribers to the Census Bureau's foreign trade data products. The invitation for written comments was mailed to 589 organizations and individuals on subscription lists provided by the Census Bureau, with a follow-up mailing two months later. The response rate was slightly under 10 percent: after combining multiple responses from the same organization, there were usable responses from 48 organizations. Group 4 is people who had participated in a November 1989 Conference, “International Financial Transactions: Issues in Measurement and Empirical Research,” sponsored by the National Bureau

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BEHIND THE NUMBERS: U.S. Trade in the World Economy of Economic Research (NBER). The invitation for written comments was mailed to 186 conference participants. A total of 17 responses were received, again slightly less than 10 percent of those invited to comment. In sum, we received 111 responses. To provide an overall view of the kinds of users whose views we obtained, Table B-1 shows the distribution of the four groups by type of organization, using a slightly modified version of the U.S. Standard Industrial Classification. About two-thirds of the responses came from the private sector and one-third from users at various government levels. The invited presentations and the responses from Census Bureau subscribers covered a broad spectrum of users from both sectors. We do not know for certain why manufacturers of chemical products were so heavily represented in the latter group; possibly a particularly interested and active industry association encouraged responses by its members. On-site interviews were limited to private-sector users because at that stage of the study the panel had already TABLE B-1 User Responses By Type of Group   Groupa Type of organization 1 2 3 4 Total Chemical manufacturers - - 16 - 16 Other manufacturers 1 4 11 - 16 Universities 2 1 - 7 10 Membership organizations 1 2 4 - 7 Consulting and research firms 2 3 6 1 12 Other private-sector organizations 3 - 4 - 7 U.S. federal agencies 10 - - 8 18 Congress, state and local government 12 - 1 - 13 Other countries 1 - 6 - 7 International organizations 4 - - 1 5 Total 36 10 48 17 111 aGroups: 1, invited presentations; 2, on-site interviews; 3, Census Bureau data subscribers; 4,participants, conference of the National Bureau of Economic Research. See text for more detailed description.

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BEHIND THE NUMBERS: U.S. Trade in the World Economy received presentations from all of the key government organizations. The participants in the NBER conference were mostly university-based researchers who use foreign trade data and representatives of U.S. executive branch agencies. The user database contains a large number of responses, covering all of the major categories of users of foreign trade data. Many of the responses were detailed, thoughtful, and informative. Virtually all of those who were invited to make presentations to the panel or to participate in on-site interviews agreed to do so, although a small proportion of the Census Bureau subscribers and NBER conference participants responded to our invitation for written comments. Like the subgroups of the general population who write letters to newspapers or to their representatives in Congress, foreign trade data users who are articulate and have strong views or feelings undoubtedly predominated among the recipients of our written invitations for comments who responded. The panel carried out a content analysis of the user responses and a few simple tabulations based on the responses of Census Bureau subscribers, covering five general topics: acquisition, processing, and uses of foreign trade data; the specific kinds of data used; evaluation of costs and convenience of data access; evaluation of the quality of the data; and current and anticipated future needs for additional data. Few of the users' responses covered every one of these topics. Each of the responses was reviewed and its contents, if any, relative to each of the above subject categories briefly summarized. Then the summaries of individual user comments for each topic were reviewed and synthesized as part of the findings presented in the body of the report. For topics commented on by many of the Census Bureau subscribers, a few simple tallies were prepared. The rest of this appendix presents some of the individual responses. MERCHANDISE TRADE DATA SOURCES AND KINDS OF DATA Among the organizations that responded to the survey, the Census Bureau was the most frequently cited source of foreign trade data. However, this could be misleading, since nearly one-half of the responses came from organizations on the list of subscribers to Census Bureau data products. With a few exceptions, commercial firms that rely entirely on secondary sources for their foreign trade data were not covered directly in our canvass of users. We know

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BEHIND THE NUMBERS: U.S. Trade in the World Economy from our contacts with some of the data retailers that there are a large number of such data users in the private sector. There is considerable variation in the number of different sources used. Large companies, companies that are primarily in the information business, and government agencies are more likely to use multiple sources. Of 27 Census Bureau subscribers in the manufacturing sector who responded, 10 relied solely on those foreign trade data. Data from the Piers Import/Export Reporting Service (PIERS) were used by 12 of the remaining 17, and for several of these it was the only source used in addition to Census Bureau data. A few companies, especially those with manufacturing facilities in other countries, are interested in the total international trade picture for specified commodities, not just bilateral trade between the United States and other countries. To obtain information on non-U.S. trade, they must rely on data produced by other countries or by data retailers in the public or private sector. The kinds of data used are even more variable than their sources, so it is hard to generalize; nevertheless, some patterns do emerge from our user statements. Except for academic research users, most private sector users of foreign trade data appear to want monthly data. A distinction is drawn between market analysis, which requires monthly data, and strategic planning, which can usually be based on annual data. Some market analysts are aware of the volatility of monthly trade data for specific commodities. Two responses from manufacturers noted that they use rolling 12-month totals for their analyses. In the public sector, frequency requirements are more varied. Users of monthly data include policy analysts, such as those at the Federal Reserve Board and units of the International Trade Administration and Agricultural Marketing Service of the Department of Agriculture that provide current market analysis for their constituencies. Other researchers in the Federal Reserve System or the Department of Labor 's Office of International Labor Affairs rely mostly on annual or quarterly data. State agencies that promote production for export rely on annual data, since no monthly or quarterly data on exports by state of origin are available. Most users, other than those interested only in broad economic indicators, need data for selected commodities or commodity groups. Users looking only at international trade are generally content with commodities as classified under the Harmonized System (HS), but those who want to look at both domestic and foreign compo-

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BEHIND THE NUMBERS: U.S. Trade in the World Economy nents of production and consumption usually find it necessary to convert the HS data to a system compatible with the U.S. Standard Industrial Classification (SIC), or vice versa. Finally, there are users in the transportation industry with entirely different needs. Mode of shipment—vessel, air, or other—is their primary interest, along with data on port of entry or exit, point of origin within the exporting country, and final destination in the importing country. USES In asking foreign trade data users to tell us how they use the data, we did not try to constrain their uses to any specified set of categories. However, earlier attempts at classification were of some value in organizing the information they gave us (see Committee on National Statistics, 1976). We discuss uses in three broad categories: private sector, excluding research; public sector, excluding research; and research in both the private and public sectors. In the private sector, nonresearch uses of merchandise trade data that were reported fell into three broad categories: market analysis, strategic planning, and activities intended to influence government policy and administrative decisions. Of these three, market analysis, often called market-share analysis, was by far the most frequently mentioned. Such analysis focuses on past, present, and future (forecasted) supply and demand balances for specific products of interest to the user. Producers want to track their own market shares and those of their competitors, both at the country and individual company level. A business researcher for a chemical manufacturer said that PIERS was a powerful tool and that, in combination with Census Bureau data, it provided a detailed picture of product movement. With these sources and a knowledge of the industry, a user can usually determine “how much of a particular chemical is imported or exported and by which company.” Companies usually do market analysis only for their own use, but research and consulting firms and in some instances even manufacturers share information with their customers or clients. Thus, for example, an aircraft manufacturer reported that it provides information to airlines on international commodity movements by air to help the airlines in planning their freight operations. Strategic planning is a longer range activity and does not necessarily require up-to-the minute monthly data. It does require the

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BEHIND THE NUMBERS: U.S. Trade in the World Economy analysis of trend data for specific commodities and country combinations. Such analyses are used to support decisions on investments in new facilities and their location and on the development and marketing of new products. Companies in the private sector try to influence government decisions in a variety of ways and often use statistics on various aspects of foreign trade to support their cases. Manufacturers who believe that foreign competitors are using unfair trade practices, such as dumping, will marshal the evidence and present it to Congress and the appropriate executive branch agencies. One large corporation stated that the foreign trade data it acquires and processes are useful to company officials who serve on various government committees concerned with trade policies. Another interesting example of this type of use was described by the manufacturer of a specialized product that requires a particular type of wood that is not widely available. Some countries placed import restrictions on this product in the belief that it could be just as well manufactured domestically, using any available type of wood. The company provided customers in these countries with U.S. export data showing that it was selling its product to countries all over the world, allowing some of the customers to appeal successfully to their governments to remove the import restrictions. We also heard from some law firms that assist clients in their dealings with government agencies on trade regulatory matters. Understandably, these users did not provide specific information on their clients or the issues they dealt with, but they had some interesting comments on other aspects of the data (covered below). In the public sector, we identified three main categories for nonresearch uses of foreign trade data: policy guidance, administrative decisions, and trade promotion. Aggregate trends in foreign trade, as presented in the Census Bureau's monthly trade balance series and the Bureau of Economic Analysis's quarterly balance-of-payments trade balance series, are important elements of the economic data that guide broad economic policies at the national and international levels. Detailed information on trade for specific countries and commodities is used to evaluate U.S. international trade policy and to predict the likely effects of new legislation and regulations. Primary concerns are the international competitiveness of U.S. exports and the effects of imports on domestic employment and earnings. Agencies such as the International Trade Administration, the International Trade Commission, and the Labor Department's Office of International La-

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BEHIND THE NUMBERS: U.S. Trade in the World Economy bor Affairs are frequently asked to prepare analyses of these issues for policy makers in the executive branch and Congress. Administrative decisions that depend on foreign trade data include decisions on which foreign countries are eligible for various trade preference programs and which U.S. companies are eligible for assistance to counteract the effects of import competition. At the federal level, the International Trade Commission is the primary user of data for these purposes. Some of the program eligibility requirements have precise cutoffs for eligibility, with the result that the accuracy of the data can become critical in borderline cases. The ability to develop comparable data for imports and domestic production is also an important consideration. To promote exports, and in some instances the substitution of domestic products for imports, federal and state agencies monitor foreign trade and conduct market analyses for the benefit of current and potential exporters. At the federal level, the Commerce Department 's International Trade Administration and the Agriculture Department 's Agricultural Marketing Service are important users of foreign trade data for these purposes. At the state level, departments of commerce or industry and other state agencies assist exporters by providing technical assistance, market information, export financing, and state representatives to foreign countries. To support and monitor the effectiveness of these activities, states have strongly urged the federal government to provide detailed state-by-state data on exports and imports. Quantitative research on international trade was reported to us by foreign trade data users in executive branch agencies, the Federal Reserve System, international agencies, universities (some supported by federal funding) and commercial and nonprofit research organizations. Most of the research is policy oriented; much is aimed at better understanding the effects of foreign trade on the U.S. economy. Some examples of research topics and studies are the development of models to predict the outcomes of changes in foreign trade policies; analysis of the response of specific industries to global exchange rate disturbances; identification of the determinants of trade patterns, including cost, production, and demand factors, for specific commodities; analysis of the determinants of the commodity composition of trade for various foreign countries; cross-sectional and longitudinal analysis of the economic determinants of variation in the volume of aggregated and disaggregated bilateral trade flows; and the testing of hypotheses that trade enhances cooperation and deters conflict between countries.

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BEHIND THE NUMBERS: U.S. Trade in the World Economy The majority of the researchers who work on these topics combine data on foreign trade with data on domestic production and consumption; they therefore tend to use SIC-based classifications for foreign trade data by commodity. DATA ACQUISITION AND PROCESSING Most of the Census Bureau subscribers who commented on costs were satisfied with the fees charged for trade data, and some thought they were quite low. Some subscribers who used data from both the Census Bureau and other sources noted that data from private sources (such as the Journal of Commerce, PIERS, or Tradstat) or other countries were more expensive. One respondent observed that the charges for Japanese data on imports and exports were about 20 times the charges for comparable U.S. data. Another, who uses data from the Census Bureau, PIERS, and Tradstat, noted that PIERS data were more expensive than Census data but believed that PIERS was a cost-effective service. The same user noted that Tradstat was twice as expensive as PIERS but still regarded Tradstat as quite affordable. Two Census Bureau subscribers said they would be willing to pay more for data of higher quality. Most of the comments on costs of acquisition obtained from sources other than the Census Bureau's subscriber list (groups 1, 2, and 4; see Table B-1, above), also indicated satisfaction with Census Bureau charges for foreign trade data. One group of academic users took a strongly contrary view, however, pointing out that the annual costs of obtaining the Census Bureau's import and export tapes, along with the concordance tapes needed to convert the commodity data to other classifications, would total $1,200. Their statements also commented on the high costs of purchasing international bilateral trade data from the United Nations or the Organization for Economic Cooperation and Development (OECD) and expressed their unhappiness that purchasers are not permitted to share these data with other institutions, so that acquisition through data retailers is precluded. Users had numerous suggestions for making the data more convenient to work with, which in most cases was equivalent to saying that they would like data suppliers to add value to their product in ways that would reduce users' processing costs. These suggestions covered four topics: mode of dissemination, time-series data, seasonal adjustment, and classification. Most users were aware that the Census Bureau is phasing out

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BEHIND THE NUMBERS: U.S. Trade in the World Economy its microfiche releases and shifting to the use of CD-ROM, so comments on the difficulty of working with microfiche are now of limited relevance. For the record, however, an academic respondent said that “microfiche is probably the most ‘user-hostile' manner in which this information could be stored,” citing the fact its resolution was not sufficient to use it for optical scanning or even to make readable hard-copy prints. A majority of the users who commented on the Census Bureau's switch to CD-ROM appeared to be looking forward to it, even though some recognized that the costs of acquisition and processing would be higher. However, these views were by no means unanimous. Some users objected to what they anticipated would be substantial increases in costs to acquire and process data in CD-ROM format that were previously available on microfiche. Some mode-related comments came from Census Bureau subscribers who use the microfiche releases who may not have been aware of the impending switch to CD-ROM. Some had been using spreadsheet utilities for their analyses and would have liked to receive the data in a form more directly compatible with that approach. The development of usable time-series data is complicated by two factors: revisions made to correct reporting and processing errors and changes in commodity classifications and definitions used for key variables. The shift in January of 1989 from the classifications of the Tariff Schedule of the United States Annotated (TSUSA) for imports and the Statistical Classification of Domestic and Foreign Commodities Exported from the United States (Schedule B) for exports to the Harmonized System brought significant advantages in terms of increased international comparability of foreign trade data, but it created difficulties for users attempting to maintain time series for specific commodities. Some users' comments on revisions to correct errors came from Census Bureau subscribers. Four of them want the Census Bureau to provide more complete information about revisions or expressed unhappiness about the lack of such information. A U.S. agency that uses Census Bureau foreign trade data and also compiles trade data from its own sources compares these data and submits information about suspected errors to the Census Bureau. That statement said that revisions based on their feedback were being made at a slower pace than in the past. The respondent attributed this change to shortage of staff in the Census Bureau's Foreign Trade Division and problems associated with the changeover to the Harmonized System. An international organization expressed concern about the size of revisions in Census Bureau data

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BEHIND THE NUMBERS: U.S. Trade in the World Economy and questioned whether the same revisions were being applied to all data series. We received several comments on the shift to the Harmonized System. Most of those who commented approved of the change or at least recognized the need for it, but some raised questions about how best to bridge the break in commodity time-series data. A representative of an international organization, recognizing the cost of providing a bridge between the old and new systems, nevertheless urged that Census Bureau recompile prior years' data in the HS commodity classifications. Users also mentioned other factors that have complicated the development and use of time-series data, such as the substitution of Canadian import data for U.S. export data that took effect at the start of 1990 and the frequent changes in commodity definitions within existing classification systems. Comments on the seasonal adjustment of foreign trade data came mostly from trade policy and research-oriented users in federal agencies and universities. One agency user believed that the seasonal adiustment factors were not being revised often enough and complained that the older seasonally adjusted data were not being revised to reflect recalculated factors. Other respondents, including a data retailer and a federal agency, wanted seasonally adjusted data at a finer level of detail. Problems associated with the use of foreign trade and domestic production or employment data in the same analyses were mentioned by several users, including both researchers and persons doing market share analyses for a company, commodity, or industry. A federal agency user called for an improved and automated, current and consistent master concordance that could be used to link trade classifications to domestic output and employment classifications. It is difficult to identify any consensus from the users' comments on acquisition and processing of data. Federal agency users are in a privileged position and tend to be fairly well satisfied. One of them said: “The availability of the COMPRO data base to federal users greatly facilitates access to trade information; hopefully, the new National Trade Data Bank will perform the same service to the general public.” Researchers in universities had varying opinions. For those who are working under government contracts or grants, the acquisition of data is often facilitated by access to COMPRO. One individual researcher who did not use this source said that the U.S. foreign trade data he needed for his project “was easy to find and use.” At the other end of the spec-

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BEHIND THE NUMBERS: U.S. Trade in the World Economy able to monitor productivity levels achieved, rather than just growth rates, especially in manufacturing. Several users want access to more complete and centralized information on tariffs and nontariff trade restrictions. Some wanted the information for operational rather than statistical uses, but others want it in connection with their research. An official of a foreign economic research unit in the Department of Labor called for the development and maintenance of a tariff-rate file, with inclusion of information about product and country eligibility for special tariff rates. With regard to nontariff trade restrictions, a university researcher and an economist in the Federal Reserve System were clearly frustrated by their inability to obtain detailed information. The lack of such information on a historical basis made it difficult, if not impossible, for them to analyze the structural characteristics of protection and its effect on country-specific trade patterns. The user from the Federal Reserve System pointed out that the United Nations and the World Bank maintain extensive sets of data on nontariff barriers but that, because of the political sensitivity of these data, these agencies are reluctant to allow researchers access. Most of the users who gave us their views focused their attention on current needs for data and did not respond to our invitation to comment on anticipated future needs for additional or different data as the international trade environment changes. There were some notable exceptions, however. The corporate economist and chief statistician of a major data wholesaling corporation recommended that the panel step back from the existing system and take “a more comprehensive look at what is really needed for longer term policy making.” He mentioned several ongoing and anticipated changes in the environment for international trade. Among them were the greatly expanded role and flexibility of multinational corporations and the attendant increase in the volume of intracompany transfers, trends toward multilateral reductions in trade barriers and the establishment of regional trading blocs, shifts to market-based economic activities in the Eastern European countries, and the discontinuities in long-standing trade time series created by the recent adoption of the Harmonized System. The corporate economist stated: “A fundamental redesign of information gathering about international transactions is called for . . . . ” With respect to merchandise trade, he said: “A redesigned trade data system could be developed by using well-known principles of sampling and devoting the same resources that are currently expended (for 100 percent processing of foreign

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BEHIND THE NUMBERS: U.S. Trade in the World Economy trade documents) for a much more sophisticated and intensive analysis of the characteristics behind the data.” Others described what are seen as the main challenges facing the present U.S. system of foreign trade statistics: the possibility that starting in 1992 it may no longer be possible to identify country of origin or destination within the European Economic Community; the full implementation of the Canada-United States Free Trade Agreement, which will lead to the end of filing of import documentation on both sides of the border; the increasing commingling of goods and services, making the collection of detailed merchandise trade statistics less meaningful and relatively more costly; and the arbitrary nature of the valuation of commodities in affiliated transactions. In view of these emerging trends, some doubt that the U.S. system of merchandise trade statistics could be maintained indefinitely in its present form and therefore that large investments to make it more efficient would be misdirected. With respect to the scheduled 1992 changes in the European Economic Community, a business analyst for a chemical manufacturer had a specific recommendation, namely, that the U.S. should press the EC to continue reporting exports and imports by individual countries within the EC. Several users commented on the difficulty of using existing foreign trade statistics to understand the increasingly complex flows involved in production by multinational companies. They noted that parts of final products are often made in several countries and shipped back and forth before final assembly. Lack of information about these processes, they believed, might distort perceptions of U.S. bilateral trade problems and economic and political responses to them. On the marketing side, they wanted better access to data on bilateral trade transactions not involving the United States. INTERNATIONAL SERVICES TRANSACTIONS AND CAPITAL FLOWS Only about one-third of the more than 100 respondents to our canvass commented on statistics for international services transactions or financial flows. This was not unexpected because nearly one-half of these organizations were reached through the list of subscribers to the Census Bureau's publications of merchandise trade statistics. Furthermore, data on merchandise trade have historically received the lion's share of attention and interest from the general public, and only a relatively small number of special-

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BEHIND THE NUMBERS: U.S. Trade in the World Economy ists follow trends in other kinds of international economic transactions. The past decade, however, has seen a rapid growth of the service sector, both domestically and internationally, with a consequent increase in the demand for data needed by the government to establish and evaluate national strategies and priorities and by the private sector to monitor trends and analyze market shares. To ensure that these areas were properly covered in its study, the panel invited several experts on statistics on international services transactions and financial flows, representing both producers and users of data, to make presentations. Primary attention was given to international services transactions. INTERNATIONAL SERVICES TRANSACTIONS Some users commented on unresolved problems associated with the concepts and definitions used in the collection and dissemination of data on trade in services. Two users said that the dividing line between goods and services is often not clear. One pointed out that multinational companies have considerable flexibility in valuing services associated with goods and may be expected to use this freedom to change the domestic or foreign content of their products to their own advantage. He believed that there should be a standardized way to allocate such costs. One official from the Office of the U.S. Trade Representative pointed out that the terms “exports of services” and “invisibles,” which are used in analyzing services transactions, are frequently misunderstood. He recommended that total trade in services be labeled as “U.S. sales of services to foreigners,” rather than as “exports”: the former applies to both cross-border sales and sales through affiliates; the latter bears the connotation of cross-border trade only. Similar recommendations were made by both a staff member of the Senate Subcommittee on Government Information and Regulation of the Committee on Government Affairs and the Coalition of Services Industries. A representative from the Office of the U.S. Trade Representative (USTR) also commented on the completeness, timeliness, and comparability of U.S. statistics on international service transactions. With respect to completeness, he stated that “several important sectors, particularly financial services and transportation, are underrepresented” and that certain types of financial services are not covered at all. On the subject of timeliness, he noted that

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BEHIND THE NUMBERS: U.S. Trade in the World Economy the need to obtain the data through establishment surveys precludes the development of monthly data, and he pointed to the fairly substantial lag in obtaining information through such surveys. On the question of international comparability, the USTR representative said that many countries do not collect balance-of-payments data in the same detail as the United States. To improve comparability for those who do, international agencies are attempting to establish standard classifications and formats for compiling and presenting the data. Two university researchers who are adding services trade to a general equilibrium model covering several industries and countries confirmed the need for such standards; they said they were facing enormous difficulties in putting the data for different countries on a comparable basis. A former Commerce Department official pointed to several possible sources of error in the statistics on services transactions. He believes that the methods now used in estimating receipts and expenditures related to international travel, including transportation expenditures, should be thoroughly evaluated. U.S. residents are not questioned about how much they spend abroad after they return; rather they are asked when they depart from the United States how much they intend to spend. The sample excludes travelers on chartered planes, and the sample data are processed by a private company subject to relatively limited control. He also noted that for several types of services, data are now collected that previously had not been available. Yet the minimum amounts of individual transactions for which reports are requested are so high that presumably some types of transactions, for example, legal services, are substantially underreported. For some kinds of transactions, no data are collected or estimated: for instance, receipts and expenditures by news organizations or incomes from the sale of foreign newspapers and magazines that are printed in the country where they are sold but obtain their content from abroad through electronic transmission. On the subject of completeness, a statement from the Coalition of Services Industries noted that BEA surveys have begun to capture information on some service industries previously ignored but that many service industries still are not covered by any survey. The statement also asserted that reporting requirements and the complexity of the surveys have limited company response. A BEA official alluded to the effects of the U.S.-Canada data exchange agreement on the valuation of U.S. exports to Canada, pointing out that one consequence would be a complete lack of

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BEHIND THE NUMBERS: U.S. Trade in the World Economy data on cross-border receipts and payments by U.S. and Canadian carriers because Canadian import data are valued on a free-on-board (f.o.b.) basis. Several users commented in broad terms about needs for more and better data on trade in services. An official of the U.S. Trade Representative noted the need for putting together a good information base on service transactions for use in connection with the Uruguay round of multilateral negotiations on services trade and said that much more detailed data may be needed as the negotiations progress. An official of the Department of Statistics of the International Monetary Fund also alluded to interest in an expanded list of service items in the context of these negotiations. User statements included recommendations covering several aspects of statistics on international service transactions. A statement from the Coalition of Services Industries expressed substantial dissatisfaction with the data currently available and recommended clarification of concepts, more detail on different types of services, and monthly reporting. Other statements by a rather diverse group of users called for a variety on enhancements and improvements of services trade data, including more data on the educational component, more analyses of the data, development of price indices, more detail by country, and data by state. CAPITAL FLOWS Comments about statistics on financial flows were included in 10 of the presentations and statements received by the panel. The majority dealt with perceived deficiencies in the quality of existing data. In contrast to their perceptions of recent advances in the quality of data on international service transactions, the users believe that the quality of data on financial flows has been declining (see also Lipsey, 1990). Specific problems with the existing reporting systems were discussed by researchers of the Federal Reserve Board and the Department of the Treasury. Both emphasized coverage problems and inaccurate reporting. Concerning the coverage problem, the Treasury International Capital (TIC) system concentrates on large filers and tends to miss the small filers. Given the development of the 24-hour international market, it is believed that the system will have to be modified to encompass the smaller players if they become more prevalent. Concerning inaccurate reporting, respondents said filers are devoting less resources to accurate reporting

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BEHIND THE NUMBERS: U.S. Trade in the World Economy and do not exercise adequate quality control. In addition, data collection agencies have inadequate quality control. Users believe that the accuracy of the data on U.S. capital flows and investment income cannot be improved without the devotion of additional resources and efforts to convince filers that accuracy in these reports is important. Others noted that large quantities of physical cash move in suitcases and boxes outside normal banking channels. Electronic transfers among banking institutions have ballooned, and the movement of financial transactions is increasingly difficult to monitor. One proposed solution is for transnational banking authorities and national central banks to undertake a careful review of the types of financial flows occurring inside and outside of current measurement systems. One respondent believes this to be of paramount importance because the current information is woefully inadequate to address the key policy issues that will be important in the 1990s and beyond. A researcher at the Federal Reserve Bank of New York also recognized increasing difficulties in measuring financial flows. The most important future problem he could foresee was the globalization of financial markets. Noninterest income has been growing in size relative to total services trade, but, it has become increasingly difficult to measure these transactions, even in nominal terms. Some users called for additional detail on certain kinds of financial transactions and for greater consistency with other kinds of data. A representative of an industry association wanted foreign investment data to be available at finer levels of disaggregation and on a consistent basis with other data series. A bond market specialist from an investment firm was interested in better information on interest income received and paid, portfolio investment incomes, and factors driving foreign direct investment and foreign takeovers in the United States. A Treasury Department representative said that criticisms of the crude breakdown used in the TIC reporting system were common and that users wanted more information on purchaser characteristics and coverage of instruments, such as futures swaps, that could be used as hedges. Finally, as was the case for merchandise and services trade, users of state data wanted information on some types of financial transactions at the state level. A representative from the Minnesota Department of Trade and Economic Development told the panel that data for the state from the BEA surveys of U.S. affili-

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BEHIND THE NUMBERS: U.S. Trade in the World Economy ates of foreign firms were of limited value due to disclosure problems. No information is provided on the value of Japanese affiliates in Minnesota, for example, because it could potentially reveal proprietary data of a single firm. Yet the Japan External Trade Organization reports two dozen firms in Minnesota owned in part or entirely by Japanese entities. The Minnesota representative also said that a second source of information on foreign investments at the state level is the transactions data produced by the Commerce Department 's International Trade Administration, which provides an annual listing of individual foreign investment transactions in the United States. Because the information is collected from secondary sources, it is fully disclosed. But the Minnesota official found the information from this source to be of limited usefulness, because the value was reported for fewer than half of the transactions and because the listing provided only a limited amount of summary information by state. INVITATION FOR WRITTEN COMMENTS Reproduced below is the text of the letter sent by panel chair Robert E. Baldwin to solicit comments from users of international trade data. Accurate, timely and relevant data on U.S. foreign trade are necessary for many purposes, especially in the present era of trade deficits, greater competition from abroad, and increasing globalization of production. Under the auspices of the National Academies of Sciences and Engineering—National Research Council, the Committee on National Statistics is undertaking a two-year panel study to evaluate the quality of U.S. foreign trade statistics and to develop recommendations for improving them. The study, which has been funded by the Bureau of the Census and the Bureau of Economic Analysis of the U.S. Department of Commerce and the Customs Service of the U.S. Department of the Treasury, covers international trade in both merchandise and services. For our evaluation, it is essential that we obtain the views of a wide spectrum of users of foreign trade data. As part of the panel study we will be interviewing users in several categories, but our resources are insufficient to meet or speak with all of you. Therefore, as Chair of the Panel on Foreign Trade Statistics, I would like to invite you to submit written statements describing what foreign trade data you are using, where you obtain the data, how you use the data, what your views are on the adequacy of the data for your purposes and how it might be improved, and what type of trade data will be most useful to you in the coming years.

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BEHIND THE NUMBERS: U.S. Trade in the World Economy Please send your statements to Dr. Anne Kester, the Study Director of the Panel on Foreign Trade Statistics, at the address shown below. Information on any or all of the following subjects will be useful: The kinds of data that you are using. (Specify level of detail such as geographic and commodity types for merchandise trade data and services categories for services trade statistics.) The sources — governmental or non-governmental — from which you obtain the data? How you process and use the data. Your views about various aspects of the data you use, including relevance, level of detail provided, frequency of publication, timeliness, accuracy, costs of obtaining the data and compatibility with other kinds of data, such as domestic production, as well as your views on how they might be improved. Your anticipated future needs for additional or different data as the international trade environment changes. To be of maximum benefit to our study, please send your statements to us by April 30, 1990. We look forward to hearing from you. PROTOCOL FOR INFORMAL INTERVIEWS WITH DATA USERS Reproduced below is the protocol for panel and staff members in interviews with data users. Introduction Review purpose of interview and how the information will be used. If agreed to by respondents, start recording. User/respondent characteristics. Organization or business. Name and address. Type of organization. For each person being interviewed, name, telephone number and position in organization or business. Are those present answering questions for the entire organization or only part of it? If the latter, may want to identify other important users in the organization. Acquisition of foreign trade data by the organization. Source agencies/organizations: Census, BEA, BLS, ITA, USDA, EIA, United Nations, OECD, EUROSTAT, private companies, etc. For each source, modes of acquisition. Hard copy publications. Electronic (magnetic tape, CD-ROM, on-line, other).

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BEHIND THE NUMBERS: U.S. Trade in the World Economy Microform/microfiche. Other. Specifics. Obtain name, source, frequency and cost of each acquisition. For frequency, is it regular (monthly, quarterly, or annual) or occasional? How are data converted to usable information? Which of the following are done? Extract data items for citation in article or report. Extract data items for use in models. Calculate indices. Create new tables. Time series analyses. Other If yes to any of the items in C,1, how are the data prepared for input to perform the necessary calculations? Are data adjusted to conform to concepts or classifications different from those used by the source organization? If yes, what adjustments are made? Are foreign trade data processed or analyzed in conjunction with other kinds of data, e.g., data on domestic production or sales? Specific data items used. Are the same items used regularly or do they vary over time. If the latter, what is the nature of the variation? Broad categories of data used: imports, exports, prices, service trade, others. Variables, e.g., quantity, value (Customs import value, C.I.F. import value, F.A.S. export value). Classifiers. Commodities. Which classification systems are used? What is the finest level of detail and what are the groups or items of interest at that level? Geography. Region/country of origin or destination. What is finest level and which regions or countries are of interest? Port or district of entry/exit. Which are of interest? State of origin of exports. Which ones? Mode of transportation. Outputs containing foreign trade data. Publications of user organization or individual. For each one identified obtain: Name and type of publication (e.g., newsletter, industry or trade publication, economic report or bulletin, article for scholarly journal, etc.). How foreign trade data are presented (e.g., tables, charts, cited in text).

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BEHIND THE NUMBERS: U.S. Trade in the World Economy Frequency (periodicity or one-time). Size and nature of audience, method of distribution. als. Identify specific medium, e.g., magnetic tapes, diskettes, CD-ROM, on-line access. general nature and purpose, frequency, recipients and how the foreign trade data are presented. Intended effects/uses of outputs. Identify and discuss all that apply. Influence trade policies or negotiations. Influence legislation or regulation relevant to foreign trade. Analysis and forecasting of general economic conditions. International market analysis. Investment decisions. Provide general information to secondary users. Other. Satisfaction with data currently available. [NOTE: If respondents are unsatisfied with any aspects, probe concerning adverse effects of perceived deficiencies on the uses identified in G. If they express satisfaction with respect to items 1 to 4 below, ask how their uses of the data would be affected if the amount of detail or frequency of publication were reduced, the delays following the end of reference periods were increased, or subscription prices were increased?] Content. Does it meet all needs? If no, what else is needed? Are there problems of comparability with other kinds of data? Costs and convenience of acquisition and user processing of foreign trade data. If not satisfied, what improvements are desired? Frequency and timeliness. Ask how respondents' use of the data would be affected if data are published less frequently (e.g., for merchandise trade statistics, from a monthly to a quarterly or annual basis.) Ask specifically about reactions to February 1987 shift from 30 to 45 days for publication of Census monthly data on merchandise trade. Are there problems associated with revisions? Describe. Accuracy. Have respondent's uses been affected by errors in data? How? How were the errors detected? Do they inform source organizations? Have they received satisfactory responses? Information on data concepts, definitions and methodology. What sources of information do they use and are these adequate for their needs? What are the other limitations of the data?

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BEHIND THE NUMBERS: U.S. Trade in the World Economy Future data needs. Do respondents expect that their needs for foreign trade data will change in the future? If yes, how and why? Access to users of foreign trade data supplied by this organization. If this organization supplies foreign trade data to other organizations and individuals through publications or other media, inquire about their willingness to allow use of their mailing list for distribution of an invitation for users of their data to submit written statements to the Panel on Foreign Trade Statistics.