U.S. international services consist of services provided by and to the United States in international markets through all four modes of supply of services: (1) cross-border supply, (2) consumption abroad, (3) commercial presence, and (4) presence of natural persons. BEA’s international services statistics bring together information on all services provided to international customers or procured from international sources. These statistics are 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. 1
U.S. trade in services statistics are recorded as U.S. exports and U.S. imports in the international transactions accounts (ITAs). They include twelve broad categories: manufacturing services on physical inputs owned by others2; 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 of “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 statistics refer to services supplied by 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 the 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.
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 services trade statistics. The distributive services associated with importing and exporting goods is included, but 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 supplies through affiliates is the larger channel of delivery of services in international markets (see international services table 1.1).