Item 20a International delivery of services by mode of supply

1. Item 20a International delivery of services by mode of supply Andreas Fuchs and William Cave OECD Statistics Directorate

2. Overview • OECD Statistics working paper on globalisation of services Bensidoun&Ünal-Kesenci 2008 • compared trade in services and FATS for 2000 • outlined a methodology for estimating modes of supply • Rare attempt to look at the two datasets TIS and FATS together • Published and unpublished FATS data supplied by OECD DSTI • OECD TIS data ( no partners) • variable sales or gross output common to trade and FATS • estimates delivery of services by modes 1, 2 and 3

3. Overview continued.. • evolution 2000 to 2005 • Five broad sectors • Up to 20 countries analysed • Foreign service penetration ratio looks at exposure of markets to foreign competition • Basic data presented • Some missing values in time series interpolated • Data quality problems • Conclusions

4. Methodological issues • Used common variable sales/gross output for trade statistics and FATS • FATS represent business and production statistics • Problem of FA distribution sector sales of goods adjusted to gross output using a crude factor 25% • Not clear what FATS data covers for insurance and financial services not much metadata • Computed a simple foreign service penetration ratio (services imports +inward FATS sales)/domestic demand • Similarly for outward delivery of services • FATS sales are not international trade in the SNA sense – does comparison with trade or adding to trade make sense? • FATS sales are in someway related to international trade and the factor of intra-firm trade (complements or substitutes? )

5. Affiliated trade in services • US BEA has shown that a majority of royalties, computer services and other business services trade is between affiliated parties • Important that we know more about such affiliated trade

6. Inward delivery of services • Imports and inward FATS sales of services • Mode 3 dominant in most cases • Relative importance of mode 3 increased 2000-2005 • Japan appears least open and Czech Republic most open to foreign services

7. Inward service supply by mode of supply

8. Average annual growth in inward delivery of services

9. Evolution of relative importance of mode 3 2000-2005

10. Outward delivery of services • Mode 3 dominates for larger countries but less so for smaller ones • Germany “compensate” deficits in trade in services with large “surpluses” in mode 3

11. Conclusions/suggestions • A very interesting exercise to compare FATS and TIS data • Relative importance of mode 3 increased over period • Data shortcomings – e.g.Lack of FATS data and issue of time series, some FATS data on merchandise trade but not on trade in services, poor EBOPS match to industry • Demonstrates the interest in simple allocation of modes • Highlights importance of having more information on intra-firm or affiliated trade • Encourage more countries to produce FATS data and consider links with TIS • Question: Should this work be developed further? • Your comments on the paper are sought