The recommendations of the revised Manual on Statistics of International Trade in Services, (MSITS 2010). OECD Statistics Directorate Measuring Global Trade – Do we have the right numbers? 2-4 February 2011, Geneva, Switzerland.

The recommendations of MSITS 2010: Outline General overview and structure of the Manual. The phased implementation of MSITS Summary of core and other recommendations regarding “ Services Transactions between residents and non residents.” (Chapter 3) Summary of core and other recommendations regarding “Foreign Affiliates Statistics and the international supply of services”. (Chapter 4) Summary of recommendations regarding “statistics on the international supply of services by modes”. (Chapter 5) Compilation Guidance

The Task Force on Statistics of International Trade in Services (TFSITS). European Commission International Monetary Fund Organisation for Economic Co-operation and Development United Nations United Nations Conference on Trade and Development World Tourism Organization World Trade Organization

General overview of MSITS 2010 Manual on Statistics of International Trade in Services (MSITS) first published in Aim : provide clearer, more detailed and comprehensive guidance for the measurement of international supply of service in a broad sense (needs of GATS). MSITS 2010 adopted by UNSC in February 2010 –Edition being finalised at UNSD.

Outline of the Manual 1/2 Chapter I –General introduction and foundations Chapter II – Conceptual framework Chapter III– Services transactions between residents and non- residents Chapter IV– Foreign affiliates statistics Chapter V– Modes of supply NEW

Outline of the Manual 2/2 Annex I: 2010 Extended Balance of Payments Services Classification (EBOPS 2010). Annex II: ISIC Rev. 4 Categories for Foreign Affiliates in services (ICFA Rev.1) Annex III: Extract from the General Agreement on Trade in Services Annex IV: Services Sectoral Classification List – MTN.GNS/W/120 Annex V: Clarifying the Relationship Between MSITS 2010 And Tourism Statistics International Recommendations

Online annexes (not finalised) 1.EBOPS-CPC Ver.2; EBOPS 2010-W/120 correspondence tables. 2. ICFA-EBOPS correspondance tables 3. EBOPS-BPM6 correspondence table 4. Relation between system of health accounts and MSITS 2010.

Conceptual frameworks 1/2 Constructed, with some elaboration on two basic frameworks: 1.for trade between resident and non- residents: IMF BPM6 Chapter 10 on services which was elaborated in close cooperation with the TFSITS. In MSITS 2010, same information as in BPM6 chapter 10, but more detailed.

Conceptual framework 2/2 2. For foreign affiliates statistics: Concepts and definitions are consistent with  SNA 2008,  Handbook on Economic Globalisation Indicators (HEGI),  The OECD Benchmark Definition of Foreign Direct Investment 4th edition (BD4)  Regulation (EC) No 716/2007 of the European Parliament and of the Council on community statistics on the structure and activity of foreign affiliates.

A phased implementation 1/2. MSITS 2010 recognises many countries will view the full implementation of recommendations to be long term goal. Active cooperation among data compiling institutions at the national level is necessary to integrate the various elements of trade in services from BoP, foreign direct investment and foreign affiliates in one framework.

A phased implementation 2/2 A phased implementation is therefore recommended. –To be tackled first : the core elements to be given particular priority, –Other elements should be implemented incrementally thereafter.  Metadata on data coverage and definitions are expected to be compiled by countries.

The MSITS 2010 recommendations

MSITS Chapter 3 Services transactions between residents and non residents.

14 The Balance of Payments Where are the services transactions in the BOP? BOP Current account Capital & financial account Goods Services Primary Income Secondary Income 12 components

15 BPM6 Main Services Components 1.Manufacturing services on physical inputs owned by others 2.Maintenance and repair services n.i.e. 3.Transportation 4.Travel 5.Construction 6.Insurance and pension services 7. Financial services 8. Charges for the use of intellectual property n.i.e. 9. Telecommunications, computer and information services 10. Other business services 11. Personal, cultural and recreational services 12. Government goods and services n.i.e.

Main conceptual changes In an attempt to better capture globalisation and its statistical implications, there is a stricter application of the change of ownership principle both in revised SNA and BoP Manuals.

Major challenges New treatment of goods for processing mean that statisticians have a major communication challenge ahead as this change has as a consequence important changes in trade balances as in the case of countries where processing is an important activity. Also treatment of FISIM and Insurance services are difficult issues which have to be dealt with practical country cases in the future MSITS 2010 (online) Compilation Guide.

Summary of core recommendations 1.BPM6 recommendations on the principles of recording (residence valuation, time of recording, currency of recording and conversion) should be followed. 2.EBOPS 2010: first part : compiling BoP info following EBOPS 2010 starting with subcomponents of major economic importance for compiling country. 3.By partner country in priority for 12 main components

Other recommendations 4. EBOPS 2010 second part – completion: to the extent relevant to the compiling economy, including the supplementary items. 5. Total services transactions compiled separately for transaction with related and unrelated parties. 6. Each EBOPS components should be allocated either to one dominant mode, or whether there is no single dominant mode, the most significant mode of supply.

MSITS Chapter 4 Foreign Affiliates Statistics and the international supply of services

1. Target population Inward and outward FATS compiled for foreign-controlled subset of foreign affiliates. Control defined in Framework for Direct Investment Relationships (FDIR) and BPM6: Control deemed to exist if there is majority ownership (i.e. control of more than 50%) of the voting power at each stage of ownership chain.

Core recommendations for FATS. Collect complete statistics on Foreign Direct Investment (FDI) : Flows, income and stocks; Broken down by industry. Partner detail should be reported in the aggregate and for major industries following ISIC rev.4.  For those countries that must delay the implementation of FATS, FDI statistics provide useful and complementary information on commercial presence

Core recommendations on basic variables. FATS (inward and outward) variables to include at least the following basic measures of foreign affiliate activity:Sales (or turnover) and/or outputEmploymentValue addedExports and imports of goods and servicesNumber of enterprises Inward information is usually easier information to collect.

Variables: further details Additional measures are suggested for countries wishing to expand data collection of FATS beyond the core set. Assets Compensation of employees Net worth Net operating surplus Gross fixed capital formation Taxes on income Research and development expenditures Purchase of goods and services.

FATS to be compiled on an activity basis… but also by products The core recommendation is to compile FATS statistics on an activity basis following the Industry Categories for Affiliates in Services (ICFA rev.1) as provided by annex II. As long term goal, compilation of data on a product basis is recommended for those variables that lend themselves to this basis of attribution ( sales (turnover) and/or output, exports and imports).

2. FATS variables collected for all foreign affiliates FATS variables should be compiled for all foreign affiliates, not only those affiliates in services. However, the activity classification to be used for reporting to international organizations provides more detail for services than for goods.

Geographical attribution For inward FATS statistics, the first priority for geographical attribution should be the country of the ultimate controlling institutional unit. However, to facilitate linkages with FDI data, countries are also encouraged to provide some data in which attribution is based on the country of the first foreign parent. Outward FATS should be attributed based on the country of location of the affiliate whose operations are being described.

Collecting FATS information A variety of sources and methods may be used to collect and compile FATS. Separate surveys may be conducted or links may be established with domestic enterprise statistics that have already been collected. In either case, there are likely to be links with existing FDI data.

Statistics on the international supply of services by mode

A statistical synthetic view of modes of supply

Information Needs 1) Value of the international supply of services 2) Additional indicators (e.g. FDI, number (stocks and flows) of mode 4 persons)

MSITS Recommendations Allocate the transactions between residents and non residents over the GATS modes of supply. As a starting point, each balance-of-payments services component (broken down according to EBOPS 2010) should be allocated either to one dominant mode or, where there is no single dominant mode, to the most significant mode(s) of supply. As a general rule, FATS sales (turnover) and/or output provide(s) information on Mode 3.

V.2. Simplified allocation of FATS and balance-of- payments to modes of supply (extract) FATS (sales or output) Balance-of-payments trade in services Mode 3 Mode(s) and 4 2 and 4 3 and 4 Manufacturing services on physical inputs owned by others XX Maintenance and repair services n.i.e. XX Transport XX Passenger XX Simplified allocation of FATS and balance-of-payments data to modes of supply a As a general rule, FATS sales (turnover) and/or output provide(s) information on Mode 3. Manufacturing services can be allocated to the predominant mode 2 as property of consumer is moving for the service to be supplied

Other recommendations While trade in distribution services (that is, wholesaling and retailing) is included within the value of goods traded, separate estimation of trade margins would improve the estimation of the supply of services through Mode 1. For services sectors that are important for compiling economies, the practice of separately identifying information on the modes of supply within specific balance-of-payments services items could be developed.

Presence of natural persons (mode 4). Given that the number of persons crossing borders and staying abroad is a particularly important indicator within the context of Mode 4, MSITS 2010 recommends such information be collected following the recommendations of IRTS 2008, Tourism Satellite Account-RMF 2008 and RSIM, Rev.1.

Compilation Guidance Compilation Guidance will be an online living document developed by the TFSITS following a modular approach. It will take into account existing material (IMF CG) which will be extended with country practical experience and country questionnaire examples. Next TF meeting in Luxembourg (28 to 30 March 2011) will discuss the draft outline for the MSITS compilation guide.

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