Analysing the Trade in Services Data Draft analytical (annex 7)

1. Analysing the Trade in Services DataDraft analytical (annex 7) OECD Statistics Directorate

2. Introduction • In September 2007 at the TFSITS meeting in Paris OECD presented paper setting out draft proposals for an analytical annex. • It addressed six themes highlighted by the responses to the world wide consultation and slightly amended at the Madrid (January) 2007 and Vienna (March) 2008 meetings. • Purpose of the annex: to provide a toolbox to make better use of trade in services data, which would ultimately help to improve the data quality.

3. Worldwide consultation priority ranking • 1) Combining balance of payments data, foreign affiliates trade data, and mode 4 data for analysis; • 2) addressing linkages between services trade and production data; • 3) how to link trade in services data with merchandise trade statistics showing overlaps and gaps; • 4) bilateral asymmetries in trade in services data applying the data to models of world trade flows; • 5) analysis on a sectoral basis of trade in particular services – such as health services; • 6) identification of services for which a country has a comparative advantage in trade.

4. Theme 1. Combining balance of payments data, foreign affiliates trade data, and mode 4 data for analysis; • A text taking a broder view on international delivery of services (settingBOP,FATS and mode 4 in same picture) and giving an example on software services was was provided from the BEA. • Diagram illustrating the BEA example on software services.

5. Theme 1. Diagram on modes of supply (software example)

6. Theme 2) addressing linkages between services trade and production data; • A list of trade indicators • Basic • Export propensity. • Import penetration • Broader view of services delivered • Outward services sales of FA + Services exports (ODS) • Inward services sales of FA + Services imports. (IDS) • A table produced by statistics Canada where trade is broken down by industry.

7. Theme 2 Outward Delivery of Services (ODS).   • Where • ODS= Total exports of services and outward foreign affiliates sales of services . • Xs= BoP Total services exports • SFos= Outward foreign affiliates sales of services excluding Wholesale, retail trade and repairs (ISIC G) and construction (ISIC F) • XFos=FATS outward exports of services to the country of the parent or to a third country.

8. Theme 2 Outward Delivery of Services divided by GDP (ODS’). If aim of the analysis is to look at the affects of trade on the home economy (benefits of trade), smaller weight should be applied on FA sales information compared to Exports information as in term of primary flows: Exports: all gains from exports accrues to home economy Foreign affiliates outward: Only a share of the profit would accrues to the domestically owned parent company. W=weight (rate of return of outward DI ?) applied on the value of services local sales of foreign affiliates where 0<w<1.

9. Theme 2 Outward delivery of services All Export money accrues to home economy Exports of servicesXs Trade data Local sales SFOs-XFOs Affiliates of A Share (w) of profit accrues to home economy Production data Exports by FAsto parent XFOs

10. Theme 2 Inward Delivery of Service indicator (IDS). • Adds the value of services imports and inward foreign affiliates local sales of services. • IDS = total imports of services and inward foreign affiliates sales of services • Ms = BoP Total services imports • SFis = Inward foreign affiliates sales of services excluding Wholesales, retail sales and repairs (ISIC section G) and construction (ISIC section F) • XFis = Exports of services of inward foreign affiliates to the country of the parent or a third country.

11. Theme 2 Inward Delivery of Services divided by Domestic Demand (IDS’). • If aim of the analysis is to look at the effects of trade on the home economy (cost of trade), equal weight should not be applied on imports and FA sales as in term of primary flows: • Imports: all expenses of imports accrue to foreign economies • Foreign affiliates inward sales: Only a share of profit would accrue to the foreign owned parent company. • W=weight (rate of return of inward DI ?) applied on the value of services local sales of foreign affiliates where 0<w<1.

12. Theme 2 Inward delivery of services All Import money leaves the home economy. Imports of servicesMs Trade data Affiliates Only a share (w) of profits leaves the home economy Local sales SFIs-XFIs Exports by FAsXFIs Production data

13. Theme 2

14. Theme 3. Uses of bilateral flow data including asymmetries • Mirror data can help in checking whether the flows reported by each reporting country are reflected by its partner country. • To check whether the reported flows are the same or compatible. • To detect systematic differences in the reporting process. • To detect differences in definitions from one country to the other. • The annex exposes the different uses of bilateral data, with definitions, examples, asymmetries causes. • Reference on internet to work done by Eurostat on Asymmetries in EU Current Account data. http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-DB-06-002/EN/KS-DB-06-002-EN.PDF

15. Theme 3. Coverage of reported exports in partner country data and estimates based on mirror statistics

16. Theme 4. Identification of services for which a country has a comparative advantage in trade. • Export Dynamics Compare average growth for specific services among countries (explanation Formula) source ECB. • Balassa index of Revealed Comparative Advantage (RCA) measures the intensity of trade specialization of a country within a region or the world. [Explanation , definition, formula, example of the calculation of the Balassa index for i) developed country ii) developing country]

17. Theme 5. Market access • Why is it of interest • There is a growing interest in identifying Barriers to service trade and to find out what gains could be achieved by removing those barriers. • What does the annex say Work is being undertaken to set up services restrictiveness indexes in major organisations (OECD). The Productivity Commission and the Australian National University have been measuring restrictions on trade in services for a number of economies in Europe, Asia, and North and South America.

18. Theme 6. Example on global outsourcing • Herfindahl index of geographical concentration (shows geographical diversification of export) (Formula, explanations, calculations)

19. Suggestions ? • Do you find analytical themes proposed in the annex useful? • Do you have any other comments or suggestions regarding the content of the proposed analytical annex? • Do you agree that a new analytical annex along the lines of the draft provided should be included in MSITS to assist users in adding value to the basic statistics?