Maria Borga

Ralph H. Kozlow

English

Research Papers in Economics

 
 
 
 
 
 
 
 
 
 
 
 
“Offshoring” and the U.S. Balance of Payments 
Ralph H. Kozlow and Maria Borga 
WP2004-05 
July 16, 2004 
 
 
 
 
 
 
 
Presented at: 
 
The Brookings Institution 
June 22, 2004 
 
 
 
 
 
 
 
 
The views expressed in this paper are solely those of the author and  
not necessarily those of the U.S. Bureau of Economic Analysis  
or the U.S. Department of Commerce. “Offshoring” and the U.S. Balance of 
Payments
Ralph Kozlow
Associate Director for International Economics
Maria Borga
Economist, International Investment Division
Services Offshoring: What Do the Data Tell Us?
The Brookings Institution
June 22, 2004
Views expressed in this presentation are those of the presenters and do not necessarily reflect those of the Bureau of Economic Analysis.2
www.bea.gov
Major Questions
• How much has the U.S. economy’s reliance on 
imports increased?  Goods?  Services? 
• What do the data tell us about the growth of trade 
in services?
• Do BEA’s estimates undercount trade in services?
– Why was there zero growth in real imports of services 
between 2002 to 2003 in the NIPA’s?
– Why are services imports from India so small?
– What is the impact on GDP and productivity if the data 
on imports of services are substantially wrong?
– How is BEA working to improve its estimates?3
Imports of Goods & Services in U.S. 
Gross Domestic Purchases, 1977-2003
0
10
20
30
40
50
60
70
80
90
100
1977 1982 1987 1992 1997 2002
P
e
r
c
e
n
t4
www.bea.gov
Components of Trade in Services
• Seven major categories
• Several of these categories have little 
relation to offshoring
• Other private services (OPS) are most 
associated with offshoring
• OPS’ share of both services imports and 
exports has increased5
www.bea.gov
Growth in Imports by Type, 1992-2003
 Rate  (%) 
Total   7.1 
More slowly 
  Direct defense expenditures  5.5 
  Other government  2.6 
  Travel  3.5 
  Passenger fares  6.3 
  Other transportation  5.9 
More rapidly 
  Royalties & license fees  13.0 
  OPS  11.6 
 6
www.bea.gov
Share in Imports, 1992 and 2003 
1992 2003
Direct defense expenditures 12 10
Other government 2 1
Travel 32 22
Passenger fares 9 8
Other transportation 20 17
Royalties & license fees 4 8
OPS 21 33
Percent7
Growth in OPS Imports Has Continued
• Recent growth in OPS obscured by fall in travel and 
passenger fares
0
50
100
150
200
250
300
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Other private services
Travel & passenger fares
Total services
Billions of $8
www.bea.gov
Growth in Exports by Type, 1992-2003
 Rate 
(%) 
Total 5.1 
More slowly 
  Transfers under U.S. military agency sales contracts  0.1 
  Other government  -0.3 
  Travel  1.5 
  Passenger fares  -0.5 
  Other transportation  3.6 
More rapidly 
  Royalties & license fees  7.8 
  OPS  9.2 
 9
Trade Balances
0
10
20
30
40
50
60
70
80
90
100
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Surplus on services
Surplus on OPS
Billions of $10
www.bea.gov
Business, Professional, and Technical 
Services
• Some services within OPS tend to be associated 
with offshoring:
– Business, professional, and technical services 
(BPT) generally are, but
– Insurance is less so
• Much import growth has occurred within MNC’s
• Estimates of trade in BPT services between 
affiliated parties only available separately from 
1997 through 200211
Business, Professional, and Technical 
Services Imports
0
5
10
15
20
25
30
35
40
1992 1994 1996 1998 2000 2002
Billions of dollars
Affiliated imports
Unaffiliated imports12
www.bea.gov
OPS Imports from Asia & Pacific, 
1992-2002
• Slow growth in U.S. imports from Japan masked 
faster growth in several other Asian countries:
Rate (%) Imports in 2002 ($)
Japan 4.6 4.2 B
Singapore 21.9 0.7 B
India 18.7 0.7 B
Hong Kong 16.6 1.7 B
China 15.0 0.4 B
Taiwan 4.1 0.3 B13
OPS Imports from Asia & Pacific
0
1
2
3
4
5
6
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Australia
Japan
Other Asia & Pacific
Billions of $14
www.bea.gov
Comparisons
• Comparisons with private sector data 
difficult
–E-tailing
–Fragmentation of delivery channels
• Comparisons with other countries difficult
–Different methodologies
–Different definitions15
Imports of Services from India
Total Services (billions of dollars) 1997 1998 1999 2000 2001 2002
Exports to world reported by India 9.1 11.7 14.5 19.2 20.9 24.9
Imports from India reported by:
United States 1.2 1.5 1.5 1.9 1.8 1.7
EU 2.2 2.4 2.5 2.3 2.4 2.3
Japan 0.5 0.4 0.4 0.3
Canada 0.1 0.1 0.1 0.1 0.2
Sum of reported imports 3.6 4.1 4.6 4.7 4.7 4.3
Percentage of Indian exports 
unaccounted for by above countries 61 65 68 76 77 83
Source: Organisation for Economic Co-Operation and Development, 2004, 
“Globalisation of the ICT Sector,” Information Technology Outlook 2004, Paris, Draft.16
www.bea.gov
Impact on GDP and Productivity
• If actual growth in services imports was 50 percent 
faster between 1992 and 2003
– Real GDP growth: .0.1 percentage point lower
– Productivity growth: . 0.1 percentage point 
lower
• Evidence that exports are also understated17
www.bea.gov
Data Sources
• Trade in goods data collected by Census 
Bureau and U.S. Customs and Border 
Protection
• Most trade in services data collected by 
BEA
• For most services, data collected by 
mandatory surveys
• Some estimates rely on data from other 
sources18
www.bea.gov
Data: Strengths
• U.S. utilizes mandatory annual and quarterly 
surveys
• Other countries often use a mix of
–Voluntary surveys
–Information from bank settlement systems19
www.bea.gov
Data: Challenges
• Accounting for low value transactions and 
transactors
• Difficult to identify services importers
• Can be difficult to measure services that are 
just starting to be traded20
www.bea.gov
Recent Improvements
• Pilot quarterly surveys of large and volatile 
categories
• Performing research into possible causes of
–Measurement error in private services 
data
–Measurement error in goods trade data21
www.bea.gov
Conclusions
• Importance of imports in the U.S. economy 
has been growing
• Bilateral and private sector comparisons are 
difficult
• A large error in growth of services imports 
has a small impact on growth in GDP and 
productivity 22
www.bea.gov
Conclusions (continued)
• U.S. has among the best data on trade in 
services in the world
• BEA is working to improve its estimates of 
trade in services

"Offshoring" and the U.s. Balance of Payments

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"Offshoring" and the U.s. Balance of Payments

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