1. INTERNATIONAL TRADE IN SERVICES Introduction
Christie Richards
Syria- June 28 – July 2, 2009

2. Topics to be discussed Definition Purpose Background Components
Sources
Data collection
Data analysis

3. Definition of services Definition of international services
Sources of definition
Definition of services
Definition of international services

4. Sources of definition
Manual on Statistics of international trade in services, 2002 (SITS), a joint product of United Nations (UN), European Commission (EC), International Monetary Fund (IMF), Organization for Economic Co-operation and Development (OECD), United Nations Conference on Trade and Development (UNCTAD), World Trade Organization (WTO);

5. Sources of definition (contd)
International investment position and Balance of payments manual, sixth edition; (IMF)

6. Definition of services
Simple definition not possible
Services cover a heterogeneous range mostly of intangible products
Services also include goods with which they may be associated in varying degrees (e.g. travel, construction, computer services, government services)

7. Definition of international services
Conventional statistical meaning of international trade in services is that described in BPM6 (and previous BPMs);
International trade in services defined as those between residents and non-residents of an economy;
While above definition satisfies the needs of BOP data compilation, it does not satisfy the needs of other uses for these data such as international trade agreements concerning services (e.g. GATS);

8. Definition of international services (contd)
GATS make provision for agreement on suppliers moving to the country of the consumer;
To satisfy GATS’ needs, SITS extends definition of international trade in services to include value of services provided through foreign affiliates established abroad and described as foreign affiliates trade in services (FATS)

9. Definition of international services (contd)
Services are also supplied by individuals located abroad, either as service suppliers themselves or employed by service suppliers including those in the host country;
A large part of above services covered by the BPM6 and FATS frameworks;
Concept of residency important for BOP statistics to determine international trade in services;

10. Definition of international services (contd)
Although, SITS extends the scope of the term international trade in services, it does not suggest that these extensions be regarded as imports or exports.

11. Purpose
To identify comprehensive and broader data on international trade in services that would satisfy not only the needs of BOP data but also provide appropriate data for other uses such as international trade agreements embodied in GATS, analysis of the performance of foreign direct investment (FDI) enterprises etc;

12. Background
Traditionally, various users relied on BOP data for international trade in services;
But for many countries, BOP data on international trade in services were among the weakest components since they were not comprehensive, lacked details, many gaps in collection, misclassified, and not amenable to changes to accommodate fast changing circumstances

13. Background (contd)
Many countries while producing data on transportation, travel and insurance (partial), other data were either ignored or covered unsatisfactorily due to lack of staff and other re sources, use of inappropriate sources, lack of training of staff, failure to use alternate sources or estimates;
Even the few data that were produced were not done well as too much reliance was placed on formulas that were never changed

14. Components Manufacturing services on physical inputs by others
Maintenance and repair services n.i.e.
Transport
Travel
Construction
Insurance and pension services
Financial services
Charges for the use of intellectual property n.i.e

15. Components (contd)
Telecommunications, computer and information services;
Other business services;
Personal, cultural, and recreational services;
Government goods and services, n.i.e.

16. Sources International Transactions Recording System
Administrative Data
Surveys
Financial Statements of Corporations
Media
Formal and Informal Interviews
Partner Country Data
Estimates
Multitude Sources

17. Sources (contd) – International Transactions Recording System (ITRS)
Information obtained through commercial and central banks in host countries;
Information obtained from bank accounts held abroad through which BOP transactions conducted;
ITRS could be simple or complex systems;
Complex systems involve reconciliation of transactions with foreign currency assets of banks on a daily, weekly or monthly basis

18. Sources (contd) – International Transactions Recording System (ITRS)
Complex system requests details on BOP transactions according to the standard presentation of BOP data as spelt out in IMF’s BOP manuals (latest manual is BPM 6)
Both simple and complex systems have a number of “other” categories for various classes of transactions to reduce response burden

19. Sources (contd) – International Transactions Recording System (ITRS)
“Other” categories are to report insignificant transactions;
In practice, in most countries “other” categories amount to most of the value of transactions reported;
Both transactors and banks resort to short cut reporting;
ITRS requires that both transactors and banks have adequate knowledge of BOP concepts

20. Sources (contd) – International Transactions Recording System (ITRS)
In practice, transactors and bank officials do not have adequate knowledge of BOP concepts;
Effects of staff turnover in companies, banks and statistical offices;
Need to maintain on-going liaison
Other issues – ITRS compilers different from BOP compilers

21. Administrative Data
Customs data (e.g. transport and freight insurance)
Investments approval or promotion agencies (pre-investment expenses, some of which may be capitalized)
Oil and gas ministries (signature bonuses {FDI}, geological and other surveys {expensed or capitalized} )

22. Administrative Data (contd)
Telecommunications regulatory agencies (licenses – capitalized);
Budget documents (expenditures of embassies abroad; expenditures of other government agencies such as tourism ministries; foreign aid – current and capital transfers; construction expenses on infrastructure; )

23. Surveys BOP Surveys focused on trade in services ;
BOP surveys could be either general or tailor designed to particular industries such as insurance companies, construction companies, airlines etc;

24. Surveys (contd)
Use of surveys done for related data (tourism satellite surveys);
Surveys/administrative data on migration including entry/exit documents submitted at border points;
Household surveys (e.g. West Bank and Gaza Strip);

25. Surveys (contd)
Tailor made surveys as follow ups on administrative data (e.g. travel associated with education, health, and pilgrimages as in Nigeria)

26. Financial Statements of Corporations
Increasingly, countries using financial statements of companies to extract /validate BOP and international investment position (IIP) data;
Transactions with related parties referred to in notes to financial statements

27. Media
Tracking BOP current developments through business pages of daily newspapers, business and other magazines, radio and television;
Tracking current and past developments through websites;
“Googling”

28. Formal and informal interviews
Formal interviews are pre-arranged with respondents to obtain specific data;
Informal interviews may or may not be pre-arranged; data obtained informally or indirectly (e.g. embassy expenditures in host countries)

29. Formal and informal interviews (contd)
Informal interviews often crucial in some countries to obtain BOP data;
Examples (Informal settings at social functions such as embassy events; government events {Georgia}; restaurants {Cambodia}; workshops {Gambia}; friends and relatives {unnamed country})

30. Formal and informal interviews (contd)
BOP statistician no different from an investigative reporter;
Necessary for BOP statistician to think “out of the box”

31. Partner Country Data
Use other countries data when your data not sufficiently developed or for validation;
United States has the best published bilateral data pertaining to trade in services;
United States has the best published data on foreign affiliates trade in services (FATS)

32. Partner Country Data (contd)
Other countries may have unpublished data on services;
Hence networking with counterparts in principal trading countries very important;
Partner country data for services not as well developed as for foreign direct and portfolio investments;

33. Estimates
When other sources not available or unsatisfactory, resort to estimates (e.g. government goods and services, n.i.e., estimates of free food, accommodation and other services provided by friends and family to nonresident tourists; goods and services provided by friends and relatives to students and patients);

34. Multitude sources Combination of one or more of the above sources;
Travel data, a product of administrative sources (entry and exit at border points; purpose of travel; number of days spent etc), surveys (various types of accommodation, travelers, organizations that cater to short term workers in other economies) and estimates

35. Multitude sources (contd)
Other examples
Use of multitude sources is modeling

36. Data collection
Since a variety of sources are available, compilers should carefully choose which sources or a combination of sources best serve a cost effective and reliable method of data collection;
Most compilers usually opt for either a ITRS or surveys for BOP data collection;

37. Data collection (contd)
However, due to a variety of needs and periodicity (monthly, quarterly, annual) for BOP and IIP data, no one source of data satisfies all requirements;
Need for data should be determined in context of resources available (staff and financial);

38. Data collection (contd)
Staff resources include number of staff and how well they are equipped to perform tasks;
Equipment of staff includes materials (state of the art computers) as well as skills (economics, statistics, accounting etc), and continuous training;

39. Data analysis Very important
Analysis is not a separate function (as in the Philippines)
Analysis is a function at every stage of identification of data sources, data collection through final publication of data and there after

40. Data analysis (contd)
It is important that not only appropriate data collected but they are also validated;
In assessing quality of data, it is important to perform not only arithmetical checks but also relational checks;
Another check on quality is to resolve the problem of statistical outliers;

41. Data analysis (contd)
Data revisions subsequent to initial publication should be considered normal;
Initial publication (e.g. quarterly data) may be based on sample population or estimates based on previous trends and current developments;

42. Data analysis (contd)
Annual data may be based on more comprehensive data sources;
Subsequent to publication of annual data, new sources of data such as partner country data may become available;
Some countries revise data over a 3-5 years period and even longer;

43. Data analysis (contd)
Further, on occasional instances, revisions may go beyond a 5 year period if countries decide to revise data on account of revised concepts in order not to have breaks in statistical series;
Therefore, data collection and analysis go hand in hand.