U.S. international sales and purchases of private services: U.S. cross-border transactions, 1989-92, sales by affiliates, 1990-91.

Sondheimer, John A. ; Bargas, Sylvia E.

THIS ARTICLE presents detailed estimates of U.S. international sales and purchases of private services. The estimates cover services delivered either through cross-border (balance of payments) transactions or through sales by majority-owned affiliates.(1) For cross-border services transactions, this article provides preliminary estimates for 1992 and revised estimates for 1989--91; in addition, a summary of cross-border transactions for selected areas and countries has been added to table 2. For sales of services by affiliates, the article provides preliminary estimates for 1991 and revised estimates for 1990.

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In 1991, the latest year for which information on both types of transactions is available, a majority of U.S. sales of private services to foreigners were in the form of cross-border transactions; in that year, U.S. receipts from cross-border sales of services totaled $153.0 billion, compared with $133.5 billion in sales abroad by majority-owned foreign affiliates of U.S. companies (MOFA'S) (table 1). In contrast, a majority of U.S. purchases of services from foreigners was in the form of sales by majority-owned U.S. affiliates of foreign companies (MOUSA'S); in 1991, these sales totaled $119.0 billion, compared with $99.9 billion in U.S. payments for cross-border purchases of services.

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These patterns have held since at least 1989, the earliest year for which comparable data on sales of services by MOFA'S and MOUSA'S are available. However, the patterns for individual types of services are quite diverse: Some services, such as travel and transportation, are inherently cross-border in nature, whereas other services, including many business, professional, and technical services, usually must be delivered through affiliates because of the need for close and continuing contact between service providers and their customers. If services that are inherently cross-border in nature were excluded, transactions through affiliates would exceed cross-border transactions for U.S. sales as well as purchases of services.

The United States ran a surplus both on cross-border transactions and on transactions through affiliates in 1991. The surplus on cross-border transactions was $53.2 billion; it widened to $60.6 billion in 1992, in contrast to a deficit of $96.1 billion on U.S. merchandise trade. In 1991, sales of services abroad by MOFA'S were $14.4 billion larger than sales of services in the United States by MOUSA'S. Since 1989, the difference between the two sales totals has widened somewhat, as sales of services abroad by MOFA'S have increased at an annual rate of 16 percent, compared with a 12-percent rate for sales of services in the United States by MOUSA'S.

U.S. Cross-Border (Balance of Payments) Transactions

In 1992, U.S. cross-border receipts (exports) for sales of private services continued to increase faster than U.S. cross-border payments (imports) for purchases of private services (table 2). The surplus on these transactions increased to $60.6 billion from $53.2 billion in 1991, continuing a trend since 1987 of sharp annual increases in the surplus (chart 1). Except for "other transportation" services, the surpluses in every component showed large increases during 1987--92. Similarly, the increasing surplus was evident in the balances by major areas and countries (chart 2).

Major developments in 1992

Receipts on travel and passenger fares increased $7.0 billion, or 11 percent, to $71.2 billion in 1992. Payments increased $5.5 billion, or 12 percent, to $50.8 billion. From 1986 to 1992, the average annual growth in receipts was nearly three times faster than that in payments. The faster growth in receipts was mostly due to sharp increases in receipts from areas other than Canada and Mexico.

Receipts on "other transportation" services increased $0.4 billion, or 2 percent, to $22.8 billion in 1992. Payments increased $0.2 billion, or 1 percent, to $23.5 billion. From 1986 to 1992, receipts and payments increased at similar rates--about 6 percent per year. The 1986--92 increase in receipts was in both freight and port services, reflecting moderate growth in export volumes and in the number of foreign airlines flying to U.S. ports. The 1986--92 increase in payments was almost solely due to growth in port services, specifically air port services, reflecting aggressive expansion overseas by U.S. airlines.

Receipts on royalties and license fees increased $1.8 billion, or 10 percent, to $20.2 billion in 1992. Payments increased $0.8 billion, or 19 percent, to $5.0 billion. Since 1986, receipts have grown at an annual rate of 17 percent, and payments have grown at an annual rate of 23 percent. The 1986--92 growth in receipts was due mainly to an increase in receipts from affiliated foreign companies, including both foreign affiliates of U.S. parents and foreign parents of U.S. companies; by area, most of the growth was in receipts from affiliated companies in Western Europe, Canada, and Japan. The 1986--92 growth in payments was due mainly to an increase in payments to affiliated foreign companies in Western Europe and Japan.

Receipts on other private services increased $5.6 billion, or 12 percent, to $53.6 billion in 1992. Payments increased $1.0 billion, or 4 percent, to $28.0 billion. From 1986 to 1992, receipts and payments increased at similar rates. About one-third of the 1986--92 increase in receipts was accounted for by transactions with affiliated foreign companies. The rest of the increase was accounted for by transactions with unaffiliated foreigners, most notably transactions for business, professional, and technical services; within that group, the largest gain was in receipts for construction, engineering, architectural, and mining services, for installation, maintenance, and repair of equipment, and for computer and data processing services. For payments, the increase since 1986 was equally divided between transactions with affiliated foreign companies and those with unaffiliated foreign companies. Payments to unaffiliated foreign companies were mostly for financial services, for telecommunications, and for business, professional, and technical services.

Sales by Affiliates

In 1991, worldwide sales of services by nonbank MOFA'S and MOUSA'S increased 9 percent each--to $146.0 billion and $126.5 billion, respectively. MOFA sales of services to foreign persons were $133.5 billion, up 10 percent after a 22-percent increase in 1990. MOUSA Sales of services to U.S. persons were $119.0 billion, up 9 percent after a 16-percent increase.

Table 10 summarizes the available data for 1990--91 on sales of services by nonbank MOFA'S and MOUSA'S for all countries and industries combined. Highlights for 1991--the most recent year for which estimates are available--are discussed in the following two sections. The first section covers sales by MOFA'S, and the second

Sales by MOFA'S

Of the $146.0 billion in worldwide sales of services by MOFA'S, 86 percent were to unaffiliated persons, and 14 percent were to affiliated persons. By location of customer, 9 percent of the sales were to U.S. persons, and the remainder were to foreign persons. Of the sales to U.S. persons, 60 percent were to U.S. parents; of the sales to foreign persons, go percent were to unaffiliated persons.

The rest of this section focuses on MOFA sales to foreign persons, which represent sales delivered by U.S. companies to foreign markets through the channel of direct investment. Those sales are shown by country of affiliate in table 11 and by industry of affiliate cross-classified by country in table 12.

Sales to foreign persons.--Of the $133.5 billion in MOFA sales of services to foreign persons in 1991, 89 percent were sales within the country of the affiliate, and the remainder were sales to other foreign (non-U.S.) countries.

By area, MOFA'S in Europe accounted for $75.6 billion, or 57 percent, of affiliates' sales of services to foreign persons in 1991. Sales by European affiliates increased 9 percent in 1991. Within Europe, the largest sales were by affiliates in the United Kingdom, followed by affiliates in Germany, France, and the Netherlands. Outside Europe, affiliates in Canada had the largest sales, followed by affiliates in Japan.

By industry, MOFA'S classified in the "services" division of the Standard Industrial Classification (sic) had the most sales of services to foreign persons in 1991--$41.7 billion, up 8 percent from 1990.(2) Affiliates in Europe accounted for 72 percent of "services" sales. Within "services," affiliate sales were largest in "other" services and in computer and data processing. After "services," the next largest sales were by affiliates in insurance--$23.4 billion. Of this total, nearly 80 percent were sales by affiliates in Canada, Japan, the United Kingdom, Bermuda, and Hong Kong, each of which had sales exceeding $1.0 billion.(3)

MOFA'S in wholesale trade, manufacturing, finance (except banking), and "other industries" also had large sales of services to foreigners in 1991. In both manufacturing and wholesale trade, most of the sales were for computer and data processing services provided by affiliates whose principal business was the manufacture or distribution of computers and related equipment. In finance, three-quarters of the sales were by affiliates in the United Kingdom, Japan, Canada, and Switzerland; in each of these countries, affiliates had sales in excess of $1.0 billion. Within "other industries," transportation affiliates had the most sales, followed by communications affiliates.

Sales by MOUSA'S

Of the $126.5 billion in worldwide sales of services by MOUSA'S, 94 percent were to U.S. persons, and 6 percent were to foreign persons. Of the sales to foreign persons, 52 percent were to members of the U.S. affiliates' foreign parent groups, and 45 percent were to unaffiliated foreigners. (MOUSA'S have few foreign affiliates of their own, so their sales to such affiliates are very small.)

The rest of this section focuses on MOUSA Sales of services to U.S. persons, which represent sales delivered by foreign companies to the United States through the channel of direct investment. These sales are shown by country of ultimate beneficial owner (UBO) in table 11 and by industry of affiliate cross-classified by country of UBO in table 13.4

Sales to U.S. persons.--Of the $119.0 billion in MOUSA sales of services to U.S. persons, 60 percent were sales by affiliates with European UBO'S. Within Europe, the largest sales were by affiliates with UBO'S in the United Kingdom, followed by affiliates with UBO'S in Switzerland, the Netherlands, Germany, and France. Outside Europe, affiliates with UBO'S in Canada had the most sales, followed by affiliates with UBO'S in Japan.

By industry, MOUSA'S in insurance had the largest sales to U.S. persons in 1991. Most of these sales were by affiliates with UBO'S in the United Kingdom, Canada, and the United States. By type of insurance, sales by property and casualty insurers--primarily those with UBO'S in the United States, the United Kingdom, and Switzerland--accounted for slightly more than one-half of the total. Most of the remaining sales were by life insurers, and nearly one-half of these sales were by affiliates with Canadian UBO'S. After insurance, affiliates in "services" had the largest sales, at $28.1 billion; within "services," sales were largest in "other" services, motion pictures, and hotels and other lodging. Sales were also sizable in real estate and "other industries." Nearly two-thirds of the sales in "other industries" were in transportation.

Data Availability

These estimates, along with revised estimates for 1986--88, are available on printouts and on diskette. The set of printouts and the diskette (3 1/2" HD) each cost $20.00. Send orders to the Public Information Office, Order Desk, BE-53, Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230. When ordering, please include accession number 58-93-20-500 for printouts and accession number 58-93-40-501 for diskette, and make checks or money orders payable to the Bureau of Economic Analysis. Visa or MasterCard orders may be placed by telephone at (202) 606-9592. (1.) Estimates of both types of transactions were first presented in this format in "U.S. International Sales and Purchases of Services," Survey of Current Business 70 (September 1990): 37-72. A number of formal frameworks for the analysis of international sales and purchases of services (and goods) have been proposed in recent years. These frameworks are based on the concept of ownership and can be viewed as supplements to the conventional residency-based balance of payments accounts. In a forthcoming issue of the Survey, these proposals will be reviewed, and an experimental set of ownership-based accounts will be constructed using available data and BEA estimates of missing items. (2.) The "services" division of the sic comprises the services listed under "services" in tables 12 and 13. (3.) Insurance affiliates in Bermuda are largely "captive" offshore affiliates of U.S. parents that are not themselves insurance companies; these affiliates primarily provide self-insurance within their multinational companies. (4.) The UBO of a U.S. affiliate is that person, proceeding up the affiliate's ownership chain beginning with and including the foreign parent, that is not owned more than 50 percent by another person.