Foreign Affiliates' Trade in Services
Statistics: Concepts, Data collection,
and Use for Mode 4
Michael Mann
U.S. Bureau of Economic Analysis
Presented to the UNSD Subgroup on MODE 4
Paris, France
September 16, 2004
*These slides draw heavily on a presentation by BEA's Obie Whichard for the IMF Institute's Course on Balance of Payments Statistics, March 2004. The
slides on the treatment of FATS in the Manual of Statistics on International Trade in Services were, in turn, adapted from materials prepared by the WTO.
Outline for Presentation
• FATS treatment in MSITS
• FATS data collection: The U.S. experience
• FATS statistics and Mode 4
• BEA’s methods for estimating “remittances”
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What are FATS statistics?
• Conceptually: Information relevant to
services delivered through foreign affiliates
• Practically: A range of indicators pertaining
to the activities of foreign affiliates
– With a particular focus on services
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Principles Underpinning FATS Statistics
In line with international standards
• SNA 1993 (National Accounts)
• BPM5 (BOP)
• OECD Benchmark Definition of FDI
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Firms Covered in FATS
•
Ownership criteria
Majority-owned foreign affiliates (a single foreign investor owns
more than 50% of their ordinary shares or voting power)
Types of producers
Affiliates producing goods, services
Statistical Units
Enterprises vs Establishments
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Time of Recording FATS Variables
Accrual
basis
Recording when the activity (production,
employment, etc.) occurs rather than when
the related payment is made
Period of
recording
Flow variables
Stock variables
Reference
year
Calendar year in principle
reference year
end of reference year
If only fiscal or accounting year is available, disclose this.
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Economic Variables for FATS
Most are drawn from SNA 93
Basic FATS variables
(minimum recommended by MSITS)
• Sales (turnover) and/or output
• Employment
• Value added
• Exports and imports of goods
and services
• Number of enterprises
• Assets
• Compensation of employees
• Net worth
• Net operating surplus
• Gross fixed capital formation
• Taxes on income
Additional
FATS variables
• Research and development expenditures
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Geographical Attribution:
Inward investment
COMPILING
COUNTRY
Foreign
investor
(immediate)
Operations of
foreign-owned
affiliate
Foreign
Investor
(ultimate)
Described
Statistics on
inward FATS
Operations attributed to the country of
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Geographical Attribution - Outward Investment:
Treatment of Indirectly Held Affiliates
COMPILING
COUNTRY
Directly held
foreign affiliate
Resident
investor
Statistics on
outward FATS
Described
Indirectly held
foreign affiliate
Operations attributed to the country of
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Compilation Issues
• Two principal methods of data collection:
– Identifying the foreign-owned subset of
domestic firms for which data are already
collected (can be used only for inward
investment)
– Separate surveys
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United States Experience
• First collected FDI operations data for 1950,
covering outward investment
• Collection became more regular and more detailed
in the late 1970’s / early 1980’s
• Authority provided by the International Investment
Survey Act of 1976, later expanded and
redesignated as the International Investment and
Trade in Services Survey Act
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U.S. Experience (Cont’d):
Collection methods
• A survey-based system
– Benchmark surveys every 5 years
• Most comprehensive in subject matter
• Lowest reporting thresholds
– Annual surveys in interim years
• Higher exemption levels and fewer items
• Are starting to make use of statistical sampling
• Estimates are made for below-threshold companies
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U.S. Collection methods (Cont’d)
• Link to Census Bureau establishment-level data every 5
years
Advantages:
– Greatly increased industry detail (still not productbased, but gives more precise clues to products
produced and sold)
– No added reporting burden
Limitations:
– Applies only to inward investment
– Less timely
– Less frequent
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Types of data collected
•
•
•
•
•
•
•
Balance sheets
Income statements
Sales
Employment and employee compensation
Research and development expenditures
Taxes
U.S. trade in goods
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Adaptation to Services Needs
• Sales of goods and sales of services now reported
separately
• More detailed industry classification for services
– Aided by new North American Industry
Classification System (introduced in 1997)
• Introduced annual presentation that combines
data on cross-border (resident/nonresident) trade
with data on sales through foreign affiliates
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FATS coverage of Mode 4
• Services supplied through:
– intra-corporate transferees
– other foreign individuals working on a nonpermanent basis for foreign affiliates
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Measuring Services Delivered by nonPermanent Workers in Foreign Affiliates
• Compensation
– Collected from FATS statistics
– Workers remittances (not collected from
FATS): will understate compensation and would
cover all migrant workers
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Data collection challenges
• How to avoid double counting FATS
compensation-based data, and data collected from
companies on their sales of services to foreigners.
• What if the number of foreign employees at the
end of year does not reflect normal operations?
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Data collection challenges (continued)
• Can companies readily provide additional
information of interest for Mode 4?
- the number of non-permanent employees
working for their foreign affiliates
- citizen vs non-citizen
- for non-citizen, break out by citizenship
- contract employees vs payroll
- employments by occupation
- intra-corporate transferees vs other
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How Does the U.S. Estimate the Components of
“Remittances”?
• Workers remittances
• Migrants transfers
• Compensation of employees
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How Does the U.S. Estimate the Components of
“Remittances” (continued)
• Workers remittances
- basic model: # of workers * average per capita
income * propensity to remit
- the model considers several demographic
characteristics including family status, age, length
of U.S. residency, and country of origin
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How Does the U.S. Estimate the Components of
“Remittances” (continued)
• Migrants transfers
– For Canada - partner country data
– Basic model for countries other than Canada:
Immigrants transfers - # of immigrants *
average per capita income * wealth-to-income
ratio
Emigrants transfers - # of emmigrants *
median net worth
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How Does the U.S. Estimate the Components of
“Remittances” (continued)
• Best to estimate remittances as compensation less
expenditures
• Compensation of employees
– U.S. Receipts:
• Partner country data from Germany, the UK, and Canada.
Estimates for other countries are based on data from the IRS
(the U.S. tax collection authority)
– U.S. Payments:
• Foreign professionals - IRS data
• Seasonal and border workers: # of workers * average
compensation
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Questions?
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