Printer Friendly

U.S. merchandise trade associated with U.S. multinational companies.

U.S. Merchandise Trade Associated With U.S. Multinational Companies

U.S. merchandise exports associated with U.S. multinational companies (MNC's) were $155.0 billion in 1983, down 5.1 percent from 1982. U.S. merchandise imports associated with U.S. MNC's were $121.1 billion, up 0.3 percent. Because MNC-associated exports fell at about the same rate as total U.S. exports, the MNC share of the total was the same in 1983 as in 1982--77 percent. The MNC share of total U.S. imports, however, declined--from 50 percent to 46 percent--because MNC-associated imports grew more slowly than total U.S. imports.

The 1983 estimates of MNC-associated U.S. trade are universe estimates based on data from BEA's new annual sample survey of U.S. direct investment abroad. The data for 1982 are from BEA's most recent benchmark survey, or census, of U.S. direct investment abroad; previous benchmark surveys that collected information on MNC-associated trade covered 1966 and 1977.

U.S. direct investment abroad exists when one U.S. person (U.S. parent) has a direct or indirect ownership interest of 10 percent or more in a foreign business enterprise (foreign affiliate). A U.S. MNC is composed of a U.S. parent and its foreign affiliates.

MNC-associated U.S. trade consists of (1) trade between U.S. parents and their own foreign affiliates, (2) trade between these same foreign affiliates and other (unaffiliated) U.S. persons, and (3) trade between U.S. parents and unaffiliated foreigners. Total U.S. trade of foreign affiliates is equal to (1) plus (2); total U.S. trade of U.S. parents is equal to (1) plus (3).

The MNC data cover only nonbank MNC's--that is, nonbank parents of nonbank foreign affiliates, and their nonbank foreign affiliates. however, trade of bank MNC's is probably insignificant.

The all-U.S. trade data, to which the MNC data are compared, are as compiled by the Bureu of the Census; that is, they are on the so-called Census basis. Although the MNC data were defined to be as comparable as possible to the Census data, strict comparability could not be achieved in practice (see technical note).

This article first presents an overview of changes in MNC-associated trade and in the MNC share of total U.S. trade, in 1983 and in 1977-82. The remainder of the article focuses primarily on MNC-associated trade in 1982, with perspective provided by a few comparisons with 1977. Data for 1982,

rather than for 1983, are the focus, because the former are much more detailed, particularly by product and by country of destination or origin, than the latter.

It should be noted that the data in this article only indicate the magnitude of MNC-associated U.S. trade, given the actual levels of U.S. direct investment abroad. They do not indicate what the magnitude would have been in the absence of such investment or at other levels of investment.

MNC-Associated U.S. Trade in

Perspective

U.S. exports

In 1983, MNC-associated exports declined 5.1 percent--about the same rate as all U.S. exports. Thus, the MNC share of total U.S. exports remained at 77 percent (table 1). The declines in exports, both for MNC's and for the United States as a whole, partly reflected the limited recovery abroad in 1983, which dampened foreign demand for U.S. goods. Also, the large cumulative appreciation of the U.S. dollar since 1980 had, by 1983, significantly eroded the competitiveness of U.S. exports in world markets. Finally, U.S. exports were adversely affected by import by a number of developing countries in an attempt to conserve the foreign exchange needed to service their external debt.

In 1977-82, both MNC-associated exports and total U.S. exports grew, but the annual average rate of growth for MNC's war slower than that for the total--9.9 percent compared with 11.8 percent. Trade not associated with U.S. MNC's grew at a 20.2-percent rate. Because MNC-associated exports grew more slowly than total U.S. exports, the MNC share of the total fell from 84 percent to 77 percent. In 1966-77, in contrast, MNC-associated exports had grown much faster than total U.S. exports, and the MNC share of the total had increased substantially.

The slower growth of MNC-associated exports than of total U.S. exports in 1977-82 was entirely in exports shipped to foreign affiliates, both by U.S. parents and by unaffiliated U.S. persons. Exports shipped to unaffiliated foreigners by U.S. parents--which accounted for nearly two-thirds of MNC-associated exports in 1982--rose at the same rate as total U.S. exports.

Affiliates' demand for U.S. exports was probably dampened largely by the decline in their real economic activity over the 1977-82 period. Although most dollar measures of affiliates' activity increased during the period (for example, their sales rose at a 7.6-percent rate and their total assets at an 8.9-percent rate), the increases mainly reflected the effects of U.S. and foreign inflation. Affiliate employment, which is not directly affected by price changes, declined 1.6 percent a year, on average. The decline in employment was probably largely cyclical: The economies of most major foreign host countries were expanding in 1977, but were in recession in 1982.

The slow growth in exports to foreign affiliates may also have reflected a pattern of maturation frequently observed among affiliates of U.S. MNC's. According to that pattern, affiliates are first established primarily to sell their parents' products. Later, they process or assemble their parents' products abroad and, finally, they develop and produce their own products to sell locally, to third countries, or even to the United States. Thus, as these affiliates mature, products exported from the United States become a smaller component, and the affiliates' own products a larger component, of their total sales.

Although a large number of U.S. parents left the direct investment universe between 1977 and 1982, their leaving did not contribute significantly to the slower growth in MNC-associated exports compared with total U.S. exports. A preliminary tabulation of the 1977 data for these parents and their affiliates indicates that U.S. exports associated with them were very small. (Parents would have left the universe if, during the period, (1) they sold or liquidated all of their foreign affiliates, (2) all of their foreign affiliates became exempt from being reported under the higher 1982 exemption level, or (3) they should have reported in 1982 but failed to do so. Parents that reported in 1977 but had merged or were consolidated with other U.S. parents by 1982 were considered to have been in the universe in both years.)

U.S. parents' share of total U.S. exports remained considerably larger than their share of total domestic business activity in 1982. In that year, U.S. parents accounted for 72 percent of total U.S. exports, but for only 25 percent of total employment of non-bank U.S. businesses. Their much larger share of exports reflected both their higher concentration in goods-producing industries and greater international orientation compared with other U.S. firms. It may also have reflected the fact that the MNC's remained among the largest and most technologically advanced U.S. firms. Thus, they continued to have an edge over other firms in exporting because of their greater ability to benefit from economies of scale, produce technically superior products, and adapt rapidly to the needs and tastes of foreign customers.

U.S. imports

In 1983, U.S. imports associated with U.S. MNC's increased 0.3 percent, considerably slower than the 7.3-percent increase in total U.S. imports; imports not associated with U.S. MNC's increased 14.1 percent. Because of the slower growth in MNC-associated imports, the MNC share of the U.S. total declined from 50 percent to 46 percent. The slower MNC growth was more than accounted for by a steep declined in U.S. petroleum imports. Because such imports were a much larger share of MNC-associated imports than of total U.S. imports, their decline had a much greater impact on MNC-associated imports than on the total.

In 1977-82, MNC-associated imports grew at an average annual rate of 6.8 percent, compared with a 10.2-percent rate for all U.S. imports. The MNC share of total U.S. imports fell from 58 percent in 1977 to 50 percent in 1982. In 1966-77, in contrast, imports associated with U.S. MNC's appear to have grown faster than total U.S. imports, and the MNC share of the total probably increased.

MNC-associated imports grew more slowly than total U.S. imports in 1977-82 mainly because they were much more highly concentrated in relatively slow-growing import categories, such as petroleum and Canadian autos, and less highly concentrated in faster-growing categories, such as machinery and non-Canadian autos. The slow growth in U.S. petroleum imports reflected declines in the volume of such imports in response to both the relatively brief U.S. recession in 1980 and the somewhat longer one in 1981-82, sharp increases in world petroleum prices, and continued U.S. energy conservation efforts. Automotive imports from Canada were dampened by the U.S. recessions and the weak U.S. auto market in 1982. In contrast, U.S. imports of machinery and of non-Canadian autos grew strongly in 1977-82. An increasing share of these imports were from Japan and the newly industrialized countries of Asia, whose aggressive export promotion strategies made significant inroads into the U.S. market during the period. Most of the increase in automotive imports other than from Canada occurred early in the period, before growth was slowed by the U.S. recessions, the weak U.S. auto market, and voluntary restraints on automotive imports from Japan.

The slower growth of MNC-associated imports than of all U.S. imports may also have reflected differences in the pace of real economic activity of U.S. parents compared with other U.S. firms. U.S. parent employment declined at an annual average rate of 0.2 percent in 1977-82, while employment of all nonbank U.S. businesses rose at a 1.7-percent rate. Most of the rise in all-U.S. business employment, however, occurred in non-goods-producing industries, particularly services, in which U.S. parents accounted for small shares of ttoal employment. In manufacturing alone, all-U.S. employment actually declined at an annual rate of just under 1 percent. Nevertheless, employment of U.S. manufacturing parents declined even faster--at a 2.2-percent rate.

As with exports, the slower growth of MNC-associated imports than of total U.S. imports was not the result of U.S. parents leaving the direct investment universe between 1977 and 1982. Imports associated with these parents and their affiliates were small in 1977, and their omission in 1982 should have had little impact on the 1977-82 change.

In the 3 years 1977, 1982, and 1983, MNC's accounted for much smaller shares of total U.S. imports than of total U.S. exports. A large portion of U.S. imports is normally imported by independent wholesalers or retailers, or by the U.S. affiliates of foreign MNC's, rather than by U.S. MNC's. Moreover, a sizable share of the imported goods used by U.S. MNC's in manufacturing may be purchased domestically from independent wholesalers rather than imported directly by the U.S. parents. Because they exclude imported goods purchased domestically, U.S. parents' imports would, therefore, understate the parents' total purchases of imported goods.

U.S. trade balance

In each of the years 1977, 1982, and 1983, MNC-associated exports exceeded MNC-associated imports, and the MNC trade balance was in surplus. The surplus increased from $15.1 billion in 1977 to $42.6 billion in 1982, as MNC-associated exports rose faster than MNC-associated imports. The surplus then declined to $33.9 billion in 1983, as MNC-associated exports declined but imports rose. In contrast to the surpluses on MNC-associated trade, total U.S. trade was in deficit each year. This contrasting result largely reflected the fact that U.S. MNC's were much more heavily concentrated in manufacturing, and much less heavily concentrated in wholesale and retail trade, than all U.S. firms. Thus, a sizable share of total U.S. merchandise exports were manufactured and directly exported by the U.S. MNC's, whereas, as noted earlier, a significant portion of total U.S. merchandise imports were directly imported by others.

MNC-Associated U.S. Trade in 1982

This part of the article focuses on MNC-associated U.S. trade in 1982. Exports and imports are discussed separately. For each, the discussion is governed by the amount of detail obtained in the benchmark survey--for example, more detail was obtained for exports than for imports, and for trade and majority-owned foreign affiliates (MOFA's) than for trade with other foreign affiliates or trade of U.S. parents with unaffiliated foreigners. (MOFA's are foreign affiliates owned more than 50 percent by all U.S. parents combined.) Thus, the section on exports discusses (1) MNC-associated U.S. exports, by country of destination and by industry of U.S. parent, (2) U.S. exports associated with MOFA's and their U.S. parents for which product detail is available, by product, and (3) U.S. exports to MOFA's only, by product and by intended use, cross-classified by country of destination and by industry of affiliate. The section on imports discusses (1) MNC-associated U.S. imports, by industry of U.S. parent, (2) U.S. imports associated with MOFA's and their U.S. parents for which product detail is available, by product, and (3) U.S. imports from MOFA's only, by product, cross-classified by country of origin and by industry of affiliate.

U.S. exports

In 1982, MNC-associated U.S. exports were $163.4 billion. Of the total, $46.6 billion (29 percent) were shipped to foreign affiliatres by their U.S. parents, $10.2 billion (6 percent) were shipped to foreign affiliates by unaffiliated U.S. persons, and $106.7 billion (65 percent) were shipped to unaffiliated foreigners by U.S. parents (table 2). Total U.S. exports to affiliates, the sum of the first two components, were $56.7 billion, of which more than four-fifths were by U.S. parents and less than one-fifth were by unaffiliated U.S. persons. Total exports by U.S. parents, the sum of the first

and third components, were $153.2 billion, of which 70 percent were to unaffiliated foreigners and 30 percent to foreign affiliates.

By country of destination.--AT least 65 percent of total MNC-associated U.S. exports were to developed countries and at least 33 percent were to developing countries. Most of the remaining 2 percent consisted of exports that did not have to be allocated by country in the benchmark survey. Exports to "international"--that is, to affiliates that had operations spanning more than one country and that were engaged in petroleum shipping, other water transportation, or oil and gas drilling--were very small.

MNC-associated exports to Canada, at $27.7 billion, and to Japan, at $20.0 billion, were much larger than those to any other individual countries. Exports to Canada accounted for 17 percent of total MNC-associated exports. More than two-fifths were shipped, primarily by U.S. parents, to Canadian affiliates in the transportation equipment industry. Two-way trade between these affiliates and their U.S. parents has been particularly encouraged since 1965 by a U.S.-Canadian automotive agreement that eliminated tariffs on most such trade. Other factors contributing to the large Canadian share of total MNC-associated exports were Canada's geographical proximity to the United States and the close economic ties between the two countries.

Exports to Japan accounted for 12 percent of total MNC-associated U.S. exports. Most--87 percent--were shipped by U.S. parents to unaffiliated Japanese customers. A sizable portion of these exports were to Japanese MNC's that had (usually minority) ownership interests in the U.S. parent companies. (Such Japanese MNC's are considered "unaffiliated" because, for U.S. direct investment abroad, that term covers all foreigners that are not foreign affiliates of a U.S. company; thus, it includes foreigners that have ownership in, but are not owned by, a U.S. company.)

Europe accounted for 32 percent and Australia, New Zealand, and South Africa for 4 percent of total MNC-associated exports. Within Europe, exports to the United Kingdom, Germany, and the Netherlands were largest.

Among developing countries, Latin America accounted for 13 percent, "other Asia and Pacific" for 12 percent, the Middle East for 6 percent, and "other Africa" for 3 percent of total MNC-associated exports. Within Latin America, exports to Mexico, Venezuela, and Brazil were largest. Within "other Asia and Pacific," exports to South Korea and Taiwan were largest. More than one-half of the exports to the Middle East were to Saudi Arabia.

From 1977 to 1982, there were several significant changes in the distribution of MNC-associated exports by country of destination. In particular, the share destined for Canada declined nearly 6 percentage points, while the shares destined for Japan and "other Asia and Pacific" rose about 4 percentage points each (table 3 and chart 4). These changes, to a large extent, mirrored changes in all-U.S. trade.

The decline in the share of MNC-associated exports destined for Canada partly reflected declines in Canadian economic activity. Canadian industrial production, which had increased modestly in 1977-79, turned down briefly in 1980 and again in mid-1981. By the end of 1982, it had fallen below the 1977 level. U.S. exports of automotive vehicles and parts to Canada, most of which were shipped by U.S. MNC's, were especially hard hit.

Exports destined for Japan and for "other Asian and Pacific" in contrast, were boosted by the relatively strong economic performance of these countries in 1977-82. Despite a downturn in 1980 and early 1982, Japanese industrial production ended 1982 well above the 1977 level. In "other Asia and Pacific," several newly industrialized countries sustained particularly high rates of growth. Largely reflecting that growth, both MNC-associated and total U.S. exports to "other Asia and Pacific" rose at average annual rates of over 20 percent. The rapid rise in exports to "other Asia and Pacific" may also have reflected significant increases in shipments of U.S. goods for further processing or assembly in those countries; special U.S. tariff provisions have encouraged such exports by permitting the finished goods to be returned to the United States with duties levied only on the value added abroad.

MNC's accounted for sizable shares of total U.S. exports to most countries in 1982. Their share of exports to developed countries, however, was considerably higher than that to developing countries--84 percent compared with 64 percent. Among developed countries, their share of exports to Canada was 82 percent; to Europe, 81 percent; to Japan, 95 percent; and to Australia, New Zealand, and South Africa, 83 percent. Among developing countries, their share of exports to Latin America was 62 percent; to "other Africa," 59 percent; to the Middle East, 63 percent; and to "other Asia and Pacific," 67 percent.

Although the MNC shares of total U.S. exports to most countries remained large in 1982, they declined broadly since 1977. The MNC share of exports to developed countries declined from 86 percent to 84 percent, and that to developing countries declined from 74 percent to 64 percent. Declines also occurred in the MNC shares of exports to most individual countries. The most notable exception was the share for Japan, which rose from 85 percent to 95 percent.

In 1982, the shares of total MNC-associated exports that were shipped to foreign affiliates and, therefore, the shares shipped to unaffiliated foreigners varied significantly among destinations. For developed countries, 41 percent of the MNC total was to foreign affiliates. In contrast, only 25 percent of MNC-associated exports to developing countries were to affiliates. The affiliate share in developed countries was boosted by the very large share--70 percent--of MNC-associated exports to Canada that were shipped to affiliates. A major portion of these exports were road vehicles and parts for resale or further assembly by affiliates in the transportation equipment industry. In addition, fewer affiliates in developed countries than in developing countries were subject to host government restrictions on imports, such as those imposed as a condition for the affiliates' being able to operate in those countries.

Exports by U.S. parents were large shares, and exports by unaffiliated U.S. persons to foreign affiliates small shares, of MNC-associated exports to virtually every destination. For most countries, the parents' shares exceeded 85 percent.

By industry of U.S. parent.--Although a breakdown by product is preferable to one by industry of U.S. parent for examining the composition of MNC-associated exports, a product breakdown is not available for the total. Thus, this section discusses total MNC-associated exports disaggregated by industry of U.S. parent; the next section discusses the portion of the total for which product detail is available.

The industry of the U.S. parent may not accurately reflect the products being exported--in part, because U.S. parents tend to be highly diversified, and may produce and export products outside the single major industry in which they are classified. Also, MNC-associated exports include goods purchased domestically and then exported by U.S. parents, as well as goods shipped directly by unaffiliated U.S. persons to foreign affiliates. In either case, the goods are likely to be outside the parent's industry of classification.

MNC's with U.S. parents in manufacturing accounted for more than two-thirds of total MNC-associated exports in 1982 (table 4). Within manufacturing, industries with the largest shares were transportation equipment, nonelectrical machinery (which includes computers), electrical machinery, and chemicals. MNC's with parents in wholesale trade accounted for 16 percent and those with parents in petroleum for 13 percent of total MNC-associated exports.

Among industries, as among areas, the shares of total MNC-associated exports that were shipped to affiliates varied considerably. The affiliate shares were 42 percent in manufacturing, 20 percent in petroleum, and 15 percent in wholesale trade. The share in wholesale trade was low because wholesale trade parents normally distribute a large portion of their exported goods--mainly bulk shipments of agricultural products and raw materials--directly to unaffiliated foreign customers.

Within manufacturing, the shares shipped to affiliates wer particularly large--52 and 48 percent, respectively--in nonelectrical machinery, mainly office and computing machines, and in transportation equipment, mainly motor vehicles and equipment. The large share in office and computing machines probably reflected the highly integrated operations of MNC's in this industry; parents shipped substantial exports to their manufacturing affiliates for further processing or assembly or to their wholesale trade affiliates for resale without further manufacturing. The large affiliate share in motor vehicles and equipment mainly reflected sizable shipments of autos and parts to Canadian transportation equipment affiliates.

In most industries, exports shipped by U.S. parents were very large shares, and exports shipped by unaffiliated U.S. persons very small shares, of total MNC-associated exports. The parents' shares usually exceeded 85 percent.

By product.--Detail by product, based on the Standard International Trade Classification (SITC), is presented in this section for exports associated with MOFA's and their U.S. parents only. Exports to minority-owned foreign affiliates were not disaggregated by product in the benchmark survey.

Exports associated with MOFA's and their U.S. parents for which product detail is available were $147.7 billion, or 90 percent of total MNC-associated exports, in 1982 (table 5).sup.10 MOFA's and their parents accounted for over 90 percent of total MNC-associated exports to most major areas of destination and in most major industries of U.S. parent. The major exceptions were their shares in Japan, among areas, and in petroleum, among industries.

The share in Japan was relatively low--60 percent--primarily because the data for MOFA's and their parents excluded, but the MNC total included, sizable exports by several U.S. companies that had only minority-owned foreign affiliates. Although the affiliates of these U.S. companies were located outside Japan, the U.S. companies themselves were, in turn, owned by Japanese MNC's. Most of the excluded exports were probably shipped by the U.S. companies to their Japanese parents. Japanese restrictions on majority ownership by foreigners may also have contributed to the low share for Japan.

The share in petroleum was relatively low--61 percent--because the data for MOFA's and their parents excluded exports by some of the same Japanese-owned U.S. companies mentioned above. Several of these companies were classified in petroleum--mainly petroleum wholesale trade.

Machinery, both electrical and non-electrical, accounted for by far the largest share--30 percent--of total exports associated with MOFA's and their U.S. parents in 1982 (table 6). Exports of food and of road vehicles and parts each accounted for 12 percent, and exports of chemicals for 11 percent. Accounting for between 5 and 10 percent each were "other transport equipment," "other manufactures," and inedible crude materials, except fuels. Metal manufactures, petroleum and products, coal and coke, beverages and tobacco, and "other"--which consists of animal and vegetable oils and fats and of commodities not elsewhere classified--each accounted for 5 percent or less.

From 1977 to 1982, the shares of total exports associated with MOFA's and their parents accounted for by machinery, chemicals, petroleum (including coal, which was not reported separately in 1977,) and "other transport equipment" increased. The shares accounted for by "other manufactures," road vehicles, and inedible crude materials declined.

In both 1977 and 1982, the shares for road vehicles and other transport equipment were overstated (and the shares for other products, particularly machinery, understated), because of difficulties encountered by reporters in classifying parts and accessories for such equipment. The SITC specifies that parts shipped separately, and certain accessories not attached to the vehicle chassis, be excluded from road vehicles and parts and "other transport equipment," and included instead in other SITC categories (for example, tires and tubes in "other manufactures," engines and engine parts in machinery, etc.). Often, however, reporters could not separately identify such parts and accessories and included all of them in road vehicels and parts or "other transport equipment."

In 1982, exports associated with MOFA's and their parents for which product detail is available were 70 percent of all U.S. exports. (As noted earlier, total MNC-associated exports in 1982 were 77 percent of all U.S. exports. Thus, 7 percent of all U.S. exports were associated with MNC's, but cannot be compared with all U.S. exports by product.) Product categories in which MOFA's and their parents accounted for more than 70 percent of total U.S. exports were road vehicles and parts, "other transport equipment," metal manufacturers, chemicals, beverages and tobacco, food, and machinery. Categories in which their shares were less than 70 percent were petroleum, "other manufactures," coal and coke, and "other."

The extraordinary high shares for road vehicles and "other transport equipment"--over 100 percent and 91 percent, respectively--occurred partly because of the above-mentioned misclassification of vehicle parts and accessories in the MNC data for these two categories. The high share for road vehicles was also partly due to underreporting of vehicle shipments to Canada in the all-U.S. export data. Based on a United States-Canadian data reconciliation, such underreporting was $1.2 billion in 1977 and $1.5 billion in 1982.

Table 7 shows U.S. exports associated with MOFA's and their parents, by product, cross-classfied by industry of U.S. parent. In goods-producing industries, such as petroleum and manufacturing, most exports tended to be products of the parents' own industries of classification or of closely related industries. This tendency reflected the fact that a large share of exports in these industries was from U.S. parents and that a large share of the parent's exports was their own products. In non-goods-producing industries--such as wholesale trade, services, and finance (except banking), insurance, and real estate--the products shipped were, by definition, from industries other than those in which the parents were classified.

Within manufacturing, particularly high concentrations--from 80 to 90 percent--of the exports in nonelectrical machinery, electrical machinery, and transportation equipment were products of those industries. In chemicals, 63 percent of the exports were chemicals; the remainder was largely "other manufactures," machinery, and inedible crude materials, except fuels. In foods and metals, about 40 percent of the exports were products of those industries. In foods, most of the remaining exports were of inedible crude materials, probably largely shipments of soybeans; in metals, most of the remaining exports were of machinery.

U.S. exports shipped to MOFA's.-- As noted earlier, more detail is available from the benchmark survey for U.S. exports to MOFA's than for exports to other foreign affiliates or for exports by U.S. parents to unaffiliated foreigners. Specifically, exports to MOFA's can be disaggregated by product or intended use, cross-classified by country of destination and by industry of affiliate.

In 1982, exports shipped to MOFA's, at $52.8 billion, were 93 percent of exports to all foreign affiliates and 32 percent of total MNC-associated exports (table 8). The bulk of these exports--84 percent--were shipped by U.S. parents.

Compared with the MNC total, exports to MOFA's were more heavily concentrated, by product, in road vehicles and machinery, and less heavily concentrated in food, "other transport equipment," and inedible crude materials, except fuels. By area of destination, they were more heavily concentrated in developed countries. Within developed countries, their concentration was higher in Canada, and lower in Japan, compared with total MNC-associated exports. In Japan, most MNC-associated exports were to unaffiliated foreigners rather than to affiliates.

More than three-fourts of exports to MOFA's, both in the aggregate and in most individual product categories, were shipped to developed countries. Exports of petroleum and products were the major exception; nearly 40 percent of these exports were to developing countries, mainly to MOFA's in Latin America engaged in petroleum wholesale trade, refining, and chemical manufacturing. For machinery, coal and coke, and metal manufactures, 30 percent of the exports were to developing countries. Compared with other products, an especially large share--15 percent--of machinery exports were to "other Asia and Pacific;" some of these exports were probably further assembled by the MOFA's and then reexported to the United States.

In all product categories except food, beverages and tobacco, and inedible cruce materials, exports to MOFA's in Canada were larger than those to MOFA's in any other individual country. Canada accounted for a particularly large share--84 percent--of total exports to MOFA's of road vehicles and parts.

By industry of affiliate, 66 percent of exports to MOFA's were in manufacturing, 27 percent were in wholesale trade, largely durables, and 5 percent were in petroleum. Exports to MOFA's in all other industries together accounted for 2 percent of the total.

In most industries within manufacturing, exports to MOFA's were products either of the MOFA's own or of related industries. In the electrical and the nonelectrical machinery industries, machinery accounted for 94 percent and 91 percent, respectively, of total exports to MOFA's. In transportation equipment, 93 percent of the exports were either road vehicles and parts or other transport equipment. Chemicals accounted for 80 percent of exports to MOFA's in chemicals. In foods, 44 percent of the exports were food or beverages and 45 percent were inedible crude materials, mainly soybeans. Metal manufactures accounted for 44 percent of exports to MOFA's in metal manufacturing; most of the remainder was machinery or inedible crude materials, including metal ores.

In wholesale trade, machinery accounted for 58 percent, chemicals for 12 percent, and food and "other manufactures" for 11 percent each of the exports to MOFA's. About one-third of exports to petroleum MOFA's were petroleum and products and 12 percent were chemicals; most of the remainder was machinery.

By intended use, 53 percent of exports to MOFA's were for further manufacture by the affiliates, 40 percent were for resale without further manufacture, 6 percent were capital equipment or other goods charged to fixed assests, and 1 percent were for "other" uses, mainly expensed supplies and materials (table 9). Exports of capital equipment were small because MOFA's obtained most of such equipment locally or from other non-U.S. sources, rather than from the United States; capital equipment exports were only 7 percent of total plant and equipment expenditures by MOFA's in 1982.

From 1977 to 1982, the proportion of total exports to MOFA's that was for resale without further manufacture fell from 57 percent to 40 percent, and the proportion that was for further manufacture rose from less than 40 percent to 53 percent (chart 5). These shifts occurred in both developed and developing countries. Compared with 1977, therefore, U.S. MNC's in 1982 tended to rely on their MOFA's relatively more to further process and assemble their parents' products and relatively less to resell their parents' products without further manufacture. This tendency may have partly reflected the pattern of maturation of affiliates noted earlier. In developing countries, particularly the newly industrialized countries of Asia, it may also have reflected the increasing share of exports to MOFA's that were for further processing or assembly and subsequent re-export to the United States.

In 1982, exports for further manufacture accounted for about the same shares of total exports to MOFA's in developed and developing countries--52 percent and 55 percent, respectively. Their shares were particularly large in developing countries where many MOFA's were engaged in processing or assembling their parents' products for reexport to the United States. For example, between 75 and 90 percent of the exports to MOFA's in Mexico, Malaysia, the Philippines, South Korea, Taiwan and Thailand were for further manufacture. By industry of affiliate, exports for further manufacture were 76 percent of total exports to MOFA's in manufacturing. Their shares of the totals in petroleum and wholesale trade were much smaller--18 percent and 4 percent, respectively.

Exports for resale without further manufacture were a much larger share of exports to MOFA's in developed countries than in developing countries--44 percent compared with 25 percent. Thus, U.S. MNC's tended to use their affiliates in developed countries relatively more than those in developing countries as distribution channels. This tendency, evidenced by the much higher concentration of wholesale trade affiliates in developed countries, probably reflected those countries' larger, more diverse markets. By industry of affiliate, nearly all--93 percent--of the exports to MOFA's in wholesale trade were for resale without further manufacture; in contrast, only 27 percent of exports to petroleum MOFA's, and 19 percent of exports to manufacturing MOFA's, were for resale.

Compared with exports for resale, exports of capital equipment were a significantly larger share of total exports to MOFA's in developing countries than in developed countries--15 percent compared with 3 percent. Within developing countries, capital equipment exports accounted for particularly large shares of the totals in Africia, some Latin American countries, and the Middle East. By industry of affiliate, capital equipment exports were a very large share--43 percent--of exports of MOFA's in petroleum. In manufacturing, in contrast, their share of the total was only 4 percent. The large share in petroleum probably reflected the capital intensiveness of that industry and the likelihood and the needed equipment--particularly oil rigs and other heavy-drilling equipment--was not avialable locally.

U.S. imports

MNC-associated U.S. imports in 1982 were $120.8 billion, of which $41.6 billion (34 percent) were shipped by foreign affiliates to their U.S. parents, $9.8 billion (8 percent) were shipped by foreign affiliates to unaffiliated U.S. persons, and $69.4 billion (57 percent) were shipped by unaffiliated foreigners to U.S. parents (table 2). Total imports shipped by affiliates, the sum of the first two components, were $51.4 billion; about four-fifths were to U.S. parents. Total imports shipped to U.S. parents, the sum of the first and third components, were $111.0 billion, of which nearly two-thirds were shipped by unaffiliated foreigners.

As previously mentioned, somewhat less detail was obtained for imports than for exports in the 1982 benchmark survey. In particular, imports shipped by unaffiliated foreigners to U.S. parents were not disaggregated by country of origin, and imports from MOFA's were not disaggregated by intended use. Thus, this section first discusses total MNC-associated imports by industry of U.S. parent but not by country of origin. It then presents product detail for imports associated with MOFA's and their U.S. parents comparable to that for exports. (Product detail for imports shipped by unaffiliated foreigners to U.S. parents was collected for the first time in the 1982 benchmark survey; however, as with exports, product detail for imports shipped by minority-owned foreign affiliates was not collected). Finally, this section discusses imports shipped by MOFA's disaggregated by product (but not by intended use), cross-classfied by country of origin and by industry of affiliate.

By industry of U.S. parent.--By industry of U.S. parent, petroelum accounted for 47 percent and manufacturing for 40 percent of total MNC-associated imports in 1982 (table 4). Wholesale trade accounted for 8 percent. The large share in petroleum reflected the predominant role MNC's play in the U.S. petroleum industry and the heavy dependence of that industry on foreign petroleum. Although the industry of the U.S. parent does not necessarily indicate the products being imported, most of the imports in petroleum were probably crude petroleum and petroleum products.

Of total MNC-associated imports in manufacturing, the transportation equipment industry had by far the largest share--36 percent. The imports were mainly from Canada and, to a lesser extent, Japan. The electrical equipment industry accounted for 16 percent, "other manufacturing" for 14 percent, and chemicals for 11 percent of total MNC-associated imports in manufacturing.

The shares of total MNC-associated imports that were shipped by foreign affiliates, rather than by unaffiliated foreigners, varied considerably among industries. In manufacturing, two-thirds of total MNC-associated imports were shipped by affiliates, mainly to their U.S. parents. Within manufacturing, the affiliate share was particularly large--90 percent--in transportation equipment. It was also relatively large, at 76 percent, in nonelectrical machinery.

In contrast to manufacturing, the affiliate shares in petroleum and wholesale trade were much lower--26 percent and 11 percent, respectively. Most of the imports in these industries were shipped directly by unaffiliated foreigners to U.S. parents, rather than originating in, or being channeled through, foreign affiliates. In petroleum, the affiliate share had declined significantly since 1977, when it was 46 percent. The decline largely reflected the nationalization of petroleum affiliates in Iran and the impact of weak petroleum markets on relatively high-priced crude oil from affiliates in Libya.

In most industries, imports shipped to U.S. parents--whether by affiliates or by unaffiliated foreigners--were very large shares, and imports shipped to unaffiliated U.S. persons very small shares, of total MNC-associated imports.

By product.--As in the case of exports, product detail is available only for imports associated with MOFA's and U.S. parents. Imports associated with MOFA's and their parents for which product detail is available were $106.1 billion, or 88 percent, of total MNC-associated U.S. imports in 1982 (table 10). Such imports accounted for more than four-fifths of the MNC totals in all major industries of U.S. parent except wholesale trade. As noted earlier, a number of U.S. parents in wholesale trade had only minority-owned foreign affiliates. Thus, data for these parents and their affiliates are not included in the MNC data by product.

By product, 44 percent of imports associated with MOFA's and their parents were petroleum and products, 14 percent were machinery, and 13 percent were road vehicles and parts (table 11). (As with exports, imports of road vehicles and parts may be somewhat overstated, and imports of other goods understated, because of reporters' difficulties in classifying transportation equipment parts and accessories.) Inedible crude materials, except fuels, accounted for 5 percent, metal manufactures for 4 percent, and chemicals and food for 3 percent each of the total.

Imports associated with MOFA's and their parents for which product detail is available were 43 percent of all U.S. imports in 1982. (Total MNC-associated imports, as noted earlier, were 40 percent of all U.S. imports.) MOFA's and their parents accounted for particularly large shares of total U.S. imports of petroleum and of beverages and tobacco--71 and 65 percent, respectively. They also accounted for sizable shares of U.S. imports of inedible crude materials, except fuels (58 percent), road vehicles (46 percent), and coal and coke (42 percent). Their shares of U.S. imports of chemicals, machinery, and "other transport equipment" ranged between 30 and 40 percent, while their shares of imports of food, metal manufactures, and "other manufactures" ranged between 15 and 25 percent. In the latter categories, a large portion of total U.S. imports were by independent wholesalers or retailers or by the U.S. affiliates of foreign NNC's in wholesale trade, rather than by U.S. MNC's.

When imports associated with MOFA's and their parents, by product, are cross-classified by industry of U.S. parent, the imports in most industries appear to be either products of the parents' own industries or inputs to the parents' products (table 12). In petroleum, 86 percent of the imports were petroleum and products. Within manufacturing, between 82 and 88 percent of the imports in electrical and nonelectrical machinery, foods, and transportation equipment were products of those industries. In primary and fabricated metals, 36 percent of the imports were metal manufactures and 32 percent were inedible crude materials, including metal ores. In chemicals, 46 percent of the imports were chemicals; most of the remaining imports were petroleum and products or inedible crude materials. In wholesale trade, there were sizable imports of a variety of products; the largest were of road vehicles and parts, "other manufactures," machinery, and food.

U.S. imports shipped by MOFA's.-- In 1982, U.S. imports shipped by MOFA's were $46.1 billion, 90 percent of imports shipped by all foreign affiliates and 38 percent of total MNC-associated U.S. imports (table 13). Most of these imports were shipped to U.S. parents.

By product, petroleum accounted for one-third, road vehicles and parts for about one-fourth, and machinery for one-fifth of total imports shipped by MOFA's. By area of origin, 60 percent of the imports were from developed countries and 40 percent were from developing countries. Canada accounted for 44 percent of all imports from MOFA's, by far the largest share for a single country. Among other developed areas, Europe accounted for 13 percent and Japan and Australia, New Zealand, and South Africa for 2 percent each. Among the developing countries, Latin America and "other Asia and Pacific" each accounted for 15 percent, "other Africa" for 6 percent, and the Middle East for 4 percent of total imports from MOFA's.

In 9 of the 12 product categories shown in table 13, imports from MOFA's in developed countries far exceeded those form MOFA's in developing countries. Nearly all of the imports of road vehicles and parts were from developed countries, mainly Canada. Developed countries also accounted for very large shares--between 73 and 87 percent--of the imports of inedible crude materials, chemicals, "other transport equipment," metal manufactures, and "other manufactures." In each of these product categories, imports from Canada were the largest for a single country.

In three product categories--food, petroleum, and machinery--imports from devloping countries were larrger than those from developed countries. Sixty-nine percent of food imports and 64 percent of petroleum imports were from developing countries. Most of the food imports were from Latin America. More than two-thirds of the petroleum imports were from Indonesia, Nigeria, and several countries in "other Western Hemisphere."

Fifty-six percent of machinery imports were from MOFA's in developing countries. The bulk of these imports were from the newly industrialized countries of "other Asia and Pacific" and from MExico. A large share of the imports from these countries may have contained U.S.-source goods that were processed and assembled by the affiliates for reexport back to the United States.

By industry of affiliate, 57 percent of the imports were from manufacturing MOFA's, 34 percent from petroleum MOFA's, and 6 percent from MOFA's in wholesale trade. MOFA's in all other industries combined accounted for 3 percent. Of the manufacturing total, 47 percent were from MOFA's in transportation equipment, 20 percent from MOFA's in electrical machinery, 10 percent from MOFA's in nonelectrical machinery, and 7 percent from MOFA's in chemicals.

In petroleum and in all industries within manufacturing, very large shares of the imports shipped by MOFA's were products of the affiliates' own industries of classification or of closely related industries. In wholesale trade, about one-third of the imports were machinery; imports of metal manufactures, food, and inedible crude materials, except fuels, were also large.

Technical Note

U.S. trade is defined by the Census Bureau as the physical movement of goods between the customs area of the United States and the customs area of a foreign country. The all-U.S. trade data in this article are as compiled by Census.

All-U.S. exports and imports are valued f.a.s. (free alongside ship) at the U.S. or foreign port of exportation; the f.a.s. value represents the transaction value of the goods, including inland freight, insurance, and other charges incurred in placing the merchandise alongside the carrier at the port of exportation. All-U.S. exports include reexports and military grant shipments; all-U.S. imports include goods for immediate consumption as well as goods entering into U.S. Customs bonded warehouses.

The MNC data were defined to be as comparable as possible with the all-U.S. trade data. In practice, however, the MNC and all-U.S. trade data are not strictly comparable because hey are derived form different sources. The MNC data are based on company records, whereas the all-U.S. trade data are compiled by the Census Bureau from shippers' export declarations or from import entry forms filed with the U.S. Customs Service on each transaction.

The MNC data, like the all-U.S. data, were required to be reported on a "shipped basis"--that is, on the basis of when, where, and to (or by) whom the goods were physically shipped. However, most reporters maintained their books, and probably, in some cases, reported to BEA, on a "charged basis"--that is, on the basis of when, where, and to (or by) whom the goods were billed or charged. Data on the two bases can differ significantly. For example, of a U.S. parent buys goods from an affiliate in country A and sells them to an affiliate in country B, but the goods are shipped directly from country A to country B, a U.S. import or export would not be recorded on the shipped basis, because the goods never physically entered or left the United States. On the charged basis, however, both a U.S. import (to show the purchase charged to the U.S. parent from country A) and a U.S. export (to show the sale charged by the U.S. parent to country B) would be recorded. A BEA review indicated that most of the reported data were on a shipped rather than a charged basis. When it was determined that the data were on a charged basis, BEA required revised reports to be filed. However, some cases of erroneous reporting were probably not identified or corrected.

The MNC data may also contain duplication. For example, if one U.S. parent exported goods to an affiliate of another U.S. parent, the goods would be counted twice in total MNC-associated U.S. exports--once as goods shipped by U.S. parents to unaffiliated foreigners and once as goods shipped to affiliates by U.S. persons other than their U.S. parents. This duplication would cause the MNC data to be overstated relative to the all-U.S. data. The amount of any such overstatement is unknown, but delieved to be small.

The MNC and all-U.S. trade data may also differ because the timing, valuation, origin or destination, shipper, or product involved in a given transaction may have been recorded differently on company records than on the Customs export and import documents. Other comparability problems are noted in the text, including the misclassification of certain parts and accessories for transportation equipment in the MNC data disaggregated by product, the understatement of all-U.S. exports because of underreporting of exports of road vehicles and parts to Canada, and the use of the "unallocated" category in the data on MNC-associated U.S. exports disaggregated by country of destination.
COPYRIGHT 1986 U.S. Government Printing Office
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1986 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Barker, Betty L.
Publication:Survey of Current Business
Date:May 1, 1986
Words:8084
Previous Article:U.S. business enterprises acquired or established by foreign direct investors in 1985.
Next Article:The business situation.
Topics:


Related Articles
U.S. multinational companies: operations in 1986.
U.S. multinational companies: operations in 1987.
An overview of corporate tax issues involving the European Community.
U.S. multinational companies: operations in 1992.
Pending tax treaties and protocols.
U.S. multinational companies: operations in 1993.
Global sourcing strategies of U.S. subsidiaries of foreign multinationals.
Multinational transfer pricing: implications for North American firms.
Foreign Direct Investment and the Operations of Multinational Firms.
Research spotlight: taxation and multinational activity: new evidence, new interpretations.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters