International Transactions

with Services
5th Course 1st part:
a. Measurement;
b. Evolution.

Measuring ITS
BOP

Current account
Goods
Services
Income
Current transfers

FATS
Capital
&financial
account
11 components
Transportation
Travel
Communications
etc.

Measuring ITS - BOP

Commercial services:
1. Transportation

3. Communications services
4. Construction services
5. Insurance services

2. Travel

6. Financial services

3. -10. Other commercial services

7. Computer and information

services
8. Royalties and licence fees

11. Government services

(not in GATS)

9. Other business services

10. Personal, cultural and
recreational services

Measuring ITS - BOP

More detail needed than 11 BPM5 services components
MSITS introduces EBOPS (breakdown of BPM5 services)
Most services delivered under Mode 3 and Mode 4 are
not covered
However, some BOP indicators helpful:
Foreign Direct Investment

Mode 4

Mode 3

Compensation of employees
Workers remittances
Migrant transfers

Measuring ITS - FATS

Guidelines for measuring the activity of foreign affiliates
What are FATS statistics useful for?
Focus on services
measuring Mode 3 (commercial presence),
Help understand the phenomenon of globalization.

What do FATS statistics measure?

A range of indicators on the activity of foreign affiliates

Turnover
Employment
Value-added

Inward and outward FATS

With a particular focus on services

Mode 3 - FDI
FDI: the direct investor makes an international investment to obtain a
lasting interest (existence of a long-term relationship between the direct
investor and the enterprise and a significant degree of influence of the investor
on the management of the enterprise) in an enterprise abroad
Country A
Direct
investor

Country B
Owns >10% shares, voting power or the equivalent

FATS

Direct investment
enterprise

between 10 and 50%

Associate

more than 50%

Subsidiary

wholly or jointly unincorporated enterprise

Branch

individuals
enterprises
associated groups of individuals/enterprises
governments...

Mode 4
Purpose
of stay

Fulfilling a service contract, whether as a service

supplier (self-employed) or as an employee

Duration
of stay

Temporary: Measures regarding citizenship, migration,

residence and permanent employment are not covered

Mode 4 comprises services delivered in the framework of:

service contracts with foreign service suppliers
(the individuals themselves or their employer)
employment contracts
for independent service suppliers it is difficult to establish
borderline between service and employment contract

Measuring ITS
Modes of Supply and Statistical Domains

Trade in services by modes of supply

Source: Karsenty, G. (2002), Trends in Services Trade under GATS recent developments, Symposium on Assessment of Trade in
Services, OMC

Trade in services by modes of supply

Mode of supply

% in overall
transactions

Cross-border transfer

35%

Consumption abroad

10-15%

Commercial presence

50%

Temporary presence

1-2%

Sursa: Karsenty, G. (2002), Trends in Services Trade under GATS recent developments, Symposium on Assessment of Trade in
Services, OMC

ITS Evolution
World merchandise exports stagnated in value terms in 2012, while exports
of commercial services increased by 2 %

Internationalization of
services
5th Course 2nd part

PREREQUISITES:
enhanced degree of tradability of services:
services revolution growing expansion
of information-intensive services;
technological innovation - improved the
capacity of services to be embodied in
goods traded internationally;
electronic networks expansion
increasing internationalization of services.

PREREQUISITES:
barriers to trade and FDI in services:
Uruguay Round lower barriers to
international transactions with services;
globalization process increasing
opportunities for marketing services
internationally
relatively slow rhythm of the
internationalization process, despite the
improved commercial capabilities.

Approaches to internationalizing
services:

1. Internationalization of
services;
2. Internationalization
strategies for service
companies.

Internationalization of services:

1) international trade (export);

M1, M2, M4
2) some degree of commercial
presence (indirect and direct
entry).
M3

Typology of international services trade:

P and C do not move for the supply of the

service long distance supply;
What facilitates the identification of the
activity that crosses the border is not the
person, nor the activity itself for which
he/she is traveling, but the support (R = C +
transportation mean);
C moves to the country p for the supply of
services by P;
P moves towards C to render the service, in
country c;

Typology of commercial presence for services transactions:

Degree of Low degree of property

property and and control over the
control
commercial presence
entity
Degree of
involvement in
local production

High degree of
property and control
over the commercial
presence entity

Small part of the

service produced
locally

(d)

(b)

Majority of the service

produced locally

(c)

(a)

General entry modes for services firms:

client-following mode;
market-seeking mode;
electronic marketing mode

Strategies for internationalizing services firms:

Export strategies:
direct export
systems export

Entry strategies:
direct entry
indirect entry

Electronic strategies
electronic marketing