From the October 1997 SURVEY OF
CURRENT BUSINESS
Michael A. Mann, Daniel J. Atherton, and Laura L. Brokenbaugh prepared the section on cross-border transactions. Sylvia E. Bargas prepared the section on sales by affiliates.
Both in cross-border trade and in services delivered through the majority-ownedaffiliates of multinational companies, the U.S. position in international markets forprivate services remains strong. The U.S. recorded another surplus on cross-border transactions in private services in 1996, when the balance rose to a record $78.1 billion, as exports grew faster than imports for the second year in a row. The large surplus on private services contrasted sharply with the deficit on trade in goods, which rose to a record $191.2 billion. In 1995, as in earlier years, the sales of services abroad by the foreign affiliates of U.S. companies exceeded the sales of services in the United States by the U.S. affiliates of foreign companies.
The estimates of U.S. international sales and purchases of private services that are presented in this article measure transactions that take place through two distinct channels: (1) Cross-border transactions between U.S. residents and foreign residents, and (2) sales of services through nonbank majority-owned affiliates of multinational companies, which cover the sales of services abroad by foreign affiliates of U.S. companies and the sales of services in the United States by U.S. affiliates of foreign companies./1/ Cross-border transactions represent international trade in the conventional sense—exports and imports—and are recorded, in summary form, in the U.S. international transactions accounts./2/ Sales through affiliates represent services delivered to international markets through the channel of direct investment; the data are drawn from larger data sets on affiliate operations that are presented in annual articles on the operations of U.S. multinational companies and of U.S. affiliates of foreign companies./3/ (Also see the box "Channels of Delivery of Services to Foreign Markets.") Most of the estimates are based on surveys conducted by the Bureau of Economic Analysis (BEA) (see the box "Data Sources" on page 99).
This article presents the annual data for cross-border transactions for 1996 and annual data on services delivered through majority-owned affiliates for 1995, the most recent year for which the affiliate data are available. In 1996, U.S. cross-border sales, or exports, of services to foreigners rose 8 percent, slightly above the 6-percent increase in U.S. exports of goods. U.S. cross-border purchases, or imports, of services from foreigners rose 6 percent, slightly below the 7-percent increase in U.S. imports of goods.
In 1995, U.S. exports of services increased 11 percent, and U.S. imports increased 10 percent. However, for services delivered through majority-owned affiliates, U.S. sales increased 20 percent, well above the 9-percent increase in U.S. purchases.
Additional highlights for 1995 include the following:
The remainder of this article is presented in two parts. The first part discusses cross-border sales and purchases, and it presents preliminary estimates for 1996 and revised estimates for 1986–95. The second part discusses sales through majority-owned affiliates, and it presents preliminary estimates for 1995 and revised estimates for 1994.
U.S. exports of cross-border services (receipts) increased 8 percent in 1996 to $221.2 billion, compared with an 11-percent increase in 1995. U.S. imports of cross-border services (payments) increased 6 percent in 1996 to $143.1 billion, compared with a 10-percent increase in 1995. This marked the second consecutive year that exports of private services increased at a faster rate than imports of private services.
Additional highlights for 1996 are as follows:
| Percent change from prior year | ||||
| Exports | Imports | |||
| 1995 | 1996 | 1995 | 1996 | |
| Private services | 11 | 8 | 10 | 6 |
| Travel and passenger fares |
9 | 10 | 7 | 7 |
| Other transportation |
10 | -1 | 4 | 1 |
| Royalties and license fees |
21 | 9 | 17 | 13 |
| Other private services |
9 | 10 | 19 | 9 |
| Change from prior year in millions of dollars | ||||
| Exports | Imports | |||
| 1995 | 1996 | 1995 | 1996 | |
| Private services | 19,970 | 17,059 | 11,903 | 8,563 |
| Travel and passenger fares |
7,020 | 7,945 | 3,819 | 4,029 |
| Other transportation |
2,471 | -196 | 994 | 204 |
| Royalties and license fees |
4,722 | 2,591 | 943 | 819 |
| Other private services |
5,757 | 6,719 | 6,147 | 3,511 |
The following two sections discuss cross-border transactions in services in 1996 by major type of service and by geographic area. These sections, along with the accompanying tables, provide information for more types of services and more geographic areas than are available in the U.S. international transactions accounts. The estimates for cross-border transactions incorporate recent improvements in source data; these include improvements to transportation services, affiliated services transactions, and "business, professional, and technical services." (For details, see the box "Revisions to the Estimates of Cross-Border Service Transactions.") The transactions covered are those between U.S. residents and both affiliated and unaffiliated foreign residents./4/ Affiliated transactions consist of intrafirm trade by multinational companies—specifically, transactions between U.S. parent companies and their foreign affiliates and transactions between U.S. affiliates and their foreign parent groups. (Cross-border transactions between affiliated enterprises should not be confused with sales by affiliates, which are discussed in the second half of this article.)
Cross-border services transactions are classified under the same five broad categories used in the U.S. international transactions accounts: Travel, passenger fares, other transportation, royalties and license fees, and other private services.
Travel.—This category covers purchases of goods and services by U.S. persons traveling abroad and by foreign persons traveling in the United States for business or personal reasons for less than 1 year. The types of goods and services most likely to be purchased by these travelers are lodging, food, recreation and entertainment, local transportation, and gifts. Travel transactions between the United States and both Canada and Mexico include border transactions, which often involve stays of less than 24 hours.
U.S. receipts for travel increased 10 percent in 1996, to $69.9 billion, following a 9-percent increase in 1995. The increase in 1996 was largely accounted for by an increase in receipts from travelers from overseas; 44 percent of the increase was attributable to travelers from the Asia and Pacific area. Japan and South Korea continued to be the largest source of travelers to the United States from the Asia and Pacific area. Receipts from Japan increased 12 percent, and receipts from South Korea increased 37 percent. Receipts from Canada increased 9 percent, the first increase since 1991, partly reflecting a 17-percent increase in Canadian air travelers to the United States; the turnaround is partly attributable to the "Open Skies" agreement between the United States and Canada, which became effective in 1995 and which has resulted in an increase in the number of scheduled flights between the two countries. Receipts from Mexico increased 5 percent, following a 41-percent decline, as Mexico began to recover from the devaluation of the peso that occurred in late 1994.
U.S. payments for travel increased 6 percent in 1996, to $48.7 billion, following a 5-percent increase in 1995. The increase in 1996 largely reflected the effects of continued expansion in the U.S. economy, which led to an increased propensity for Americans to travel abroad. U.S. payments to Canada increased 7 percent, following a 10-percent increase. U.S. payments to Mexico increased 12 percent after virtually no change.
Passenger fares.—This category covers fares paid by residents of one country to airline and vessel operators who reside in another country. Exports consist of fares received by U.S. operators for transporting foreign residents between the United States and a foreign country and between foreign countries. Imports consist of fares paid to foreign operators by U.S. residents for travel to and from the United States.
U.S. passenger fare receipts increased 7 percent in 1996, to $20.6 billion, following a 12-percent increase in 1995. The deceleration reflected a smaller increase in foreign travelers coming to the United States on U.S. airlines.
U.S. passenger fare payments increased 9 percent, to $15.8 billion, following a 12-percent increase in 1995.
Other transportation.—This category primarily covers transactions for freight and port services for the transportation of goods by ocean, air, and truck to and from the United States. Freight receipts of U.S. carriers are for transporting U.S. goods exports and for transporting goods between two foreign points; freight payments to foreign carriers are for transporting U.S. goods imports./5/ Port services receipts are the value of the goods and services procured by foreign carriers in both U.S. ocean and air ports; port services payments are the value of goods and services procured by U.S. carriers in foreign ocean and air ports.
U.S. receipts for "other transportation" decreased 1 percent in 1996, following a 10-percent increase in 1995. Receipts for freight services decreased 2 percent, and receipts for port services decreased 1 percent. A decrease in ocean freight receipts was partly offset by an increase in air freight services receipts that was attributable to an increase in the volume of air exports carried by U.S. airlines. Receipts for ocean port services decreased, as a decline in the export volumes of foreign vessels and lower average costs in U.S. ports more than offset an increase in the import volumes of foreign vessels.
U.S. payments for "other transportation" increased 1 percent in 1996, to $28.5 billion, following a 4-percent increase in 1995. Payments for ocean freight services decreased 2 percent, as freight rates per ton decreased because of overcapacity in the ocean freight market. Payments for ocean port services decreased 13 percent. These decreases were partly offset by increases of 3 percent in air freight payments and 7 percent in air port payments, partly reflecting an upward trend in the air cargo industry that was attributable to increases in the use of time-sensitive cargo services.
Royalties and license fees.—This category covers transactions with foreign residents that involve patented and unpatented techniques, processes, formulas, and other intangible property rights used in the production of goods; transactions involving copyrights, trademarks, franchises, broadcast rights, and other intangible rights; and the rights to sell products under a particular trademark, brand name, or signature.
Receipts of royalties and license fees increased 9 percent in 1996, to $30.0 billion, following a 21-percent increase in 1995. The increase in 1996 was largely attributable to a $1.7 billion increase in receipts of U.S. parent companies from their foreign affiliates. These affiliates were mostly concentrated in manufacturing, particularly in the chemicals industry. Royalties and license fees from unaffiliated foreigners increased 9 percent, reflecting an 11-percent increase in fees for the use of industrial processes and a 7-percent increase in fees for the rights to sell products under a particular trademark, brand name, or signature (see footnote 1, table 4).
Payments of royalties and license fees increased 13 percent in 1996, to $7.3 billion, following a 17-percent increase in 1995. Payments to affiliated foreigners increased 3 percent. Payments to unaffiliated foreigners increased 47 percent; the substantial increase was due to payments to the International Olympic Committee for broadcast rights to the Summer Olympic Games.
Other private services.—This category consists of a variety of private services: Education; financial services; insurance; telecommunications; business, professional, and technical services; and other affiliated and unaffiliated services.
Receipts for "other private services" increased 10 percent in 1996, to $73.6 billion, following a 9-percent increase in 1995. Affiliated services receipts increased 13 percent, to $22.8 billion, primarily reflecting increased receipts by U.S. affiliates from their foreign parents. Unaffiliated services receipts increased 9 percent, to $50.8 billion, reflecting increases across most services categories.
Payments for "other private services" increased 9 percent in 1996, to $42.8 billion, following a 19-percent increase in 1995. Payments to affiliated foreigners increased 18 percent; the increase was mostly attributable to a 26-percent increase in payments by U.S. affiliates to their foreign parents. Payments to unaffiliated foreigners increased 4 percent, following a 21-percent increase in 1995.
"Education" receipts consist of expenditures for tuition and living expenses by foreign students enrolled in U.S. colleges and universities; payments consist of tuition and living expenses of U.S. students for study abroad. Education receipts increased 4 percent to $7.8 billion, and payments increased 10 percent to $1.0 billion, as the number of foreign students studying in the United States rose only slightly while the number of U.S. students studying overseas continued to increase.
"Financial services" covers a variety of services, including funds management, credit card services, explicit fees and commissions on transactions in securities, fees on credit-related activities, and other miscellaneous financial services; implicit fees paid and received on bond trading are also covered. In 1996, receipts for financial services increased 14 percent to $8.0 billion, and payments increased 29 percent to $3.2 billion, as a result of stepped up activity in U.S. and foreign financial markets. The increases in both financial service receipts and payments also reflected the globalization of financial services—deregulation of financial markets, advances in technology and telecommunications in the finance industry, and cross-border diversification of investors' and borrowers' portfolios.
"Insurance" includes premiums received and paid for primary insurance and for reinsurance; losses paid by U.S. insurers and losses recovered from foreign insurers are netted against the premiums. Primary insurance includes life insurance, accident and health insurance, and property and casualty insurance. Each type of primary insurance may be reinsured by the primary insurer; reinsurance is the ceding of a portion of a premium to another insurer, who then assumes a corresponding portion of the risk. Reinsurance is one way of providing coverage for events with so high a degree of risk or liability that a single insurer is unwilling or unable to underwrite insurance against their occurrence. In 1996, net insurance receipts increased 53 percent to $2.1 billion. The increase was largely attributable to a leveling off in losses paid, as premiums continued to increase steadily. Reinsurance losses paid returned to more normal levels after unusually large payments in 1995 that covered a variety of claims, mainly related to product liability and the environment. Net insurance payments decreased 19 percent to $4.4 billion; the decrease was almost solely the result of a 13-percent increase in losses recovered from foreign insurers.
"Telecommunications" includes settlements between U.S. and foreign communications companies for the transmission of messages between the United States and other countries; channel leasing; telex, telegram and other jointly provided (basic) services; value-added services, such as electronic mail and video conferencing; and telecommunications support services. Receipts for telecommunications services increased 7 percent to $3.4 billion in 1996, and payments increased 8 percent to $8.4 billion, as the volume of international telephone calls increased more than rates fell.
"Business, professional, and technical services" covers a wide variety of services (table 1). Receipts for business, professional, and technical services increased 8 percent to $19.2 billion in 1996, following a 12-percent increase in 1995. The fastest growing categories were research, development, and testing services; legal services; and installation, maintenance, and repair of equipment. Payments for business, professional, and technical services increased 12 percent to $5.3 billion. By subcategory, the fastest growing services were installation, maintenance, and repair of equipment; construction, engineering, architectural, and mining services; and advertising.
"Other unaffiliated services" receipts cover a wide variety of services, including expenditures by foreign governments for services related to maintaining embassies and consulates in the United States; expenditures of international organizations—such as the United Nations, the International Monetary Fund, and the World Bank—headquartered in the United States; receipts from unaffiliated foreigners for sales and rentals of U.S. motion picture and television films and tapes; and expenditures of foreign residents employed temporarily in the United States. Payments consist primarily of earnings of foreign residents employed temporarily in the United States and of payments by U.S. film distributors to unaffiliated foreign residents for purchases and rentals of motion picture and television films and tapes. Receipts of "other unaffiliated services" increased 5 percent to $10.1 billion in 1996, and payments increased 2 percent to $4.5 billion.
Twelve countries accounted for nearly two-thirds of U.S. cross-border exports and U.S. cross-border imports (table B). The top six countries for both exports and imports of U.S. services—Japan, the United Kingdom, Germany, France, Canada and Mexico—accounted for 48 percent of services exports and 49 percent of services imports and for 45 percent of the $78.1 billion U.S. surplus on private services. By area, the combined areas of Europe and of Asia and Pacific accounted for more than two-thirds of exports and for slightly less than two-thirds of imports (chart 4).
Europe.—Europe accounted for 36 percent of exports and 39 percent of imports of private services in 1996. The U.S. services surplus with Europe increased 25 percent to $24.4 billion. European travelers to the United States accounted for 33 percent of U.S. travel and passenger fare receipts; payments by U.S. travelers to Europe accounted for 40 percent of U.S. travel and passenger fare payments. Europe accounted for 36 percent of both exports and imports of "other private services."
The United Kingdom ranked as the leading source of U.S. imports of services in 1996, but the growth rate for U.S. services imports from the United Kingdom was less than the growth in total U.S. imports of private services. The United Kingdom ranked second to Japan as a destination of U.S. exports of services, but the growth rate for U.S. services exports to the United Kingdom exceeded the growth rate for total U.S. exports of services. An acceleration in exports to the United Kingdom was primarily attributable to step-ups in travel and "other private services"; each of these two categories increased by 10 percent in 1996, compared with increases of 5 percent and 7 percent, respectively, in 1995. The United Kingdom ranks first in imports of "other private services," with 14 percent of the total, and it ranks second in exports of "other private services," with 10 percent. The U.S. services surplus with the United Kingdom increased 53 percent to $3.4 billion.
The U.S. services surplus with Germany increased 4 percent to $5.2 billion in 1996. Travel and "other private services" accounted for the largest portions of this surplus. Exports of "other private services" to Germany increased 24 percent, and imports of "other private services" from Germany increased 17 percent; these growth rates exceeded those for both total U.S. exports and total U.S. imports of "other private services."
Excluding the United Kingdom, exports to Europe increased 10 percent, and imports from Europe increased 4 percent; these countries accounted for $21.1 billion of the U.S. services surplus.
Asia and Pacific.—This area accounted for 33 percent of exports and 25 percent of imports of private services in 1996 and for 48 percent of the U.S. services surplus. The U.S. services surplus with this area was $37.4 billion, the largest for any area.
Japan accounted for 16 percent of exports and 9 percent of imports of private services. Japan accounted for 45 percent of all U.S. private services transactions with Asia and Pacific and for nearly 15 percent of all U.S. private services transactions, but the growth rate of U.S. private services transactions with Japan did not keep pace with the growth rates either for the area or for total U.S. private services transactions. Within payments for private services, Japan accounted for 15 percent of "other transportation" payments, reflecting the high volume of goods shipped from Japan to the United States on Japanese-operated vessels, and it accounted for 18 percent of royalties and license fees receipts.
The U.S. services surplus with Japan increased 13 percent to $22.0 billion—of which $15.5 billion was attributable to travel and passenger fares. Japanese visitors to the United States accounted for 21 percent of U.S. travel and passenger fare receipts in 1996. In contrast, U.S. residents traveling to Japan accounted for only 6 percent of total U.S. travel and passenger fare payments.
Excluding Japan, exports of private services to Asia and Pacific increased 11 percent, and imports increased 7 percent; the U.S. services surplus was $15.3 billion.
Latin America and Other Western Hemisphere.—This area accounted for 15 percent of U.S. exports and 21 percent of U.S. imports of private services in 1996. The U.S. services surplus with the area was $4.0 billion—of which one-half was attributable to travel and passenger fares. This area accounted for 27 percent of "other private services" payments and for 15 percent of "other private services" receipts in 1996.
Mexico accounted for 23 percent of the area's total exports of private services and 38 percent of the area's imports. The growth rate of exports of private services to Mexico kept pace with the worldwide growth rate; imports exceeded the worldwide growth rate. The U.S. services deficit with Mexico increased 7 percent to $3.6 billion—of which $2.9 billion was attributable to travel and passenger fares. Mexican visitors to the United States accounted for 4 percent of total U.S. travel and passenger fare receipts, while U.S. visitors to Mexico accounted for 10 percent of travel and passenger fare payments. Excluding Mexico, exports of private services to Latin America and Other Western Hemisphere increased 5 percent, and imports increased 12 percent; the U.S. services surplus was $7.6 billion.
Canada.—Transactions with Canada accounted for about 9 percent of both U.S. exports and U.S. imports of private services in 1996. Canada ranked as the second largest source of U.S. imports of services and as the third largest destination for U.S. exports of services. The growth rate of exports of private services to Canada kept pace with the growth rate for total U.S. services exports, and the growth rate of imports from Canada exceeded the growth rate for total U.S. services imports. The U.S. services surplus with Canada increased 8 percent to $6.1 billion—of which one-half was attributable to travel and passenger fares.
For both U.S. exports and U.S. imports of "other transportation" services, transactions with Canada ranked second to Japan, partly reflecting the high volume of goods shipped by truck, pipeline and inland waterway between the United States and Canada. Exports of "other private services" to Canada exceeded those to any other country, and imports of these services from Canada were second only to those from the United Kingdom. The growth in imports of "other private services" from Canada exceeded the growth in these imports from all countries combined, and the growth in exports to Canada kept pace with the worldwide growth in exports. The increase in payments for "other private services" was concentrated in telecommunications and insurance.
Other.—The remaining areas—Africa, the Middle East, and "International organizations and unallocated"—combined accounted for about 6 percent of total U.S. exports and imports of private services in 1996. Exports of private services to these areas increased by only 4 percent, one-half the growth rate for total U.S. exports of these services. In contrast, imports from these areas increased 17 percent, more than double the growth rate in U.S. imports from all countries. Imports of "other private services" from these areas increased 23 percent; this increase was largely attributable to payments to the International Olympic Committee for the rights to broadcast the Summer Olympic Games.
In 1995, worldwide sales of private services by nonbank majority-owned foreign affiliates of U.S. companies were $205.8 billion, up 20 percent from 1994 (table 8)./6/ Worldwide sales of services by nonbank majority-owned U.S. affiliates of foreign companies were $167.6 billion, up 8 percent.
Sales of services by affiliates tend to be predominantly local transactions, reflecting the importance of proximity to the customer in the delivery of many services. In 1995, sales in the country of the affiliate (local sales) accounted for 81 percent of worldwide sales of services by foreign affiliates, well above the corresponding share—66 percent—for sales of goods. Sales of services by foreign affiliates to other foreign countries accounted for 12 percent of worldwide sales by foreign affiliates. Only 7 percent of sales by foreign affiliates were to U.S. persons, and a majority of these sales were to the U.S. parents of the affiliate making the sale. Partly reflecting the large U.S. market, local sales accounted for 95 percent of sales by U.S. affiliates.
Sales by foreign affiliates to foreign persons and sales by U.S. affiliates to U.S. persons both represent services delivered to international markets through the channel of direct investment. Unlike cross-border transactions, which are generally classified by type of service, these sales are classified by the primary industry of the affiliate. These sales are shown by country of affiliate or ultimate beneficial owner (UBO) in table 9./7/ The sales by foreign affiliates in table 10 and by U.S. affiliates in table 11 are shown by industry of affiliate cross-classified by country.
The following two sections discuss foreign affiliates' sales to foreign persons and U.S. affiliates' sales to U.S. persons in 1995.
In 1995, foreign affiliates' sales of services to foreign persons were $191.5 billion. As in past years, affiliates in Europe had the largest share, accounting for 57 percent of the total. Affiliates in Asia and Pacific had the next largest share—22 percent. By industry, affiliates classified in the "services" division of the Standard Industrial Classification (SIC) had the largest share, accounting for 38 percent of the total./8/ Affiliates in insurance had the next largest share—18 percent.
Foreign affiliates' sales increased $32.4 billion, or 20 percent, in 1995. The continuing operations of existing affiliates accounted for 90 percent of the increase. The remaining 10 percent was accounted for by affiliates that were established or acquired by U.S. direct investors in 1995, as a boom in mergers and acquisitions resulted in a substantial number of new direct investments by U.S. multinational companies./9/
The strong rate of growth in 1995 was partly attributable to exchange rate changes; the trade-weighted value of the U.S. dollar against the currencies of 10 major trading partners fell 8 percent in 1995, so the dollar value of foreign-currency-denominated sales by foreign affiliates rose.
By area, sales of services to foreign persons by affiliates in Europe increased $24.2 billion—75 percent of the overall increase. Affiliates in the United Kingdom and Germany accounted for 61 percent of the increase in Europe; the remainder was concentrated among affiliates in France, the Netherlands, and Italy.
Foreign sales by affiliates in Latin America and Other Western Hemisphere increased $3.5 billion—11 percent of the overall increase. Affiliates in Brazil, Chile, and Bermuda had the largest increases. Sales by affiliates in the Asia and Pacific area rose $3.2 billion—10 percent of the overall increase. Affiliates in Australia and Taiwan had the largest increases; sales by affiliates in Japan were virtually unchanged. Sales by affiliates in Canada increased only $0.3 billion—1 percent of the overall increase.
By industry, the largest increases were by affiliates classified in "services," followed by affiliates in manufacturing and in finance. Within both "services" and manufacturing, the largest increases were in computer-related services provided by affiliates whose principal business is to provide computer and data processing services or to manufacture computers and related equipment. The only decrease was in real estate.
In 1995, sales of services to U.S. businesses and individuals by U.S. affiliates of foreign companies were $159.1 billion. As in previous years, affiliates with UBO's in Europe had the largest share, accounting for 61 percent of the total. Affiliates with UBO's in Asia and Pacific had the next largest share—18 percent. By industry, affiliates in insurance had the largest share, accounting for 36 percent of the total. Affiliates classified in "services" had the next largest share—26 present.
U.S. affiliates' sales in the United States increased $13.7 billion, or 9 percent, in 1995. The continuing operations of existing affiliates accounted for 95 percent of the increase; the remaining 5 percent was accounted for by affiliates that were established or acquired by foreign direct investors in 1995.
By area, sales by affiliates with UBO's in Europe increased $11.6 billion—85 percent of the overall increase. Affiliates with UBO's in Switzerland—particularly insurance affiliates—accounted for $5.9 billion, or more than one-half, of the increase for Europe; the remainder was concentrated among affiliates with UBO's in Germany, Sweden, and France.
Sales by affiliates with UBO's in Canada increased $4.2 billion; more than three-fourths of this increase was by affiliates whose primary industry is in "services." Sales by affiliates with UBO's in Latin America and Other Western Hemisphere increased $0.2 billion. In contrast, sales by affiliates with UBO's in Asia and Pacific decreased $2.2 billion; the decrease was more than accounted for by Japan.
By industry, sales by affiliates in insurance increased $8.6 billion—nearly two-thirds of the total increase. Property and casualty insurers with UBO's in Switzerland accounted for most of the increase in insurance. Sales by affiliates in "services" were up $3.5 billion; within "services," the largest increases were in motion pictures and hotels. Sales by affiliates in wholesale trade, real estate, and petroleum decreased.
1. These data are limited to nonbank affiliates because the surveys used to collect the data do not cover banking affiliates. The data exclude minority-owned affiliates because data on sales of services by foreign affiliates are collected only for affiliates that are majority owned by U.S. direct investors. However, the exclusion of minority-owned affiliates may also be preferred conceptually. Unlike majority-owned affiliates, minority-owned affiliates are not are unambiguously under foreign control; a direct investor may own as little as 10 percent of an affiliate, and the principal interest in the affiliate's sales may lie with local investors.
2. See tables 1 and 3 in the quarterly article on the U.S. international transactions in the January, April, July, and October issues of the SURVEY OF CURRENT BUSINESS. In table 1, cross-border exports of private services are presented in lines 5–9, and cross-border imports, in lines 19–23. In table 3, additional detail is provided.
3. See "U.S. Multinational Companies: Operations in 1995," in this issue and "Foreign Direct Investment in the United States: New Investment in 1996 and Affiliate Operations in 1995," SURVEY 77 (June 1997): 42–69.
4. The term "affiliated" refers to a direct investment relationship in which a business enterprise located in one country is directly or indirectly owned or controlled by an investor in another country to the extent of 10 percent or more of its voting stock for an incorporated business, or an equivalent interest for an unincorporated business.
5. By balance-of-payments-accounting convention, the importer assumes ownership of the goods and bears all subsequent costs of transportation when the goods cross the border of the exporting country. Thus, receipts of U.S. carriers for transporting U.S. imports are excluded from U.S. transportation receipts because by this convention, they represent transactions between U.S. importers and U.S. vessel and airline operators. Similarly, payments to foreign carriers for transporting U.S. exports are excluded from U.S. payments because they represent transactions between foreign importers and foreign carriers.
6. In this section, sales of services are defined as sales characteristic of establishments classified in the industries listed in the footnote to table 8.
7. The UBO of a U.S. affiliate is that person (in the broad legal sense, including a company), proceeding up the affiliate's ownership chain and beginning with and including the foreign parent, that is not owned more than 50 percent by another person. The UBO ultimately owns or controls the affiliate and derives the benefits associated with ownership or control. Unlike the foreign parent, the UBO of a U.S. affiliate may be located in the United States.
8. In the SIC, the "services" division includes a variety of business and personal services industries (see the group "services" in tables 10 and 11) but excludes several industries—such as finance, insurance, transportation, and communication—that also are considered as services producing in disaggregating total sales between goods and services.
9. For additional information about U.S. direct investment abroad in 1995, see "Direct Investment Positions on a Historical-Cost Basis, Country and Industry Detail for 1995 and Changes in Geographic Composition Since 1982," SURVEY 76 (July 1996): 45–55, and "U.S. Multinational Companies: Operations in 1995" in this issue.
