Reconciliation of the U.S.-Canadian current account, 1993-94.

DiLullo, Anthony J. ; Laliberte, Lucie

The Reconciliation of the U.S.-Canadian current account for 1993 and 1994 resulted in a shift to a small U.S. deficit, or Canadian surplus, for 1993 and in an increase in the U.S. deficit, or Canadian surplus, for 1994. Before reconciliation, the U.S. published current-account balance with Canada showed a surplus of $0.4 billion for 1993 and a deficit of $5.7 billion for 1994. After reconciliation, the U.S. surplus for 1993 shifts to a deficit of $0.7 billion, and the U.S. deficit for 1994 increases to $7.0 billion (chart 1, table 1). The corresponding Canadian estimates showed a deficit of $1.8 billion for 1993 and a surplus of $3.8 billion for 1994; after reconciliation, the estimates change to surpluses of $0.7 billion for 1993 and $7.7 billion for 1994.(1)

Table 1. -- Major U.S.-Canadian Balances

 [Billions of U.S. dollars]

 Published Reconciled
 estimates estimates(1)

 United United
 States Canada States Canada

 1993

 Merchants trade -12.2 14.8 -16.0 16.0
 Services 7.1 -8.0 6.2 -6.5
 Investment income 5.7 -9.7 9.4 -9.1

Good, services, and income .7 -2.9 -.5 .5

 Unilateral transfers, net -.3 1.1 -.2 .2

Current account .4 -1.8 -.7 .7

 1994

 Merchandise trade -16.2 19.2 -20.2 20.2
 Services 5.5 -5.9 4.6 -4.5
 Investment income 5.3 -10.5 8.9 -8.2

Good, services, and income -5.4 2.8 -6.7 7.4

 Unilateral transfers, net .4 1.1 -.3 .3

Current account -5.7 3.8 7.0 7.7

(1.) Some differences remain in the reconciled estimates because some service and income estimates could not be fully reconciled. Note.- A U.S. surplus (+) is a Canadian surplus (+) is a U.S. deficit (-). Details may not added to totals because of rounding.

This article presents the results of the reconciliation of the bilateral current-account estimates of Canada and the United States for 1993 and The reconciliation is undertaken because of the extensive economic links between the two countries and the need to explain differences in the published Canadian and U.S. estimates of the bilateral current account. In principle, the bilateral current account of one country should mirror the bilateral current account of the other country.

Differences occur in the U.S. and Canadian current accounts as published by the Bureau of Economic Analysis (BEA) and by Statistics Canada because of differences in the definitions, methodologies, and statistical sources used by each agency. The reconciled estimates reflect the elimination of most of those differences.(2) However, a few differences, mainly related to insurance transactions, cannot be satisfactorily reconciled because of differences in accounting conventions and survey methods in each country. in addition, some of the remaining differences for 1994 are in components of the current account for which data are still preliminary and subject to revision., these differences may be eliminated when final data for these components become available.

After reconciliation, revisions are incorporated into the U.S. and Canadian published estimates as far as possible. Exchange of data between Canada and the United States for transactions such as merchandise trade. travel and passenger fares.. Canadian and U.S, government transactions. and some transportation transactions covers over 80 percent of the value of the Canadian and U.S, current-account. A more complete exchange of data or substitution of reconciled estimates for published estimates is not feasible, for several reasons: Transactions with third countries would be affected, protection of the confidentiality of source data bars the exchange of data for some transactions, and some requirements for the integration of the international and national (domestic) accounts in each country differ.

The longstanding Canadian-U.S, current account reconciliation is among the leading examples of the benefits that can be derived from international data sharing. The reconciliation process has resulted in greater accuracy of the published estimates of transactions between Canada and the United States and in increase efficiency in producing the estimates, Wider opportunities for international data sharing may result from the upcoming 1997 yearend coordinated benchmark survey of international portfolio investment to be undertaken by more than 20 countries, including Canada and the United States, under the auspices of the International Monetary Fund.

The details of the current-account reconciliation for 1993-94 are presented in the following tables. Tables 2.1 and 2.2 show the major types of reconciliation adjustments -- definitional, methodological, and statistical -- made to the major current-account components. Tables 3.1 and 3.2 present the published estimates, the reconciled estimates, and the amounts of adjustments for each major component. Tables 4.8 present the reconciliation details for each current-account component.(3)

Reconciled Current-account Balances

for 1993-94

In the U.S,. current account, the reconciliation adjustments resulted in a shift of $1.1 billion from a surplus to a deficit for 1993 and in an increase of $1.3 billion in the deficit for 1994. The changes reflect larger adjustments to the U.S. southbound estimates (payments) than to the northbound estimates (receipts) (tables 2.1 and 2.2).(4) The largest increases in the U.S. southbound estimates result from the addition of reexports to U.S. merchandise imports (a definitional adjustment) and from increases in the estimates of transportation and other services" for undercoverage (statistical adjustments). The largest adjustments to U.S. northbound estimates, such as the reclassification of inland freight and statistical adjustments to transportation and investment income, largely offset each other.

In the Canadian current account, the reconciliation adjustments resulted in a shift of $2.5 billion from a deficit to a surplus for 1993 and in an increase of $3.9 billion in the surplus for 1994. The changes reflect increases to Canadian southbound estimates (receipts) and decreases to Canadian northbound estimates (payments). The shift to a Canadian surplus in 1993 is mainly due to a decrease in estimates of northbound services (statistical adjustment). In 1994 the upward adjustment to the Canadian surplus reflects an increase in estimates of southbound investment income and a decrease in estimates of northbound services (statistical adjustments).

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(1) The reconciliation of the current account has been undertaken each year since 1970. Summary of the reconciliations were published in the United States in the following issues of the Survey of Current Business: June 1975, September 1976 and 1977, December 1979, June 1981, and December 1981 through 1991. Complete details of the reconciliations for 1990 and later years were published in the November 1992 and the October 1993 and 1994 issues of the Survey. In Canada, the results were published in the following issues of Canada's Balance of International Payments (catalogue 67-001), a publication of Statistics Canada; Fourth Quarter 1973, Second Quarter 1976 and 1977, Third Quarter 1978 and 1979, First Quarter 1981, and Third Quarter 1981 through 1994.

(2.) A detailed article on the methodology used to reconcile the U.S. Canadian current account was published by REA m the November SURVEY and by Statistics Canada in Reconciliation of the Canadian-United States Current Account, 1990-91. Statistics Canada also published a shortened version n the December 1992 Canadian Economic Observer and in Canada, Balance of International Payments, Third Quarter 1992.

(3.) For reconciliation purposes, some of the details in the tables in this article differ from those in balance-of-payments tables regularly published by BEA and Statistics Canada.

(4.) In this article, the term "northbound" refers to U.S receipts, or Canadian payments; the term "southbound" refers to U.S. payments, or Canadian receipts. All values are expressed in U.S. dollars.

The reconciliations were carried out under the direction of Lucie Laliberte, director of Statistics Canada's Balance of Payments Division, and Anthony DiLullo, assistant chief Of BEA'S Balance of Payments Division. At Statistics Canada, Hugh Henderson, Emmanuel Manolikakis, Robert Theberge, Denis Caron, and Linda Tasse participated in the reconciliation of the Canadian accounts. Denis Caron was responsible for the production and coordination of reconciliation tables. At BEA, Russell Scholl, assisted by Jane Newstedt, was responsible for reconciling the U.S. portfolio income accounts Mark New, for the accounts related to U.S. direct investment in Canada; Gregory M. Fouch, for the accounts related to Canadian direct investment in the United States; and Kwok Lee, for merchandise trade.