U.S. international trade and investment in services: data needs and availability Essay

This paper describes and evaluates BEA data on U.S. trade andinvestment in services, discusses recent efforts by BEA to improve itsdata, and makes suggestions for further improvement. Services are generally defined as economic outputs that areintangible and invisible. In analyzing international servicestransactions in this paper, this definition is interpreted broadly toinclude the output of such diverse industries as petroleum services;construction; transportation, communications, and public utilities;wholesale and retail trade; banking; finance (except banking),insurance, and real estate; agricultural services, hotels and logingplaces; and a variety of business, technical, professional, and personalservices. The first section of the paper reviews the growing policy andstatistical interest in services transactions over the last decade andBEA’s response to it. The most significant of the steps BEAalready has taken to improve its services data is a new annual survey ofU.S.

direct investment abroad, which was approved in July 1984. Otherimprovements, including some that would require new legal authority toimplement, are underway. The most significant is a benchmark survey ofservices transactions between U.S.

residents and unaffiliated foreignresidents. Such a survey would help fill the pressing need forinformation on “other private services” (see below). Following a summary of the paper in the second section, the thirdsection discusses definitional and methodological issues.

Thediscussion of definitional issues–for example, that goods and services may be sold jointly and not priced separately–indicates the difficultyof isolating services activity. The discussion of methodological issuesprovides the framework, used in the fourth section, for evaluatingexisting BEA data. The issues relate to (1) the basis used forclassifying data, (2) the detail in which data are, or can be,disaggregated by country, industry, or type of transaction, (3) thecoverage of transactions by the existing reporting system, and (4) thebasis used for recording transactions. The fourth section transactions, evaluates existing BEA data oninternational services transactions. BEA data are from two sources. Thefirst source, the international transactions (balance of payments)accounts, covers transactions, including services transactions, betweenU.S. and foreign residents, both affiliated–that is, between U.

S.parent companies and their foreign affiliates and between foreign parentcompanies and their U.S. affiliates–and unaffiliated. The balance ofpayments data cover travel, passenger fares, other transportation,royalties and fees from and to affiliated foreigners, royalties and feesfrom and to unaffiliated foreigners, other private services (such asforeign contract operations of U.S. companies, internationalcommunications, reinsurance, and film rentals), direct investmentincome, and other private receipts and payments (such as interest anddividends on portfolio investment). The second source, directinvestment financial and operating data, covers various aspects,including services-related aspects, of the financing and operations ofU.

S. parent companies, their foreign affiliates, and U.S. affiliates offoreign companies.

Instances where no coverage exists–such astransactions between unaffiliated U.S. and foreign persons foradvertising, accounting, legal, and medical services–are noted. The fifth section discusses methods of combining data from the twosources to obtain a measure of total sales between U.S. and foreignresidents, whether made through trade or investment channels. Itpresents a tabulating scheme, using engineering services as an example,that shows how the necessary information can be derived by utilizing,and building upon, BEA’s system of international surveys.

The last section presents illustrative data on services from thebalance of payments accounts and the 1977 benchmark survey of U.S.direct investment abroad. The latter data are using to address twoanalytic questions: (1) whether data classified by industry ofenterprise are adequate proxies for data classified by industry ofactivity, and (2) to what extent, and in which industries, data on salescan substitute adquately for data on value added.

References to related studies and papers are provided.

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