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

Whichard, Obie G.

This paper describes and evaluates BEA data on U.S. trade and investment in services, discusses recent efforts by BEA to improve its data, and makes suggestions for further improvement.

Services are generally defined as economic outputs that are intangible and invisible. In analyzing international services transactions in this paper, this definition is interpreted broadly to include 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 loging places; and a variety of business, technical, professional, and personal services.

The first section of the paper reviews the growing policy and statistical interest in services transactions over the last decade and BEA's response to it. The most significant of the steps BEA already has taken to improve its services data is a new annual survey of U.S. direct investment abroad, which was approved in July 1984. Other improvements, including some that would require new legal authority to implement, are underway. The most significant is a benchmark survey of services transactions between U.S. residents and unaffiliated foreign residents. Such a survey would help fill the pressing need for information on "other private services" (see below).

Following a summary of the paper in the second section, the third section discusses definitional and methodological issues. The discussion of definitional issues--for example, that goods and services may be sold jointly and not priced separately--indicates the difficulty of isolating services activity. The discussion of methodological issues provides the framework, used in the fourth section, for evaluating existing BEA data. The issues relate to (1) the basis used for classifying data, (2) the detail in which data are, or can be, disaggregated by country, industry, or type of transaction, (3) the coverage of transactions by the existing reporting system, and (4) the basis used for recording transactions.

The fourth section transactions, evaluates existing BEA data on international services transactions. BEA data are from two sources. The first source, the international transactions (balance of payments) accounts, covers transactions, including services transactions, between U.S. and foreign residents, both affiliated--that is, between U.S. parent companies and their foreign affiliates and between foreign parent companies and their U.S. affiliates--and unaffiliated. The balance of payments data cover travel, passenger fares, other transportation, royalties and fees from and to affiliated foreigners, royalties and fees from and to unaffiliated foreigners, other private services (such as foreign contract operations of U.S. companies, international communications, reinsurance, and film rentals), direct investment income, and other private receipts and payments (such as interest and dividends on portfolio investment). The second source, direct investment financial and operating data, covers various aspects, including services-related aspects, of the financing and operations of U.S. parent companies, their foreign affiliates, and U.S. affiliates of foreign companies. Instances where no coverage exists--such as transactions between unaffiliated U.S. and foreign persons for advertising, accounting, legal, and medical services--are noted.

The fifth section discusses methods of combining data from the two sources to obtain a measure of total sales between U.S. and foreign residents, whether made through trade or investment channels. It presents 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 the balance of payments accounts and the 1977 benchmark survey of U.S. direct investment abroad. The latter data are using to address two analytic questions: (1) whether data classified by industry of enterprise are adequate proxies for data classified by industry of activity, and (2) to what extent, and in which industries, data on sales can substitute adquately for data on value added.

References to related studies and papers are provided.