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U.S. international sales and purchases of services.

U.S. International Sales and Purchases of Services

* U.S. Cross-Border Transactions, 1987-90

* Sales by Affiliates, 1988-89

This article updates the detailed estimates of U.S. international sales and purchases of private services that were first presented in a unified format in an article last September.(1) These estimates cover both the cross-border service transactions that appear in the U.S. international transactions (balance of payments) accounts and the services delivered to foreign markets through affiliates. Last year's article presented estimates beginning with 1986, when the data on services were significantly expanded, largely as the result of a new BEA survey of selected services transactions with unaffiliated foreigners.(2) For cross-border service transactions, this year's article provides preliminary estimates for 1990 and revised estimates for 1987-89.(3) For sales of services by affiliates, it provides preliminary estimates for 1989 and revised estimates for 1988.

U.S. Cross-Border (Balance

of Payments) Transactions

U.S. receipts for cross-border sales (exports) of private services continued to outpace U.S. payments for cross-border purchases (imports) of private services in 1990 (tables 1 and 2). Service receipts increased $16.3 billion, or 14 percent, to $131.3 billion; service payments increased $11.3 billion, or 13 percent, to $96.1 billion. The following sections discuss the 1990 estimates of receipts and payments for travel, passenger fares, and other transportation, for royalties and license fees, and for other private services.

[Tabular Data Omitted]

Travel, passenger fares, and other

transportation

Travel. - Travel receipts increased $5.4 billion, or 15 percent, to $40.6 billion in 1990 (chart 7 and table 3.4). In 1987-89, the average annual rate of increase was 20 percent. The deceleration partly reflected a slowdown last year partly reflected a slowdown last year in growth in the number of visitors from overseas, mainly from Western Europe and Japan, because of the Persian Gulf crisis. By area, receipts from Western Europe and Japan increased 15 percent and 9 percent, respectively. Receipts increased 17 percent each from Canada and from "Latin America and Other Western Hemisphere," receipts from Canada and Latin America were boosted by an increase in short-term visits by Canadians and Mexicans in the U.S. border areas. Receipts from from all other areas increased 20 percent.

Travel payments increased $4.1 billion, or 12 percent, to $38.7 billion in 1990 (chart 8). The increase exceeded the 1987-89 average annual increase of 9 percent. Travel payments to Europe and Japan increased strongly despite a slowdown in U.S. economic growth and in U.S. overseas travel after the Persian Gulf crisis began in August. By destination, payments to Europe increased 21 percent, and payments to Japan increased 15 percent; in contrast, payments to Canada increased only 3 percent and those to "Latin America and Other Western Hemisphere," only 5 percent.

Passenger fares. - Passenger fare receipts increased $1.9 billion, or 18 percent, to $12.3 billion. In 1987-89, the average annual increase was 23 percent. The deceleration reflected the slowdown in the number of visitors from overseas.

Passenger fare payments increased $0.6 billion, or 7 percent, to $9.0 billion. The increase was slightly less than the 8-percent average annual increase in 1987-89, despite a relatively strong increase in U.S. overseas travel. The increase in passenger fare payments to foreign carriers was held down in 1990 because a larger share of U.S. residents flew on U.S. carriers than in previous years. (Payments by U.S. residents to U.S. carriers are not included in the U.S. international accounts, because those payments are transactions between domestic residents.)

Other transportation. - Receipts for other transportation increased $1.7 billion, or 8 percent, to $22.4 billion. One-half of the increase was in freight receipts, mainly air freight receipts. Air freight receipts have increased at an average annual rate of 33 percent since 1987, as several U.S. carriers have substantially expanded their international air freight service capacity. Ocean freight receipts increased 3 percent, partly reflecting an 8-percent increase in the volume of U.S. export cargo.

Receipts for port services provided to foreign air and ocean carriers increased $0.8 billion, or 6 percent, to $14.7 billion. The increase, which partly reflected a jump in fuel prices in the latter part of 1990, was mostly in receipts from air carriers.

Payments for other transportation increased $2.8 billion, or 13 percent, to $23.5 billion. Almost two-thirds of the increase was accounted for by payments by U.S. carriers for port services abroad, which increased $1.7 billion, or 21 percent, to $9.9 billion. In addition to a jump in fuel prices, the increase reflected expanded international freight and passenger services of U.S. air carriers.

Freight payments increased $0.9 billion, or 8 percent, to $12.6 billion. All of the increase was in ocean freight payments. The increase partly reflected a 4-percent increase in the total volume of U.S. import cargo and an increase in foreign tanker operators' share of petroleum import cargo.

Royalties and license fees

Receipts of royalties and license fees increased a record $3.4 billion, or 28 percent, to $15.8 billion in 1990 (table 4.5). Most of the increase was in receipts from machinery manufacturing and service companies in Germany, France, the Netherlands, Japan, and the United Kingdom. Receipts from affiliated foreign companies - including both foreign affiliates and foreign parents of U.S. companies - increased 29 percent; receipts from these companies were more than three times as large as those from unaffiliated foreign companies, which increased 22 percent.

Payments of royalties and license fees increased $0.6 billion, or 21 percent, to $3.2 billion. The increase was mainly in payments to Japan and Western Europe.

Other private services

Receipts for other private services increased $3.9 billion, or 10 percent, to $40.2 billion in 1990 (table 5.4). The largest gains were in business, professional, and technical services, largely reflecting a strong increase in sales of U.S. construction, engineering, and architectural firms (table 9.4); most of the gains were from a few countries in the Middle East. Receipts for film and tape rentals also increased strongly; most of the increase was in receipts from Canada and Western Europe. A decrease in receipts for financial services reflected a drop in foreign trading in U.S. securities.

Payments for other private services increased $3.2 billion, or 17 percent, to $21.8 billion. The largest increase, almost $1.0 billion, was in net insurance payments (premiums paid less losses recovered) (table 7.4); these net payments were unusually low in 1989 because of the recovery of large losses caused by Hurricane Hugo. Telecommunications payments grew strongly for the third consecutive year (table 8). Growth in payments to "Latin America and Other Western Hemisphere," which now account for one-third of all telecommunications payments, outpaced the growth in payments to other areas. Payments for financial services also increased substantially, as transactions in foreign securities, mostly bonds, increased almost 40 percent.

Sales by Affiliates

Table 11 shows a summary of all available data for 1988-89 on sales of services by nonbank majority-owned affiliates for all countries and industries combined. Highlights for 1989 - the most recent year for which estimates are available - are discussed in the following two sections. The first section covers sales by foreign affiliates of U.S. companies, and the second section covers sales by U.S. affiliates of foreign companies.

Sales by foreign affiliates

Worldwide sales of services by nonbank majority-owned foreign affiliates (MOFA's) were $110.5 billion in 1989. This estimate is based on the preliminary results of BEA's 1989 benchmark survey of U.S. direct investment abroad. Two definitional changes affecting sales of services were made in connection with the benchmark survey. First, investment income has been excluded from sales of services; previously, it had been included in the operating revenues of affiliates in finance and in insurance, because BEA's surveys required that all operating revenue be allocated to either goods or services, and investment income was associated with services industries. Beginning with the 1989 benchmark survey, investment income is being reported separately from services. As a result of this change, sales of servies by MOFA's appear to have decreased in 1989. However, if investment income had been included, the estimate of sales of services by MOFA's in 1989 would have increased $17.8 billion, or 15 percent, to $128.3 billion. The data on investment income that would be needed to prepare estimates for 1988 and previous years on the new basis are unavailable.

Second, the geographical allocation of sales of services by affiliates classified in "international" has been changed.(4) Beginning with 1989, sales by these affiliates to U.S. persons are recorded as sales to the United States; previously, all sales by these affiliates had been recorded as local sales. As a result of this change, sales of services by MOFA's to U.S. persons in 1989 were $2.5 billion higher - and those to foreign persons, $2.5 billion lower - than they otherwise would have been.

These definitional changes improve the conceptual basis for measuring sales of services by MOFA's and make the estimates of sales by MOFA's consistent with the estimates of sales by U.S. affiliates of foreign companies. However, they create a break in the series of estimates on sales of services by MOFA's between 1988 and 1989.

Of total sales of services by MOFA's in 1989, 80 percent, or $88.5 billion, were to unaffiliated - mainly foreign - persons, and 20 percent, or $22.0 billion, were to affiliated persons. Of the sales to affiliated persons, a little less than one-third were to U.S. parent companies, and the remainder were to other foreign affiliates of the U.S. parent of the affiliate that made the sale. By location of customer, 10 percent of sales by MOFA's were to U.S. persons, and the remainder were to foreign - mainly unaffiliated - persons.

The rest of this section focuses on the sales of services by MOFA's to foreign persons, which represent sales delivered by U.S. companies to foreign markets through direct investment. These sales are shown by country in table 12 and by industry of affiliate cross-classified by country in table 14.

Sales to foreign persons. - Sales of services by MOFA's to foreign persons were $99.7 billion in 1989. (If investment income and sales by "international" affiliates to U.S. persons were added to this figure to make it conceptually consistent with the figure for 1988, sales to foreign persons would have been $116.6 billion in 1989, up 17 percent.)

Of total sales to foreign persons in 1989, sales within the country of the affiliate (local sales) accounted for 86 percent, and sales to other foreign (non-U.S.) countries, for 14 percent. The preponderance of local sales reflects the need for many services businesses to serve their customers from a nearby location. A majority of the sales to other foreign countries were by affiliates in Europe and may largely reflect sales to neighboring countries.

Affiliates in Europe accounted for $53.9 billion, or over 50 percent, of total sales of services by MOFA's to foreign persons in 1989 (table 12). Within Europe, sales by affiliates in the United Kingdom were largest ($18.8 billion); sales by affiliates in Germany ($7.1 billion), in the Netherlands ($6.9 billion), and in Italy ($6.7 billion) were also sizable. Outside Europe, sales by affiliates in Japan were largest ($8.8 billion).

By industry of affiliate, affiliates classified in the "services" division of the Standard Industrial Classification accounted for the largest sales - at $30.4 billion (table 14.2). Over two-thirds of these sales were accounted for by affiliates in Europe. In "services," the largest sales were by affiliates in computer and data-processing services and in "other services." Outside "service," the largest sales were by affiliates in insurance, manufacturing, wholesale trade, and finance (except banking). In manufacturing, sales of services were largely by affiliates in machinery, where sales of computer and data-processing services by computer manufacturers accounted for a large share of the total.

Sales by U.S. affiliates

Worldwide sales of services by nonbank majority-owned U.S. affiliates (MOUSA's) of foreign companies in 1989 were $96.5 billion, or 87 percent as large as worldwide sales of services by MOFA's. Sales of services by MOUSA's increased 23 percent from 1988 to 1989.

Of total sales of services by MOUSA's, 94 percent, or $90.8 billion, were to U.S. persons, and 6 percent, or $5.7 billion, were to foreign persons. The sales to foreign persons were almost entirely to members of the U.S. affiliates' foreign parent groups and to unaffiliated foreigners. (U.S. affiliates of foreign companies have few foreign affiliates of their own.)

The rest of this section discusses sales of services by MOUSA's to U.S. persons by country of ultimate beneficial owner (UBO) and by industry of affiliate.(5) These sales represent services delivered by foreign companies to the United States through direct investment.

Sales to U.S. persons. - Sales of services by MOUSA's to U.S. persons increased 24 percent in 1989. By country of UBO, affiliates with European UBO's accounted for $55.6 billion, or over 60 percent, of total sales to U.S. persons (table 13). Nearly one-half of the sales by affiliates with European UBO's were accounted for by affiliates with British UBO's. Sales by affiliates with UBO's in Switzerland ($9.3 billion), the Netherlands ($7.1 billion), Germany ($4.9 billion), and France ($3.7 billion) also were sizable. Outside Europe, sales by affiliates with Japanese UBO's were largest, at $6.3 billion.

By industry of affiliate, affiliates in insurance accounted for the largest sales, at $33.0 billion (table 15.2); these sales accounted for over one-third of total sales to U.S. persons. A majority of the sales in insurance were accounted for by affiliates with UBO's in Canada, the United Kingdom, Switzerland, and the Netherlands. Sales by affiliates in "services" were next largest, at $20.0 billion.

(1.) "U.S. International Sales and Purchases of Services," SURVEY OF CURRENT BUSINESS 70 (September 1990): 37-72.

(2.) Estimates of one item - sales of services by U.S. affiliates of foreign companies - began with 1987.

(3.) Table 4.1 corrects errors in the geographical allocation of royalties and license fees for 1986.

(4.) "International" affiliates are those that have operations in more than one country and that are engaged in petroleum shipping, other water transportation, or operating movable oil- and gas-drilling equipment.

(5.) An ultimate beneficial owner 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.

PHOTO : Exports of Private Services Imports of Private Services
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Article Details
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Title Annotation:includes 34 tables and 2 charts
Author:DiLullo, Anthony J.; Whichard, Obie G.
Publication:Survey of Current Business
Date:Sep 1, 1991
Words:2479
Previous Article:U.S. international transactions, second quarter 1991.
Next Article:The business situation.
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