Manual on Statistics of International Trade in Services

Workshop onInternational Trade in Services

Beirut April 18-20, 2011

Structure of Lecture

Background GATS; modes of supply Foreign Affiliates Statistics (FATS) Statistics on Activities of

Multinational Enterprises (AMNE)

Background

The 2010 Manual on Statistics of International Trade in Services (2010 MSITS) serves… primarily as a guide for compilers to support

implementation of statistical concepts governments in providing a better overview for

economic analysis, policy-making, and guidance in international negotiations on trade in services

businesses and others to monitor developments in international services markets, to identify potential trade opportunities

Background The term “international trade in services” in

the Manual covers… trade in services between residents and

nonresidents services delivered through locally established,

but foreign-controlled enterprises cases where individuals are temporarily

present abroad to supply a service

The Manual extends the concept of trade in services, however it conforms entirely to existing international standards

Background

The Manual’s major components: BPM6 concepts and classifications related to

international trade in services BPM6 extensions by product category and partner

country Foreign Affiliates Statistics (FATS) that complement

BPM6, and are beyond the scope of BPM6, as broadly defined in General Agreement on Trade in Services (GATS)

Statistical approach for the treatment of the GATS’ modes of supply, especially mode 4, i.e. services supplied through the presence of natural persons

Negotiations under the DohaDevelopment Agenda (DDA); GATS (1)

Under the framework General Agreement on Trade in Services (GATS), WTO members are committed to entering into successive rounds of trade liberalizing negotiations

Governments require statistics to support the negotiation of specific commitments in trade in services, and to monitor developments in the area concerned

GATS (2)

In March 2001 the Guidelines and Procedures for the Negotiations on Trade in Services were adopted by the Council for Trade in Services

first set of legally enforceable multilateral obligations and commitments governing the use by WTO members: laws; regulations; administrative actions in

respect of the purchase/payment/use of a service; presence of foreign service suppliers

GATS (3)

Three main objectives: to progressively liberalize trade in

services through rounds of negotiations

by that to encourage economic growth and development

to increase participation of developing countries in world trade in services

Modes of Supply (1)

GATS defines the modalities through which services may be supplied, depending of the location of the supplier and the consumer: Mode 1 – cross border supply

Supplier of one country supplies services to consumers in another country without either supplier or consumer moving into the resident country of the other• e.g. services supply enabled by Internet or telephone;•law firm delivering legal advice by phone to a consumer; a physician providing medical diagnosis to a patient via email.

Modes of Supply (2) Mode 2 – consumption abroadConsumers are outside their home territory to

consume services• e.g. travel

Mode 3 – commercial presenceService suppliers establish or acquire an affiliate, branch or representative office in another territory to provide their services

FATS • e.g. foreign bank invests in host economy to create

a subsidiary in order to supply banking services

Modes of Supply (3) Mode 4 – presence of natural persons (i.e. an

individual)Individual moves temporarily to resident country of

consumer to provide the service on behalf of himself or the enterprise (self-employed person or his/her employee)

• e.g. independent architect overseeing a construction project; a self-employed computer consultant; or a computer specialist transferred temporarily to a branch of his employer; fruit-picker on a host country farm on the basis of a services contract

Balance of payments transactions are primarily mode 1, mode 2, and [part of] mode 4

Modes of Supply (4)

Example: Supply of tourism and travel-related services:

Mode 2 – consumption abroadConsumers are outside their home territory to consume

services Mode 3 might be involved, e.g. the establishment of a

branch of a hotel chain With the presence of a hotel manager, Mode 4, intra-

company movement; or a foreign tourist guide present in the host economy

Sale of services by international tourism operator through computer reservation system, Mode 1

Modes of Supply (5)

Example: A computer services supplier and a consumer are established

in 2 different territories The supplier has a commercial presence in a third

territory, Mode 3 The affiliate may act as intermediary between client and

supplier However, most of the supply may be taking place through

Mode 4, i.e. the parent company sends specialist to client Part of the services are also provided online, Mode 1 The affiliate may also be involved in the supply, online,

Mode 1, or itself sending an employee, Mode 4

MSITS: Allocation of BOP/EBOPS to Modes of Supply

BPM6/EBOPS largely corresponding to Mode 1:

• Transport(except supporting and auxiliary services to carriers in foreign ports),

• Telecommunications services• Information services• Insurance and pension services• Financial services• Fees for franchises (part of charges for intellectual

property n.i.e.)

Mode 1

MSITS: Allocation of BOP/EBOPS to Modes of Supply

BPM6/EBOPS largely corresponding to Mode 2:

Mode 2

• Travel (excluding purchases of goods)• Supporting and auxiliary services to carriers

in foreign ports• Maintenance and repair services n.i.e.• Manufacturing services on physical inputs

owned by others

MSITS: Allocation of BOP/EBOPS to Modes of Supply

BPM6/EBOPS services transactions, where no single Mode is dominant Information technology consultant may provide

computer services through traveling to non-resident client (Mode 4), or from his office through telecommunications (Mode 1); or combination of two

For construction, companies may want to establish short-term commercial presence (Mode 3), and/or post own workers in the host economy (Mode 4)

Extended Balance of Payments Services Classification (2010 EBOPS)

The EBOPS is consistent with the BPM6 standard components

Gives further detail on resident-nonresident transactions in services than covered in the BPM6

Developed specifically for MSITS

Foreign Affiliates Statistics (FATS) (1)

Mode 3, commercial presence: services delivered through locally established but foreign controlled enterprises

definition of foreign affiliate an enterprise resident in the compiling economy over

which a unit not resident in the economy has control

similar to direct investment enterprise but only concerned with enterprises in which the direct investor has majority interest. (i.e. more than 50% ownership)

FATS(2) Establishment of affiliate usually only method that

permits close and continuing contact between provider and customer

Sales – measure of service transaction; therefore, most important variable

other important variables – employment; value added; exports and imports of goods and services; and number of enterprises

generally required as an adequate assessment of economic effects of affiliate operations and measures to liberalize the delivery of services

through Mode 3

FATS (3)

Outside the scope of balance of payments statistics Data compiled for:

inward FATS —foreign-owned affiliates in the compiling economy

outward FATS —foreign owned affiliates of the compiling economy

FATS (4)

Why FATS? to capture aspects of international trade in

services that are out of scope of BPM6 to understand the phenomenon of growing

integration and globalization to monitor commitments under the GATS

Statistics on Activities of Multinational Enterprises (AMNE)

not a grouping in MSITS but closely related to FATS provides information on foreign controlled enterprises data relate to overall holdings and activities of direct

investment enterprises wider dataset compiled separately from BOP and IIP

statistics complements data on international transactions

data cover all activities (services as well as mining, manufacturing, etc.)

What does MSITS Recommend? Disaggregate according to EBOPS (start with

items of major importance to country) Collect FDI statistics FATS basic variables EBOPS, FDI, and FATS by partner country and

by industry aggregates EBOPS memorandum items FATS further details Allocation to GATS modes of supply

Current Work Update of MSITS in line with the 2008 SNA

and BPM6 revisions to EBOPS and to FATS recommendations MSITS 2010 Approved by UNSC in February

2010 EBOPS 2010 fully consistent with BPM6 Develop recommendations for mode 4

Develop compilation guidance (FATS, travel services, remittances) Already developed for remittances

Where to Find the Manual?

http://unstats.un.org/unsd/tradeserv/TFSITS/msits2010.htm