Manual on Statistics of International Trade in Services

partner basis, at least at the level of the 11 major 
components of BPM5 (see para. 2.52 above). 
4.  Data for total services transactions should be 
compiled separately for transactions with related 
and with unrelated parties. 
5.  Each EBOPS component should be allocated either 
to one dominant mode or, where there is no single 
dominant mode, to the most significant modes of 
supply. This is accorded a low priority. 
 

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54 
IV. 
Foreign affiliates trade in services statistics
A. Introduction 
4.1. For both goods and services, international sales may 
be effected not only through the transactions between 
residents and non-residents that are recorded in balance 
of payments accounts as specified by BPM5 (and in the 
1993 SNA’s external account for goods and services), 
but also through direct investment enterprises or 
affiliates established in the countries of foreign 
customers.
59
  For services, this method of serving 
foreign markets is particularly important because it is 
often the only method that permits the close and 
continuing contact between service providers and their 
customers necessary to compete effectively with 
indigenous firms.  
4.2. In the present Manual, statistics describing the 
overall operations of affiliates are termed “foreign 
affiliates trade in services statistics”, or “FATS 
statistics”.  Consonant with the Manual’s theme and 
purpose, its recommendations for compiling these 
statistics have been designed and presented with services 
in mind.  However, except for the particular activity and 
product breakdowns suggested, most of the 
recommendations are equally applicable to goods or 
services and may be considered in developing a 
generalized framework for statistics on affiliate 
operations.  
4.3. The most pertinent information on the operations of 
affiliates may be considered to be that on their sales.  
Services delivered through transactions between 
residents and non-residents are measured in terms of 
                                                       
 
59
 Here, “affiliate” is used synonymously with “direct 
investment enterprise”, which, following BPM5, is an 
incorporated or unincorporated enterprise in which a direct 
investor who is resident in another economy owns 10 per cent 
or more of the ordinary shares or voting power (for an 
incorporated enterprise) or the equivalent (for an 
unincorporated enterprise).  As will be explained below, most 
of the present chapter is concerned with only those affiliates 
in which the direct investor has a majority ownership interest.  
These may be termed “majority-owned affiliates”; however, 
in what follows, these affiliates may––for ease in exposition––
also be referred to simply as “affiliates”, where the limitation 
to the majority-owned subset of affiliates is clear within the 
context of the discussion. 
sales (apart from any services that may have been 
donated), and a comparable measure must be available 
for affiliates in order to measure services delivered 
through them on a parallel basis.  Although, as discussed 
below, the present Manual recommends a broader 
programme of data collection, it recognizes that some 
countries may, at least initially, limit themselves to the 
collection of statistics on sales because these most 
directly support the monitoring of commitments under 
GATS. 
4.4. While sales may thus be considered to be the most 
important information to collect for FATS, additional 
information is generally required for an adequate 
assessment of the economic effects of affiliate 
operations and of measures to liberalize the delivery of 
services through the commercial presence mode of 
supply.  For example, information on value added allows 
output originating within the affiliate to be distinguished 
from output originating in the firms that supply it with 
intermediate inputs.  Similarly, information on 
employment is required to assess the impact of affiliates 
on labour markets. Accordingly, the Manual 
recommends multiple indicators, or variables, for FATS, 
rather than only sales. 
4.5. FATS statistics may be developed for both foreign-
owned affiliates in the compiling economy (inward 
FATS) and foreign affiliates of the compiling economy 
(outward FATS).  Because, under GATS, countries 
make commitments with respect to the supply of 
services in their own economies rather than services they 
supply abroad, the most directly related data with respect 
to commercial presence may be those on the activities of 
foreign-owned affiliates in the domestic economy. 
 
Nonetheless, the reason countries make these 
commitments is to secure commitments on the part of 
other countries, with a view to enhancing the ability of 
their firms to supply services in those countries.  For 
commercial presence, this supply is tracked by data on 
outward FATS, which therefore must also be considered 
relevant. 
4.6. In addition to being more directly related to the 
compiling country’s own commitments under GATS, 
data on inward FATS are often easier to collect than data 
on outward FATS.  The entities covered are located in 

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55 
the compiling country, and data for them would 
ordinarily already be included in the country’s domestic 
enterprise statistics.  Thus, compiling data for them may 
involve only identifying the foreign-owned subset of 
domestically located firms and tabulating existing data 
for them.  For outward FATS, in contrast, the entities 
covered are located outside the compiling economy and 
generally would not be covered by existing data. 
 
Furthermore, there may be legal or practical obstacles to 
surveying them directly; generally, the data would have 
to be collected from resident direct investors rather than 
from the foreign affiliates themselves.  The present 
Manual recognizes that for these reasons, many 
countries may initially limit their FATS statistics to 
those related to inward investment.  Nonetheless, it notes 
that some countries have successfully compiled data for 
outward FATS as well. 
4.7. 
Because one country’s inward FATS statistics 
provide information on the outward FATS of partner 
countries, exchanges of information among partner 
countries have the potential to provide countries that do 
not collect data on outward FATS with information on 
the overseas activities of their own multinational 
companies.  For such data to be useful, it is important 
that they be compiled using standardized definitions and 
methodologies, and in this regard the Manual can play 
an important role in promoting comparability.  In 
addition, international organizations can, by republishing 
member country data, serve as clearing houses for such 
information. The value of such clearing houses can be 
considerable, inasmuch as they can help to achieve 
consistency in presentation and greatly reduce the 
number of contacts required to assemble the data.  
4.8. Foreign direct investment financial transactions and 
related investment position (stock) and income measures 
are not, strictly speaking, FATS variables because they 
do not pertain to the overall operations of foreign 
affiliates but relate only to transactions between and 
positions with direct investors and their foreign 
affiliates.  In addition, FDI measures are ordinarily 
compiled with respect to transactions and positions with 
all foreign affiliates, whereas FATS variables are, as 
discussed in paragraphs 4.17-4.24 below, to be compiled 
only with respect to affiliates in which the direct investor 
holds a majority interest. 
4.9. Notwithstanding those differences, FDI statistics 
should be considered an important adjunct to FATS 
statistics. Countries that cannot implement the 
compilation of FATS statistics immediately may find 
that FDI statistics can provide an alternative interim 
indicator of commercial presence.  In addition, FDI 
statistics can be used in conjunction with FATS statistics 
to indicate the extent to which the operations of affiliates 
were financed with funds from direct investors, as well 
as the extent to which the income generated by affiliates 
accrues to direct investors. The present Manual 
recommends that FDI statistics be compiled as specified 
by BPM5 and BD3.  For convenience, those guidelines 
are summarized in box 7.