As part of its initiative to improve the source data used in preparing the estimates of U.S. international transactions in private services, BEA has begun collecting more detailed data by type of service on cross-border sales and purchases of services between U.S. parents and their foreign affiliates and between foreign parents and their U.S. affiliates. These affiliated (intrafirm) services transactions previously were included in the cross-border estimates of "other private services," but the data were not collected in a form that could be disaggregated by type of service.
The expanded detail was first collected in BEA's 1994 benchmark survey of U.S. direct investment abroad (USDIA) and has since been reported once a year on BEA's quarterly sample survey of USDIA. This detail is also being collected on surveys of foreign direct investment in the United States, beginning with the benchmark survey for 1997, which is currently being processed.
In the surveys, respondents disaggregate their affiliated services transactions into five categories of services and a residual category: Insurance services, financial services, transportation services, computer and information services, communications services, and all other services./1/ The five categories were selected partly to conform with the services categories in cross-border transactions and partly on the basis of the classifications for services recommended in the fifth edition of the International Monetary Fund's Balance of Payments Manual.
Preliminary estimates of the transactions between U.S. parents and their foreign affiliates for 1994–97 are now available (see the accompanying table). The estimates for 1994 incorporate the 1994 benchmark survey data; the estimates for 1995–97 were extrapolated from the benchmark data on the basis of movements in the data reported on the quarterly sample surveys.
As shown in the table, more than three-fourths of receipts and more than two-thirds of payments are in the "Other services" category. A significant portion of the transactions in "Other services" is believed to be accounted for by overhead expenses, such as management services and research and development assessments, that are allocated among the various divisions or parts of an enterprise.
The new detail on affiliated services by type of service will be published annually in this article. In the coming year, BEA will be considering how best to incorporate the new detail into the cross-border estimates.
Footnotes:
1. The transactions reported for insurance services are limited to those not already collected on other surveys—specifically, to purchases of primary insurance (and the related recovery of losses) by U.S. parent companies from foreign affiliates in insurance.