Definition of International Services

U.S. international services consist of all services provided by and to the United States in international markets. BEA's international services statistics comprise statistics on trade in services and on services supplied through affiliates.¹

The Basics of How International Services Are Supplied and Received by the United States

International services are supplied (top panel) and received (bottom panel) by the United States through four modes of supply organized into two groups: trade in services, which approximately cover modes of supply 1, 2, and 4, and services supplied through affiliates, which approximately cover mode 3.

Mode 1. Cross-border supply: the supplier provides a service to the consumer remotely, such as over the internet or phone.

Mode 2. Consumption abroad: the consumer travels to the supplier’s location to consume the service.

Mode 3. Commercial presence: services supplied through affiliates are services provided by multinational enterprises through their U.S. or foreign affiliates.

Mode 4. Presence of natural persons: the supplier travels to the consumer’s location to provide the service.

Trade in Services

U.S. trade in services statistics are recorded as U.S. exports and U.S. imports in the International Transactions Accounts (ITAs). They include 12 broad categories: manufacturing services on physical inputs owned by others;² maintenance and repair services n.i.e. (not included elsewhere); transport; travel (for all purposes including education); construction; insurance services; financial services; charges for the use of intellectual property n.i.e.; telecommunications, computer, and information services; other business services; personal, cultural, and recreational services; and government goods and services n.i.e. For more information on the definitions of the major trade in services categories, see “Part III. Statistical Methodology of International Transactions Accounts” in U.S. International Economic Accounts: Concepts and Methods.

The trade statistics cover both affiliated and unaffiliated transactions between U.S. residents and foreign residents. Affiliated trade consists of intrafirm trade within multinational enterprises—trade between U.S. parent companies and their foreign affiliates and trade between U.S. affiliates and their foreign parent or other members of their foreign parent groups. Unaffiliated trade is with foreigners that neither own, nor are owned by, the U.S. party to the transaction. Not all transactions that flow through affiliated channels are recorded as or considered to be affiliated transactions. In particular, all insurance services are recorded as unaffiliated in BEA's statistics because most insurance services are considered to be provided to the policyholders who pay the insurance premiums and who are unaffiliated with either company and those that are not are not separately identifiable in source data.

Services Supplied Through Affiliates

Services supplied through affiliates statistics refer to services supplied by multinational enterprises (MNEs) through their majority-owned affiliates. The statistics cover transactions between majority-owned foreign affiliates of U.S. enterprises and foreign residents, both in the local economy and in other foreign markets, and transactions between majority-owned U.S. affiliates of foreign enterprises and U.S. residents. Because of the importance of proximity to customers in the delivery of services, many MNEs serve foreign markets partly or wholly through their affiliates located in, or close to, the markets they serve.

For affiliates in industries other than wholesale and retail trade, insurance, and banking, services supplied through affiliates are the sales of services reported by multinational enterprises. For wholesale and retail trade, insurance, and banking, adjustments are made to reported sales of services to better capture the value of services supplied. More specifically, these adjustments add (1) wholesalers and retailers distributive services, (2) insurers premium supplements, and (3) banks' implicitly charged services; they subtract a proxy measure of insurers' expected losses.³

Sales of services are defined as sales of intangible outputs; therefore, they generally exclude the sales by establishments in manufacturing; mining (except support activities); agriculture, forestry, fishing, and hunting (except support activities); and construction, which typically produce and sell tangible goods. However, affiliates in any industry can be providers of services because BEA’s classification of an affiliate reflects the affiliate's primary industry of sales, and affiliates classified in industries that typically produce goods may have secondary activities in services industries. In cases where a sale consists of both tangible and intangible output that cannot be unbundled, sales are classified based on whichever accounts for the majority of the value.

Comparing U.S. Trade in Services and Services Supplied Through Affiliates

Differences in coverage and classification make it difficult to precisely compare trade in services with services supplied through affiliates. An example of a difference in coverage is the inclusion of distributive services (wholesale and retail trade services) in services supplied through affiliates but not in the trade in services statistics. The distributive services associated with importing and exporting goods are included, but are not separately identifiable, in the value of trade in goods. The differences in classification arise because the statistics on trade in services are collected and published by type of service, but those on services supplied through affiliates are collected and published by the affiliate's primary industry.

Despite the difficulties in comparing statistics on U.S. trade in services with statistics on services supplied through affiliates, the large difference in value between the two indicates that the services supplied through affiliates is the larger channel of delivery of services in international markets (see international services table 1.1).