Int'l Accounts - International Trade

The United States and the European Union are the foremost trading partners in the world, with total bilateral current-account transactions exceeding $1.8 trillion in 2017, as reported by the U.S. Bureau of Economic Analysis (BEA) and the Statistical Office of the European Union (Eurostat). In 2017, the 28 Member States of the European Union accounted for more than 26 percent of U.S. current-account transactions, while the United States accounted for more than 23 percent of EU current-account transactions with countries outside the EU (extra–EU). The current account, a major component of a country’s balance of payments accounts, shows economic transactions of an economy with the rest of the world and provides valuable information about how economies are intertwined globally. Persistent bilateral asymmetries—differences in the statistics reported by the United States and the EU Member States—have led to questions about the interpretation of the statistics by data users. A reduction in these asymmetries would be a major step towards increasing confidence in the statistics. This paper presents an overview of findings on asymmetries in current-account statistics for the EU and individual Member States as reported by Eurostat, and for the United States as reported by BEA. A quantitative analysis of the largest asymmetries in these accounts is accompanied by a discussion of the different concepts and methods underlying the EU and U.S. statistics that help explain the causes of these asymmetries. Current-account transactions are compiled and presented in the balance of payments framework based on conceptual and presentational guidelines promulgated by the International Monetary Fund (IMF) in Balance of Payments and International Investment Position Manual, 6th edition (hereafter cited as “BPM6”). Standard presentations of the statistics recommended in BPM6 facilitate comparisons of the current-account statistics published by different countries. This paper focuses on the components with the largest asymmetries, trade in services and cross-border primary income flows, about which there is little documentation in international literature as to the underlying reasons for the asymmetries. The analysis of asymmetries is based on a comparison of the values reported by two countries for the same set of bilateral trade transactions.

The internationally agreed guidelines for national economic accounts, System of National Accounts 2008 (hereafter referred to as SNA 2008) (United Nations Statistics Division 2008), explicitly recommend that illegal market activity should be included in the measured economy. This recommendation has not yet been implemented by the U.S. Bureau of Economic Analysis (BEA) because of challenges inherent in identifying suitable source data and differences in conceptual traditions. This paper explores how tracking illegal activity in the U.S. national economic accounts might impact nominal Gross Domestic Product (GDP), real GDP, productivity, and other economic statistics. Nominal GDP rises in 2017 by more than 1 percent when illegal activity is tracked in the U.S. National Income and Product Accounts (NIPAs). By category, illegal drugs add $108 billion to measured nominal GDP in 2017, illegal prostitution adds $10 billion, illegal gambling adds $4 billion, and theft from businesses adds $109 billion. Real GDP and productivity growth also change. Real illegal output grew faster than overall GDP during the 1970s and post–2008. As a result, tracking illegal activity ameliorates both the 1970s economic slowdown and the post–2008 economic slowdown considerably.

The European Union (EU) and the United States are the biggest economic partners in international trade in services in the world, with total bilateral trade in 2015 exceeding EUR 400 billion according to the data reported by Eurostat. The United States accounted for close to 30 percent of total Extra-EU trade in services, while for the United States the share of the EU in total trade in services was just over 30 percent. Persistent bilateral asymmetries in trade in services remain, however, a substantial issue and their reduction should lead to improved data quality and increased usefulness of data for users.

This document presents an overview of findings on asymmetries for international trade in services data for the EU-28 and its Member States with the United States, as collected by Eurostat and the U.S. Bureau of Economic Analysis (BEA). Quantitative analysis of the data is accompanied by a discussion of identified differences in applied methodologies that might have contributed to the asymmetries. Data used in the analysis are compiled in the framework of the balance of payments and are based on the methodology in accordance with the IMF Balance of Payments and International Investment Position Manual, 6th edition. Due to availability of bilateral figures and better comparability of more aggregated items, the analysis is limited to total services and 10 services components. Data for manufacturing services on physical inputs owned by others (processing abroad) and personal, cultural and recreational services were not available for the United States because BEA does not estimate these services categories. However, values for these items vis-à-vis the United States as estimated by Eurostat have not exceeded 2 percent of total services flows, so they should not significantly impact the overall picture. The asymmetries in services are relatively high compared with asymmetries for trade in goods, being particularly substantial for financial services and other business services. The analysis of the reasons for asymmetries should therefore primarily focus on these service items.