Data from the Bureau of Economic Analysis (BEA) show that the United States has historically maintained a trade surplus in private services. So what types of firms are involved in this kind of trade abroad? Thanks to a new BEA study we have a better understanding of the kinds of American companies that export and import services.
Here are some of the key findings:
• Firms in industries typically associated with the production or sales of manufactured goods are significant services traders, accounting for more than 25 percent of exports and imports covered by the study. Trade in services by manufacturers largely consists of transactions related to the use or creation of intellectual property, the provision of headquarters’ management and support services, or the allocation of expenses.
• Multinational companies, especially U.S. parent companies, are important services traders, accounting for more than 80 percent of trade in services with both affiliated (their own foreign branches) and unaffiliated parties. U.S. parents tend to have larger transactions, trade with more countries, and trade more service types as compared to U.S. affiliates of foreign parents and non-multinationals.
• Business, professional, and technical services, especially research and development, testing services, and management and consulting services, accounted for more than one third of trade by both U.S. parents and U.S. affiliates.
• Many small firms engage in services trade, but large firms dominate the value of trade.
• The trade in services of multinational companies is dominated by transactions with their affiliated parties. This is especially true for business, professional, and technical services, and royalties and license fees. Financial services trade, such as brokerage and advisory and management services, is primarily with unaffiliated parties. Those findings are based on a new data set that combines data from surveys on cross-border trade in services with data on the operations of multinational companies.
In 2008, trade in services included in the study—financial services; insurance; royalties and license fees; telecommunications; and business, professional, and technical services (excluding medical services)—totaled $302.3 billion in exports and $195.6 billion in imports, resulting in a surplus on trade of $106.7 billion. These services accounted for more than half of total private services exports and imports, and nearly three-quarters of the $148.3 billion U.S. surplus on private services trade in 2008. To learn more about the characteristics of U.S. exporters and importers of services, read the full article.