RESTRICTED
WORLD TRADE WT/WGTI/W/14
2 February 1998
ORGANIZATION
(98-0352)
Original: English
Working Group on the Relationship
between Trade and Investment
COMMUNICATION FROM THE UNITED STATES
The following communication, dated 8 December 1998, was received from the Permanent
Mission of the United States with the request that it be circulated to Members. It draws on a report on
foreign direct investment prepared by the United States Department of Commerce.
________________
INTRODUCTION AND OVERVIEW
This paper looks at foreign-owned US firms’ US merchandise trade, US - EU foreign direct
investment, and US - EU goods and services trade, US - EU goods and services trade between related
parties. The three sections of this paper are designed to help contribute to the understanding of the
relationship between trade and investment for development and growth and the economic relationship
between trade and investment.
The first section shows that foreign-owned US firms continue to account for a substantial share of
total US merchandise exports and imports and the dominant share of the overall US trade deficit. Thus
these large shares and their trends provide important insights in to the overall US trade performance.
This first section addresses several of the key issues underlying the trade of foreign-owned US
firms. It discusses (1) key factors affecting US affiliate-foreign parent trade; (2) their contribution to US
trade and trade balance relative to that by other firms; (3) recent developments in their trade; (4) the effects
of key macro economic developments on their deficit growth; and (5) the extent that US production and
wholesaling operations of foreign-owned firms changed their dependence on imported inputs. The scope
of this chapter is limited to the US trade in merchandise by foreign-owned US firms.
The key conclusion of the first section is that the contribution to the size and growth of the US
merchandise trade deficit by foreign-owned US firms is proportionately far greater than their shares of US
exports and imports. In 1994, they accounted for 22 per cent of total US exports and accounted for 33
per cent of total US imports but accounted for a very large 70 per cent of the total US trade deficit. Other
findings include:
·The contribution to the size and growth of the US merchandise trade deficit by foreign-owned US firms is
proportionately far greater than their shares of US exports and imports. In 1994, they accounted
for 22 per cent of total US exports and a much larger 33 per cent of total US imports, but
accounted for a very large 70 per cent of the total US trade deficit.WT/WGTI/W/14
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·In recent years, foreign-owned firms appear to have increasingly behaved like US-owned firms with respect
to their propensity to export relative to their total sales, however, but not with respect to their
imports.
·Since 1980, foreign-owned firms’ share of total US exports has decreased and their share of US imports
has risen, with the result that their share of the total US trade deficit has increased.
·In 1994, their US merchandise trade deficit reached a record $105.4 billion--the net of an even larger
$112.3 billion deficit with their foreign parent groups and a small $6.9 billion surplus with
unrelated foreign firms .
·Their trade imbalance appears to be driven by the parent-affiliate relationship. Parent firms tend to have
export surpluses with their foreign affiliates, reflecting their effort to gain access to foreign markets
for products produced by the parent firms.
·Affiliates that are largely or primarily wholesalers are major participants in foreign parent sales to their US
affiliates and other US firms -- in recent years, accounting for about two-thirds of the total US
merchandise trade deficit of all foreign-owned US firms.
·Japanese-owned US firms accounted for a major share of the total US merchandise trade deficit of
foreign-owned US firms (53 per cent in 1994) and over one-half of the 1990-94 rise in the deficit,
notwithstanding the decline in the volume of autos imported from Japan. In 1994,
Japanese-owned US wholesalers accounted for over 80 per cent of the total exports and imports
of all Japanese-owned US firms.
·Foreign-owned firms in US high-technology industries incurred rising trade deficits between 1990 and
1994--with surpluses in 1994 only in industries producing industrial chemicals and synthetics and
producing instruments and related products.
The second and third sections of this paper focus primarily on the linkages between bilateral
US-EU direct investments and their relationship to bilateral trade performance. Foreign direct investment
(FDI) and trade are key economic linkages between the United States and the European Union. These
linkage account for large shares of total US exports and imports with all countries and even larger shares of
total FDI in the United States and abroad. They also account for similarly large shares of total EU FDI
and trade with non-EU countries.
The analysis in these chapters examines the linkages between parent and foreign affiliate firms,
which from the US perspective are primarily described in terms of US direct investment abroad (USDIA)
and foreign direct investment in the United States (FDIUS), and the trade between these related
firms-related-party trade. These relationships are examined in the aggregate and at the individual US and
EU industry and EU country levels. The following two papers describe those US-EU linkages - focusing
on the transactions involving the 12 countries that were members of the EU before 1995.1These papers
cover FDI in both goods producing and services producing industries, and the bilateral related-party trade
by firms in goods and services producing industries and their trade in goods and services.
The distinction between transactions of affiliates in goods producing and in services producing
industries (including wholesaling) is important to interpreting these parent-affiliate relationships and their
contribution to overall national trade performance. The following two chapters show that the relative
importance of individual key industries is substantially different in terms of FDI and of the related firms’
trade transactions. In particular, substantially less than one-half of the bilateral FDI flows and
1The twelve EU countries are Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, and United Kingdom. Not included in these data are Austria, Finland, and Sweden.WT/WGTI/W/14
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accumulated stock are in manufacturing industries and far more than one half are in services industries,
especially wholesaling. In sharp contrast, only about one-half of the bilateral goods trade is between
related parties whose affiliates are in manufacturing and about one-half are in wholesaling. This analysis
also provides some insights into the often asserted point that, on balance, FDI results in net export
growth rather than net displacement of exports.2
Sections I and II were written by Lester A. Davis, Senior International Economist in the Office of
International Macroeconomic Analysis, Office of the Chief Economist, Economics and Statistics
Administration, US Department of Commerce. Section II was written by Johanna L. Barraza, a graduate
research intern in the Office of International Macroeconomic Analysis, Office of the Chief Economist,
Economics and Statistics Administration, a position sponsored by a Woodrow Wilson Public Policy
Fellowship.
2The primary sources of data on FDI in these chapters are the US Department of Commerce’s Bureau of
Economic Analysis (BEA) and Eurostat, an agency of the European Commission. The primary sources of the data
on bilateral trade are the US Department of Commerce’s Economics and Statistics Administration, and its Bureau of
Economic Analysis and Bureau of the Census, and the International Monetary Fund’s Direction of Trade .WT/WGTI/W/14
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SECTION I
Foreign-owned US firms' US merchandise trade3
Foreign-owned US firms continue to account for a substantial share of total US merchandise
exports and imports and the dominant share of the overall US merchandise trade deficit. Thus, these
large shares and their trends provide important insights into the overall US trade performance. Their
contribution to the US deficit is particularly important because the US trade deficit has been growing
sharply again since the 1991 US recession.
This chapter addresses several of the key issues underlying the trade of foreign-owned US firms.
It discusses (1) key factors affecting US affiliate-foreign parent trade; (2) their contribution to US trade and
trade balance relative to that by other firms; (3) recent developments in their trade; (4) the effects of key
macro economic developments on their trade deficit growth; and (5) the extent that US production and
wholesaling operations of foreign-owned firms changed their dependence on imported inputs. The data
in this chapter cover developments up through 1994.4
The scope of this chapter is limited to the US trade in merchandise by foreign-owned US firms,
including that with related and unrelated foreign firms. Not covered is their trade in services as the data
on their trade in services is limited to that with related parties. Moreover, their trade in services with
related parties is subject to several key limitations.5
Key findings
The contribution to the size and growth of the US merchandise trade deficit by foreign-owned US
firms is proportionately far greater than their shares of US exports and imports. In 1994, they accounted
for 22 per cent of total US exports and a much larger 33 per cent of total US imports, but accounted for a
very large 70 per cent of the total US trade deficit.
·In recent years, foreign-owned firms appear to have increasingly behaved like US-owned firms with respect
to their propensity to export relative to their total sales, however, but not with respect to
their imports.
·Since 1980, foreign-owned firms' share of total US exports has decreased and their share of US imports
has risen, with the result that their share of the total US trade deficit has increased.
3The author of this chapter is Lester A. Davis, a senior international economist in the Office of International
Macroeconomic Analysis, Office of the Chief Economist, Economics and Statistics Administration, US Department of
Commerce.
41994 is the most recent year for which detailed data are available on the trade of foreign-owned US firms. For
earlier analyses of US trade performance of foreign-owned firms see: William J. Zeile, "Merchandise Trade of US
Affiliates of Foreign Companies," in US Department of Commerce, Economics and Statistics Administration, Office
of the Chief Economist, Foreign Direct Investment in the United States: An Update, January 1995; and Lester A.
Davis, "US Foreign Trade in Merchandise and Services by Foreign-Owned Firms," in US Department of Commerce,
Economics and Statistics Administration, Office of the Chief Economist, Foreign Direct Investment in the United
States: An Update, June 1993.
5For a discussion of these data limitations, see chapter 8 of this report on US-EU related-party trade.WT/WGTI/W/14
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·In 1994, their US merchandise trade deficit reached a record $105.4 billion - the net of an even larger
$112.3 billion deficit with their foreign parent groups and a small $6.9 billion surplus
withunrelated foreign firms.
·Their trade imbalance appears to be driven by the parent-affiliate relationship. Parent firms tend to have
export surpluses with their foreign affiliates, reflecting their effort to gain access to foreign
markets for products produced by the parent firms.
·Affiliates that are largely or primarily wholesalers are major participants in foreign parent sales to their US
affiliates and other US firms - in recent years, accounting for about two thirds of the total
US merchandise trade deficit of all foreign-owned US firms.
·Japanese-owned US firms accounted for a major share of the total US merchandise trade deficit of
foreign-owned US firms (53 per cent in 1994) and over one-half of the 1990-94 rise in the
deficit, notwithstanding the decline in the volume of autos imported from Japan. In
1994, Japanese-owned US wholesalers accounted for over 80 per cent of the total exports
and imports of all Japanese-owned US firms.
·Foreign-owned firms in US high-technology industries incurred rising trade deficits between 1990 and
1994 - with surpluses in 1994 only in industries producing industrial chemicals and
synthetics and producing instruments and related products.
Factors underlying affiliate-parent trade links
Understanding the differences in ownership of firms provides a vital key to understanding
differences in the extent of their contributions to US trade performance. Over the past several decades,
the US economy has become increasingly interdependent with those of our major trading partners. A key
vehicle of this interdependence has been the large capital inflows that have enabled foreign firms either to
establish new US firms or acquire existing US firms. A major component of the operations of those
foreign-owned US firms--one on which their sales directly and indirectly depend--has been their expanding
exports and imports.
Foreign-owned US firms increase their exports and imports for reasons similar to those driving
US-owned firms--to increase sales by expanding global market share, obtain economies of scale through
operations as multinational corporations, and improve returns on investment and profits. However, these
reasons translate somewhat differently in the trade performance of foreign-owned than US-owned firms
largely because of several key factors, including (1) differences in the geographic location of their parent
firms, (2) differences or similarities in the principal industrial activity of the parents and foreign affiliates, (3)
whether or not the foreign parent firm regards the operations of the US affiliate as primarily
complementary with those of the parent or independent of them, and (4) differences in relative costs,
market growth rates, and technology change in the parent’s country versus those in the United States.
Decisions to operate an affiliate in a complementary or more independent mode may change over
time in response to the wide range of factors that affect the operations of both parent and affiliate. Among
these factors are those that change relative costs of production (including exchange rates, wages and
productivity), differences in macroeconomic growth rates, and government rules such as those affecting
national treatment, and changes in taxes, other trade barriers, and product standards.
Examples of complementary activities are seen in a major reliance by foreign parent firms to
operate through US affiliates that are wholesalers of products produced by the foreign parent, and affiliates
that produce final goods from inputs produced by the parent. In many instances, wholesaling affiliates
provide the parent with additional economies of scale and thus the opportunity for the parent to improve
the price competitiveness of its products. The ability of manufacturing affiliates to rely onWT/WGTI/W/14
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parent-produced inputs partly explains the shift in Japanese motor vehicle production from Japan to their
US manufacturing affiliates and the significant effect of this shift on US trade in these products. This shift
in production location is discussed further in this chapter in the sections on the linkage to parent firms and
on the affiliates’ dependence on imported inputs.
Foreign-owned US firms' US trade in perspective
The US trade of foreign-owned US affiliates (FDIUS-based trade) is an important component of
overall US trade. Moreover a large share of FDIUS trade is between related parties--that is, between the
affiliate and its foreign parent or that parent’s other foreign-owned firms. That related-party share of the
US affiliates’ trade is particularly important because it reflects that ability of major multinational
corporations (MNCs) to shift production location among its foreign and US plant locations. These
transactions are also important because they involve the well-known issues of “transfer pricing” - the ability
to shift profit-taking among related firms; however, these FDI data do not lend themselves to dealing with
this latter issue.
Understanding the importance of foreign-owned US firms’ US trade (FDIUS-based trade) to the
overall US trade performance requires examining their trade not only in comparison with the total US
trade of all firms, but also separately in terms of their trade with related foreign firms and with all other
foreign firms. It also is important to compare their trade with other US multinational firms’ trade, that is,
comparing FDIUS-based trade with the US trade between US parent firms and their foreign affiliates and
other firms located abroad (USDIA-based trade).
A comparison of FDIUS-based and USDIA-based US trade between related parties clearly
illustrates the point that FDI generally results in a net trade surplus--that is, FDI generally stimulates net
exports by parent firms in one country with their affiliated firms in other countries. Thus, the
related-party share of total FDIUS trade deficit appears largely attributable not to some serious distortion
in short-run cyclical or exchange rate fluctuations, but rather to the typical practice of parent firms to
establish foreign affiliates mainly to facilitate the sales of their products in foreign markets.6
Over the past decade and a half, foreign-owned US firms have accounted for one-third or less of
total US exports and imports, while conversely US-owned firms have accounted for two-thirds or more of
total exports and imports.
·The value of US merchandise exports by foreign-owned US firms has more than doubled between 1980
and 1994, rising from $52 billion to $114 billion - slightly less rapidly than the much larger exports
by US-owned firms (Figure 5-1).
·As a result, the foreign-owned firms’ share of US exports was somewhat higher before 1986 than after
1986. Exports by foreign-owned US firms ranged between 24 and 28 per cent between 1980 and
1985 and between 19 and 24 per cent between 1986 and 1994, when they accounted for 22 per
cent of total exports (Figure 5-2).
·The value of imports by foreign-owned US firms also more than doubled between 1980 and 1994, rising
from $76 billion to $219 billion - slightly more rapidly than the much larger imports by US-owned
firms (Figure 5-3). As a result, the foreign-owned firms’ share of US imports rose irregularly over
the 1980-94 period, ranging between 30 and 37 per cent and accounting for 33 per cent of total
US imports in 1994.
6For a detailed comparison of FDIUS-based and USDIA-based related-party trade between the United States and
the European Union, see chapter 8 of this report.WT/WGTI/W/14
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Because the US imports by foreign-owned US firms have been more than twice as large as their
exports throughout most of the period 1980-94, their trade deficits have been very large -- so large in fact
that they have dominated the total US merchandise trade deficits. Moreover, the size of their trade
deficits has far overshadowed the smaller US trade deficits of US-owned firms. Furthermore, almost all of
the foreign-owned firms’ trade deficit has been due to their trade with their foreign parent firms rather than
with unrelated firms.
·The overall deficit in US merchandise trade of all firms in the United States (US-owned and
foreign-owned) increased from much lower levels in the early 1980s to a 1987 peak of $152.4
billion, decreased to a 1991 low of $66.7 billion--the lowest since 1983, and increased again to a
near record $150.6 billion in 1994.
·The trade deficit of foreign-owned firms sharply deteriorated from lower early-1980s levels to an interim
peak in 1987 of $95.4 billion, decreased slightly to $81.8 billion in 1991 and $80.5 billion in 1992,
and thereafter increased to a record $105.4 billion deficit in 1994 (Figure 5-4).
·The trade deficit of US-owned firms reached a record peak of $69.4 billion in 1984, and thereafter
steadily improved, reaching a small $15.1 billion surplus in 1991 (a US recession year). After
1991, their trade balance sharply deteriorated like that of foreign-owned firms, reaching a $45.2
billion deficit in 1994 (Figure 5-5).WT/WGTI/W/14
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Propensity to export and import
One of the key economic issues concerning the behaviour of foreign-owned firms is the extent
they do or do not behave similarly to US-owned firms with respect to their propensity to export and
import. This is a very difficult issue to examine because, among other factors, their trade performance
differs widely across industries and among the countries of ownership, and there is a lack of precision in
the data available for such a comparison. In particular, it is reasonable to expect that the propensity to
import is far higher for firms in the wholesale industry than in manufacturing industries. Moreover, it is
likely that the variation in propensity to import is greater across industries than in terms of ownership.
The propensity ratios for foreign-owned firms can be calculated directly from the data reported by
those firms, however, the ratios for US-owned firms must be estimated on the basis of netting out the data
for foreign-owned firms from national aggregates that are only close proxies to those for the foreign-owned
firms. Nevertheless, at least a simple aggregate comparison can be made in terms of the ratio of exports
and imports to sales over time.
In recent years, foreign-owned firms appear on average to have increasingly behaved like
US-owned firms with respect to their propensity to export merchandise relative to their total sales of all
goods and services, including exports. However, this is far from so with respect to their average
propensity to import merchandise in terms of the ratios of that trade to their sales.
·The ratio of merchandise exports to sales of foreign-owned firms was consistently higher for
foreign-owned than US-owned firms throughout the entire period 1980-94 (Figure 5-6).
Nevertheless, the propensity of foreign-owned firms apparently decreased sharply between 1980
and 1987, and thereafter, was only slightly higher than that for US-owned firms. In effect, since
1987 their export behaviour has been very similar to that of US-owned firms.WT/WGTI/W/14
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·The ratio of merchandise imports to sales of foreign-owned firms remained far higher for foreign-owned
than US-owned firms throughout 1980-94 - a roughly three times higher propensity to import
(Figure 5-7). This difference in behaviour between exporting and importing helps to explain why
the trade deficit of these firms throughout the period was also very large relative to the trade deficit
of US-owned firms.
·Although the difference between foreign-owned and US-owned firms in their average propensity to import
appears to be substantial, this difference is far narrower than the range in propensity to import
among foreign-owned firms in individual industries. For example, the propensity ratio of
foreign-owned firms in most individual industries to import merchandise in 1994 averaged 0.15,
but ranged between less than 0.01 and 0.56 (Figure 5-8). In 1994, the range in propensity to
import by foreign-owned firms in individual industries was more than 8 times as large as the
difference between the average propensity to import by foreign-owned and US-owned firms.
Moreover, the propensity to import of foreign-owned firms in one-fourth of the US industries was
lower than that of the average for US-owned firms.
·There is also a large range in the propensity to export among foreign-owned firms in individual industries.
In 1994 their export-propensity ratios ranged from less than 0.01 and 0.36 - a range far greater
than the relatively small difference in the average propensity to export of foreign-owned and
US-owned firms (Figure 5-9). Moreover, the propensity to export of foreign-owned firms in
nearly one-half of the US industries was higher than that of the average for US-owned firms.WT/WGTI/W/14
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Foreign parent-US affiliate trade links
Investment by foreign parent firms in their US affiliates provides a vital bilateral linkage that largely
determines the size and growth of their intra-firm trade transactions. Their bilateral trade balance is very
different (their trade deficit so much larger relative to the size of their trade) from that of firms with no
such links. The asymmetry in that trade relationship with their parent firms is a major factor in explaining
the far higher growth rate in their imports from parent firms than their exports to those or other foreign
firms and to the rapid growth in their large overall US trade deficit.
·All of that growth in the trade deficit of foreign-owned US firms was accounted for by their trade with their
parent firms throughout the 1980-94 period, except for 1985-87, when their trade with other
(unrelated) firms was in small deficit (Figure 5-10).
·Over the 1980-94 period, imports of the affiliates from their parent firms more than tripled to $164
billion, while their exports to their parent firms slightly more than doubled to $52 billion (Figure
5-11). As a result, the trade deficit of the foreign-owned US firms with their parent firms rose
almost every year between 1980 and 1994, except 1991 and 1992, and reached a record $112
billion in 1994.
·Over the 1980-94 period, the foreign-owned US firms exports to, and imports from unrelated firms
roughly doubled in parallel. As a result, their trade with unrelated firms was in small surplus
during most of those years, reaching a $10.1 billion peak in 1989 and edging down to $6.9 billion
in 1994 (Figure 5-12).WT/WGTI/W/14
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Response to macroeconomic factors
The foreign trade of both foreign-owned and US-owned US firms appear to be similarly
responsive to cyclical and exchange rate fluctuations in terms of their exports and imports. These
responses to macro economic factors are only roughly reflected in the changes in direction of their trade
deficits over the longer period.
The trade deficits of both groups increased after 1982, both stopped increasing after 1987, and
both increased again after 1992 (Figure 5-5). Moreover, the post-1992 resurgence in the trade deficits of
US-owned and foreign-owned US firms in particular support that conclusion. However, this
responsiveness is clearly demonstrated only by a separate examination of the export and import trends.
Moreover, in the case of their exports, it is only clearly demonstrated by a separate examination of the
trends in their exports to individual key markets because the aggregate value of those exports obscures the
differences in the timing of the exports’ responsiveness to those markets’ recessions and recoveries.
The US 1991 recession and recovery
US imports by both foreign-owned and US-owned firms responded to recessions in US domestic
demand in 1982 and 1991 and to US economic recovery thereafter. In 1991, the drop in the level of
imports by foreign-owned and US-owned firms largely reflects the decline in domestic demand during the
1991 US recession, as is reflected in changes in the growth rates of those imports (Figure 5-13). The
similar strong recoveries in imports by both firm groups in 1993 and 1994 largely reflect the strong
post-1991 recovery in US domestic demand. The post-1991 recession recovery in US imports by
US-owned firms was more rapid than in imports by foreign-owned US firms, with imports by US-owned
firms rising by 48 per cent between 1991 and 1994, while imports by foreign-owned US firms rose by only
20 per cent.
·The level of imports by US-owned firms decreased in 1991 in response to the 1991 US recession when
their growth rate became negative, and then sharply recovered in 1992 in response to the US
economy’s recovery.WT/WGTI/W/14
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·The growth in total imports by foreign-owned firms were similarly slowed by the slackening in US
domestic demand during the 1991 recession. This response is more clearly revealed in terms of
growth rates than merely the level of imports, as the growth in imports by foreign-owned firms
from unrelated foreign firms continued to rise, not decline in level, in 1991. However, the
growth rates of their imports from both parents and unrelated firms sharply slowed in 1991, with
the former dropping in level and growth rate in 1991 and recovering in 1992, while the latter never
decreased in level but slowed sharply in growth rate in 1991 and again in 1992 and recovered in
1992.
Recession and recovery abroad
The levels of total US exports by foreign-owned US firms show no clear response to foreign
cyclical changes, largely because the timing of the recent recessions in demand varied widely among
individual major US export markets. However, that response to cyclical change in key individual foreign
markets is clearly reflected in the level of their exports to those individual markets, and particularly in
changes in the growth rates of those exports. For example, while the US and Canadian recessions
bottomed out in 1991, the recessions in Japan extended over several years and continued into at least
1994, and the recessions in France and Germany were largely in 1993.
·Foreign demand appears to have sustained into 1992 the growth in the level of US exports of
foreign-owned US firms, as recession in most major markets for those exports - particularly in
Japan and Western Europe - lagged the 1991 US recession, and aggregate exports of
foreign-owned US firms continued to rise in 1993. Nevertheless, some response to foreign
recession is reflected in a slowing in the growth of their exports.
The nominal (current dollar) growth rate of the total exports of foreign-owned firms dipped sharply from
7.2 per cent in 1992 to 2.5 per cent in 1993, before recovering to 6.7 per cent in 1994. The
growth rate of US-owned firms' exports also slowed, but by far less, down from 6.0 per cent in
1992 to 4.6 per cent in 1993, before recovering to 11.3 per cent in 1994.WT/WGTI/W/14
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·Exports of foreign-owned firms to Canada decreased in 1993 in a lagged response to the Canadian
recession that bottomed out in 1991 and continued into 1992 (Figure 5-14).
·Exports to Japan also decreased in 1993 in response to that economy’s recession.
·In contrast, their total exports to Europe continued to rise throughout the early 1990s, despite decreases
in their exports to individual countries in response to differences in the timing of those decreases
for some of those key markets. For example, the level of their exports to France decreased
sharply in 1990 and were much lower in 1991 and 1992 than in the preceding several years.
Their exports to the United Kingdom dropped in 1993 and then recovered in 1994. In contrast,
their exports to Germany continued to rise throughout this period, reflecting no apparent
recession response
The value of US exports also reflect the effect of other macroeconomic non-cyclical factors that
affected their competitiveness - particularly the major swings in the US dollar exchange rate after 1995, and
particularly against the yen in 1995.
Although the growth in total exports of foreign-owned firms merely slowed in 1993, as the level
continued rising, this continued rise in level is wholly accounted for by differences in the timing of the
response of their exports to their parent firms versus to other foreign firms . Their aggregate exports to
other foreign firms did not drop in either 1992 or 1993, albeit they were virtually flat between 1990 and
1991, increased only slightly in 1992, but rose by 7.4 per cent in 1993. In contrast, their exports to parent
firms continued rising strongly through 1992, but dropped by 2.9 per cent in 1993, before rising by 9.2 per
cent in 1994.
Dollar depreciation
On a trade-weighted basis against all currencies, the US dollar depreciated sharply from a 1985
peak to its 1988 rate and remained relatively flat until 1993. The implicit negative impact of that US
dollar depreciation during 1985-88 is not clearly reflected in changes in the aggregate value of US imports
by either foreign-owned or US-owned firms during the 1985-90 period (Figure 5-15). US imports by both
groups continued to rise strongly during this period and on into 1990. The effects of dollar depreciation
(and, inversely, those of dollar appreciation) are obscured by the opposing effects of (1) the tendency of
dollar depreciation to increase the total dollar value of imports because in these circumstances the foreign
currency prices of imports translate into higher US dollar prices, and (2) the tendency of those higher
dollar import prices to reduce effective US demand volume for imports. It also is very difficult to separate
out the extent of those exchange rate effects from the effects of other factors, such as cyclical changes in
domestic demand.
In addition, exchange rate changes across countries do not generally closely coincide in timing or
direction with foreign national cyclical changes and their effects on prices and available supply. For
example, between 1988 and 1994, the value of the US dollar remained relatively stable when weighted by
US trade with all countries . This average, however, obscures a major 1990-94 appreciation of the
Japanese yen against the US dollar (Figure 5-16). The 23 per cent yen appreciation against the US dollar
during this period might have significantly contributed to a stalled growth in the nominal value of US
imports from Japan by Japanese-owned US firms in 1991 and 1992. Nevertheless, that yen appreciation
impact apparently was offset by other factors in 1993 and 1994, when the value of those imports increased,
despite a continued decline in imports of Japanese automobiles. Imports by other US firms from Japan
only accounted for a small share of those imports.WT/WGTI/W/14
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Importance of particular nationality of parent firms
US firms owned by parents located in four major country groups--Japan, the European Union, all
other Europe, and Canada--account for most of the rise in the overall US trade of foreign-owned US firms,
with Japanese-owned firms accounting for the dominant share of this trade.WT/WGTI/W/14
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Japanese-owned US firms
In 1994, Japanese-owned firms accounted for by far the largest shares of the total exports (40 per
cent) and imports (46 per cent) by foreign-owned US firms (Figure 5-17). Japanese-owned firms also were
the largest single contributors (53 per cent) to the overall US trade deficit of foreign-owned US firms
(Figure 5-18) and the largest contributors (49 per cent) to the total US merchandise trade deficit of all US
firms--foreign- and US-owned firms.7
7Bureau of Economic Analysis data on the trade of foreign-owned US firms are reported in terms of “country of
UBO” (ultimate beneficial owner) and “industry of affiliate” and “industry of UBO”. These are not necessarily the
same as country of destination or origin of the products traded nor the industries in which the goods would otherwise
be classified if they were the primary product produced by that industry.WT/WGTI/W/14
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Between 1981 and 1994, the Japanese owned firms’ exports more than doubled, reaching
$45.1 billion in 1994; their imports more than tripled over the period, reaching $101.4 billion, and their
trade deficit rose by more than five times its 1981 level to $56.3 billion in 1994. Nevertheless, over the
entire 1981-94 period, their shares of total exports and imports by foreign-owned US firms has varied
within a relatively narrow range, with their import share exceeding their export share throughout the period
(Figure 5-19). There has been little, if any trend in their export share since 1983. In contrast, their
import share has been edging down since its peak in 1985. Their share of the deficit in the total US trade
of foreign-owned US firms has varied irregularly throughout the period, always accounting for over
one-half or more of the deficit, and averaging 56 per cent of the deficit since 1980.
A major share of the Japanese-owned affiliates' deficit was concentrated in the deficit of those
affiliates that are classified primarily either as manufacturers or wholesalers of motor vehicles and
equipment.8Until 1989, the combined trade deficit of Japanese-owned firms primarily in these two motor
vehicle industries rapidly and steadily increased. Between 1989 and 1994, a significant shift occurred in the
composition of this trade.
·While the trade deficit of Japanese-owned firms in most other industries apparently continued to rise, the
deficit in the combined motor vehicle and equipment manufacturing and the wholesaling
industries decreased from an estimated $33 billion in 1989 to 1992-94 average $23 billion deficit
(Figure 5-20).
·The 1993 $25 billion deficit reflected both a $3 billion increase in exports and a $5 billion decrease in
imports from that in 1989.
·As a result, between 1989 and 1993, the combined motor vehicle share of all Japanese-owned US firms'
total trade deficit shrank from about 66 per cent to 49 per cent.
It is difficult to discern the key product details in the trade of Japanese-owned US firms classified
as motor vehicle producers and as motor vehicle wholesalers. During the past decade, some of the firms
that are classified in BEA statistics as a US wholesalers also manufactured motor vehicles and some of
those classified as US manufacturers also imported motor vehicles. Moreover, these BEA trade data are
in terms of the industry of the affiliate, not the product they import or export. Nevertheless, available data
suggest that Japanese-owned US firms shifted to importing fewer finished motor vehicles to manufacturing
more of them in the United States. This conclusion is partly supported by the 40 per cent decrease in the
number of autos imported from Japan between 1986 and 1994 that is reported by the Bureau of the
Census (Figure 5-21). (The implication of a shift toward less import dependence among foreign-owned
US firms in general is discussed further in a separate following section in this chapter).
8The combined value of exports of Japanese-owned firms in the motor vehicle and equipment manufacturing and
wholesaling industries in 1989-92 was estimated by the author in the absence of published BEA data.WT/WGTI/W/14
Page 27
Most US imports of automobiles produced in Japan are imported by Japanese-owned US firms,
and those autos account for a large share of their total US imports from Japan. Although the number of
those auto imports decreased between the mid-1980s and 1994, the total value of all imports by
Japanese-owned firms continued to rise, indicating that the value of their imports of motor vehicle parts
and other products increased more than enough to make up any decrease in auto imports. According to
Census Bureau data, over the 1986-94 period in which the volume of US auto imports from Japan
decreased by 40 per cent, the value of US imports of automotive parts and equipment from Japan more
than doubled.
There appears to be increasing long-term pressure on the competitiveness of Japanese parents’
auto production in Japan. These pressures stem from exchange rate adjustments and from the rising
technological capabilities of low-end producers in East Asia.WT/WGTI/W/14
Page 28WT/WGTI/W/14
Page 29
Other foreign-owned US firms
The US trade of US firms owned by several other major trading partners, in addition to trade of
Japanese-owned firms, also has been in large deficit relative to the size of their exports. The deficits of
firms owned by parents located in the European Union equalled over one-half the value of their exports.
The deficits also were large relative to their exports for foreign-owned US firms with parents located in
Canada and other key import sources, such as Venezuela, Hong Kong, and South Korea.
South Korean-owned firms accounted for the second largest share of the total $14.8 billion (16.3
per cent) increase in the overall trade deficit of foreign-owned US firms. Not only was the $3.5 billion
increase in the South Korean-owned firms' deficit relatively large compared with the $8.1 billion deficit
increase by Japanese-owned firms, this increase was proportionately far larger relative to their exports than
for Japanese-owned firms. Moreover, the South Korean-owned firms’ deficit increase was nearly as large
as the $3.8 billion increase in the deficit of firms owned by parents in the European Union. In contrast,
the trade deficit increase of Canadian-owned firms ($437 million) between 1990 and 1994 was small
compared to that of the Japanese and South Korean owned firms.
Importance of foreign ownership links to US wholesaling affiliates
The industry composition of US affiliates of foreign-owned firms appears to be a major factor
affecting their US trade performance, and in particular, because of the large share of that trade that is
concentrated in the wholesaling versus manufacturing industries. Moreover, where the preponderance of
the affiliates are in wholesaling a major US trade imbalance tends to occur, as those wholesaling affiliates
primarily function as distributors in the US market of the foreign parent’s output, rather than mainly as
independent firms that distribute US-produced products abroad.
·In recent years, all foreign-owned US firms whose primary line of business was wholesaling consistently
accounted for about two-thirds of the overall US trade deficit by all US firms in all industries,
although they accounted for a far smaller share of total imports and exports.
·This linkage to US wholesaling affiliates is far more important for Japanese-owned firms than other
foreign-owned firms. Affiliates in the wholesaling industry account for a far larger share of the
total trade of Japanese-owned US firms than of all other foreign-owned US firms. In 1994,
Japanese-owned wholesalers accounted for over 80 per cent of the total exports, imports and trade
deficit of all Japanese-owned US firms (Figure 5-22). In contrast, for all other foreign-owned
firms, wholesalers accounted for much smaller shares - 31 per cent of the exports, 40 per cent of
the imports, and 54 per cent of the trade deficit.
Japanese-owned firms account for a dominant share of the overall trade of foreign-owned US
firms that are primarily wholesalers.
·In 1994, Japanese-owned US wholesalers accounted for 63 per cent of the exports, 64 per cent of the
imports, and 64 per cent of the trade deficit of all foreign-owned US firms classified primarily as
wholesalers.
·Moreover, most of the trade of these Japanese-owned US wholesalers was with their parent firms - 74 per
cent of their exports, 86 per cent of their imports, and 95 per cent of their trade deficit. This high
share of the affiliates’ imports clearly illustrates the importance to foreign parent firms of
establishing US affiliates to distribute their products in the United States.WT/WGTI/W/14
Page 30
High-technology manufacturing industries' trade
The overall US trade performance appears to differ little between foreign-owned and US-owned
US firms in high-technology manufacturing industries, as in recent years the trade balances of both groups
has significantly worsened.9Between 1990 and 1994, the trade deficit of foreign-owned US firms in
high-technology manufacturing industries more than doubled from $3.0 billion to $7.6 billion (Figure
5-23). During this same period the trade balance of all US firms in high-technology manufacturing
industries (US-owned and foreign-owned) worsened from a surplus of $24 billion in 1990 to a deficit of $4
billion.10
9For the purpose of this paper, the following manufacturing industries are identified as high-technology industries:
industrial chemicals; drugs; computers and office equipment; audio, video and communication equipment; electronic
components; rubber products; miscellaneous plastic products; and instruments and related products. This list does
not exactly conform with the so-called DOC-3 list of high-technology industries due to the limitations of the BEA data.
For example, it does not include the aircraft industry, which is included in the large BEA category for “other transport
equipment”. The trade of foreign-owned US firms in this industry is not expected to be large.
10The change in trade deficit of US-owned high technology industries can not be estimated directly by deducting
the deficit of foreign-owned US firms from that for all US firms because US Census-based trade data on an industry
basis do not exactly match BEA FDI-based trade data, and because of the lack of separate data on the trade of
foreign-owned US firms in the aircraft industry. However, the size and direction of the two data sets reported above
suggest that the growth in the trade deficit of the US-owned firms was large.WT/WGTI/W/14
Page 31
The trade balances of foreign-owned US firms in individual high-technology manufacturing
industries have been in deficit for some industries and in surplus for others (Table 5-1). Moreover, the
trade deficits of most of the foreign-owned firms in individual high-technology manufacturing industries
has been large relative to the level of their exports. In contrast, the trade balances of those in industrial
chemicals and in instruments and related equipment have been in surplus.
The aggregate trade deficit of foreign-owned US firms in high-technology manufacturing industries
is smaller in absolute and relative terms than the trade deficit of foreign-owned firms in all other
(non-high-technology) industries. Between 1990 and 1994, while the trade deficit of these foreign-owned
US firms in high-technology manufacturing industries increased from $3 billion to $8 billion, the deficit of
foreign-owned firms in all other industries increased from $88 billion to $98 billion (Figure 5-24).
Dependence on imported inputsWT/WGTI/W/14
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The extent to which foreign-owned US firms are dependent on imported inputs has gained
increased attention because of the growing US trade deficit, and the high visibility of foreign-owned firms in
key US sectors, such as autos, electronics and chemicals. The newly available data obtained from the
BEA FDI benchmark surveys now provide insights into this issue.
Measurement of dependence on imported inputs differs according to the coverage of
foreign-owned firms: (1) all firms in each year, or (2) only a constant panel of firms over the entire
multi-year period. Comparison of the results suggests that over a multi-year period the “all firm” coverage
of the input dependence measure is biased upward, as foreign-owned firms measured on a panel basis
became less import dependent over time.WT/WGTI/W/14
Page 33
All foreign-owned firms
The following summarizes the recent BEA comparison of changes in the import content
embodied in the output of foreign-owned US manufacturing firms with that of foreign-owned wholesaling
firms and with that of all US manufacturing firms.11
The BEA data show that on average the import share of all inputs used by all foreign-owned US
manufacturing firms changed little between 1987 and 1991 (the latest year for which such data are currently
available), and averaged between 16 and 17 per cent (Figure 5-25).12In contrast, the import content share
of inputs used by those firms primarily in wholesaling was twice as large as those in manufacturing but
declined during the 4-year period from 41 per cent to 34 per cent in 1991.
11See Zeile (January 1995) cited above, and Zeile, ”Imported Inputs and the Domestic Content of Production by
Foreign-Owned Manufacturing Affiliates in the United States," revision of paper presented at NBER Conference on
Geography and Ownership Bases for Economic Accounting, Washington, DC, May 1995 (revised draft September 7,
1995).
12Zeile (January 1995), Table 6-9, page 62.WT/WGTI/W/14
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Dependence on imported inputs was substantially higher for foreign-owned than US-owned firms,
although the shares for both groups were relatively small. While no exactly comparable data are available,
an indicator of their difference in import dependence is illustrated by the 1991 share of inputs by
foreign-owned US manufacturing firms, compared with the 1989 import share of inputs used by
US-owned parent manufacturing companies. These imported input shares were 17 per cent for
foreign-owned US manufacturing firms, and 11 per cent for US-owned parent firms.
The import dependence of firms in all industries averaged 20 per cent in 1991 across all countries
of ownership, but varied widely, ranging for the major countries from over 31.7 per cent for
Japanese-owned firms to over 9.2 per cent for U.K.-owned firms (Figure 5-26).
The average import dependence also varied widely among individual industries owned by foreign
parents in each country. For example, the import ratios for Japanese-owned firms, which averaged 32 per
cent in 1991, varied from well over one-half of the inputs to virtually no imported inputs (Figure 5-27).WT/WGTI/W/14
Page 35
Panel of foreign-owned firms
Changes over time in the share of aggregate inputs used by all foreign-owned manufacturing firms
do not provide a direct measure of changes in the dependence of those firms on imports. The aggregate
data include the rapid increase in foreign ownership through acquisition of existing firms, establishment of
new firms, expansion of already foreign-owned firms, and changes in the composition of foreign
ownership of the firms in terms of the industries in which they are located.
One way of abstracting from the statistical effects of those factors in order to more clearly examine
changes in dependence on imported inputs would be to create a statistical panel of firms for the entire time
period. Data based on a panel comprising the same foreign-owned firms throughout 1988-92 show that
foreign-owned US firms in four out of nine major manufacturing industries decreased their import content
ratio, those in one industry--instruments and related products--already had very low import content, and
the import content of those in the remaining four industries was either stable or showed no sustained
trend. Foreign-owned firms in the motor vehicle and equipment manufacturing industry made a
particularly large decrease in the import content share of their output from 54 to 35 per cent, and a
correspondingly large decrease in the import share of their total purchased inputs from 62 to 42 per cent
(Figure 5-28).13
13Zeile, (May 1995), Table 4.WT/WGTI/W/14
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Relation to US economic growth
From an accounting standpoint, the US exports of foreign-owned firms contribute an apparently
small but important share of the total growth of the US economy and jobs between 1986 and 1990. In
1994, their exports accounted for an estimated 1.6 per cent of total US GDP - about one-fourth of the total
contributed by all firms’ US exports. This 1994 level of export contribution to GDP has roughly
prevailed since 1990 (Figure 5-29) and is substantially higher than the preceding low of 1.0 per cent in
1987, but not higher than the previous peak at the beginning of the 1980s. Over the long term, these
exports can be expected to have contributed proportionately to economic growth, although the data on
exports of foreign-owned firms are not available in terms of constant dollars by which to estimate that
growth contribution in real dollar terms.
Although these shares of the overall US economy may seem small, they take on more significance
when translated into the estimated number of US jobs they support. Based on rough estimates, in 1994,
goods exports by foreign-owned firms supported about 1.6 million of the total 6.8 million US jobs
supported by all goods exports.14
A similar accounting estimate can be made of the shares of US gross domestic purchases supplied
by goods imported by foreign-owned US firms. In 1994, their imports supplied about 3.1 per cent of the
total US gross domestic purchases -- one-third of the total supplied by all firms’ US goods imports. This
14This rough estimate of the jobs supported by these exports is based on the national averages reported in studies
by the US Department of Commerce on the number of jobs supported by all US merchandise exports. For example,
see: Lester A. Davis, US Jobs Supported by Goods and Services Exports, 1983-94, US Department of Commerce,
Economics and Statistics Administration, Office of the Chief Economist, November 1996.WT/WGTI/W/14
Page 37
import share of gross domestic purchases has roughly prevailed since 1988 and is substantially higher than
the preceding low of 2.3 per cent supplied in 1983.W
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8Table 5-2
US Merchandise Trade, Total and by Foreign-Owned and US-Owned Firms
(Million dollars)
Total All US Firms* Foreign-Owned Firms** US-Owned Firms Foreign-Owned Share of Total
Exports Imports Balance Exports Imports Balance Exports Imports Balance Exports Imports Balance
1980 220,701 245,519 (24,818) 52,199 75,803 (23,604) 168,502 169,716 (1,214) 23.7% 30.9% 95.1%
1981 233,739 261,309 (27,570) 64,066 82,259 (18,193) 169,673 179,050 (9,377) 27.4% 31.5% 66.0%
1982 212,275 243,942 (31,667) 60,236 84,290 (24,054) 152,039 159,652 (7,613) 28.4% 34.6% 76.0%
1983 201,708 261,723 (60,015) 53,854 81,464 (27,610) 147,854 180,259 (32,405) 26.7% 31.1% 46.0%
1984 218,743 330,510 (111,767) 58,186 100,489 (42,303) 160,557 230,021 (69,464) 26.6% 30.4% 37.8%
1985 212,621 336,383 (123,762) 56,401 113,331 (56,930) 156,220 223,052 (66,832) 26.5% 33.7% 46.0%
1986 226,471 365,672 (139,201) 49,560 125,732 (76,172) 176,911 239,940 (63,029) 21.9% 34.4% 54.7%
1987 253,904 406,283 (152,379) 48,091 143,537 (95,446) 205,813 262,746 (56,933) 18.9% 35.3% 62.6%
1988 323,335 441,926 (118,591) 69,541 155,533 (85,992) 253,794 286,393 (32,599) 21.5% 35.2% 72.5%
1989 363,836 473,647 (109,811) 86,316 171,847 (85,531) 277,520 301,800 (24,280) 23.7% 36.3% 77.9%
1990 392,924 495,980 (103,056) 92,308 182,936 (90,628) 300,616 313,044 (12,428) 23.5% 36.9% 87.9%
1991 421,764 488,452 (66,688) 96,933 178,702 (81,769) 324,831 309,750 15,081 23.0% 36.6% 122.6%
1992 448,164 532,665 (84,501) 103,925 184,464 (80,539) 344,239 348,201 (3,962) 23.2% 34.6% 95.3%
1993 465,091 580,659 (115,568) 106,615 200,599 (93,984) 358,476 380,060 (21,584) 22.9% 34.5% 81.3%
1994 512,627 663,256 (150,629) 113,774 219,172 (105,398) 398,853 444,084 (45,231) 22.2% 33.0% 70.0%
Sources:* Total, all US firms: exports and imports of goods, Census basis, Bureau of Economic Analysis, Survey of Current Business, July 1996.
** Foreign-owned firms: Bureau of Economic Analysis, Survey of Current Business, July 1996.W
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US Trade of Foreign-Owned Firms with Foreign Parent Groups and with Other Foreign Firms
(Million dollars)
Exports Imports Balance
Total Parents Other Firms Total Parents Other Firms Total Parents Other Firms
1980 52,199 20,983 31,216 75,803 47,010 28,793 (23,604) (26,027) 2,423
1981 64,066 26,911 37,155 82,259 52,196 30,063 (18,193) (25,285) 7,092
1982 60,236 25,024 35,212 84,290 51,915 32,375 (24,054) (26,891) 2,837
1983 53,854 22,577 31,277 81,464 54,802 26,662 (27,610) (32,225) 4,615
1984 58,186 27,072 31,114 100,489 70,451 30,038 (42,303) (43,379) 1,076
1985 56,401 25,900 30,501 113,331 81,740 31,591 (56,930) (55,840) (1,090)
1986 49,560 21,873 27,687 125,732 93,418 32,314 (76,172) (71,545) (4,627)
1987 48,091 19,109 28,982 143,537 108,201 35,336 (95,446) (89,092) (6,354)
1988 69,541 26,425 43,116 155,533 118,362 37,171 (85,992) (91,937) 5,945
1989 86,316 34,276 52,040 171,847 129,926 41,921 (85,531) (95,650) 10,119
1990 92,308 37,764 54,544 182,936 137,458 45,478 (90,628) (99,694) 9,066
1991 96,933 42,222 54,711 178,702 132,166 46,536 (81,769) (89,944) 8,175
1992 103,925 48,767 55,158 184,464 137,799 46,665 (80,539) (89,032) 8,493
1993 106,615 47,350 59,265 200,599 150,789 49,810 (93,984) (103,439) 9,455
1994 113,774 51,722 62,052 219,172 164,066 55,106 (105,398) (112,344) 6,946
Source: Bureau of Economic Analysis, Survey of Current Business, July 1996.WT/WGTI/W/14
Page 40
SECTION II
US-EU foreign direct investment
The United States and the European Union (EU) countries have long been at the forefront of
rising international economic integration. The importance of the US-EU economic relationship is
reflected in the recent undertaking of the "Transatlantic Business Dialogue" proposed in December 1995.
This integration is particularly notable in terms of US-EU investment linkages, especially in the form of
direct investment as their bilateral shares of each others' total foreign direct investment are larger than in
their bilateral shares of their total international trade. For example, the EU accounts for far larger shares
of US direct investment abroad (USDIA) and of foreign direct investment in the US (FDIUS) than do our
NAFTA trading partners, which account for far larger shares of US trade than the EU.
To simplify the following discussion, US direct investment in the European Union is frequently
referred to as USDIEU and EU direct investment in the United States is referred to as EUDIUS. In
addition, the following analysis of EU FDI covers only the 12 countries that were members of the EU at
the end of 1994.
For the purpose of showing the relative importance of the bilateral FDI linkage between US and
EU firms, the EU countries are treated as a single economic unit. This exclusion of intra-EU FDI from
total EU FDI measurement recognizes that, although these members clearly are independent countries,
the barriers to intra-EU direct investment have virtually disappeared and that there is currently a high
degree of economic integration among the EU member economies in terms of their firm ownership and
the EU markets they serve. Nevertheless, for the purpose of describing the composition of EU FDI, the
key national locations of US investment in the EU and of EU investment in the United States are
highlighted.
In summary, this analysis highlights several key points on the bilateral importance of US-EU direct
investments.
•US and EU firms are major bilateral direct investors in EU and US firms, respectively.
•These bilateral direct investments account for very large shares of the total US and EU FDI
positions (the accumulated values of the stock of those investments) with all countries.
•Their shares of each others' total foreign direct investment are larger than their shares of each
others' total merchandise trade.
•In each of the past ten years the EUDIUS and USDIEU stock positions increased significantly,
reaching record levels in 1995.
•In most of the part ten years, the current value of EUDIUS flows averaged twice the size of
USDIEU flows. Nevertheless, by 1995, on a historical cost basis the EUDIUS position
led the USDIEU position by only 3 per cent.
•In recent years, the composition of the bilateral US and EU FDI flows has significantly in terms
of the different types of sources - equity, intercompany debt flows (both borrowing and
repayments), and reinvested earnings.
•In contrast, the bilateral US and EU FDI investment positions are very similar in terms of their
composition of the key industries in which the US and EU affiliates are located, andWT/WGTI/W/14
Page 41
similar in terms of the composition of the EU countries in which US-owned affiliates are
located and in which the parents of EU-owned US firms are located.
Measurement issues
The following analysis is based on US data, because of several key differences between the US
official data reported by the Bureau of Economic Analysis (BEA) and the official EU FDI data published
by Eurostat. The BEA and Eurostat data differ in four key respects: (1) the minimum share of
investment ownership or control by a single person is 10 per cent for US data and 20 per cent for EU data;
(2) Eurostat data exclude reinvested earnings produced by foreign direct investments, which account for a
significant share of FDI flows; (3) Eurostat currently reports only FDI flows data for the EU, as stocks
data are not expected to be available until 1997, and (4) BEA FDI data are reported in US dollars and
Eurostat data are reported in ecus on a weighted national EU national currency to ecu basis. Both the
Eurostat and BEA aggregate EU data are affected by weighting. In addition, for the aggregate EU data,
both the Eurostat values in ecus and BEA data in dollars have the undesirable characteristic of
significantly reflecting fluctuations in exchange rates in addition to the variations in the actual FDI stocks
and flows.
Several other limitations also adversely affect the BEA data on US-EU FDI.
•The BEA FDI stock data used in this discussion are on a historical-cost basis, as opposed to
current cost or market value bases, as historical cost is the only basis on which BEA
reports detailed data on the USDIEU and EUDIUS stock position by country, by
industry. Historical cost is the basis used for valuation in company accounting records in
the United States and is the only basis on which companies can report data in the direct
investment surveys conducted by BEA. Moreover, for consistency, the estimates of
earnings and reinvested earnings used in analysing changes in the historical-cost positions
are also on this basis and are not adjusted to current cost; country and industry detail for
these items, like the positions, is not available with such adjustment.15BEA obtains
historical-cost based data for all countries and industries; however, these data are not
published for some individual EU countries and industries in order to avoid disclosure of
the operations of individual firms.
•Comparison of BEA reported historical-cost FDI stock values over time in any one time series
in terms of their absolute dollar growth or growth rates can incur significant biases
because each of these values reflects the accumulated value of the stock of investment in
current and prior years at the price levels in those years. Therefore, comparison of two
separate time series also can be biased by differences in the timing of the bulk of the FDI
reflected in the end period value and by differences in the degree of price inflation
reflected in those values. No data are available for adequately adjusting for these biases
at the bilateral level.
•Some EUDIUS data for 1983-85 are publicly available only for the ten EU countries, excluding
Portugal and Spain, and for the ten EU countries' data, none are available for Denmark
15For an extensive discussion of these valuation issues, see: Raymond J. Mataloni, Jr., "A Guide to BEA Statistics
on US Multinational Companies", US Department of Commerce, Economics and Statistics Administration, Bureau of
Economic Analysis, Survey of Current Business , March 1995, pp. 38-55, and J. Steven Landefeld and Ann M.
Lawson, "Valuation of the US Net International Investment Position", Survey of Current Business , May 1991, pp.
40-49. See also for a discussion of this issue: Christian Bellak and John Cantwell, "Foreign direct investment - how
much is it worth"? Comment on S.J. Gray and A.M. Rugman, United Nations Conference on Trade and
Development, Division on Transnational Corporations and Investment, Transnational Corporations, Vol. 5, No. 1,
April 1996, pp.85-100.WT/WGTI/W/14
Page 42
or Ireland prior to 1987, and none are available for Greece or Portugal for 1994-95. For
1994-95, some industry by country data are suppressed to avoid disclosure of individual
firm's operations.
•Finally, for 1995, while aggregate stocks and flows data are available, detailed flow data by county
and industry were not yet available when this chapter was prepared.
A comparison of available BEA and Eurostat data on EUDIUS capital flows shows a substantial
higher BEA than Eurostat level when both are compared in dollar values (Figure 7.1).16The direction and
relative consistency in this difference in values for 1984-93 suggest that it may primarily reflect the larger
ownership coverage of the US BEA 10 per cent minimum ownership compared with the EU Eurostat 20
per cent minimum ownership. A corresponding substantially higher level in BEA than Eurostat EUDIUS
stocks data also can be expected even though this cannot yet be demonstrated until the Eurostat FDI
stocks data are published as expected in 1997.
No similar general difference between the BEA and Eurostat USDIEU flow data levels was
apparent (Figure 7.2). The lack of such a difference in values possible may be due to the exclusion from
the Eurostat data of reinvested earnings.
16The Eurostat values are in US dollars converted from ecus at current market exchange rates.WT/WGTI/W/14
Page 43WT/WGTI/W/14
Page 44
Bilateral US and EU FDI compared
Bilateral importance in total US and EU FDI
The United States and the EU are major participants in each others' total FDI. BEA data on the
US FDI position abroad show that the EU is the United States' most important investment partner. In
1995, the EU accounted for roughly one-half of total stock position of US direct investment abroad and
total foreign direct investment in the United States. Eurostat publishes no data on the EU FDI data that
are comparable to the BEA data. Eurostat so far has published only FDI flow, not stock position data,
and the coverage of Eurostat FDI flows coverage is smaller than BEA data because of Eurostat's higher
minimum ownership share required to be considered as FDI and because it excludes reinvested earnings
from FDI totals. Nevertheless, Eurostat data show that17in 1993 about 40 per cent of total third-country
EU flows were accounted for by the United States.
Compared with other economic partners, the EU is far more important to total US FDI than to
total US goods trade performance. While the EU accounted in 1995 for 42 per cent of total US FDI
stock position abroad and 55 per cent of that in the Untied States, the EU accounted for far smaller shares
of US trade performance in 1995 - 21 per cent of total US goods exports and 16 per cent of total US
goods imports. This relative difference in importance of the two types of economic linkages sharply
contrasts with the US links with its NAFTA partners Canada and Mexico. Our NAFTA partners account
for much smaller shares of total US FDI - 13 per cent of US FDI abroad and 9 per cent of FDI in the US -
than their far larger shares of US goods trade - 38 per cent of exports and 34 per cent of imports.
17Eurostat, "European Union Direct Investment, 1984-1993".WT/WGTI/W/14
Page 45
Total annual bilateral US-EU foreign direct investments are a very small share of the total
investments in both domestic and foreign firms in either the US or EU economies. A sense of the order
of magnitude of FDI flows can be shown when compared with gross investment in the US economy from
all sources. For example, in 1995, the total flows of foreign direct investment in the United States by all
foreign parent groups equalled 5.7 per cent of the total US gross private domestic investment (USGPDI)
and that by EU parent groups equalled 3.7 per cent of the total. Similarly, the total flows of FDI by US
parent groups in all of their foreign affiliates abroad equalled 8.8 per cent of the total USGPDI and that in
EU affiliates equalled 3.4 per cent of the total.
Although the US-EU FDI flows are a small share of total US and EU national investment, these
bilateral direct investment flows account for much larger shares of their total national investment in some
of the key US and EU industries. These FDI investment shares are particularly large for EU investment
in the US chemicals industry and for US investment in the EU autos industry. The foreign-owned firms
are also particularly important in key individual industries when measured in terms of the size of the
foreign-owned firm asset value, employment and other indicators.18
Several types of motives for FDI are frequently mentioned as explanations for large foreign direct
investments.19Direct investment in both the US and EU is frequently made to gain access to their
respective large and prosperous markets. It also is particularly important in order to meet local standards
and design requirements, to overcome national tariff and quota barriers, to provide in-country research
and development facilities for product development, and to facilitate product distribution. Access
probably is a more important factor in the case of US-EU FDI than lower labour costs as both markets are
among the highest paying in terms of wage rates and are the largest and wealthiest markets in the world.
Relative size of bilateral FDI stocks and flows
Over the entire 1985-95 period, based wholly on BEA historical-cost data, US direct investment
position in the EU (USDIEU) and EU direct investment position in the United States (EUDIUS) both
grew rapidly, averaging annually 13.2 per cent and 11.2 per cent, respectively. Throughout this entire
period, EUDIUS at least slightly exceeded USDIEU. In 1995, the EUDIUS position reached a record
$309 billion, and was 3.0 per cent larger than the USDIEU record position of $300 billion (Figure 7.3).
18For extensive data on the relative size of foreign-owned firms in the US, compared with the overall industry size,
see for example, Office of the Chief Economist, Economics and Statistics Administration, US Department of
Commerce, Foreign Direct Investment in the United States: An Update, January 1995.
19For more on the determinants of foreign direct investment, see "US Multinational Companies Operations in
1991", Survey of Current Business , (July, 1993, number 73).WT/WGTI/W/14
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During that ten-year period significant differences occurred in the growth rates of these investment
positions. While USDIEU grew relatively steadily throughout that period, EUDIUS during mid-period
first accelerated sharply and then stopped growing before growing sharply in the last three years of the
period. As a result, there was no significant difference in size in the very small gaps between the USDIEU
and EUDIUS stock values at the period beginning and ending (Figure 7.4).20
20As pointed out earlier in this chapter, comparison of stocks on a historical-cost basis can be biased and
substantially different from their relative value on a current- or market-cost basis, for which no detailed data are
available.WT/WGTI/W/14
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In large measure, these fluctuations in EUDIUS stocks are consistent with the timing of the 1991
US recession and recovery thereafter. In contrast, the steady growth in total USDIEU stocks fails to
reflect the overall cyclical slow-down in European economies largely after 1991.
Over the entire period, 1984-94 EUDIUS flows averaged twice the size as USDIEU flows,
although in 1991-94 they averaged at similar levels (Figure 7.5). However, fluctuations in these aggregate
national FDI capital flows, like income, are usually sensitive to cyclical fluctuations in the aggregate demand
of the country or countries in which they are being invested. In the US-EU relationship, aggregate
EUDIUS flows appear to vary more widely than USDIEU flows, as the variations in aggregate national
demand for investment in the 12 individual EU economies is minimized by differences in their cyclical
patterns. In contrast, EU investors in the United States respond to variations in the investment demand of
only one country's economy.
When the US economy is in a recession (as in 1991), the EUDIUS flows can be expected to
clearly reflect a corresponding decline in investment. In contrast, USDIEU investors have faced a wide
range of cyclical economic conditions in the individual EU countries at any one time which tend to even
out the fluctuations in the aggregate level of all USDIEU.WT/WGTI/W/14
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The fluctuations in aggregate FDI capital flows also reflect a number of major one-time factors.
For example, the quadrupling in EUDIUS flows between 1985 and 1987 appears to reflect a rapid rise in
EU investors' demand for US assets in response to the rapid decrease in the cost of those US assets to EU
investors in terms of EU currencies as a result of the rapid depreciation of the US dollar.
Compositional differences between USDIEU and EUDIUS
Throughout at least the past ten years there has been a very similar concentration in USDIEU and
EUDIUS among the industries in which the affiliates produce goods and services. There also is a strong
similarity between the concentration among EU countries in which USDIEU affiliates are located and in
which EUDIUS parents of US firms are located. However, the composition of USDIEU and EUDIUS
FDI flows substantially differ among the key sources of funding that contribution to the accumulated FDI
stock. Moreover, the relative importance among those types of funding sources has varied widely between
years.
Funding sources
The sources of funding for USDIEU and EUDIUS have differed significantly in recent years.
The three sources of FDI funding are: (1) equity capital flows, (2) intercompany debt flows and
(3) reinvested earning. A much larger share of USDIEU than EUDIUS capital flows have been mainly
in the form of reinvested earnings, and considerably less as equity flows and intercompany debt flows.
This difference in capital flow composition can be mostly attributed to the higher income levels earned by
USDIEU than EUDIUS affiliates over the 1985-95 period (Figure 7.6). The level of income earned by
EUDIUS affiliates rose sharply after a record 1991 low, largely due to the positive effect on those earnings
of the US recovery from the 1990-91 recession.WT/WGTI/W/14
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Country composition
Since 1982, in terms of the stock of investment, the United Kingdom has been both the largest
investor in the United States and the largest host country for US direct investment abroad, except in 1992,
when Japan was the larger investor. France, Germany and the Netherlands, are the next most important
US-EU investment partners. In 1995, 33 per cent of all USDIEU stock was invested in affiliates located
in France, Germany, the Netherlands and the UK, and 51 per cent of the Eudius in foreign parent groups
(FPGs) located in these four countries.
The EUDIUS figures are based on country of foreign parent group (FPG) and can differ
substantially from data based on the location of the ultimate beneficial owners (UBO), particularly in the
case of Netherlands' ownership. The Netherlands serves as a home for holding companies for firms from
all over the world, and it is not unusual for firms to make investments through their Dutch holding
companies. For example, when FDIUS is accounted for on a UBO basis, a French company that
purchases a US firm through its Dutch holding company will be listed as the UBO while the Netherlands
will be listed as the country of FPG.
Table 7.1 compares EUDIUS by UBO and FPG countries of ownership in 1994, the most recent
year for which comparable data are available. This comparison shows that the Netherlands direct
investment position in the United States is far higher - 33 per cent - on an FPG than on a UBO basis.WT/WGTI/W/14
Page 50
TABLE 7.1
EU Country FDIUS Positions, by Basis of Ownership in 1994
(Billion Dollars)
Country UBO basis FPG basis
Belgium 2.9 3.6
Denmark 1.5 1.9
France 38.4 33.5
Germany 44.2 39.6
Italy 4.1 2.4
Luxembourg 0.6 2.1
Netherlands 53.0 70.6
Spain 1.3 1.8
United Kingdom 110.7 113.5
Source: Bureau of Economic Analysis.
Industry composition
The two most important industries in which affiliates are located in both USDIEU and EUDIUS
are (1) manufacturing and (2) finance, insurance and real estate (FIRE). These sectors have been growing
rapidly since 1983, particularly in and with the UK, succeeding petroleum as the dominant industry in the
US-EU investment relationship. The wholesale industry is another important US-EU industry, which has
declined in importance for EUDIUS since 1983, but remained relatively stable for USDIEU.
USDIEU composition
The composition of FDI flows in terms of sources of capital funding has been a key factor
affecting the growth in the USDIEU position. The growth in the USDIEU position between 1985 and
1991 depended primarily on the reinvestment of the earnings in these US holdings in the European
Union, which accounted annually for over one-half of the total flows, except for 1989 (Figure 7.7). After
1990, equity capital accounted for an increasing share of these flows.
Intercompany loans in 1989 and again in 1993 were by far the largest funding source of USDIEU
flows. In contrast, intercompany debt repayments in 1990 significantly offset the contribution to the
USDIEU stock position of capital outflows and reinvested earnings. These debt transactions were largely
accounted for either by loans from US parents to their UK investment bank affiliates (1989 and 1993), or
loan repayments by UK investment bank affiliates to US parents (1990).WT/WGTI/W/14
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In recent years, there have been two major fluctuations in the annual aggregate levels of the
individual types of funding of USDIEU capital flows. In 1990, the repayment of loans by UK financial
affiliates increased sharply and reinvested earnings in EU affiliates dropped sharply. In addition, loans by
affiliates to their US manufacturing parents increased. In 1993, aggregate FDI flows reached a record
level due to larger US acquisitions in the UK manufacturing and transportation industries. In 1993, these
USDIEU flows also reflected large intercompany debt flows to UK financial affiliates and continued
reinvestment of affiliate earnings.21
In terms of industry composition, the overall USDIEU position in 1995, the largest shares were
in the EU FIRE and manufacturing industries, accounting for about 36 per cent each of the total position.
The USDIEU position in the FIRE industries has increased over ten-fold from $9.7 billion in 1983 to
$104 billion in 1995, while the USDIEU position in the manufacturing industries increased over three-fold
during this same period. Wholesale trade and banking have also experienced significant growth, leaving
only the petroleum industry as a stagnating sector of USDIEU.
In terms of country of affiliate composition, the USDIEU position in the UK is the most
important, more that quadrupling in size between 1983 and 1995 (Figure 7.8). The magnitude of this
position is accounted for primarily by the FIRE industries, although most of the USDIEU in petroleum is
in the UK, as well as a considerable amount of manufacturing investment. Since 1950, the United States
tended to have large growing investment positions in France, Germany and the Netherlands, but countries
such as Belgium, Ireland, Italy and Luxembourg, have seen large increases in their USDIEU positions as
well, primarily in manufacturing.
21The 1995 USDIEU capital flows surpassed those of 1993 due to record reinvested earnings.WT/WGTI/W/14
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EUDIUS composition
The sources of capital flow funding for EUDIUS have historically relied more on equity flows and
intercompany debt, as EUDIUS affiliates generally have earned less than USDIEU affiliates (Figure 7.6).
The record $40 billion peak in EUDIUS flows in 1987 can be largely attributed to dollar depreciation, US
economic growth, corporate restructuring in the United States, and the availability of large dollar holdings
in several developed countries with trade surpluses. The sharp rise in EUDIUS flows between 1985 and
1989 resulted in a two-and-a-half fold increase in the EUDIUS position from $82 billion in 1983 to $212
billion in 1989.
After the 1989 peak, EUDIUS capital flows dropped in each of the next three years primarily in
response to the onset of the US 1991 recession (Figure 7.9). The negative reinvested earnings on
EUDIUS in 1989-93 indicate that these investments in the United States were either incurring losses or
paying dividends to their parents in excess of their current earnings. Leading up to the 1991 recession, the
earnings of EU-owned US affiliates were probably slowing down due to decreased aggregate demand in the
sluggish US economy, which dampened income available for reinvestment. There were also negative
intercompany debt flows in 1990 and 1992, particularly by EU-owned US affiliates in the US finance and
petroleum industries that made repayments on their outstanding debt. In 1993-95, capital flows recovered
with the US economy recovery. Reinvested earnings shifted from negative to positive in 1993, and mostWT/WGTI/W/14
Page 53
of the increase was due to loans to US financial affiliates by their British parents. In 1994, reinvested
earnings were positive for the first time since 1988, and equity capital flows increased.22
22"Direct Investment Positions on a Historical-Cost Basis, 1993 Country and Industry Detail", Survey of Current
Business, June 1994.WT/WGTI/W/14
Page 54
In terms of the composition of EUDIUS by industry of affiliate, the EU positions in the US FIRE
and manufacturing industries more than quadrupled between 1983 and 1995. Although the position in
the US petroleum industry was 52 per cent larger in 1995 than 1983, that position reflected a decline from
$34 billion in 1990 to $24 billion in 1995, due to decreased equity flows and reinvested earnings, along
with large negative intercompany debt flows representing loan repayments to EU parents. The EUDIUS
position in the US wholesale trade industry nearly tripled between 1983 and 1995, while the EUDIUS
position in banking more than tripled between 1983 and 1995.WT/WGTI/W/14
Page 55
In terms of the composition by country of foreign parent group, during the 1980s EUDIUS was
dominated by France, Germany, the UK and the Netherlands (Figure 7.10). The EUDIUS positions of
France, the UK and Germany, more than quadrupled from 1983 to 1995, while the EUDIUS position of
the Netherlands more than doubled. Much of the growth in the UK's investment in the United States
occurred in 1987 and is attributed to a sharp appreciation of the pound against the dollar, and the
deregulation of UK capital markets. The latter provided an opportunity to British parents to finance large
acquisitions in the United States by issuing their shares in the London stock market.
Several smaller EU countries substantially increased their investments in the United States in the
early 1990s - Luxembourg's EUDIUS position doubled, both Denmark and Spain's positions tripled, and
Ireland's position grew five fold. In contrast, the position of most larger EU countries except France grew
far slower. France's position in the United States doubled in the early 1990s.W
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USDIEU Direct Investment Capital Flows, by Industry of EU Affiliate 1983-1995
(millions of dollars, outflows (-))
USDIEU 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
All industries 4,644 5,553 7,285 7,904 10,228 9,205 23,297 4,230 17,738 15,300 37,401 17,249 36,293
Petroleum D D D -390 203 -1,245 -904 3,222 1,059 372 457 91 D
Manufacturing 3,038 3,218 3,811 3,610 7,603 3,837 5,798 3,707 8,543 7,844 5,648 9,224 D
Wholesale D D D 1,212 1,739 2,224 1,735 802 2,464 2,319 2,057 3,036 2,610
Banking 490 460 D -480 -798 32 -446 -387 -1,054 -260 901 199 D
Finance (except banking), insurance and
real estate 891 828 1,103 3,578 2,100 3,592 14,786 -5,141 3,761 2,232 27,411 1,133 D
Other services D D D 232 222 302 1,956 1,380 1,386 1,717 755 1,483 4,186
*Other industries 141 -34 238 142 -841 463 372 647 1,578 1,076 173 2,084 DW
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ge 2EUDIUS Direct Investment Capital Flows, by Industry of US Affiliate 1983-1995
(millions of dollars, outflows (-))
EUDIUS 1983** 1984** 1985** 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
All industries 7,712 13,483 10,445 19,856 42,313 31,032 35,699 20,836 11,581 4,347 32,017 22,987 39,745
Petroleum 1,031 6,757 2,918 1,107 8,272 -2,433 -629 -151 -1,932 -376 -555 1,304 D
Manufacturing 3,075 1,832 4,370 8,308 18,733 21,979 26,940 10,135 5,078 2,269 9,182 12,122 22,180
Wholesale 940 1,009 1,669 2,373 3,493 2,108 1,821 2,369 402 -910 926 1,081 D
Banking 609 104 316 690 823 1,646 1,516 -916 -291 1,319 2,379 2,908 D
Finance (except banking), insurance
and real estate 1,736 2,822 501 4,062 3,956 859 3,368 864 4,552 718 17,491 -476 9,290
Other services D D D D 4,924 5,219 3,557 4,914 2,782 -26 -788 257 D
*Other industries 321 1,319 671 3,316 2,112 1,657 -874 3,621 990 1,353 3,380 5,790 D
*Other industries include retail trade, mining and other services for '83-'86 EUDIUS data.
**Excludes data on Portugal and Spain.
"D" - data are suppressed to avoid disclosing individual firm data.
Source: US Department of Commerce, Bureau of Economic Analysis.W
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USDIEU Direct Investment Capital Flows by Country of EU Affiliate, 1983-1995
(millions of dollars)
USDIEU 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Total outflows (inflows "-") 4,644 5,553 7,285 7,904 10,228 9,205 23,297 4,230 17,738 15,300 37,401 17,249 36,293
Belgium -189 353 7 -370 1,045 485 669 746 1,411 778 675 1,663 2,651
Denmark 212 42 33 -252 -289 132 D D 219 -29 141 194 -88
France 155 207 828 480 1,078 1,789 1,584 1,267 2,737 3,857 -495 2,770 5,954
Germany 760 447 383 1,203 805 -1,822 2,522 1,626 4,832 1,754 4,263 1,846 2,481
Greece -65 -78 -32 65 3 38 -80 33 14 75 67 24 -33
Ireland 479 463 645 606 909 725 793 926 537 1,191 1,506 1,659 1,087
Italy 770 723 988 -523 954 755 1,657 1,219 1,508 1,159 1,427 2,086 2,855
Luxembourg 205 122 53 27 -47 427 65 -129 -3 217 3,686 553 1,525
Netherlands 443 -51 641 3,396 2,104 1,446 3,112 -2,004 1,654 -1,562 1,398 3,212 7,134
Portugal 5 4 18 50 203 38 D D 193 175 140 175 183
Spain 231 12 285 493 498 614 979 460 -29 1,468 -759 1,146 920
United Kingdom 1,636 3,309 3,437 2,728 2,966 4,576 11,825 -202 4,665 6,215 25,355 1,920 11,624
*Excludes data on Portugal or Spain.
"D" - data suppressed to avoid disclosing individual firm data.
Source: US Department of Commerce, Bureau of Economic Analysis.W
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ge 2EUDIUS Direct Investment Capital Flows by Country of FPG, 1983-1995
(millions of dollars)
EUDIUS 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Total inflows (outflows "-") 7,712* 13,483* 10,445* 19,856 42,313 31,032 35,699 20,836 11,581 4,347 32,017 22,987 39,745
Belgium 317 302 -28 680 351 460 467 115 -584 794 -464 -172 -302
Denmark D D D D 19 84 47 165 -428 31 641 622 720
France -133 776 35 980 3,155 3,122 2,744 5,987 4,407 -105 6,778 3,987 3,719
Germany 1,011 1,219 2,056 2,186 4,591 2,245 3,738 585 2,160 1,274 7,698 6,551 8,117
Greece D D D D D D D D D D D D D
Ireland NA NA NA NA 100 295 1,008 -138 20 307 2,379 -181 2,752
Italy 21 3,212 68 74 -21 -683 850 429 -70 76 -605 1,466 -182
Luxembourg -12 113 -175 -42 -11 -318 509 1,851 -1,359 -2 190 1,191 2,205
Netherlands 2,662 3,381 2,877 4,375 8,413 6,137 7,323 7,163 3,631 2,709 2,967 -2,272 -184
Portugal D D D D D D D D D D D D D
Spain D D D D 76 63 90 188 403 299 -809 659 795
United Kingdom 1,207 7,184 5,198 11,319 25,627 19,617 18,939 4,519 3,450 -1,077 13,232 11,123 22,081
*Excludes data on Portugal or Spain.
"D" - data suppressed to avoid disclosing individual firm data.
Source: US Department of Commerce, Bureau of Economic Analysis.W
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USDIEU Investment Positions on a Historical-Cost Basis at Yearend, by Country of EU Affiliate, 1983-1995
(millions of dollars)
USDIEU 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Total 74,589 74,301 87,066 103,135 129,455 137,120 160,988 180,491 199,361 210,164 240,414 261,138 300,228
Belgium 5,087 5,202 5,619 5,568 7,719 7,830 7,710 9,464 10,611 11,381 11,697 14,213 17,785
Denmark 1,275 1,263 1,383 1,164 1,120 1,182 D 1,726 1,940 1,676 1,735 1,983 2,251
France 6,613 6,434 7,747 9,323 12,335 13,576 16,443 19,164 21,569 25,157 24,312 27,860 32,654
Germany 15,451 15,055 17,176 21,476 25,128 22,784 23,673 27,609 32,411 33,003 26,811 37,622 43,001
Greece 315 239 179 129 164 216 210 282 306 372 410 447 437
Ireland 2,517 2,964 3,762 4,412 5,530 6,063 4,665 5,894 6,471 7,607 9,019 10,159 10,970
Italy 4,535 4,745 6,137 7,745 9,726 10,046 11,221 14,063 15,085 13,015 12,748 14,578 16,718
Luxembourg 1,240 493 795 957 874 1,122 1,560 1,697 1,734 2,031 5,611 6,112 7,661
Netherlands 6,917 6,207 7,552 12,203 15,507 16,765 19,160 19,120 20,293 20,700 20,911 25,127 37,421
Portugal 222 210 243 302 528 583 D 897 1,034 1,290 1,264 1,465 1,712
Spain 2,331 2,224 2,407 2,882 4,334 5,220 6,500 7,868 8,088 8,757 6,689 8,316 9,689
United Kingdom 28,086 29,265 34,066 36,974 46,489 51,734 67,722 72,707 79,819 85,176 109,208 111,255 119,938
"D" - data suppressed to avoid disclosing individual firm data.
Source: US Department of Commerce, Bureau of Economic Analysis.W
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ge 2Table 7.5 (cont'd)
EUDIUS Investment Positions on a Historical-Cost Basis at Yearend by Country of FPG, 1983-1995
(millions of dollars)
EUDIUS 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Total 82,286 96,555 107,105 127,221 161,061 188,342 212,361 220,874 228,959 225,652 253,686 270,572 309,491
Belgium 2,261 2,548 2,291 2,487 3,371 3,471 3,799 3,900 3,228 4,177 3,837 3,882 3,637
Denmark D D D D 498 588 656 819 448 445 1,068 1,913 3,043
France 5,726 6,571 6,670 7,709 10,137 13,233 15,365 18,650 25,078 24,729 30,672 34,139 38,240
Germany 10,845 12,330 14,816 17,250 21,905 25,250 28,386 28,232 29,335 29,768 35,086 40,297 47,907
Greece D D D D D D D D D D D D D
Ireland D D D D 544 725 1,416 1,340 1,863 2,211 4,568 4,354 7,146
Italy 1,238 1,438 1,237 1,323 1,310 752 1,436 1,524 3,227 1,380 780 2,387 2,258
Luxembourg 297 753 345 263 590 -131 407 2,195 734 639 1,234 2,457 4,636
Netherlands 29,182 33,728 37,056 40,717 46,636 48,128 56,734 64,671 63,113 69,191 71,860 68,212 67,654
Portugal D D D D D D D D D D D D D
Spain D D D D 442 511 601 797 1,811 2,103 1,250 1,777 2,568
United Kingdom 32,152 38,387 43,555 55,935 75,519 95,698 103,458 98,676 100,085 90,931 103,270 111,068 132,273
"D" - data suppressed to avoid disclosing individual firm data.
Source: US Department of Commerce, Bureau of Economic Analysis.W
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USDIEU and EUDIUS Capital Flows, by Type of Funding Source, 1983-95
(millions of dollars)
USDIEU 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Total outflows (inflows "-") 4,644 5,553 7,285 7,904 10,228 9,205 23,297 4,230 17,738 15,300 37,401 17,249 36,293
Equity capital flows 1,859 1,465 1,362 329 2,067 26 3,928 4,342 6,591 9,085 13,781 8,449 D
Intercompany debt flows -438 -1,064 -710 1,869 555 3,176 14,293 -9,571 3,357 2,630 14,082 805 D
Reinvested earnings 3,224 5,150 6,586 5,706 7,606 6,002 5,075 9,459 7,789 3,585 9,539 7,995 20,038
EUDIUS* 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Total inflows (outflows "-") 7,712 13,483 10,445 19,856 42,313 31,032 35,699 20,836 11,581 4,347 32,017 22,987 39,745
Equity capital flows 4,457 4,878 6,393 13,659 18,211 22,112 27,022 28,870 17,608 14,948 12,732 15,011 D
Intercompany debt flows 2,388 5,736 2,878 4,847 22,756 6,937 11,510 -1,160 872 -7,071 20,965 4,340 D
Reinvested earnings 866 2,869 1,175 1,350 1,347 1,983 -2,832 -6,874 -6,899 -3,529 -1,680 3,636 9,568
*EUDIUS data for 1983-85 exclude Portugal or Spain
"D" - are suppressed to avoid disclosing individual firm data.
Source: US Department of Commerce, Bureau of Economic Analysis.WT/WGTI/W/14
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SECTION III
US-EU goods and services trade between related parties23
US trade with Europe and particularly among related firms has a history that began well before the
independence of the United States. Moreover, that trade between related parties always has been a major
factor in the overall trade between these two regions. The following brings together data on the
US-European Union trade in goods and services between non-bank related parties that are US-owned
firms or EU-owned firms, highlights the magnitude of related-party trade in the aggregate US-EU trade,
examines the extent that ownership helps explain the performance of that trade, and explains the
constraints on that examination due to the limitations on available data.
Four key points emerge from the following brief analysis of US-EU trade between related parties.
·Ownership of foreign affiliates is a key determinant of overall US-EU bilateral trade performance, as trade
between related-parties accounts for nearly one-half of the total.
·Foreign direct investment leads to substantial export surpluses in US-EU trade, with both US and EU
parent firms having large export surpluses in that trade with their foreign affiliates.
·The total trade in goods between US and EU related parties is roughly 5 times larger than their trade in
services. In 1993, their goods trade was $89.1 billion; their trade in services was $16.6
billion.
·In recent years, US trade with EU related parties has incurred small deficits in goods trade ($8.3 billion in
1993) and in services trade, although far smaller in total value, nearly equal surpluses
($9.0 billion in 1993).
This chapter discusses in two separate sections the trade in goods and services between US-EU
related parties because the basis of their valuation is very different and not directly comparable, and
because the limitations on the availability of data on services trade are substantially greater than those on
goods trade. The valuation of goods trade is based directly on their value as shipped. In contrast, the
value of services trade, such as royalties and fees are based on payments and receipts of international
payments transactions that indirectly reflect their value at the time those services were provided.
Discussion of the data limitations relating coverage and other aspects are discussed separately in the two
sections on goods trade and services trade.
23This Section was written by Chester A. Davis, a senior international economist in the Office of International
Macroeconomic Analysis, Office of the Chief Economist, Economics and Statistics Administration, US Department of
Commerce.WT/WGTI/W/14
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I.US-EU RELATED-PARTY GOODS TRADE
Background
The bilateral US-EU trade varies widely in terms of linkages between the firms involved in those
transactions. The direct investment links between US and EU firms and the wide range in the types of the
trade relationships involved in US-EU trade between US and EU firms is illustrated by Diagram 8.1.
The following assessment of bilateral goods trade between US-owned and EU-owned firms has
required a special compilation of the trade data reported by the Bureau of Economic Analysis (BEA) of
the Department of Commerce. This compilation brings together the separate detailed data on US-EU
trade of EU-owned affiliates located in the United States reported by BEA under the topic of foreign direct
investment in the United States (FDIUS) and the US-EU trade of US-owned affiliates located in the EU
reported by BEA under the topic of US direct investment abroad (USDIA).
This analysis covers US trade only with the 12 EU members in 1994, the latest year for which
US-EU related-party trade data were available at the time this report was prepared, and thus do not include
data for Austria, Finland and Sweden, who became members in 1995.
The following analysis has required some simplifying terms in order to take account of both data
describing the two separate data sets on US-EU trade of the EU-owned affiliates located in the United
States and the US-EU trade of US-owned affiliates located in the EU. In addition, this merger of the
data on as comparable a basis as possible has been significantly affected by limitations in the reported data
due to the need to avoid revealing the operations of individual firms and other factors. Because of these
data limitations, the results of this should be viewed as indicative of the extent and nature of the US-EU
related-party trade rather than as exact results, particularly because some actual related-party trade is not
covered in detail and because the some of the trade data are reported in terms of country of ownership
rather than the actual EU country of origin or destination. For these reasons it is important to
understand the following descriptions of the conventions used in this chapter to simplify terms and the
limitations that affect the reported results.
Key terms used
The terms used to describe the various types of relationships between these firms and the
limitations of available data make it very difficult to clearly describe that trade without some simplification
of terms. In order to avoid confusion and at the same time focus the analysis on the trade between
related parties, the following conventions in terms have been adopted in this chapter.
·US-EU bilateral trade: All goods trade between firms located in the United States and in the 12 countries
that were members of the European Union in 1994.
·US-EU MNC trade: All US-EU trade in which at least one of the parties is (1) a US parent having an
affiliate in the EU countries, (2) a US-owned affiliate located in the EU, (3) a US
foreign-owned affiliate for which the foreign parent or ultimate beneficial owner (UBO is
located in the EU, or (4) a foreign parent or UBO located in the EU having an affiliate
located in the US.24
24Thus, MNC excludes US-EU trade of firms that might otherwise be considered either MNC parents or
affiliates. Even so, this use of “MNC” is somewhat broader than a frequently used definition that only includes the
parent firms.WT/WGTI/W/14
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·US-EU related-party trade: That share of US-EU MNC trade that is between a US-owned or EU-owned
parent firm and its US or EU affiliate.
·USDIA trade or FDIUS trade: Trade between a US-owned parent and its EU affiliate (USDIA trade), or
trade between a EU-owned parent and its US affiliate (FDIUS trade).25
·MOFA trade: US-EU trade of a majority-owned affiliate.26
Diagram 8.2 shows the different types of US-EU trade flows using these simplifying terms and
their relative size in 1993. In particular, it distinguishes between these flows according to whether they are
between related or unrelated parties.
25Thus, USDIA trade and FDIUS trade exclude trade between US-owned or foreign-owned firms and unrelated
firms, which is included here in overall MNC trade. FDIUS trade also excludes trade between a foreign-owned US
affiliate and its affiliate in the EU, as that trade would be classified as USDIA trade.
26Separate data for majority-owned and all other affiliates is reported by BEA only for USDIA trade; no MOFA
data are available for FDIUS data.WT/WGTI/W/14
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Analysis restricted by limited scope and form of available data
The principal data source on trade between US and foreign related parties are the data reportedby
the US Department of Commerce's Bureau of Economic Analysis (BEA) on the trade between US parent
firms and their foreign affiliates (USDIA) and foreign parent firms and their US affiliates (FDIUS). BEA
provides far more data on related-party international trade than any other country. Very little data is
reported by European Union organizations and the individual national organizations. Even for the US
case, however, analysis of related-party trade is severely restricted by the scope and form of the data.
Representativeness of the BEA data on goods trade of related parties is somewhat limited for
analytical purposes by suppression of some of the individual country and industry data by BEA to avoid
divulging the operations of individual firms and differences in the comparability of the coverage by the
FDIUS and USDIA data. The main limitations include:
1. Data suppression . Some of the individual country and industry data on related-party trade are
suppressed by BEA to avoid disclosure of the operations of individual firms, which is required by
US law. This limitation particularly affects a very large share of the trade data on US trade with
related parties located in the three countries Austria, Finland and Sweden -the 1995 additions to
the EU. Thus, the most consistently available data are based on the EU-12 membership.
2. EU country of destination or origin. FDIUS-based US-EU related-party trade data are not
publicly reported on the basis of country of destination or origin. Their aggregate value by
country of destination or origin is reported for benchmark years only on the basis of the EU
country of destination or origin for all countries in which ultimate beneficial owners (UBO) or
foreign parent groups are located and the total for those UBOs that are located in Europe as aWT/WGTI/W/14
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whole or in the four largest EU countries. For non-benchmark years, no data by country of
destination or origin are reported, only by country of UBO. In contrast, USDIA-based data on
US-EU related-party trade are reported on the basis of the EU country in which the US-owned
affiliate is located, which for USDIA-based data, is the same as the country of destination or
origin.27This difference in coverage between FDIUS and USDIA data reported for US-EU
related-party trade data is probably very small. Nevertheless, for the purposes of this report, the
differences in coverage are treated as insignificant, and the time-series FDIUS-based US-EU
related-party trade data necessarily cover only their trade by country of UBO.
3. Timeliness . At the time this report was prepared, the most recent year for which detailed export
and import data were available on US-EU related-party trade was 1993.28
4. Coverage comparability . Data on both FDIUS and USDIA based US-EU trade between all
related parties (parents and their affiliates) are available on a comparable basis only for benchmark
years.
·FDIUS data are for trade between foreign parents and all minority and majority foreign-owned affiliates in
the United States.
·USDIA data for US-EU trade with US parents are available only with their MOFAs (majority-owned
affiliates abroad). No detailed data are available on US-EU trade between US parents
and affiliates located in the EU for which they hold less than majority ownership. As a
result, in this respect, the total US-EU related-party trade reported in this is slightly
undercounted.
·At the time this report was prepared, the most recent USDIA detailed benchmark data published were for
1989. (The benchmark data for 1994 were published in January 1997.) The most
recently published FDIUS benchmark data are for 1992 and were published in 1995.
·The USDIA 1989 benchmark data show that reliance on data that only cover USDIA MOFA affiliates
results in a significant, but small difference in comparability in the data, as the US trade
with US-owned affiliates abroad with less than US MOFA ownership only accounted for
about 1.2 per cent of the total USDIA exports and 1.9 per cent of the USDIA imports.
5. Unrelated parties . While data are available on US-EU trade of FDIUS and USDIA affiliates
with unrelated parties, no detailed data are available on US-EU trade of the FDIUS and USDIA
parents with unrelated parties. As a result, in order to discuss US-EU MNC trade on a balanced
basis in this chapter, US-EU data on trade between either affiliates or parents and unrelated
parties are included with trade between unrelated parties.
27For USDIA-based data, the country of affiliate is the same as the foreign country of destination or origin
because responses to the BEA survey used for these data restricts responses to enterprises located in a single country.
28The detailed data on FDIUS-based trade in 1994 were released in July 1996 and data on USDIA-based trade in
1994 were released in the benchmark report in January 1997.6. The data only cover trade by non-bank related parties; however, there is no indication that
restriction excludes a significant quantity of the actual trade between all related parties.
The US and EU are important trade partnersWT/WGTI/W/14
Page 69
Major shares of the total goods exports and imports of the United States and the European Union
have consistently depended on each other. In 1990s, the EU was the second largest US export market
and source of imports. For example, in 1995, 21 per cent of US goods exports were shipped to the EU
and it was the source of 18 per cent of US goods imports. Only the total US trade with its NAFTA
partners - Canada and Mexico - were of greater importance. The United States fulfilled a similarly
important role in EU external trade, as the entire European Union’s largest export market and source of
imports (excluding intra-EU trade). For the EU as a whole in 1994, the United States accounted for 18
per cent of the EU external goods exports and 14 per cent of its imports.29
Over most of the past decade aggregate US-EU trade has continued to generally rise, but has
clearly been affected by macroeconomic cyclical fluctuations in the US and European economies. US
imports from the EU decreased in 1991 due to the US recession and thereafter rose to a record level in
1995 (Figure 8.1). The growth in US exports to the EU was seriously impaired by the recession in EU
demand in the early 1990s, but recovered in 1994. These longer-term trends and their cyclical variations in
the overall US-EU trade are also largely reflected in the aggregate US-EU trade of US-EU MNC trade, as
well as that share of their trade between related parties.
Total US-EU MNC trade and the share between US-EU related parties
29International Monetary Fund, Direction of Trade Statistics Yearbook, 1995.WT/WGTI/W/14
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US and European multinational corporations (MNCs) and their foreign affiliates dominate
US-European goods trade. About two-thirds of total US-EU trade in recent years has been “US-EU
MNC” - bilateral trade which involved at least at one end or the other of that transaction a firm that is a
US-EU bilaterally related party. That is, trade that includes:
·US-EU trade between related US-EU parties - parent and affiliate, and
·US-EU trade between one of those US or EU related parties and another (unrelated) US or EU firm.
For example, in 1993, US and EU parent firms and/or their EU and US affiliates accounted for
$64 billion of US exports to the EU - 66 per cent of the total US exports to the EU, and $68 billion in US
imports - 70 per cent of the total US imports from the EU.30
30This is an estimated minimum, as these data do not cover (1) a small share of the US-EU trade that is
conducted by non-majority owned US affiliates (USDIA-based affiliates) located in the EU, and (2) trade between EU
parent groups and unrelated US parties.WT/WGTI/W/14
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US-EU trade between related parties
Nearly one-half of total US-EU goods trade is accounted for by trade between US and EU related
parties. In 1993, for example, this related-party trade reached a record $40.4 billion in US exports and a
record $48.7 billion in US imports (Figure 8.2). In turn, this related-party trade accounted for very large
shares of the total US-EU trade -- 42 per cent of the US exports and 50 per cent of the imports.WT/WGTI/W/14
Page 72
The aggregate trade balance between US-EU related parties has been in deficit for most of the
1983-93 period (Figure 8.3). That deficit ranged between $14 billion in 1987 and $2 billion in 1984, and
was $8.3 billion in 1993. However, the US-EU related-party deficit has accounted for a very small share
of the overall US goods trade deficit with all countries over that ten-year period.
In contrast, that $8.3 billion US-EU related-party deficit in 1993 was far larger than the
$1.0 billion overall US-EU trade deficit, as it offset the nearly as large $7.3 billion US-EU trade surplus
between unrelated firms.
Trade between unrelated parties
EU-US trade between unrelated firms, including the trade of US and EU MNCs with unrelated
firms, accounts for a slightly larger share of total US-EU trade than that between US-EU related parties.
·In 1993, trade between unrelated parties accounted for 58 per cent of total US exports to the EU and 50
per cent of the imports.
·The US trade balance between unrelated parties was in surplus by $7.3 billion, in contrast of the $8.3
billion deficit between the related parties.WT/WGTI/W/14
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These unrelated-party trade data are less than perfect as they are computed as a residual and,
therefore, are known to include related party trade, for which separate data are not available, between (1)
US parents and their EU affiliates that are not majority-owned (measured on the USDIA basis), and (2)
trade between EU-owned US affiliates and the firms in the EU they own, that is, the US affiliates’ EU
affiliates (measured on the FDIUS basis). Nevertheless, the distortion probably is not large. For
example, in 1993, US exports by EU-owned affiliates to their own affiliates in all countries was $4.6 billion
(4.7 per cent of total US exports to the EU), and their imports from their EU affiliates in all countries was
$4.6 billion, (4.7 per cent of total US imports from the EU).
Substitutionality versus complementarity between FDI and exports
A key issue with respect to foreign direct investment is its impact on the economy of the parent
country through its impact on the parent country’s exports to the country in which the affiliate is located.
Specifically, in the context of this chapter, the issue is whether bilateral US-EU FDI generally has a
complementary, neutral, or substitutional impact on US and EU exports. A very superficial approach to
answering this question is to compare on an accounting rather than causal basis (1) the EU shares of total
USDIA stock and of total FDIUS stock, with (2) the shares of total US and EU goods exports that are
accounted for by their exports to each other. That comparison suggests, for example, that in 1993 the
export shares are much smaller than the corresponding FDI shares (Figure 8.4). In 1993, a 21 per cent
share of total US goods exports was shipped to the EU - about half as large a share as the 43 per cent EU
share of the total stock of US direct investment abroad. Similarly, a 17 per cent share of total EU external
goods exports was shipped to the US market - about one-third as large a share as the 54 per cent EU
share of the total stock of foreign direct investment in the US.WT/WGTI/W/14
Page 74
If believed, this very superficial explanation would suggest that on balance, foreign direct
investment abroad is on average a substitute for exports. That approach, however, is misleading because,
among other factors, the shares are dependent on trade and foreign direct investment patterns and
practices in other regions of the world, not just for the US and EU markets. Moreover, the export shares
are based on trade with all parties rather than being decomposed on a basis consistent with related-party
trade. Furthermore, the US and EU are well known to be more open to FDI than are most other
countries.
A more insightful alternative accounting approach to this US-EU issue is an examination based on
their related-party trade - one that accounts for both exports and imports. The following examination
based on related-party trade suggests that on balance, foreign direct investment abroad and trade for both
the United States and the EU is significantly complementary, even though the data are not based on either
a directly demonstrated causal basis nor on a counter-factual basis.
USDIA and FDIUS trade comparisons
Although the US deficit in overall related-party trade was relatively small during the past decade,
much larger imbalances have occurred in the separate balances of USDIA and FDIUS related-party trade.
Moreover, those US imbalances have been persistently opposite in direction - almost mirror images of
each other. The USDIA trade has been in substantial surplus and the FDIUS trade in substantial deficit
that has moved in opposite directions from the US trade perspective.
Although the trade imbalances with the EU have been opposite in value from the US trade
perspective (a USDIA trade surplus and a FDIUS trade deficit), both of those imbalances have been inWT/WGTI/W/14
Page 75
surplus from an investor country perspective. That is, the separate US-EU trade of both the US and the
European parent groups have been in substantial surplus. The similarity of those balances in terms of
parent ownership supports the often cited thesis that outward foreign-direct investment supports net
exports.
·Between 1983 and 1993 the USDIA export surplus ratio and the FDIUS import surplus ratio were both
substantial - both more than 50 per cent (Figure 8.5). The FDIUS import ratio was somewhat
larger than the USDIA export ratio during most of that decade.WT/WGTI/W/14
Page 76
·In dollar terms, over the past decade the US-EU trade deficit between foreign parents and their US
affiliates (FDIUS) was far larger than the trade surplus between of US parents with their foreign
affiliates (USDIA) (Figure 8.6). For example, in 1993
·The FDIUS affiliate imports from their parents exceeded their exports to their foreign parents by $23.5
billion.
·The USDIA parent exports to their foreign affiliates exceeded their imports from their affiliates by $15.1
billion.
Macro and microeconomic trade determinants
Trends and levels of US-EU trade between related parties reflect a wide range of macro and micro
economic determinants. For example, cyclical variations in US domestic demand greatly affect trends in
US imports, and cyclical shifts in EU domestic demand have corresponding effects on the trend in US
exports. Other related macroeconomic factors, such as aggregate investment and exchange rates, also
effect US-EU trade. Their impact is evident in changes in the rate of growth of aggregate US imports,
imports from all EU parties, and from EU related parties (Figure 8.7). Similarly, the relative levels of
related-party exports and imports in any one year reflect to a substantial degree, but not necessarily
proportionately, the same macroeconomic factors that affect aggregate demand here and abroad in that
year.WT/WGTI/W/14
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Within the framework of macroeconomic determinants of the aggregate trade, both the trends
and levels in exports and imports are also expected to be significantly affected by microeconomic factors,
such as the trend and composition of FDI, and the effects of factors such as technology that determine
here and abroad the composition of the operations of foreign-owned firms, including their international
trade. Among these factors are technological innovation, which has been a major factor, for example, in
US exports of aircraft, chemicals, computers, and electronic components.
The direct impact of foreign macroeconomic determinants on annual variations in aggregate US
exports is not readily apparent because of the generally diverse variations in economic conditions across
countries in any one year (Figure 8.8). Some macroeconomic influence on these US exports is reflected
in recent years only in the form of the post-1990 general European economic slowdown. The malaise of
this period is reflected in the demand for US exports by foreign parents, US-owned European affiliates,
and other EU parties. The pre-1985 dollar appreciation undoubtedly exerted a major impact on US price
competitiveness in Europe, but not necessarily uniformly across all three groups of European importers.
Moreover, as US exports by foreign-owned affiliates to their parents are much smaller than those
by US parents to their EU affiliates, the growth rates of aggregate exports to EU parent groups appear to
be proportionately more affected by differences among them in import demand (Figure 8.8). For example,
almost all of the sharp 1986-88 fall and recovery in the growth of US exports to foreign parents is
accounted for by exports to parents located in only two countries -- Italy and the Netherlands.WT/WGTI/W/14
Page 78
In contrast, the influence of US macroeconomic determinants on annual variations in aggregate
US imports is readily apparent, particularly in terms of annual growth rates of US goods imports by all
three groups of importers - USDIA and FDIUS imports from related parties and imports from unrelated
parties. These data show that imports by US parents from their foreign affiliates and imports of US
foreign-owned affiliates from their foreign parents are both significantly affected by the same factors that
determine aggregate US imports from the EU (Figure 8.9). In turn, these imports reflect the influence in
US growth rate of aggregate US demand measured in terms of gross domestic demand. In particular, the
macroeconomic impact of the slowdown in economic growth going into the 1991 US recession and the
post-1991 recovery is clearly reflected in the trend in all US imports from the EU from both US-owned
MOFAs and foreign parents, as well as other EU parties.
The extent that comparative advantage of US and EU firms is reflected in their overall revealed
competitive advantage is dependent on the assumption that the US import and EU import markets are
relatively open. However, the large mirror image imbalances in that trade - large USDIA export surpluses
and large FDIUS import surpluses - suggest that this necessary assumption is not sufficient to explain the
overall revealed performance. On the contrary, a major share of the overall US-EU trade performance,
and thus the overall performance in that trade, clearly significantly depends on the nationality of
related-party ownership.WT/WGTI/W/14
Page 79
Country composition of FDI and trade
The basic nature of MNC related-party trade, particularly within the European Community, is an
effort to bridge national boundaries, in order to gain market access that leads to increased production and
distribution efficiencies through economies of scale. This goal was greatly facilitated by the reduction of
intra-EU customs barriers. These developments also have reduced the reliability and availability of EU
data measuring intra-EU trade transactions. As a result, the validity of a detailed analysis of related-party
trade data on an EU country-by-country basis is on weak ground. Moreover, as mentioned above, BEA
related-party trade data are not available exactly on the basis of country of destination or origin.
Nevertheless, the BEA data on the country composition of FDIUS and USDIA trade between related
parties probably are reasonable measures of the EU country shares of the actual US-EU related-party
trade.
These data show that the goods trade between US-EU related-parties is largely accounted for by
the same EU countries that account for most of the stock of bilateral US-EU foreign direct investment.
Moreover, that concentration has not significantly changed over the 1983-93 decade.
·The great bulk of the FDI stock among European related parties (both parents and affiliates) is
largely accounted for by the firms of four countries - France, Germany, the Netherlands,
and the United Kingdom (Figure 8.10).WT/WGTI/W/14
Page 80
·These four countries account for over 80 per cent of the total US-EU trade between
related-parties - 83 per cent of the US exports and 85 per cent of the imports in 1993
(Table 8.1). The shares in 1993 were slightly higher for FDIUS trade and slightly lower
for USDIA trade.
Table 8.1
Share of total US-EU related-party
Goods trade accounted for by four EU countries in 1993
US
Exports Imports
Combined related parties 83.3% 85.4%
USDIA 80.1% 72.8%
FDIUS 91.2% 90.3%WT/WGTI/W/14
Page 81
Industry composition of US-EU FDI and trade
Only a rough approximation of the composition of US-EU trade between related parties is
possible in terms of the major industry groups producing the traded goods, and none is possible in terms
of the products traded, because BEA data on that trade is limited in detail, scope and bases. The
principal limitations in these data are:
·Classification of trade in terms of industry of the affiliate, which is not necessarily the industry of the
product traded, nor the industry of the parent.
·Attribution of all trade by the affiliate and parent by the principal industry of the affiliate regardless of the
secondary industries in which the affiliate participates.
·Classification of trade by country of ultimate beneficial owner (UBO), not necessarily the country of
destination or origin of the trade.
·For FDIUS data by industry of affiliate, data are available for only four EU countries: France, Germany,
the Netherlands and the United Kingdom.
·For USDIA trade data, industry disaggregation is available only for majority-owned affiliates (MOFA) in
the EU, as data for all affiliates are available for only the four EU countries: France,
Germany, the Netherlands and the United Kingdom.
·Considerable suppression of industry trade data by individual country of affiliate.
All of the following discussion is based on data reported according to industry of affiliate, as BEA
data on US-EU related-party trade according to industry of parent are not separately available. The data
that are available suggest that the national location of the parent firm largely determines whether the
individual industry trade balances are positive or negative. The data show that the parents’ trade with their
affiliates in most major industries is in surplus for both US parents’ trade and EU parents’ trade:
·The USDIA industry balances of US parents’ trade with their EU affiliates are almost wholly in surplus,
·The FDIUS industry balances of EU parents’ trade with their US affiliates are mainly in deficit and thus
from the EU perspective are mainly in surplus.
The largest shares of the US-EU related-party goods trade and their trade balances are accounted
for by affiliates located in manufacturing industries and in wholesaling (Figure 8.11). This is the case for
both USDIA trade and FDIUS trade.
Much of this trade between related firms can be expected to be between parents and affiliates that
are both classified as in the manufacturing sector, particularly for trade in inputs to further manufacturing.
The foreign-owned affiliates in the United States that probably account for much of that trade include
many well known US and foreign corporate names in the metals, chemicals, pharmaceuticals, and auto
industries.31
31For examples of US firms acquired by EU parents, see the annual series of reports on FDI transactions, the last
issue of which covered transactions in 1994: US Department of Commerce, International Trade Administration,
Foreign Direct Investment in the United States, 1994 Transactions.WT/WGTI/W/14
Page 82
These industry shares are based on US data that are adversely affected by the problem of
classifying affiliates by the primary industry of their operations and the need to avoid disclosure of
individual firm’s operations. Much of the US imports in related-party trade can be assumed to be resold
(wholesaled) as a part of the normal operations of firms classified primarily as manufacturers. Conversely,
much of the US imports are by foreign-owned US firms that are primarily wholesalers that also are US
manufacturers .
Manufacturing affiliates
Although the related-party trade data are in terms of industry composition, not product
composition, probably much more than one-half of the products traded are manufactures. About
one-half of the total combined exports and imports involve USDIA and FDIUS affiliates in the
manufacturing industry. Moreover, a major share of the goods traded by affiliates that are wholesalers can
be expected to be manufactured goods (Figure 8.12).32For example, in 1993 the US imports by
EU-owned affiliates in the US motor vehicle wholesaling industry accounted for nearly one-half of the total
US imports by all EU-owned affiliates in the US wholesaling sector.
32This conclusion also is significantly supported by an examination of the annual acquisitions of affiliates in the
United States which shows that a large share of the acquisitions in the United States by EU parents in EU
manufacturing industries are affiliates in the US wholesaling industry. See various annual issues in: US Department
of Commerce, op cit.WT/WGTI/W/14
Page 83
In the related-parties trade of affiliates in the manufacturing sector, there are major parent-affiliate
similarities and differences in industry composition. A key example of similar composition - affiliates in
the chemicals industries are among the largest industry shares of exports and imports in both FDIUS and
USDIA trade(Figures 8.13 and 8.14).
In contrast, there are several key industry differences in the industry composition among affiliates:
·Affiliates in the computer and office equipment industry have very large shares of USDIA exports and
imports, but very small shares of FDIUS exports and imports.
·Affiliates in the transport equipment industry have a very large share of USDIA imports.
·Affiliates in instruments and related products industry have large shares of the USDIA exports and
imports.
·Affiliates in the electrical and electronics equipment industry have a large share of FDIUS imports.WT/WGTI/W/14
Page 84WT/WGTI/W/14
Page 85
Wholesaling affiliates
A key insight into the cause of US and EU parent firms having surpluses in their US-EU
related-party trade is provided by the fact that their EU and US affiliates classified as wholesalers account
for a large share of the US-EU related-party trade. In 1993, wholesaling affiliates accounted for 36 per
cent of USDIA exports of US parents to all of their foreign affiliates and 49 per cent of FDIUS exports of
foreign parents to their US affiliates.
Although related-party trade by industry of parent is not available, the inference of available data is
that US and foreign parents both rely on their foreign affiliates that are primarily wholesalers to distribute a
large share of the output produced by those parents. This inference is supported by the earlier conclusion
that FDI supports a large net export surplus of parents to their affiliates. This is further supported at the
industry level by the net trade balances between related parties with affiliates in leading industry of affiliate
groups such as chemicals. In both the USDIA and FDIUS relationships exports of parents to affiliates
greatly exceeded imports from them in virtually all manufacturing and other industries. It is further
supported by the fact that many of the acquisitions of wholesaling affiliates are by foreign parents that are
manufacturers of products such as foods, metals, chemicals, pharmaceuticals, and auto industries.33
For both USDIA and FDIUS, over one-half of the imbalances are attributable to trade of affiliates
in the wholesaling industry. In 1993, wholesaling affiliates accounted for 54 per cent of the total USDIA
export surplus and for 51 per cent of the FDIUS import surplus.
High-technology goods trade
On an industry basis, high-technology industries account for about one-third of total US exports to
the EU and about one-fifth of the total US imports from the EU (Figure 8.15).34Moreover, the US
high-technology trade balance with the EU is in surplus, while that in other products is in deficit. For
example, in 1993. the US-EU high-technology trade surplus on an industry basis was $15.4 billion, in
contrast to a US-EU trade deficit of $16.3 billion in other goods. Moreover, while US-EU trade in
high-technology products has been in substantial surplus, the US high-technology trade with most other
regions has been in deficit.
US-EU related-party trade in high-technology goods is very likely, although not necessarily, to
account for a large share of the total US-EU related-party trade because such a large share of total US-EU
trade is accounted for by high-technology trade. Unfortunately, the related-party trade data provide no
direct evidence on the extent that any net US-EU export surplus in high-technology products helps to
offset the net import surplus in other products, because of the lack of industry disaggregation in the
related-party trade data.
33Op cit, Department of Commerce (1994).
34Based on the DOC-3 definition of US high-technology industries.WT/WGTI/W/14
Page 86
Impact of trade barriers
Barriers to the access of goods and services to foreign markets continue to be an important issue
in particular instances. With the advent of the Uruguay Round reduction in import barriers, the impact of
other barriers such as standards and effects of linkages between parent and foreign-owned affiliates have
become relatively much more important determinants of trade than in the past. However, BEA FDI data
cannot be used to examine the effect of those barriers on US-EU related-party trade on a country of
destination basis, as the BEA FDIUS-based data are not reported by EU-12 country of destination for
UBO’s that are located only in the EU-12 countries. Moreover, the BEA data are too highly aggregated
to examine the existence of any significant relationship between US-EU trade and specific trade and other
barriers to foreign sales.
The motivations for FDI and related-party trade
A clear motivation for foreign parent firms to invest in and trade with their foreign affiliates is the
closer proximity to the ultimate foreign buyer and the ability to be more responsive to business and
technical needs. Other motivations include the need to overcome third-country discrimination produced
by the elimination of internal trading area trade barriers, such as the EU common external tariff and
reduction of intra-EU barriers, and the similar reduction in intra-NAFTA barriers.
There is no easy way to determine, in the absence of FDI, whether US-EU trade level would have
been greater in the aggregate or with any one of the EU members. Moreover, there is no clear way of
determining from these related-party trade data the extent that those trade barriers are currently moreWT/WGTI/W/14
Page 87
significant for particular product groups. A key reason this is not feasible is that the BEA related-party
trade data are aggregated into very large groups for which cross product comparisons of trade restrictions
are very difficult. Moreover, any conclusions must first take account of national comparative advantages
in particular products.
The extent to which trade between an MNC partner (either parent or affiliate) and unrelated
parties also is partly determined by the fact that the MNC partner also is related to other parties in these
US and European markets. Many major firms in one region that export to the other region are
represented by large sales networks in the importing region that are not considered affiliates, but are key
factors contributing to the export sales to independent foreign firms in the importing region. For
example, many major aircraft producers mainly export directly to independent foreign firms with the sales
assistance of other related and unrelated firms. Thus, it is not clear whether FDI can be said to generally
have been a key determinant of such trade between unrelated parties.
II.TRADE IN BUSINESS SERVICES BETWEEN US-EU RELATED PARTIES
Trade in private business services is an increasingly important component of the overall economic
relations between US and EU related parties although they are a smaller share of the total compared with
trade in goods. Transactions for which there are useable data on US-EU related-party trade in services
that are reported by BEA cover the two main categories of services: (1) royalties and licence fees and (2)
other private services.35No data are separately available on services provided between related parties in
the form of travel, transportation, or passenger fares.36
The trade in services is measured in terms of receipts by US firms (US parents or EU affiliates in
the United States) from EU related firms and payments by US firms (US parents or EU affiliates in the
United States) to EU related firms. In this paper, for ease of identifying these services transactions and
comparing them with goods trade, the receipts are frequently referred to as exports and the payments are
frequently referred to as imports even thought they do not directly measure the corresponding physical
services transactions.
The basis of measurement of these transactions is generally significantly different from, and the
difficulty of measuring them significantly greater than the measurement of goods trade, partly because the
availability of the data is more limited. Nevertheless, several key conclusions emerge from the following
discussion of US-EU related-party trade in services:
·US-EU trade in services between related parties has been rising rapidly in recent years - reaching a total
for exports plus imports of $23.2 billion in 1993 and $29.9 billion in 1995.
·The US trade in services between US-EU related parties has been consistently and in growing surplus,
reaching $9.0 billion in 1993 and $11.3 billion in 1995 - their 1993 surplus in services
trade of $9.3 billion slightly larger than their 1993 deficit in goods trade of $8.3 billion.
·The US-EU trade performance in services transactions differs sharply in both size and direction of their
trade balances (surplus versus deficit) in terms of ownership of the trading partners, that
is, in the trade balances (1) between US-owned EU affiliates and their US parents
35Other private services include education, financial services, insurance, telecommunications, business,
professional and technical services, and other services.
36By their nature, US international payments or receipts for travel or passenger fares services are not expected to
include any significant transactions between US-EU related-parties.WT/WGTI/W/14
Page 88
(USDIA trade), and (2) between foreign-owned US affiliates and their EU parents
(FDIUS trade).
·In most respects this difference in direction of services trade balances between USDIA and FDIUS
services trade is similar to their differences direction of goods trade balances - with
USDIA trade in surplus and FDIUS trade in deficit.
US-EU related-party services trade data
Bilateral international transactions in services between related parties are much more difficult to
measure than those for goods trade. For example, goods trade is largely measured directly in terms of the
value of those goods, as they physically move between geographical bodies and are reported by the firms
involved to customs authorities. In contrast, services trade is measured only indirectly in terms of receipts
or payments for those services as reflected in financial accounting documents of firms.
As a result of these measurement problems, there is a far less direct relationship between the
reported and market values of the services exchanged, and to the timing of that exchange, the geographic
location where the service is produced and rendered, and the industries producing and using the service.
Moreover, for some international services transactions, no transactions are reported at all, as in the case of
technology information frequently transferred electronically or by direct contact between US and foreign
nationals. Furthermore, unlike goods trade where the goods are measured in terms of their physical
movement across national boundaries, services trade is measured in terms of the exchange of services
between nationals and foreigners, largely without regard to their geographical location at the time the
service is rendered. For example, a US export of (receipts for) educational services rendered by a US
parent firm to its EU affiliate can be in the form of training provided to the affiliates' employees at a site in
the United States or by the parent's US employees to the affiliates' employees at a site in the European
Union.
Detailed data on the composition of trade in services between US and EU related parties are not
regularly published by BEA. The bilateral related-party services trade data on which these transactions are
reported in this paper were obtained from publicly available unpublished BEA data. The related-party
services trade data available from BEA cover two broad categories: (1) royalties and licence fees, and (2)
other private business services. No related-party data are presently available on payments or receipts for
travel, transportation, or passenger fares.
Separate USDIA-based data are collected but not reported by BEA on US parent firms' payments
to (imports from) their EU affiliates for royalties and licence fees. These data are included only in the
aggregate payments by US parents to all of their European affiliates, with no detailed data available by EU
country or industry.
Royalties and licence fees are receipts or payments for technology and other intangible property
rights, as well as transactions involving copyrights, trademarks, franchises, broadcast rights and other
intangible rights. Other private services include education, financial, insurance, telecommunications,
business, professional, technical, and other services such as rentals for use of tangible property and film
and television tape rentals.
The most recent data in this paper on the composition of US-EU related-party trade in services
are for transactions in 1995; however, the most recent data available on US-EU related-party goods trade
at the time this paper was prepared were for transactions in 1993. Both the services and goods trade data
are based on BEA FDI surveys. The time series data on both USDIA and FDIUS based services trade
presented here begin with transactions in 1987, as the earliest year for which FDIUS based data are
reported by BEA on a consistent basis are for 1987. Consistent USDIA data are available from BEA
beginning with 1982.WT/WGTI/W/14
Page 89
Relative importance of total US-EU related-party trade in services
Over the period 1987-95, both total US-EU related-party exports and imports of services have
increased fairly steadily and rapidly. In 1995 exports reached a record $20.6 billion - one and one-half
times greater than their 1987 value, and imports reached a record $9.3 billion (Figure 8.16). The growth
in US related-party imports of services, unlike the imports in goods, reflected no significant slowing due to
the 1991 US recession. The US exports of these services in 1993-94, however, appear to reflect the slow
down in EU economic growth. Nevertheless, in 1995 these services exports surged ahead.
The US trade balance in services between US-EU related parties has been in substantial and rising
surplus throughout the 1987-95 period because US exports to EU related-parties have consistently been
over twice as large in value as were imports. The surplus rose from $4.9 billion in 1987 to $11.3 billion
in 1995, with imports equal to less than one-half the value of exports.WT/WGTI/W/14
Page 90
Share of total services trade
US-EU trade in services between related parties has been a dominant factor in the total US-EU
trade of those services and a surprisingly important factor in the worldwide total of US related- and
unrelated-party services trade. Over the years, related parties on a combined USDIA and FDIUS basis
account for a major share of the total US-EU trade in services and a large share of total US worldwide
trade in those services, as measured in terms of the total of royalties and licence fees and other private
business services (excluding travel, transportation and passenger fares).
In 1995, the total value of receipts (exports) and payments (imports) for US-EU related-parties
trade in these services reached $29.9 billion and accounted for 23 per cent of total US worldwide trade in
services with related and unrelated parties, and 62 per cent of the total US-EU trade in services (Figure
8.17).
Moreover, the related-party data on services trade show that US-EU trade is by far the single most
important component total US worldwide services trade between all US and foreign-related parties. In
1995, US-EU related parties accounted for 51 per cent of that total.WT/WGTI/W/14
Page 91
The comparable shares for exports and imports are nearly equal to the share for total two-way
trade in these services. However, the near equality in the size of the related-party export and import
shares should not be interpreted as a near balance in US and EU revealed comparative advantage in the
trade of these services, as the exports and imports differ greatly in total value and in terms of related-party
ownership. For example, in 1995, US services exports in US-EU related party trade were over twice as
large as that in imports, as exports reached $20.6 billion and imports reached $9.3 billion.
Comparison of services and goods trade
Compared with US-EU trade in goods between related parties, the total value of trade in services
is much smaller; however, the net US performance in terms of trade balance has been much more
favourable. For example, in 1993, the value of US services exports to (receipts) and imports from
(payments) from related parties were a relatively small compared to their trade in goods. Those US
related-party services exports to the EU reached $16.1 billion - 40 per cent as large as goods exports, and
imports reached $7.1 billion - 14.6 per cent as large as goods imports (Figure 8.18).
The surplus in services trade between US-EU related-parties steadily rose throughout the 1987-95
period - rising from $4.9 billion in 1987 to $9.0 billion in 1993 and $11.3 billion in 1995. Their trade
surplus in services trade contrasts sharply with their deficit in the US-EU related-party goods balance,
which has been in deficit over the same period by varying amounts and was $8.3 billion in 1993 - a nearly
equal opposite value to the services surplus (Figure 8.19). Moreover, the exports of services reflects a far
stronger performance than goods exports relative to their total trade in services and goods, as the services
surplus is far larger relative to the total services trade than is the goods deficit relative to the total goods
trade.WT/WGTI/W/14
Page 92
The consistent surplus in US-EU related party trade in services, compared with the consistent
deficit in goods, suggests that the US firms on average have a revealed comparative advantage in services
relative to goods production. Moreover, most of the surplus in the export of services is accounted for by
the surplus in royalties and licence fees. This performance seems to demonstrate that a US comparative
advantage in services is mainly based on intellectual property, such as technology, produced by the US
parents that is used by their EU affiliates.
Composition of US-EU related party services trade by type of ownership
The US-EU trade performance in services differs sharply in terms of ownership - that is,
according to whether it is between US parents and their EU affiliates (USDIA-based trade) or between EU
parents and their US affiliates (FDIUS-based trade).37USDIA services trade is in surplus, and is much
larger than FDIUS services trade which is in deficit. Thus, the large growing overall surplus in US-EU
related party services trade is mainly attributable to the larger, and in surplus, services trade between US
parents and their EU affiliates.
37In this paper, USDIA payments for (imports of) royalties and licence fees are based on the total US parents'
payments of royalties and licence fees to their affiliates in all European countries, as separate data are not available by
individual EU countries and therefore for aggregate exports of these services to the 12 EU countries. However, the
use of this larger coverage is likely to produce little overall distortion in the analysis because these services payments to
(imports from ) all of Europe are very small compared to other related party imports and probably almost all of those
imports are accounted for by those imports from their affiliates in the EU countries.WT/WGTI/W/14
Page 93
In 1995, USDIA exports reached a record $16.6 billion, far outweighing USDIA imports of $3.6
billion, which resulted in an export surplus of $10.8 billion. In contrast, FDIUS exports reached a record
$4.0 billion, two-thirds as large as the FDIUS imports of $5.7 billion, which explains their $1.7 billion
deficit (Figure 8.20).WT/WGTI/W/14
Page 94
The far larger trade in services on USDIA basis than FDIUS basis illustrates the important role
that US multinational firms play in the overall US trade performance not only in their overall trade, but in
particular in their trade with their affiliates. Moreover, this is particularly important in terms of net trade
performance, as parent firms tend to have export surpluses, as is the case with both US goods and services
trade with the EU on the USDIA basis. In contrast, US affiliates of foreign parents tend to have US
deficits in both US-EU trade in goods and services. For example, in 1995, the US-EU USDIA based
trade in services was in surplus by $13.0 billion and the FDIUS trade in services was in deficit by $1.7
billion.
Composition of US-EU related party services trade by type of service
Both types of services exports and imports - royalties and licence fees and all other private services
- between US and EU related parties rose fairly steadily between 1987 and 1995, except for the 1993-94
slow down in exports of these services. Both types of exports and imports reached record values in 1995.
Royalties and licence fees have been consistently much larger in exports than other services and much
smaller in imports. In 1995, exports of royalties and licence fees reached $12.0 billion compared with
$8.5 billion in exports of other services. In contrast, in 1995, imports of royalties and licence fees reached
$3.0 billion compared with $6.3 billion in imports of other services (Figure 8.21).
Almost all (93 per cent) of the exports of royalties and licence fees between US-EU related parties
in 1995 are accounted for by exports of US parent firms to their EU affiliates. Conversely, almost all (90WT/WGTI/W/14
Page 95
per cent) of the imports of royalties and licence fees are accounted for by imports by EU-owned US
affiliates from their EU parents. This reversal of relative importance in terms of ownership suggests that,
regardless which countries are involved (the US or the EU), parent firms are by far the dominant source of
intellectual flows between parents and foreign affiliates - a clearly almost wholly one-direction dominance.
As pointed out earlier in this paper, in services trade as in goods trade between related parties, foreign
direct investment tends to support an export surplus in services trade. This point also explains why the
much larger exports of US parents than by foreign-owned US affiliates is a vital determinant of the overall
US services trade performance.
The direction in flows of transactions in other private services, in sharp contrast to that in royalties
and licence fees, is roughly in balance between originating parties. In 1995, 63 per cent of the total value
of other US private business services exports was accounted for by US parents exports to their EU
affiliates. Similarly, 52 per cent of the total US business services imports were accounted for by imports
from their EU affiliates.
Composition of US-EU related party services trade by EU country
The composition of US-EU related party trade in services is reported in terms of the EU
nationality of the EU parent of the US-owned EU affiliate. That services trade, like in their goods trade,
has been consistently dominated by the same four EU countries - the United Kingdom, Germany, the
Netherlands, and France. In 1993, these four countries accounted for 74 per cent of the total US exports
of services in US-EU related party trade, 89 per cent of the imports, and 62 per cent of the export surplus
(Figure 8.22).
In US exports, no one of these four countries was particularly dominant in either of the two typesWT/WGTI/W/14
Page 96
of services trade - services exports paid for by royalties and licence fees or other private business services.
In contrast, in US imports, the United Kingdom accounted for a particularly large share of both types of
services. In 1993, the United Kingdom accounted for 55 per cent of the royalties and licence fees paid for
imports of services, and 40 per cent of the imports of other business services. Almost all royalties and
licence fees accounted for by US payments to the United Kingdom were for imports of services by
UK-owned US firms from their UK parents. In contrast, most of the US imports of other business
services accounted for by the United Kingdom were for imports of those services by US parents from their
UK affiliates.
Composition of US-EU related party services trade by industry of affiliate
In addition to the previously discussed limitations on these related-party data, the data by industry
of affiliate are also limited by the lack of data on the industry of the parent firms and the lack of data on
imports of services accounted for by royalties and licence fees by US parents from their EU affiliates.
Nevertheless, available data show that US and EU related parties exchange a wide range of intellectual
property and other private business services. These services also range widely in terms of the primary
goods and services industries of the US and EU affiliates and whether the services are contributions to the
affiliates' further production of goods and services or are merely distributed by the affiliates as wholesalers
or retailers.
Roughly one-half of the total USDIA exports, and FDIUS exports and imports are accounted for
by US and EU affiliates in manufacturing industries. This is the case for both royalties and licence fees
and other private business services. Only in USDIA exports does trade with wholesaling affiliates account
for a significant share of their total US-EU trade in services. Table 8.2 shows the shares in 1993
accounted for by affiliates in manufacturing industries.WT/WGTI/W/14
Page 97
TABLE 8.2
Shares of US-EU Business Services Trade Accounted for
by Manufacturing Affiliates in 1993
(value in million dollars; shares in per cent)
Types of transactions Total value Shares of affiliates primarily engaged in -
Manufacturing Wholesaling
USDIA:
US exports (receipts), total $13,321 61% 13%
Royalties and licence fees 8,158 71 17
Other business services 5,163 46 7
US imports (payments), total 3,269 n.a. n.a.
Royalties and licence fees 162 n.a. n.a.
Other business services 3,107 50 7
FDIUS:
US exports (receipts), total 2,471 47 12
Royalties and licence fees 333 42 45
Other business services 2,408 48 8
US imports (payments), total 3,820 63 13
Royalties and licence fees 1,770 81 8
Other business services 2,050 47 18
n.a. - not available.
US-EU related-party trade in services by wholesaling affiliates appears to be as significant as that
with affiliates in manufacturing only for exports of royalties and licence fees earned by US parents
(FDIUS-based US exports). In 1993, wholesaling affiliates accounted for 45 per cent of the total for those
services receipts. Nevertheless, those royalties and licence fees receipts by US owned EU wholesalers are
only relatively large in terms of their share among all industries, as their total value is relatively small
compared with other types of services transactions.
Affiliates in other industries are notable in several other instances in value terms and shares of
total US-EU trade in services in 1993. More often than not, these affiliates are in US and EU industries
that primarily produce chemicals and produce non-electric machinery (industrial machinery and
equipment) such as computers, but not in the industry producing electronic components. They include:
·Of total US receipts for royalties and licence fees earned by US parent firms for services exported to their
EU affiliates (USDIA based exports):
·19 per cent were received from EU affiliates that primarily produce chemicals and allied products; and
·33 per cent were received from EU affiliates that primarily produce non-electric machinery;
·of total US payments for other business services imported by US parents from EU affiliates, 43 per cent
were paid to EU affiliates producing non-electric machinery;WT/WGTI/W/14
Page 98
·of total US payments for royalties and licence fees for services imported by US affiliates from their EU
parents, 63 per cent were paid to US affiliates that primarily produce chemicals and allied
products.
The large shares of the exports and imports of services between US-EU related parties for which
royalties and licence fees are received and paid suggests that the transfer of technology is an important
"two-way street" between them. In addition, at least for US parents with EU affiliates that are primarily
wholesalers, the data suggest that US parents significantly rely on their EU affiliates to distribute their US
produced manufactured goods, such as machinery, as well as intellectual property distributed in such
forms of "goods" as movies, books, and TV programmes on tape or transmitted electronically.W
T
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T
I
/
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/
1
4
PTABLE 8.3
Total US Goods Trade, Total All Countries, and US-EU 12 Trade, Total, Between Related Parties, and All Other Parties*
(values in million dollars)
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993** 1994 1995
US EXPORTS:
Total, all countries 205,639 223,999 218,828 227,159 254,122 322,426 363,812 393,592 421,730 448,164 465,091 512,627 584,743
EU-12 48,576 50,635 49,067 53,222 60,629 75,864 86,424 98,129 103,122 102,958 96,973 102,818 117,257
Between related, total 18,681 22,405 22,388 22,206 22,361 29,531 34,581 34,951 37,825 40,162 40,424 n.a. n.a.
USDIA, MOFA only 13,282 14,825 15,673 16,047 17,873 22,598 25,592 26,219 27,883 29,125 28,931 n.a. n.a.
FDIUS, all affiliates 5,399 7,580 6,715 6,159 4,488 6,933 8,989 8,732 9,942 11,037 11,493 12,835 n.a.
Other parties 29,895 28,230 26,679 31,016 38,268 46,333 51,843 63,178 65,297 62,796 56,549 n.a. n.a.
US IMPORTS
Total, all countries 258,048 330,681 336,536 365,438 406,241 440,952 473,211 495,310 488,453 532,665 580,659 663,256 743,445
EU-12 45,772 60,376 67,914 75,823 81,273 85,049 85,292 91,877 86,157 93,993 97,941 110,875 121,431
Between related, total 22,340 24,581 26,942 29,456 36,228 39,037 41,241 43,368 42,195 44,931 48,731 n.a. n.a.
USDIA, MOFA only 4,774 5,984 6,845 6,859 8,892 10,550 10,752 11,401 11,325 12,051 13,787 n.a. n.a.
FDIUS, all affiliates 17,566 18,597 20,097 22,597 27,336 28,487 30,489 31,967 30,870 32,880 34,944 39,944 n.a.
Other parties 23,432 35,795 40,972 46,367 45,045 46,012 44,051 48,509 43,962 49,062 49,210 n.a. n.a.
US BALANCE
Total, all countries (52,409) (106,682) (117,708) (138,279) (152,119) (118,526) (109,399) (101,718) (66,723) (84,501) (115,568) (150,629) (158,702)
EU-12 2,804 (9,741) (18,847) (22,601) (20,644) (9,185) 1,132 6,252 16,965 8,965 (968) (8,057) (4,174)
Between related, total (3,659) (2,176) (4,554) (7,250) (13,867) (9,506) (6,660) (8,417) (4,370) (4,769) (8,307) n.a. n.a.
USDIA, MOFA only 8,508 8,841 8,828 9,188 8,981 12,048 14,840 14,818 16,558 17,074 15,144 n.a. n.a.
FDIUS, all affiliates (12,167) (11,017) (13,382) (16,438) (22,848) (21,554) (21,500) (23,235) (20,928) (21,843) (23,451) (27,109) n.a.
Other parties 6,463 (7,565) (14,293) (15,351) (6,777) 321 7,792 14,669 21,335 13,734 7,339 n.a. n.a.
*Total, all countries and EU-12, total are exports by country of destination and imports by country of origin. USDIA-based trade is by country of affiliate and FDIUS-based trade is by country of ultimate beneficial
owner (UBO). 1983-89 USDIA and FDIUS data do not include East Germany.
In a few instances, individual country data have been suppressed and excluded from the EU-12 totals and included with "other parties".
**Data on related-party trade are preliminary.
"n.a." is not available.WT/WGTI/W/14
Page 100
TABLE 8.4
US - Europe Goods Trade, Total All Firms: Between US-EU Related Parties,
and Between Those Related Parties and Other Parties in 1993
(values in million dollars)
US trade with -
Europe
totalEU-12* EU-15* Other*
total
Value Share Value Share
Total US trade with all firms:
US EXPORTS 119,785 96,973 81.0% 101,501 84.7% 18,284
US IMPORTS 119,082 97,941 82.2% 105,493 88.6% 13,589
US BALANCE 703 (968) - (3,992) - 4,695
Total US trade by US-EU related parties:
USDIA, non-bank:
US EXPORTS, total** 37,321 31,142 83.4% 31,788 85.2% 5,533
To all foreign affiliates - - - - - -
By US parents - - - - - -
By other US firms - - - - - -
To MOFAs 36,074 32,055 88.9% 32,953 91.3% 3,121
By US parents 32,709 28,931 88.4% 29,730 90.9% 2,979
By other US firms 3,364 3,125 92.9% 3,226 95.9% 138
US IMPORTS, total** 19,041 16,955 89.0% 16,955 89.0% 2,086
From all foreign affiliates - - - - - -
By US parents - - - - - -
By other US firms - - - - - -
From MOFAs 18,153 17,126 94.3% 17,612 97.0% 541
By US parents 14,553 13,787 94.7% 14,201 97.6% 352
By other US firms 3,599 3,339 92.8% 3,411 94.8% 188
FDIUS, non-bank:
US EXPORTS 45,983 36,260 78.9% 39,541 86.0% 6,442
To foreign parent group 13,980 11,493 82.2% 12,235 87.5% 1,745
To others 32,003 24,767 77.4% 27,296 85.3% 4,707
To foreign affiliates*** 5,472 4,613 84.3% 5,168 94.4% 304
To unaffiliated foreigners 26,530 20,154 76.0% 22,149 83.5% 4,381WT/WGTI/W/14
Page 101
US trade with -
Europe
totalEU-12* EU-15* Other*
total
Value Share Value Share
By US MOFAs - - - - - -
US IMPORTS 69,349 56,011 80.8% 62,248 89.8% 7,101
From foreign parent group 45,515 34,944 76.8% 39,961 87.8% 5,554
From others 23,834 21,067 88.4% 22,287 93.5% 1,547
From foreign affiliates*** 5,238 4,572 87.3% 4,859 92.8% 379
From unaffiliated foreigners 18,596 16,315 87.7% 17,248 92.8% 1,348
By US MOFAs - - - - - -
Note: Data may not add due to rounding.
Total US trade with all firms are exports by country of destination and imports by country of origin.
USDIA-based trade is by country of affiliate and FDIUS-based trade is by country of ultimate beneficial owner (UBO).
"-" is not available.
*Data for some EU countries are suppressed and therefore are included in the residual "other".
**Total may exceed trade of MOFA due to suppression and inclusion of non-MOFA trade in the residual "other".
***Also included under USDIA trade to the extent that this trade is between (1) US firms that are affiliates of EU-owned
parents and (2) EU firms that are majority-owned affiliates (MOFAs) of that US firm.WT/WGTI/W/14
Page 102
TABLE 8.5
US-EU12 Goods Trade: Total All Firms, Between US-Eu Related Parties,
and Between Those Related Parties and Other Parties in 1993
(values in million dollars)
Value* Share
Total US trade with all firms:
US exports 96,973 100.0%
US imports 97,941 100.0%
US balance (968) -
US-EU trade between US-EU related parties:
US exports, total 40,424 41.7%
USDIA: to foreign affiliates** 28,931 29.8%
FDIUS: to foreign parents 11,493 11.9%
US imports, total 48,731 49.8%
USDIA: by US parents** 13,787 14.1%
FDIUS: by US affiliates 34,944 35.7%
US balance, total (8,307) -
USDIA** 15,144 -
FDIUS (23,451) -
US-EU trade by US-EU related parties with unrelated parties:
US exports, total 23,279 24.0%
USDIA: to MOFAs by unaffiliated US firms 3,125 3.2%
FDIUS: to unaffiliated EU firms 20,154 20.8%
US imports, total 19,654 20.1%
USDIA: from MOFAs to unaffiliated US firms 3,339 3.4%
FDIUS: from unaffiliated EU firms 16,315 16.7%
US balance, total 3,125 -
US-EU trade between other unrelated parties:
US exports 33,270 34.3%
US imports 29,056 29.7%
US balance 4,214 -WT/WGTI/W/14
Page 103
Note: Total US trade with all firms are exports by country of destination and imports by country of origin. USDIA-based trade is by country of
affiliate and FDIUS-based trade is country of ultimate beneficial owner (UBO).
*Data for some EU countries are suppressed and therefore are included in the residual "other".
**Understates the USDIA-based and total trade between related parties to the extent that the foreign firm is a minority-owned affiliate of the
US parent.WT/WGTI/W/14
Page 104
TABLE 8.6
US-EU-12 Goods Trade, Total All Firms and Between Related Parties in 1993
(values in million dollars; shares in per cent)
Trade between -
Total
Related parties Unrelated
parties
Value Share Value Share of total
Total, all parties:
Exports 40,424 41.7% 56,549 96,973 100.0%
Imports 48,731 49.8% 49,210 97,941 100.0%
Balance (8,307) n.a. 7,339 (968) n.a.
Combined USDIA and FDIUS:
Exports 40,424 63.5% 23,279 63,703 65.7%
Imports 48,731 71.3% 19,654 68,385 69.8%
Balance (8,307) n.a. 3,625 (4,682) n.a.
USDIA*:
Exports 28,931 90.3% 3,125 32,056 33.1%
Imports 13,787 80.5% 3,339 17,126 17.5%
Balance 15,144 n.a. (214) 14,930 n.a.
FDIUS**:
Exports 11,493 36.3% 20,154 31,647 32.6%
Imports 34,944 68.2% 16,315 51,259 52.3%
Balance (23,451) n.a. 3,839 (19,612) n.a.
Between other unrelated parties:
Exports - - 33,270 33,270 34.3%
Imports - - 29,556 29,556 30.2%
Balance - - 3,714 3,714 n.a.
Note: Total, all parties trade are exports by country of destination and imports by country of origin. USDIA-based
trade is by country of affiliate and FDIUS-based trade is by country of ultimate beneficial owner (UBO).
*Only includes trade of MOFAs. Trade of less than majority US-owned foreign affiliates is included with trade
"between other unrelated parties".
**Excludes trade of foreign-owned US firms with their foreign affiliates abroad. This trade is included with
trade of USDIA related parties.WT/WGTI/W/14
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TABLE 8.7
USDIA Goods Trade Between US Parents and Their EU-12 MOFA in 1989 and 1993
(values in million dollars; shares in per cent)
Country of affiliate US exports US imports US balance
1989 1993 1993
share1989 1993 1993
share1989 1993
EU-12, total* 25,592 28,931 100.0
%10,751 13,787 100.0% 14,841 15,144
Belgium 2,072 2,201 7.6% 897 792 5.7% 1,175 1,409
Denmark 137 160 0.6% 150 83 0.6% (13) 77
France 3,300 3,689 12.8% 1,456 1,905 13.8% 1,844 1,784
Germany** 4,911 6,955 24.0% 1,767 1,605 11.6% 3,144 5,350
Greece 45 33 0.1% 16 1 0.0% 29 32
Ireland 1,170 698 2.4% 586 1,711 12.4% 584 (1,013)
Italy 1,625 1,403 4.8% 520 697 5.1% 1,105 706
Luxembourg 96 169 0.6% 104 d 0.0% (8) d
Netherlands 3,453 4,611 15.9% 852 1,017 7.4% 2,601 3,594
Portugal 81 123 0.4% 30 d 0.0% 51 d
Spain 1,673 963 3.3% 731 355 2.6% 942 608
United Kingdom 7,028 7,928 27.4% 3,643 4,502 32.7% 3,385 3,426
Note: Trade is by country of affiliate.
*Individual country data do not add to total due to suppressed data.
**Data for 1989 include only the Federal Republic of Germany.WT/WGTI/W/14
Page 106
TABLE 8.8
FDIUS Goods Trade Between EU-Owned US Affiliates and Their EU-12 Parents in 1989 and 1993
(values in million dollars; shares in per cent)
Country of UBO US exports US imports US balance
1989 1993 1993
share1989 1993 1993
share1989 1993
EU-12, total* 8,989 11,493 100.0% 30,489 34,944 100.0% (21,500) (23,451)
Belgium 38 71 0.6% 549 502 1.4% (511) (431)
Denmark 18 55 0.5% 305 429 1.2% (287) (374)
France 3,012 4,678 40.7% 5,155 4,543 13.0% (2,143) 135
Germany** 2,021 2,515 21.9% 14,247 15,955 45.7% (12,226) (13,440)
Greece - - 0.0% - - 0.0% 0 0
Ireland 7 8 0.1% 2 169 0.5% 5 (161)
Italy 1,190 801 7.0% 97 1,820 5.2% 1,093 (1,019)
Luxembourg 14 43 0.4% 217 352 1.0% (203) d
Netherlands 929 1,422 12.4% 2,573 4,123 11.8% (1,644) (2,701)
Portugal - - 0.0% - - 0.0% 0 d
Spain 2 14 0.1% 88 146 0.4% (86) (132)
United Kingdom 1,754 1,886 16.4% 6,234 6,904 19.8% (4,480) (5,018)
Note: Trade is by country of ultimate beneficial owner (UBO).
*Individual country data do not add to total due to suppressed data.
**Data for 1989 include only the Federal Republic of Germany.WT/WGTI/W/14
Page 107
TABLE 8.9
Combined USDIA and FDIUS US-EU 12 Goods Trade Between Related Parties in 1993
(values in million dollars; shares in per cent)
Country of affiliate or of
UBOUS exports US imports
USDIA FDIUS Total Total
shareUSDIA FDIUS Total Total
share
EU-12, total* 28,931 11,493 40,424 100.0% 13,787 34,944 48,731 100.0%
Belgium 2,201 71 2,272 5.6% 792 502 1,294 2.7%
Denmark 160 55 215 0.5% 83 429 512 1.1%
France 3,689 4,678 8,367 20.7% 1,905 4,543 6,448 13.2%
Germany 6,955 2,515 9,470 23.4% 1,605 15,955 17,560 36.0%
Greece 33 - 33 0.1% 1 - 1 0.0%
Ireland 698 8 706 1.7% 1,711 169 1,880 3.9%
Italy 1,403 801 2,204 5.5% 697 1,820 2,517 5.2%
Luxembourg 169 43 212 0.5% d 352 d 0.0%
Netherlands 4,611 1,422 6,033 14.9% 1,017 4,123 5,140 10.5%
Portugal 123 - 123 0.3% d - d 0.0%
Spain 963 14 977 2.4% 355 146 501 1.0%
United Kingdom 7,928 1,886 9,814 24.3% 4,502 6,904 11,406 23.4%
Note: USDIA-based trade is by country of affiliate and FDIUS-based trade is by country of ultimate beneficial owner
(UBO).
*Individual country data do not add to total due to suppressed data.WT/
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108TABLE 8.10
USDIA and FDIUS US-EU 12 Goods Trade between Related Parties, by Industry of Affiliate, in 1993*
(values in million dollars, shares in per cent)
Industry of affiliateUSDIA FDIUS
Exports Share Imports Share Balance Share Exports Share Imports Share Balance Share
All industries 28,931 100.0% 13,787 100.0% 15,144 100.0% 11,493 100.0% 34,944 100.0% (23,451) 100.0%
Petroleum 821 2.8% 192 1.4% 629 4.2% 483 4.2% 1,315 3.8% (832) 3.5%
Manufacturing, total 16,829 58.2% 11,224 81.4% 5,605 37.0% 5,665 49.3% 15,852 45.4% (10,187) 43.4%
Food 797 2.8% 285 2.1% 512 3.4% 97 0.8% 634 1.8% (537) 2.3%
Chemicals 3,287 11.4% 1,869 13.6% 1,418 9.4% 2,542 22.1% 6,555 18.8% (4,013) 17.1%
Industrial chem. and synthetics 1,567 5.4% 984 7.1% 583 3.8% 1,102 9.6% 2,182 6.2% (1,080) 4.6%
Drugs 1,130 3.9% 724 5.3% 406 2.7% 891 7.8% 3,428 9.8% (2,537) 10.8%
Other 590 2.0% 161 1.2% 429 2.8% 549 4.8% 945 2.7% (396) 1.7%
Metals 535 1.8% 231 1.7% 304 2.0% 181 1.6% 1,257 3.6% (1,076) 4.6%
Non-electric machinery 5,729 19.8% 4,234 30.7% 1,495 9.9% 423 3.7% 1,181 3.4% (758) 3.2%
Computers and office equip. 4,430 15.3% 2,557 18.5% 1,873 12.4% 179 1.6% 117 0.3% 62 -0.3%
Other 1,299 4.5% 1,677 12.2% (378) -2.5% 244 2.1% 1,064 3.0% (820) 3.5%
Electric and electronic equip. 1,646 5.7% 1,010 7.3% 636 4.2% 1,086 9.4% 3,003 8.6% (1,917) 8.2%
Audio, video and comm. equip. 520 1.8% 168 1.2% 352 2.3% 553 4.8% d d d d
Electronic components, etc. 967 3.3% 596 4.3% 371 2.4% 102 0.9% 438 1.3% (336) 1.4%
Other 159 0.5% 246 1.8% (87) -0.6% 431 3.8% 2,565 7.3% (2,134) 9.1%
Transport equip. 745 2.6% 1,890 13.7% (1,145) -7.6% 154 1.3% 803 2.3% (649) 2.8%
Motor vehicles and equip. 709 2.5% d d d d 108 0.9% 451 1.3% (343) 1.5%
Other 36 0.1% d d d d 46 0.4% 353 1.0% (307) 1.3%WT/
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109Industry of affiliateUSDIA FDIUS
Exports Share Imports Share Balance Share Exports Share Imports Share Balance Share
Other manufacturing 4,092 14.1% 1,685 12.2% 2,407 15.9% 1,007 8.8% 1,797 5.1% (790) 3.4%
Rubber products 177 0.6% 70 0.5% 107 0.7% 167 1.5% 627 1.8% (460) 2.0%
Instruments and related product 2,649 9.2% 1,158 8.4% 1,491 9.8% 312 2.7% 458 1.3% (146) 0.6%
Other 1,266 4.4% 457 3.3% 809 5.3% 528 4.6% 712 2.0% (184) 0.8%
Wholesale trade 10,474 36.2% 2,320 16.8% 8,154 53.8% 5,079 44.2% 16,949 48.5% (11,870) 50.6%
Motor vehicles and equip. d d d d d d 293 2.5% 7,259 20.8% (6,966) 29.7%
Farm products d d d d d d 3,982 34.6% 358 1.0% 3,624 -15.5%
Other d d d d d d 804 7.0% 9,332 26.7% (8,528) 36.4%
Retail trade 122 0.4% d d d d 22 0.2% 575 1.6% (553) 2.4%
Services 634 2.2% 38 0.3% 596 3.9% 58 0.5% 199 0.6% (141) 0.6%
Other industries 51 0.2% 13 0.1% 38 0.3% 186 1.6% 54 0.2% 132 -0.6%
*FDIUS data are final; USDIA data are preliminary. For the EU-12, USDIA-based trade is by country of affiliate and FDIUS-based trade is by country of ultimate beneficial owner (UBO).
"d" Data suppressed.WT/
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110TABLE 8.11
USDIA and FDIUS US-EU12 Goods Trade between Related Parties, by Industry of Affiliate, in 1993*
(values in million dollars, shares in per cent)
Industry of affiliate US exports US imports US balance
USDIA FDIUS Total Total share USDIA FDIUS Total Total share USDIA FDIUS
All industries 28,931 11,493 40,424 100.0% 13,787 34,944 48,731 100.0% 15,144 (23,451)
Petroleum 821 483 1,304 3.2% 192 1,315 1,507 3.1% 629 (832)
Manufacturing, total 16,829 5,665 22,494 55.6% 11,224 15,852 27,076 55.6% 5,605 (10,187)
Food 797 97 894 2.2% 285 634 919 1.9% 512 (537)
Chemicals 3,287 2,542 5,829 14.4% 1,869 6,555 8,424 17.3% 1,418 (4,013)
Industrial chem. and synthetics 1,567 1,102 2,669 6.6% 984 2,182 3,166 6.5% 583 (1,080)
Drugs 1,130 891 2,021 5.0% 724 3,428 4,152 8.5% 406 (2,537)
Other 590 549 1,139 2.8% 161 945 1,106 2.3% 429 (396)
Metals 535 181 716 1.8% 231 1,257 1,488 3.1% 304 (1,076)
Non-electric machinery 5,729 423 6,152 15.2% 4,234 1,181 5,415 11.1% 1,495 (758)
Computers and office equip. 4,430 179 4,609 11.4% 2,557 117 2,674 5.5% 1,873 62
Other 1,299 244 1,543 3.8% 1,677 1,064 2,741 5.6% (378) (820)
Electric and electronic equip. 1,646 1,086 2,732 6.8% 1,010 3,003 4,013 8.2% 636 (1,917)
Audio, video and comm. equip. 520 553 1,073 2.7% 168 d d d 352 d
Electronic components, etc. 967 102 1,069 2.6% 596 438 1,034 2.1% 371 (336)
Other 159 431 590 1.5% 246 2,565 2,811 5.8% (87) (2,134)
Transport equip. 745 154 899 2.2% 1,890 803 2,693 5.5% (1,145) (649)
Motor vehicles and equip. 709 108 817 2.0% d 451 d d d (343)
Other 36 46 82 0.2% d 353 d d d (307)WT/
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111Industry of affiliate US exports US imports US balance
USDIA FDIUS Total Total share USDIA FDIUS Total Total share USDIA FDIUS
Other manufacturing 4,092 1,007 5,099 12.6% 1,685 1,797 3,482 7.1% 2,407 (790)
Rubber products 177 167 344 0.9% 70 627 697 1.4% 107 (460)
Instruments and related product 2,649 312 2,961 7.3% 1,158 458 1,616 3.3% 1,491 (146)
Other 1,266 528 1,794 4.4% 457 712 1,169 2.4% 809 (184)
Wholesale trade 10,474 5,079 15,553 38.5% 2,320 16,949 19,269 39.5% 8,154 (11,870)
Motor vehicles and equip. d 293 d d d 7,259 d d d (6,966)
Farm products d 3,982 d d d 358 d d d 3,624
Other d 804 d d d 9,332 d d d (8,528)
Retail trade 122 22 144 0.4% d 575 d d d (553)
Services 634 58 692 1.7% 38 199 237 0.5% 596 (141)
Other industries 51 186 237 0.6% 13 54 67 0.1% 38 132
*FDIUS data are final; USDIA data are preliminary. For the EU-12, USDIA-based trade is by country of affiliate and FDIUS-based trade is by country of ultimate beneficial owner (UBO).
"d" Data suppressed.WT/
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112TABLE 8.12
US Trade in Services by US-EU Related Parties, by Ownership and Type of Service, 1987-95*
(million dollars)
1987 1988 1989 1990 1991 1992 1993 1994 1995
US EXPORTS (receipts)
USDIA, total 7,013 8,577 10,234 12,201 12,732 13,987 13,321 14,108 16,560
Royalties and fees 4,433 5,212 5,854 7,530 7,905 8,772 8,158 8,861 11,132
Other private services 2,580 3,365 4,380 4,671 4,827 5,215 5,163 5,247 5,428
FDIUS, total 1,050 1,208 1,410 1,874 2,193 3,354 2,741 2,987 4,040
Royalties and fees 117 122 145 212 287 438 333 529 888
Other private services 933 1,086 1,265 1,662 1,906 2,916 2,408 2,458 3,152
Combined, total 8,063 9,785 11,644 14,075 14,925 17,341 16,062 17,095 20,600
Royalties and fees 4,550 5,334 5,999 7,742 8,192 9,210 8,491 9,390 12,020
Other private services 3,513 4,451 5,645 6,333 6,733 8,131 7,571 7,705 8,580
US IMPORTS (payments
USDIA, total 1,683 1,881 2,512 3,105 2,965 3,117 3,269 3,137 3,573
Royalties and fees* 101 98 50 164 72 103 162 184 303
Other private services 1,582 1,783 2,462 2,941 2,893 3,014 3,107 2,953 3,270
FDIUS, total 1,508 1,498 2,210 2,568 3,568 3,977 3,820 4,339 5,710
Royalties and fees 648 693 897 1,106 1,601 1,812 1,770 2,054 2,647
Other private services 860 805 1,313 1,462 1,967 2,165 2,050 2,285 3,063
Combined, total 3,191 3,379 4,722 5,673 6,533 7,094 7,089 7,476 9,283
Royalties and fees* 749 791 947 1,270 1,673 1,915 1,932 2,238 2,950
Other private services 2,442 2,588 3,775 4,403 4,860 5,179 5,157 5,238 6,333WT/
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1131987 1988 1989 1990 1991 1992 1993 1994 1995
US BALANCE
USDIA, total 5,330 6,696 7,722 9,096 9,767 10,870 10,052 10,971 12,987
Royalties and fees* 4,332 5,114 5,804 7,366 7,833 8,669 7,996 8,677 10,829
Other private services 998 1,582 1,918 1,730 1,934 2,201 2,056 2,294 2,158
FDIUS, total (458) (290) (800) (694) (1,375) (623) (1,079) (1,352) (1,670)
Royalties and fees (531) (571) (752) (894) (1,314) (1,374) (1,437) (1,525) (1,759)
Other private services 73 281 (48) 200 (61) 751 358 173 89
Combined, total 4,872 6,406 6,922 8,402 8,392 10,247 9,973 9,619 11,317
Royalties and fees* 3,801 4,543 5,052 6,472 6,519 7,295 6,559 7,152 9,070
Other private services 1,071 1,863 1,870 1,930 1,873 2,952 2,414 2,467 2,247
*Payments by US parents for royalties and fees to their affiliates are for all European affiliates, as separate data for EU-12 affiliates are not available.
Source: Unpublished data prepared by the Bureau of Economic Analysis.WT/
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114TABLE 8.13
Trade in Services by US-EU Related Parties, by Industry of Affiliate in 1993
(million dollars)
Manufacturing
Total all
industriesPetroleum Total all
manufacturingFood and
kindred
productsChemicals
and allied
productsPrimary
and
fabricated
metalsNon-electric
machineryElectric and
electronic
equipmentTransportation
equipmentOther
manufacturingWholesale
tradeFinance:
banking,
insurance and
real estateServices Other
industries
USDIA: 1,696
US EXPORTS (receipts 13,321 292 8,115 433 2,240 147 3,632 216 123 1,325 1,696 757 2,132 329
Royalties and fees 8,158 2 5,755 366 1,571 102 2,659 168 16 874 1,356 72 803 170
Other private services 5,163 290 2,360 67 669 45 973 48 107 451 340 685 1,329 159
US IMPORTS (payments) 3,269 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Royalties and fees* 162 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Other private services 3,107 45 1,548 d 110 9 1,307 46 39 38 231 626 571 86
US BALANCE 10,052 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Royalties and fees* 7,996 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Other private services 2,056 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
*Payments by US parents for royalties and fees to their affiliates are for all European affiliates, as separate data for EU-12 affiliates are not available.
"d" Data suppressed to avoid disclosure.
"n.a." Data not available.
Source: Unpublished data prepared by the Bureau of Economic Analysis.WT/
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115Manufacturing
Total all
industriesPetroleum Total all
manufacturingFood and
kindred
productsChemicals
and allied
productsPrimary
and
fabricated
metalsMachinery Other
manufacturingWholesale
tradeRetail
tradeFinance:
banking,
insurance and
real estateServices Other
industries
FDIUS:
US EXPORTS (receipts) 2,741 205 1,293 58 628 22 449 134 332 10 364 189 348
Royalties and fees 333 0 140 45 43 8 18 25 151 d d 36 5
Other private services 2,408 205 1,153 13 585 14 431 109 181 10 363 153 343
US IMPORTS (payments) 3,820 87 2,402 83 1,398 60 496 365 510 21 332 253 164
Royalties and fees 1,770 d 1,430 28 1,120 34 97 151 136 d 12 106 36
Other private services 2,050 87 972 55 278 26 399 214 374 21 320 147 128
US BALANCE (1,079) 118 (1,109) (25) (770) (38) (47) (231) (178) (11) 32 (64) 184
Royalties and fees (1,437) 0 (1,290) 17 (1,077) (26) (79) (126) 15 0 -11 (70) (31)
Other private services 358 118 181 (42) 307 (12) 32 (105) (193) (11) 43 6 215
*Payments by US parents for royalties and fees to their affiliates are for all European affiliates, as separate data for EU-12 affiliates are not available.
"d" Data suppressed to avoid disclosure.
"n.a." Data not available.
Source: Unpublished data prepared by the Bureau of Economic Analysis.WT/
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116TABLE 8.14
Trade in Services by US-EU Related Parties, by EU Country in 1993*
(million dollars)
Total
EU-12Belgium Denmark France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain United
Kingdom
US EXPORTS (receipts)
USDIA, total 13,321 759 149 2,056 2,493 27 1,474 1,009 24 1,667 74 427 3,165
Royalties and fees 8,158 495 132 1,358 1,826 16 694 768 6 950 51 325 1,539
Other private services 5,163 264 17 698 667 11 780 241 18 717 23 102 1,626
FDIUS, total 2,741 29 71 271 796 0 13 93 0 300 0 6 1,118
Royalties and fees 333 16 1 37 48 d d 4 * 88 d 6 124
Other private services 2,408 13 70 234 748 d 13 89 d 212 d d 994
Combined, total 16,062 788 220 2,327 3,289 27 1,487 1,102 24 1,967 74 433 4,283
Royalties and fees 8,491 511 133 1,395 1,874 16 694 772 6 1,038 51 331 1,663
Other private services 7,571 277 87 932 1,415 11 793 330 18 929 23 102 2,620
US IMPORTS (payments)
USDIA, total 3,269 116 0 468 641 1 36 154 0 223 0 0 1,490
Royalties and fees** 162 d d 33 d d d d d d d d 34
Other private services 3,107 116 d 468 608 1 36 154 d 223 d d 1,456
FDIUS, total 3,820 65 51 567 753 0 57 167 7 510 0 10 1,633
Royalties and fees 1,770 32 4 150 304 d 2 16 d 226 d 1 1,035
Other private services 2,050 33 47 417 449 d 55 151 7 284 d 9 598
Combined, total 7,089 181 51 1,035 1,394 1 93 321 7 733 0 10 3,123
Royalties and fees** 1,932 32 4 150 337 0 2 16 0 226 0 1 1,069
Other private services 5,157 149 47 885 1,057 1 91 305 7 507 0 9 2,054
US BALANCE
USDIA, total 10,052 643 149 1,588 1,852 26 1,438 855 24 1,444 74 427 1,675
Royalties and fees** 7,996 495 132 1,358 1,793 16 694 768 6 950 51 325 1,505WT/
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117Total
EU-12Belgium Denmark France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain United
Kingdom
Other private services 2,056 148 17 230 59 10 744 87 18 494 23 102 170
FDIUS, total -1,079 -36 20 -296 43 0 -44 -74 -7 -210 0 -4 -515
Royalties and fees -1,437 -16 -3 -113 -256 0 -2 -12 0 -138 0 5 -911
Other private services 358 -20 23 -183 299 0 -42 -62 -7 -72 0 -9 396
Combined, total 8,973 607 169 1,292 1,895 26 1,394 781 17 1,234 74 423 1,160
Royalties and fees** 6,559 479 129 1,245 1,537 16 692 756 6 812 51 330 594
Other private services 2,414 128 40 47 358 10 702 25 11 422 23 93 566
*USDIA related-party data are by EU country of affiliate; FDIUS data are by EU country of parent.
**Payments by US parents for royalties and fees to their affiliates are for all European affiliates, as separate data for EU-12 affiliates are not available.
"d" Data suppressed to avoid disclosure.
Source: Unpublished data prepared by the Bureau of Economic Analysis.