1 The International Supply of Services

2 Int’l. Supply of Services Outline Background.... What is mode 4? Recommendations of MSITS 2010 on modes and what can/could be done? Some country experiences What can we expect in the (near?) future?

3 Modes of supply in MSITS MSITS 2002 introduced modes of supply in statistical context. While introducing subject in annex, identified further research necessary for mode 4 Work that led to MSITS 2010, clarified mode 4 in statistical framework New chapter on modes of supply (chapter 5) : “.... estimating Mode 4 within BOP service account will help the overall estimation of international supply of services by mode.” (value)

4 Contractual service suppliers – Self-employed (independent) service suppliers – Employees of foreign service suppliers Who is covered by Mode 4? Intra-corporate transferees and persons directly recruited by the foreign affiliate Services sellers / Persons responsible for setting up commercial presence 2 basic information needs for mode 4 Value of services provided Number of natural persons

5 Value: Number of persons: Remittances, compensation of employees: not measures of mode 4 Labour mobilityTrade in services (incl. mode 4) Compensation of employees Workers remittances BPM6: Personal transfers Services categories RSIM Rev.1, IRTS 2008 Non-migrants International migrants, of which short-term Visitors SNA, BPM, MSITS

6 Int’l. Supply of Services Outline Background..... What is mode 4? Recommendations of MSITS 2010 on modes and what can/could be done? Some country experiences What can we expect in the (near?) future?

7 10.2% 23.1% 66.7% Mode Mode 2 International Supply of Services to United States : a first breakdown by modes Source: Author's calculations based on "U.S. International Services: Cross-Border Trade in 2008 and Services Supplied Through Affiliates in 2007" Survey of Current Business, BEA, U.S. Department of Commerce, Mode 3

8 What’s the problem with measuring the value of GATS Modes of Supply? ? ? ? Intermodal linkages Services may be delivered through several modes of supply Mode 1Mode 4Mode 3Mode 2 A single service transaction through different modes

9 Simplified allocation of FATS and EBOPS data to modes of supply (1/2) * In territory where affiliate established. If not possible to breakdown by EBOPS 2010 product, by activity using ICFA Rev.1 ** Certain degree of uncertainty regarding certain charges

10 Simplified allocation of FATS and EBOPS data to modes of supply (2/2) CHALLENGE

11 5.8% 16.8% 23.1% Mode Mode 3 Mode Mode 2 International Supply of Services to United States : further breakdown by modes Source: Author's calculations based on "U.S. International Services: Cross-Border Trade in 2008 and Services Supplied Through Affiliates in 2007" Survey of Current Business, BEA, U.S. Department of Commerce, Mode 3+4 Mode 1 Mode 4 5.7% 0.1% 0.5% 66.7% 10.2%

12 Options to assess Mode 4 delivery in surveys 1.Did the service delivery involve physical presence of service provider? Yes? Then, how was most of the service value provided (time/resources)? Mostly by fax, , etc. Natural person at the end (e.g. to supervise) The person’s knowledge was essential to deliver the service Mode 4 2. Require in services surveys allocation by each GATS mode of supply 3. Require estimated share of services inputs for Mode 4 services trade Mode 1 Combine with other sources? Model based estimates?

13 Int’l. Supply of Services Outline Background..... What is mode 4? Recommendations of MSITS 2010 on modes and what can/could be done? Some country experiences What can we expect in the (near?) future?

14 Indian International Supply of Computer Services, IT Enabled Services and BPO by Mode, Source: Reserve Bank of India (2010), converted to US dollars by authors

15 Commercial presence $116m, 27% Fly in-fly out $93m, 22% Australian projects $215m, 51% Australia's legal services international income by mode of supply, (million USD and percentage) Source: ILSAC Survey of Australian Export Market for Legal Services

16 Int’l. Supply of Services Outline Background..... What is mode 4? Recommendations of MSITS 2010 on modes and what can/could be done? Some country experiences What can we expect in the (near?) future?

17 Estimating trade in services by mode? (1/2) Demand for estimation of services trade by modes of supply exists For the value of trade: within the framework of BOP services statistics Simplified allocation in MSITS 2010 as starting point : guide for compilers for first estimation (have knowledge of how services providers and consumers behave in their economy) Do we need to do more in the (near) future?

18 Estimating trade in services by mode? (2/2) Main issue to identify modes of supply in BOP services: estimating mode 4 Necessary to estimate mode 4 for all BOP services items? Not for all : only those where mode 4 is deemed important Mode 4 importance varies across countries and items: compilers to identify necessity for specific services items. Cooperate with service sector professionals and users