1 measuring trade in services training module carsten fink based on the presentation by andreas...
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1
Measuring Trade in Services
Training Module
Carsten Fink
Based on the presentation by Andreas Maurer (WTO) at the World Bank Trade in Services
Course in Washington, DC, April 2004
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Which statistical framework do we need to measure international trade in services flows?
What is the current state and which improvements can we expect?
What do available statistics show?
How to improve the collection of data?
Overview
3
35
45
55
65
75
1990 1995 2000
Share of Services Value Added in GDP by Economic Groups
Developed countries
Developing countries
World
Economic activity
percent
4
Exports of Goods and Services, 1980-2002
0
50
100
150
200
250
300
350
400
450
(19
80
=1
00
)
0
1500
3000
4500
6000
7500
9000
10500
12000
Bill
ion
$
Goods Services
Services
Goods
GDP
Services and TIS
5
Specifics of Trade in Services
Services represent 20% of world trade, however, account for 2/3 of world GDP only
Intangible nature of services
Conventional trade statistics do not cover all international trade in services, because of the
• Many services require the physical proximity of provider and consumer: GATS therefore distinguishes 4 modes of delivery
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The 4 Modes of Supply Under GATS
COUNTRY A COUNTRY BMode 1: service transactions
Mode 2: service transactions
Mode 3: service transactions
Consumer from A
Consumer from A
CompanyForeign affiliate
Consumer from A
Supplier
Direct investment in country AService supply
Consumer from A
Supplier The service crosses the border
The consumer goes abroad Service supply
GATS
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The 4 Modes of Supply Under GATS
Mode 4: service transactions
Mode 4: employment
Service firm
Natural person
Temporary employment
Consumer from A
Naturalperson
Naturalperson
Service supply
Self-employed goes to country A
or employee sent by firm from B
COUNTRY A COUNTRY B
GATS
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What is the problem for the statistical framework?
Goods“cross-border”
response: - International Merchandise Trade Statistics (IMTS), Rev.2 - Compilers Manual
Services• mode 1: “cross-border” • mode 2: consumption abroad• mode 3: commercial presence• mode 4: movement of natural
persons
response: - Manual on Statistics of International Trade in Services (MSITS)- Compilation guidance
Manual
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The Manual on Statistics of International Trade in Services
Guidelines and recommendations on the measurement of trade in services
Balance of Payments statistics
Foreign Affiliates Trade in Services statistics
Manual
Annex: Movement of natural persons
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Principles of recording BOP transactions
The Extended Balance of Payments classification
Statistics by trading partner
Availability of BOP/EBOPS trade in services statistics
Statistics on Resident-Non Resident Trade in Services (BOP)
BOP
11
Of interest to trade negotiators
but...
BOP Statistics
BOP summarises transactions of an economy with the rest of the world
BOP
Current account
Capital & financial account
GoodsServicesIncomeCurrent transfers
11 componentsTransportationTravelCommunicationsetc.
BOP
12
BOP Statistics
• More detail needed than the 11 BPM5 services components
MSITS introduces EBOPS (breakdown of BPM5 services)
• Most services delivered under Mode 3 and Mode 4 are not covered
However, some BOP indicators helpful:
• Foreign Direct Investment
• Compensation of employees• Workers’ remittances• Migrant transfers
Mode 3
Mode 4
BOP
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• What is it?
• product-based classification,
• consistent with 11 BPM5 services components,
• more detailed than BPM5 services components,
• including additional memorandum items.
• How can it be used in the framework of GATS negotiations?
• MSITS provides a table of correspondence between EBOPS / CPC Rev.1 / GATS list of services GNS/W/120.
EBOPS
Extended Balance of Payments Services Classification
BOP
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EBOPS Main Components
3. Communications services
4. Construction services
5. Insurance services
6. Financial services
7. Computer and information services
8. Royalties and licence fees
9. Other business services
10. Personal, cultural and recreational services
Commercial services:
1. Transportation
2. Travel
3. -10. Other commercial services
11. Government services (not in GATS)
BOP
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Structure of Other Services Exports, 2001BOP
Communications4%
Construction4%
Insurance4%
Financial services14%
Computer and information
7%
Royalties and license fees
12%
Other business52%
Personal, cultural and recreational
3%
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EBOPS Detailed Components
2. Travel
1. Transport
3. Communications services
…etc
• Sea transport (passenger, freight, other)
• Air transport (passenger, freight, other)
• Other transport (passenger, freight, other)
• Space, Rail, Road, ...
• Business travel• Expenditure by seasonal and border workers• Other
• Personal travel•Health-related expenditure•Education-related expenditure•Other
• Postal & courier
• Telecommunication
…
Breakdown of main components
BOP
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Allocation of BOP/EBOPS Items to Modes of Supply
As a first step, MSITS proposes a simplified approach:
• Items deemed to be predominantly delivered through one mode
Mode 1
• Transportation (except supporting and auxiliary services to carriers in foreign ports),
• Communications services
• Insurance services
• Financial services
• Royalties and license fees
Mode 2• Travel (excluding purchases of goods)
• Supporting and auxiliary services to carriers in
foreign ports
BOP
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Allocation of BOP/EBOPS Items to Modes of Supply
Simplified approach (continued):
• Items for which significant elements of 2 modes of supply are involved
• Construction services
• Computer and information services
• Other business services
• Personal, cultural and recreational services
Mode 1
?
Mode 4
Mode 3
?
BOP
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Statistics by Trading Partner
MSITS recommends to
• Compile international trade in services statistics on an individual trading partner basis
• At least for :• Services as a whole• 11 main services components of BPM5/EBOPS• Main trading partners
• If possible:• At more detailed EBOPS level• Common geographical basis for all trade in services data
BOP
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International Dissemination of BOP/EBOPS Statistics
Publication Country coverage By type of service By partner country
IMF Balance of Payments Statistics Database(book and CD-ROM)
IMF members
YesBPM5 and
EBOPS* (provided to IMF on voluntary basis)
No
Eurostat New Cronos Database(on-line and CD-ROM)
EU members, total EU, euro area,
EU candidate countries
YesEBOPS*
Yes40 partner countries and partner regions
OECD Statistics on International Trade in Services (a joint publication of OECD and Eurostat)(book, on-line and CD-ROM)
OECD membersYes
EBOPS*No
OECD Statistics on International Trade in Services, Detailed Tables by Partner Country (book, on-line and CD-ROM)
26 OECD members and Hong Kong
Total servicesTransportation
TravelOther commercial serv.Government serv. n.i.e.
Yes60 partner countries and partner regions
WTO's International Trade Statistics(book, on-line and CD-ROM)
All countriesYes
Summary data and analysis
YesSummary data
* From 2003. Joint OECD-Eurostat Trade in Services Classification up to 2002.
BOP
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Foreign Affiliate Trade in Services Statistics (FATS)
• Focus on services measuring Mode 3 (commercial presence)• A range of indicators on the activity of foreign affiliates• Inward and outward movements• Statistics by trading partners
Overview
• What do FATS statistics measure?
FATS
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The FDI Universe
FDI: the direct investor makes an international investment to obtain a lasting interest in an enterprise abroad
Owns >10% shares, voting power or the equivalentDirect investment
enterprise
• Associate
• Subsidiary
• Branch
between 10 and 50%
more than 50%
wholly or jointly unincorporated enterprise
individualsenterprisesassociated groups of individuals/enterprisesgovernments...
Country A Country B
Directinvestor
FATS
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Firms Covered in FATS
• Ownership criteria
Majority-owned foreign affiliates (a single foreign investor owns more than 50% of their ordinary shares or voting power):
• Types of producers
Affiliates producing goods, services
Includes subsidiaries and branchesExcludes associates
FATS
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Economic Variables for FATS
• Sales (turnover) and/or output
• Employment
• Value added
• Exports and imports of goods and services
• Number of enterprises
Basic FATS variables(minimum recommended by MSITS)
Additional FATS variables
• Assets
• Compensation of employees
• Net worth
• Net operating surplus
• Gross fixed capital formation
• Taxes on income
• Research and development expenditures
Most are drawn from SNA 93
FATS
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Geographical Attribution
Foreign-owned affiliates in the compiling country (inward FATS)
COMPILING COUNTRY
Operations of foreign-owned
affiliate
Majority ownership
Foreigninvestor
Operations allocated to the country of
Majority ownership
Statistics on inward FATS
Immediate owner
Foreigninvestor
UBOSupplem
entary in
formatio
n
Described
FATS
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Geographical Attribution
COMPILING COUNTRY
Operations allocated to the country of
Statistics on outward FATS
Operationsof foreignaffiliate
Majority ow
nership
Foreign affiliate (holding company)
Majority ownership
Resident investor
Described
Foreign affiliates of investors of the compiling country (outward FATS)
FATS
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Classification by Activity and by Product
• FATS variables classified as a first priority on an activity basis
• Foreign affiliates classified by their primary activity
• According to ISIC Categories for Foreign Affiliates (ICFA)
• ICFA can be linked with EBOPS (to a limited extent)
• Long-term priority…
• FATS variables such as sales, imports and exports should also be broken-down by product
FATS
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Availability of FATS StatisticsInward Outward
Number ofemployees
Turnover Valueadded
Number ofemployees
Turnover Valueadded
Austria x x x xBelgium x x x xCzech Republic x x xDenmark x x xFinland x x xFrance x x x xGermany x x x xHungary x x xIreland x xItaly x x x xJapan x x xLuxembourg x x x xNetherlands x x xNorway x x xPoland x xPortugal x x x x x xSweden x x x xTurkey x x xUnited Kingdom x x xUnited States x x x x x x
FATS
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FDI Statistics as an Alternative
State of implementation
• Many countries collect FDI flows, with geographical and activity breakdown (more data for inward than outward)• Correlation between FDI flows/stocks and sales of foreign
affiliates is not perfect
Collection and dissemination
• Eurostat and OECD: FDI inward and outward stock, flows and income (by industry and country)
• UNCTAD: Foreign Direct Investment Database
• National sources: Central banks, statistical offices
FATS
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Availability of FDI and TNCs statisticsSelected countries
FATS
Inward Outward
Flows Stocks Flows Stocks
Albania x x x
Brazil x x x Inward InwardChina x x x x Inward x x x ActivityChinese Taipei x x x x x x x x x ActivityColombia x x x x x xCroatia x x x x Inward xFYR Macedonia x x x xMoldova x x x x InflowsHong Kong China x x x x x x x x ActivityIndia x x x x x x x x xKazakstan x x x x x xPapua New Guinea x x x Inward xRomania x x x xRussian Federation x x x x x InwardSingapore x x x x x x x x x xSouth Africa x x x x Inward st. xTunisia x x x x Inflows x
Activity breakdown
FDI
Value added
Activity and geographical breakdown
TNCs, Inward
Geographical breakdown
Employ-ment
Turnover
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The movement of natural persons in GATS• Mode 4 service suppliers
• Temporary movement
• Statistics for measuring Mode 4BOP statisticsFATS statisticsMigration statisticsOther possible sources
• Improving Mode 4-related statistics
The Movement of Natural Persons
MODE 4
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Mode 4 Service Suppliers
From the point of view of the recipient/importing country…
Mode 4 comprises services delivered in the framework of:
service contracts with foreign service suppliers (the individuals themselves or their employer)
employment contracts between enterprises established in the host country and foreign individuals
Areas of uncertainty
• employment only with foreign-owned companies?
• what does the supply of a service refer to?
• many commitments currently focus on highly-skilled workers
Mode 4
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Mode 4 and “Temporary”
GATS does not define “temporary”
• In WTO Members’ schedules of commitments
Varies between about 3 months (businesss visitors) and 2 to 5 years (intra-corporate transferees)
• In international statistical standards (BPM5, SNA, migrations)
One-year rule distinction between residents/non-residents
Statistics on residents also include Mode 4 service suppliers
Mode 4
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BOP and Mode 4
BOP Items Relevance Limitations
Services (especially computer & information, other business, personal cultural & recreational, and construction services)
Service contracts with the importer
Include other modes of supply
Mode 4
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BOP and Mode 4
BOP Items Relevance Limitations
Compensation of employees
Employment contracts, generally < 1 year
Includes workers not relevant for Mode 4 (non-services, and non-temporary)
Workers’ remittances
Indirect valuation for employment > 1 year
Indirect indicator, and includes permanent migrants
Migrants’ transfer
Supplementary information
Mode 4
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Why relevant?
How could it help?
FATS and Mode 4
Relevant variables
• Employment• Compensation of employees
• A number of trade commitments relate to intra-corporate transferees
• Separate identification of foreign non-permanent employment
Mode 4
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Migration Statistics and Mode 4
Relevant framework
UN Recommendations on Statistics of International Migration
Why relevant?
Which categories could be relevant?
Include temporary migrations for the purpose of work
• Foreign border-workers• Visitors and foreign business travellers• Some sub-categories of other migrant workers (within limits of occupation/activity): seasonal migrant workers, project-tied workers and temporary migrant workers
Mode 4
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Other Possible Sources
• Statistics on the number and type of work permits granted (e.g. by duration / occupation)
• Information from social security systems / health insurance schemes in which foreigners may be distinguished
• Statistics on arrivals and departures from migration or tourism authorities
(origin/destination, length of stay, purpose of stay...)
• Household surveys / population censuses
Mode 4
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Improving Mode 4 Related Statistics
Main difficulty in measuring Mode 4
Identify in available statistics the relevant subset of services and workers
Indicators on the value of Mode 4 services
• Identify Mode 4 in services sub-items• Identify the services sector in compensation of employees
Migration/labour statistics
but little seems feasible at present
Sounder ground for improvementHowever not in short-term, and GATS Mode 4 not translated in precise statistical requirements
Mode 4
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Summary: Modes of Supply and Statistical Domains
Mode of Supply Relevant Statistical Domains
Mode 1: Cross border supply
BOP: commercial service (excluding travel and construction services)
Mode 2: Consumption abroad
BOP: Travel
Mode 3: Commercial presence
FATS statistics BOP: FDI data, construction services
Mode 4:Presence of natural persons
Insufficiently covered
BOP: commercial service (excluding travel) BOP Statistics: Compensation of employees and workers' remittances
Modes of supply
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Sales by GATS Modes of Supply: Statistical Approximation
M o d e o f S u p p ly P r o x y r o u g h e stim a te
b illion U S$ , (% )
1 - c ro ss -b o rd e r su p p ly B O P : c o m m e rc ia l se rv ic e s e x p o rts (e x c lu d in g tra v e l)
1 ,0 0 0 (2 8 % )
2 - c o n su m p tio n a b ro a d B O P : tra v e l e x p o rts 5 0 0 (1 4 % )
3 - c o m m e rc ia l p re se n c e
F A T S S ta tis tic s : T u rn o v e r 2 ,0 0 0 (5 6 % )
4 – m o v e m e n t o f n a tu ra l p e rso n s
B O P : c o m p e n sa tio n o f e m p lo y e e s 5 0 (2 % )
Modes of supply
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Areas Where Improvements are Needed
• Few countries report the full BPM5 detail • Lack of statistics by partner countries• Lack of reliability• Documentation on coverage and deviations from international standards not available
• BOP trade in services
• Lack of reliability and comparability• No FATS collected outside OECD• Confidentiality severely limits data availability
• FATS
• No framework for statistics by mode of supply, in particular for Mode 4
Prospects
43
Implement BPM5 recommendations for trade in services
MSITS’ Phased Approach to Implementation
5 core elements to improve international comparability
Compile BOP services according to EBOPS, starting with items of major economic importance to the country
Compile FDI by ISIC categories of activity
Compile basic FATS variables broken down by ICFA categories of activity
Compile statistics by partner country
Prospects
44
Full implementation of EBOPS
MSITS’ Phased Approach to Implementation
5 other elements to improve detail of available information
Compile FATS additional detail
Compile statistics on the presence of natural persons
Split BOP trade in services between trade among affiliated parties and trade with unrelated parties
Allocate BOP trade in services by mode of supply
Prospects
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Keys for Improvement of Statistics
• Efforts by national agencies in charge of statistics
• Governments’ willingness to allocate resources to statistics
• Co-operation between national institutions
• Co-operation between international and regional institutions, and support to national initiatives
• Effective technical assistance
• Compilation guidance
Prospects