Manual on Statistics of International Trade in Services

3. Foreign affiliates trade in services statistics 
2.64.  Affiliates are often established abroad to deliver 
services that require close contact between the supplier 
and the consumer. In the present Manual and following 
GATS coverage, domestic sales by foreign affiliates are 
covered by the term “international trade in services”.  
However, because foreign affiliates are resident entities 
in their host country, their sales in these countries are not 
recorded in the balance of payments accounts, which are 
only concerned with transactions between residents and 
non-residents. 
2.65.  FATS statistics have been designed to capture 
such information. In addition, FATS statistics include a 
range of other statistical indicators so as to assess 
diverse aspects of the globalization phenomenon and to 
monitor the commercial presence mode of supply in a 
variety of contexts, such as those relative to trade, 
domestic output and employment. 
(a)  FATS statistics: concepts and classification 
2.66.  FATS statistics measure the commercial presence 
abroad of service suppliers through affiliates in foreign 

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markets, and are therefore closely related to statistics 
on FDI.  Data on the activities of majority-owned 
foreign affiliates in the compiling economy are 
usually referred to as inward FATS, and those relating 
to majority-owned foreign affiliates of the compiling 
economy that are established abroad are referred to as 
outward FATS.  FATS statistics cover a range of 
variables that can comprise some or all of the 
following: sales (turnover) and/or output, 
employment, value added, exports and imports of 
goods and services, number of enterprises, assets, net 
worth, operating surplus, gross fixed capital 
formation, taxes on income, research and 
development expenditures, compensation of 
employees and other aspects of potential interest to 
policy makers. 
2.67.  Ideally, it would be possible to attribute FATS 
variables on the basis of either the industrial activities 
of producers or the types of products produced and 
sold.  Data on a product basis would identify the 
specific types of services delivered through the 
commercial presence mode of supply and could most 
readily be compared with data on services delivered 
through trade between residents and non-residents. 
However, some FATS variables, such as value added 
and employment, do not lend themselves to a product 
classification. Also, for some countries, FATS 
statistics may be developed as a subset of domestic 
enterprise or other statistics that are classified only on 
an activity basis. Further, for some purposes, the data 
may need to be viewed in conjunction with data on 
stocks and flows of foreign direct investment, which 
would normally be classified by activity but not by 
product. 
2.68. The Manual thus recommends that FATS 
variables be classified by activity according to the 
ISIC Categories for Foreign Affiliates, a group of 
categories derived from ISIC (see chapter IV below 
and annex IV). ICFA covers all kinds of activities, 
including goods production. ICFA was designed so as 
to provide the best possible link with EBOPS in order 
to facilitate as much as possible the comparability of 
the two sets of statistics (see annex IV on the link 
between ICFA and EBOPS). This basis of 
presentation allows activities of services enterprises to 
be viewed in the context of the activities of all 
enterprises.  In addition, where a cross-classification 
by product is possible, it provides a framework for 
displaying services produced as a secondary activity 
by enterprises classified as goods producers. 
(b)  FATS statistics and other statistical frameworks 
2.69.  FATS statistics, as conceived in the Manual, are 
consistent with existing statistical frameworks.  They 
fall within the overall ambit of the 1993 SNA and 
observe the conventions of both BPM5 and BD3 in 
relation to foreign direct investment. They look to CPC 
and ISIC for product and activity classifications and to 
International Labour Organization (ILO) standards for 
employment variables. They also have been defined in a 
way that is consistent with the standards expected to be 
defined in the proposed OECD manual on economic 
globalization indicators for the measurement of foreign 
affiliates’ activity.  FATS statistics capture the activities 
of majority-owned foreign affiliates that form a subset of 
enterprises on the register of direct investment 
enterprises, and cover a wide variety of indicators on 
both their domestic and foreign operations. 
2.70.  The 1993 SNA defines a direct investment 
enterprise as “an incorporated or unincorporated 
enterprise in which an investor 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).  
Direct investment enterprises comprise those entities 
that are identified as subsidiaries (investor owns more 
than 50 per cent), associates (investor owns 50 per cent 
or less), and branches (wholly or jointly owned 
unincorporated enterprises), either directly or indirectly 
owned by the investor” (1993 SNA, para. 14.152).  
Further, foreign-controlled enterprises as defined by the 
1993 SNA include subsidiaries and branches, but 
associates may be included or excluded according to a 
qualitative assessment of foreign control. 
2.71.  FATS statistics, as described in chapter IV 
below, relate mainly to subsidiaries and branches (both 
of which are majority-owned by the direct investor), but 
they may also include supplemental information on 
associates that are deemed to be under effective foreign 
control.  In the real world, ownership structures can be 
very complex and may not fit neatly into any of these 
categories; in addition, actual management 
responsibilities may bear little or no relationship to the 
formal legal structure of the enterprise. Although it does 
not cover every possible case, chapter IV provides 
practical guidance on determining statistical coverage 
under different ownership structures (more 
comprehensive treatment of these issues is planned for 
the OECD manual on economic globalization 
indicators). 

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