Behind the Numbers U.S. Trade in the World Economy (1992) / Chapter Skim
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5. International Services Transactions
5. International Services Transactions
Pages 114-155
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From page 114... ...
international services transactions, both in cross-border delivery of services and in the sales of services abroad by foreign affiliates of U.S. firms.
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From page 115... ...
Services sales to foreigners can involve many different forms of delivery: the cross-border movement of a producer, such as the provision of professional and business services to foreigners; the cross-border movement of a consumer, such as services provided to foreign tourists, students, and medical patients; information, including electronic transmission of voice, video, or data; legal instruments, such as contractual arrangements to use intellectual property, including patents, trademarks, and broadcast rights; the movement of services themselves, including transportation of goods and passengers. Unlike the collection of merchandise trade data, the various forms of delivery of international services require the use of different data sources to gather information on transactions.
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From page 116... ...
Mandatory reporting, as required under the Trade and Tariff Act of 1984, has increased response rates of surveys, improving the quality of the data. In addition to the traditional service categories, new surveys have been conducted by BEA to collect sales and purchases data not previously gathered on business, professional, and technical services, including: advertising; computer and data processing; database and other information services; telecommunications; research, development, and testing services; industrial engineering; management, consulting, and public relations services; legal services; installation, maintenance, and repair of equipment; agricultural services; management of health care facilities; accounting, auditing and bookkeeping services; mailing, reproduction, and commercial art; personnel supply services; sports and performing arts; primary insurance; and construction, engineering, architectural, and mining services.
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From page 117... ...
They also partly reflect the concentration of international service transactions undertaken by firms in certain industries: for example, there are only a small number of firms that do international business in the construction industry. Unlike merchandise trade statistics, which are published in 14,000 import and 8,000 export commodity categories covering 212 countries and regions, international services transactions statistics are collected in aggregate values in approximately 25 broad categories, and country breakdowns are available only for major services.
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From page 118... ...
enterprises and their foreign affiliates or parent corporations. Sources and methods differ for the collection of data on services transactions between affiliated parties of multinational corporations; data on "other" private services transactions with
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From page 119... ...
cn o e1 1 o co o · · .
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From page 120... ...
For some of the data, BEA uses various surveys; see Figure 5-1. TRANSACTIONS BETWEEN AFFILIATED PARTIES OF MULTINATIONAL CORPORATIONS Services between affiliated parties of multinational corporations primarily include intracorporate receipts and payments of royalties, fees, and other service items between foreign affiliates and their parent companies.
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From page 121... ...
Banking Branch or Agency With Foreign Parent (BE-606BJ Benchmark Survey of U.S. Direct Investment Abroad {BE-1OA, BE-1OA Bank, BE- 1 OB, BE- 1 OB Bank J Benchmark Survey of Foreign Direct Investment in the U.S.
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From page 122... ...
parent companies of royalties, fees, and earnings from the use of intangible property rose very rapicllLy from 1985 through 1988, while receipts from affiliates for other service items, including intracorporate charges for management services, were relatively flat over that period. Table 5-1 also shows that receipts of royalties, fees, and other service items from foreign affiliates of U.S.
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From page 123... ...
The annual surveys covering parent companies contain no balance-of-payments type of data on services transactions; the form covering majority-owned foreign affiliates (BE-llB) contains some entries iitems 47-50)
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From page 124... ...
Information on international services transactions is rather limited. Lines 75-79 give data on sales of services, not differentiated by type, separately for sales to foreign parents and affiliates and sales to unrelated foreign persons.
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From page 125... ...
On form BE605, the relevant information on services transactions with foreign parents is given in Part III, lines 19-23, although the breakdown by type is limited. There is also an extended section in Part VII for reporting service and other transactions with foreign affiliates of the parent company.
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From page 126... ...
Service Original Revised Total 9,393 19,150 Education 3,480 Financial services 1,656 3,301 Insurancea 479 2,041 Primary insurance, net 1,600 Reassurance, net 479 441 Telecommunications 1,628 1,827 Business,professional,andtechnicalservices 1,614 4,368 Accounting, auditing, and bookkeeping 21 Advertising 94 Computer and data processing — 985 Database and other information services 124 Engineering, architectural, construction, and mining, netb 1,124 857 Installation, maintenance, and repair of equipment 973 Legal services 97 Management, consulting, and public relations 306 Medical services 490 490 Research and development, commercial testing, and laboratory services 282 Other 139 Other 4,016 4,133 Wages of temporary workers 104 104 Film rentals 550 656 Expenditures of foreign governments and international organizations 3,006 3,015 Other 356 357 Amount of change {current less previous} 9,757 New information 7,478 Transferred from other accounts 2,394 Revisions - -11 5 NOTES: The original figures are those reported based on earlier surveys; the revised figures are based on later BEA surveys. A dash indicates the data are not available.
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From page 127... ...
S ervlce Original Revised Total 7,252 10,014 Education 46 1 Financial services 1,874 1,769 Insurancea 1,406 2,201 Primary insurance, net 477 Reinsurance, net 1,406 1, 724 Telecommunications 3,027 3,252 Business, professional, and technical services 1,252 Accounting, auditing, and bookkeeping 29 Advertising 77 Computer and data processing 32 Database and other information services 23 Engineering, architectural, construction, and mining, netb 379 Installation, maintenance, and repair of equipment 466 Legal services 40 Management, consulting, and public relations 60 Medical services Research and development, commercial testing, and laboratory services 76 Other — 70 Other 945 1,079 Wages of temporary workers 698 833 Film rentals 77 73 Expenditures of foreign governments and international organizations Other 170 173 Amount of change (current less previous)
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From page 128... ...
Service Original Revised Total Education Financial services Insurancea Primary insurance, net Reinsurance, net Telecommunications Business, professional, and technical services Accounting, auditing, and bookkeeping Advertising Computer and data processing Database and other information services Engineering, architectural, construction, and mining, netb Installation, maintenance, and repair of equipment Legal services Management, consulting, and public relations Medical services Research and development, commercial testing, and laboratory services Other Other Wages of temporary workers Film rentals Expenditures of foreign governments and international organizations Other Amount of change (current less previous) New information Transferred from other accounts Revisions 10,851 2,232 690 690 1,791 1,690 4,448 120 658 3,293 377 20, 763 3,804 3,731 2,285 1,596 689 2,105 4,270 27 108 629 138 936 1,023 148 379 516 182 184 4,568 120 740 3,332 376 9,912 7, 763 2,266 -117 NOTES: The original figures are those reported based on earlier surveys; the revised figures are based on later BEA surveys.
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From page 129... ...
aInsurance receipts are published net of losses paid, and payments are published net of losses recovered. bEngineering, architectural, construction, and mining receipts are published net of merchandise exports, which are included in the merchandise trade account, and net of outlays abroad for wages, services, materials, and other expenses.
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From page 130... ...
Service Original Revised Total 11,224 21,471 Education 4,111 Financial services 1,966 3,835 Insurancea 833 1,564 Primary insurance, net 1,311 Reinsurance, net 833 253 Telecommunications 1,970 2,357 Business, professional, and technical services 1,704 4,787 Accounting, auditing, and bookkeeping Advertising Computer and data processing Database and other information services Engineering, architectural, construction and mining, netb 1,163 Installation, maintenance, and repair of equipment Legal services Management, consulting, and public relations Medical services Research and development, commercial testing, 541 541 and laboratory services Other Other 4,751 4,817 Wages of temporary workers 129 129 Film rentals 724 776 Expenditures of foreign governments and international organizations 3,487 3,504 Other 411 408 Amount of change j current less previousJ 10,247 New information 8,244 Transferred from other accounts 2,855 Revisions -852 NOTES: The original figures are those reported based on earlier surveys; the revised figures are based on later BEA surveys. A dash indicates the data are not available.
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From page 131... ...
S ervlce Original Revised Total Education Financial services Insurancea Primary insurance, net Reinsurance, net Telecommunications Business, professional, and technical services Accounting, auditing, and bookkeeping Advertising Computer and data processing Database and other information services Engineering, architectural, construction, and mining, netb Installation, maintenance, and repair of equipment Legal services Management, consulting, and public relations Medical services Research and development, commercial testing, and laboratory services Other Other Wages of temporary workers Film rentals Expenditures of foreign governments and international organizations Other Amount of change {current less previous)
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From page 132... ...
firms and unaffiliated nonresidents, supplementing the coverage of the multinational direct investment surveys. The number of respondents is now over 400.
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From page 133... ...
residents and foreign insurance companies; the exemption level is high t$250,000J, but, a priori, this would not seem likely to be a significant service activity. There are certain difficulties in calculating the value of these transactions apart from the difficulties in measuring the direct investment transactions of this industry.
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From page 134... ...
It should be notes! that it is especially difficult to separate the strictly service aspects of this industry from activities defined as direct investments.
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From page 135... ...
affiliates' receipts U.S. affiliates' payments Unaffiliated services Education Financial services Insurancea Telecommunications Business, professional, and technical services Other unaffiliated servicesb 7,254 9,070 5,412 6,900 5,518 7,049 106 150 1,842 2,171 22,174 22,959 3,024 2,196 5,375 5,106 2,351 2,910 19,150 20,763 3,480 3,804 3,301 3,731 2,041 2,285 1,827 2,105 4,368 4,270 4,133 4,568 59,281 67,455 26,000 29,215 6,774 7,423 16,715 18,062 10,687 10,999 5,201 6,360 827 703 1,062 1,365 602 843 171 240 773 1,083 461 522 8,730 11,390 -1,284 -616 2,808 2,683 1,524 2,067 10,014 12,006 461 513 1,769 2,077 2,201 3,168 3,252 3,701 1,252 1,425 1,079 1,122 10,735 8,319 8,431 112 2,416 24,331 2,858 6,168 3,310 21,471 4,111 3,835 1,564 2,357 4,787 4,817 73,073 32,112 7,872 19,641 11,841 7,059 741 2,048 968 238 1,205 1,080 11,400 -694 3,028 2,334 12,094 555 1,656 2,781 4,264 1,646 1,192 aInsurance receipts {exportsJ are published net of losses paid, and payments (importsJ are published net of losses recovered.
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From page 136... ...
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From page 137... ...
the total shipping weight of imports is known from Census Bureau merchandise trade data, this factor can be used to blow up this sample of returns to the universe to estimate foreign port expenditures in the United States ($7.3 billion in 19881. However, this estimating procedure is not smooth sailing.
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From page 138... ...
fleet from both shipping U.S. exports and carriage of cargoes in foreign countries, as well as the port expenditures abroad incurred by the U.S.
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From page 139... ...
The quantity data shown in the form can be used for cross-checking against Census Bureau data, and an annual check is made to determine coverage based on weight information. The BE-36 form is the prime source for aircraft port expenditures in the United States ($5.4 billion in 19881.
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From page 140... ...
Travel and Tourism The travel accounts in the balance of payments comprise expenditures by U.S. residents as travelers in foreign countries and on foreign airlines or other means of transportation and receipts from nonresident travelers in the United States for their expenditures within the United States as well as their fares paid to U.S.
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From page 141... ...
Collecting data covering either U.S. residents traveling abroad or foreigners traveling to the United States has been one of the perennial problem areas in the balanceof-payments accounts.
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From page 142... ...
The actual compilation of the data is contracted to an organization in San Diego, California. For each quarterly period, BEA receives a computer tape with the information for the period and prepares all the estimates of expenditures and receipts for the air travel account from these sample data.
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From page 143... ...
These changes imply large increases in estimated daily expenditures on both sides of the account, together with a significant shift in average fares paid by foreigners traveling on U.S. airlines (an increase in fares received and U.S.
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From page 144... ...
travelers under this system may have some unknown bias. BEA has reported wide quarterly variations in the daily expenditure rates for particular destinations for which there are no explanations.
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From page 145... ...
and foreign travelers. These average fares are combined with data available to BEA on the nationalities of travelers and the ownership of airlines to derive estimates of total fares paid by U.S.
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From page 146... ...
F~NANc~A~ SERv~cEs AND EDucAT~oNA~ AND MED~cA~ TRANsAcT~oNs Financial Services The rapid growth of the i nternational activities of banks and other financial institutions and the introduction of new financial instruments and new services performed for investors and borrowers should result in a considerable escalation of the fees and commissions earned by resident financial institutions from nonresidents and in payments for services performed by foreign institutions for U.S. residents.
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From page 147... ...
to foreign financial institutions is deducted from the gross trading prices reflected in the S form data. There are many peculiarities of the fee structures such as intercompany trading to adjust inventories or wholesale trading of certain kinds that must be taken into account in constructing the fee structure applicable to these trades.
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From page 148... ...
In principle, the accounts of the countries in which the trading occurs should be picking up a financial services receipt that, from the U.S. point of view, is part of the revenue of a direct investment establishment abroad.
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From page 149... ...
These considerations may lead to further modifications of the distinctions between capital gains, investment income, and returns for the provision of financial services. Some convention is likely to be adopted that will come to terms with the kinds of accounts maintained by financial institutions.
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From page 150... ...
A major concern about international services data is the difficulty of developing a complete sampling frame. BEA can use the press or other publicity avenues to call to the attention of the
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From page 151... ...
international services data appear to be those derived from Tong-standing mandatory surveys of multilateral corporations, covering intracorporate service receipts and payments. AS indicated in Table 5-1 (above!
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From page 152... ...
The new mandatory reporting requirements have helped. Nonetheless, the present exemption levels for some services are so high that some types of transactions (for example, legal services)
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From page 153... ...
. ~ ~ g,~v~n'gs aDour one quality ot tne tourist and fare data now entering the travel account, benchmarks for daily expenditure levels and average fares can be used to check the validity of the sample responses and guarc!
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From page 154... ...
Recommendation 5-1 Among the international services categories, improvements in data on international financial services should be accorded a high priority. The Bureau of Economic Analysis, the Treasury Department, and the Federal Reserve should work together to develop a clear conceptual framework, as well as effective statistical methods and procedures for collecting the information.
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From page 155... ...
Efforts to establish comparability with Census Bureau industry data should be encouraged. Recommendation 5-6 The Bureau of Economic Analysis should be given the authority to establish appropriate exemption levels for reporting requirements for various services categories consistent with the nature of the data to be collected.
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