Concentration in Trade in Services Between Enterprises of the Same Group 3rd Meeting of the WPTGS OECD, Paris October 4-6, 2010 Fernando Lemos

Introduction In the 2nd WPTGS Meeting, in 2009, I delivered the presentation Trade in Services Between Enterprises of the Same Group which demonstrated that, in the Brazilian balance of payments, “a very significant share of services is rendered between enterprises of the same group (intra-group), linked to a same transnational corporation (TNC).”

Introduction The current presentation uses the same data set as the 2009 presentation to show that intra-group transactions, which represent a significant share of total trade in services, are carried out in their majority by a small share of companies.

Methodology The assessment was conducted for selected services in which intra-group trade is more frequently encountered. It consisted of the analysis of all transactions of these services between 2006 to 2008, equal to or above US$100,000, that singled out intra-group transactions.

Methodology In the analysis, intragroup transactions amounted to approximately 37% of all expenditures and 55% of all revenues in the >=US$ 100.000 transactions. The 20%-80% rule of thumb was used as a paramater to analyse the concentration in terms of the share of companies responsible for the share of transactions, measured in terms of values.

Findings A series of graphs is presented showing the degree of concentration of transactions. Regardless of the “size” or direction – outward or inward - of the service, in all but one of the services shown the 20% share of companies exceeded 80% of the total value of transactions.

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Findings For some services, but especially Architecture, Engineering and Other Technical Services, revenues are suprisingly high. But, as pointed out in last years’ presentation, they seem to represent services rendered by resident affiliates on behalf of their non-resident parent companies.

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Final remarks These data raise a few questions, among which: Are the major forces driving the trade in services similar to those driving trade in goods? Should domestic policies related to trade in services and international trade negotiations take into account the fact that a “handful” of TNCs conduct a significant share of the international trade? How trustworthy are the intra-group data? How can they be checked for accuracy?

Thank you for your attention.