Digital Trade in North America

 

 

 

U.S. Department of Commerce 

Economics and Statistics Administration 

Office of the Chief Economist 

By 

Jessica R. Nicholson 

ESA Issue Brief 

#01-18 

January 5, 2018 

Digital Trade in North America
 

Executive Summary 

As Internet access and reliance grows, so does the potential for digital 

cross-border trade. Building on other work from the Department of 

ommerce’s Office of the Chief Economist (OCE) and Bureau of Economic 

Analysis (BEA), this report, which serves to inform policymakers, business 

leaders, and others, summarizes estimates of U.S. digital trade with 

Canada and Mexico. 

We cannot definitively identify the value of U.S. digital trade because 

official trade statistics do not contain information on the mode of delivery 

of services. However, the official international trade in services statistics, 

as well as other information published by BEA and other organizations, do 

provide insights on how digital trade impacts the U.S. economy. In 

particular, BEA produces estimates on the international trade of 

information and communications technology (ICT) services and 

“potentially” IT-enabled (PICTE) services, which are services that can be 

traded remotely using the Internet or some other digital network. 

This report shows that in 2016: 

	 PICTE services accounted for 54 percent of all U.S. services exports, 

48 percent of all services imports, and 64 percent of the trade in 

services surplus. 

	 U.S. PICTE services exports to Canada totaled $27.8 billion, or 52 

percent of all U.S. services exports to Canada and 7 percent of total 

U.S. PICTE exports to all trading partners. The United States 

imported $13.9 billion in PICTE services from Canada, equal to 46 

percent of all services imports from Canada and 6 percent of total 

PICTE services imports. 

	 U.S. PICTE service exports to Mexico totaled $8.8 billion, or 27 

percent of all U.S. services exports to Mexico and 2 percent of total 

U.S. PICTE exports to all trading partners. The United States 

imported $4.8 billion in PICTE from Mexico, equal to 19 percent of 

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Digital Trade in North America 

all services imports from Mexico and 2 percent of total PICTE services imports. 

	 U.S. PICTE services exports to Canada increased at an average annual rate of 4.0 percent from 

2006 to 2016. Growth of U.S. exports of these services to Mexico was even faster, at 5.5 

percent. 

Additionally, there is evidence that multinational firms are exchanging data and information across 

North America. Canadian and Mexican affiliates of U.S. multinationals rely on data flows to carry out 

business operations, as well as for a wide-variety of additional uses. While the Department of 

Commerce does not have specific data on the volume of these data flows, BEA does publish data that 

show the presence of U.S. affiliates in these countries, supporting the notion that data is flowing across 

borders. 

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Digital Trade in North America 

Digital Trade 

The term “digital trade” is used by many organizations to describe a range of activities that occur over a 

network, such as the Internet, and that cross geographical borders. The most explicit form of digital 

trade occurs when a business in one country sells a service to an entity in another country and delivers 

that service over the Internet. However, e-commerce, or the purchase and sale of goods through a 

network, is also considered by many to be digital trade. Others consider any digital transfer of 

information or services, whether or not there is a monetary transaction involved, to be part of this 

category. For example, this would include any digital transfer of information such as emails between 

friends, social media, personnel files, supply chain information, or even an e-mail from the headquarters 

of a multinational enterprise to one of its affiliates overseas. 

Regardless of how digital trade is defined, statistical data available to measure data flows is relatively 

scarce. BEA publishes two datasets that can help shed light on the magnitude of digital trade between 

the United States and its closest neighbors: international services trade statistics and statistics on 

foreign direct investment and multinational enterprises. 

Potentially ICT-Enabled Services 

Unlike internationally traded goods, traded services do not pass through customs as they cross borders. 

So while there are extensive administrative records of the value of goods that are traded, and even 

some information on the method of transport (such as air or other vessel), the same is not true for 

services trade. BEA collects much of its data on international trade in services directly from businesses 

through surveys. While the data indicate the value and type of service provided, there is no information 

on whether the service was delivered digitally or in person. Additionally, BEA only captures trade with a 

monetary exchange. Thus, many cross-border zero-dollar data transactions, despite being valuable to 

businesses and consumers, do not show up in BEA estimates. 

Even though the international trade in services data cannot provide a precise estimate of the value of 

U.S. digital trade, they do allow for estimation of the value of potentially-ICT enabled (PICTE) services 

trade. PITE services are those that “can predominantly be delivered remotely over IT networks, a 

subset of which are actually delivered via that method.”1 For example, the provision of insurance 

services, financial services, and engineering services do not require the provider and the customer to be 

in the same location, but instead could be provided over a digital network. PICTE services also include 

ICT services, which are services that facilitate information processing and communication. Unlike PICTE 

services, BEA can precisely measure ICT services because ICT services are defined as a group of service 

types, rather than by the mode of delivery. 

Table 1 displays the value of U.S. services trade in 2016, by type, as estimated by BEA. The table shows 

the value of trade in PICTE services. In 2016, U.S. PICTE services trade consisted of $403.5 billion in 

exports and $244.0 billion in imports. As a portion of overall U.S. services trade, PICTE services 

1 Grimm, Alexis. “Trends in U.S. Trade in Information and ommunications Technology (IT) Services and ITEnabled Services.” ureau of Economic !nalysis. Available at: 

https://www.bea.gov/scb/pdf/2016/05%20May/0516_trends_%20in_us_trade_in_ict_serivces2.pdf. 

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Digital Trade in North America 

accounted for 54 percent of exports and 48 percent of imports. The PICTE trade surplus was $159.5 

billion or 64 percent of the total U.S. services trade surplus in 2016. 

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Digital Trade in North America 

U.S. Services Trade with Canada and Mexico 

Canada accounted for 7 percent of total U.S. services exports and imports and was the United States’ 

second-largest services trading partner in 2016, behind only the United Kingdom. Mexico ranked 

seventh, accounting for 5 percent of the total volume of U.S. services trade. Table 2 displays the value 

of U.S. trade in selected services types, including ICT and PICTE services, with Canada and Mexico in 

2016. In that year, the United States ran services trade surpluses with both countries, overall and in 

PICTE services trade. PICTE services accounted for 58 percent of the services trade surplus with Canada 

and 53 percent with Mexico. 

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Exports 

In 2016, the United States exported $54.0 billion in services to Canada of which $27.8 billion, or 52 

percent, were PICTE services. Selected other business services, including services such as research and 

development, professional, management, and consulting, and architecture and engineering, accounted 

for $8.3 billion, or 30 percent, of the U.S. PICTE services exports to Canada. Charges for the use of 

intellectual property accounted for another $8.0 billion, or 29 percent. 

With Mexico, charges for the use of intellectual property accounted for the largest share of PICTE 

exports at $3.7 billion, or 43 percent of the total, while selected other business services accounted for 

$2.0 billion, or 23 percent. 

Figure 1 shows U.S. PICTE exports to Canada and Mexico over the past decade. Because of data 

limitations, U.S. PICTE exports to Canada and Mexico can only be estimated within a range from 2006 to 

2012. Figure 2 presents the upper and lower bounds of these ranges. Regardless of where the true 

values of PICTE exports fall within these ranges, it is clear that U.S. PICTE exports to Canada and Mexico 

have grown considerably over the last decade. 

Using the upper bound as the value for 2006 to be conservative, U.S. PICTE exports to Canada were 47 

percent higher in 2016 than in 2006. This is equal to an annual growth rate of 4.0 percent. U.S. PICTE 

exports to Mexico increased even faster, at an annual rate of 5.5 percent, and the value of these exports 

was 70 percent higher in 2016 than in 2006. 

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Digital Trade in North America 

Imports 

In 2016, the United States imported $30.0 billion in services from Canada of which $13.9 billion, or 46 

percent, were PICTE services. Selected other business services imports from Canada were $6.2 billion 

and, as with exports, accounted for the largest share, 45 percent, of U.S. PICTE imports from Canada. 

Telecommunications, computer, and information services accounted for another $3.8 billion, or 27 

percent of PICTE services imports from Canada. 

These two services types also accounted for the largest shares of U.S. PICTE imports from Mexico. 

Imports of selected other business services were $2.7 billion, or 56 percent, while telecommunications, 

computer, and information services were $1.0 billion, or 20 percent of PICTE services imports from 

Mexico. 

Figure 2 shows U.S. PICTE imports from Canada and Mexico over the past decade. As with Figure 1, 

Figure 2 presents the upper and lower bounds of the possible values of these imports from 2006 to 

2012. Again, using the upper bound as the value for 2006 to be conservative, U.S. PICTE imports from 

Canada were 32 percent higher in 2016 than in 2006 after growing at an annual rate of 2.8 percent. U.S. 

PICTE imports from Mexico increased at an annual rate of 6.8 percent, with the 2016 level nearly double 

the 2006 level. 

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Foreign Direct Investment and Multinational Enterprises 

In addition to international services trade data, BEA collects data on foreign direct investment in the 

United States, as well as data on U.S. direct investment overseas. These data include information on the 

financial structure and operations of U.S. multinational enterprises (MNEs) and their foreign affiliates, 

including those located in Canada and Mexico, as well as information about the activities of foreign 

MNEs in the United States. Like the international trade in services statistics, the data on direct 

investment does not provide any explicit information on the transfer of data across borders or the value 

of digital trade. However, the primary activities that MNEs engage in suggest that data flows are likely 

an important part of their operations. 

In 2015, majority-owned foreign affiliates had total assets of $25.0 trillion and employed 14.1 million 

workers.2 (See Table 3) Of the total assets, $1.4 trillion (6 percent) was held in Canada and $437.2 billion 

(2 percent) was in Mexico. Mexican affiliates employed 1.4 million workers (10 percent) while Canadian 

affiliates employed 1.2 million workers (8 percent). These affiliates and their employees were spread 

out across many different industries. In Canada, the retail trade and manufacturing industries were the 

largest affiliate employers. The most assets were held by enterprises engaged in management of 

nonbank companies. In Mexico, manufacturing enterprises employed more than half of all affiliated 

workers while finance and insurance enterprises held the most assets. 

2 Majority-owned foreign affiliates are affiliates of U.S. multinational enterprises where the U.S. parent has more 

than 50 percent ownership. Most foreign affiliates are majority-owned according to BEA data. 

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Digital Trade in North America 

To manage these assets and workforce, U.S. parent companies undoubtedly rely on cross-border data 

flows. Measured in bits and bytes, total global data flows in 2014 were 45 times larger than in 2005.3 

While these flows represent more than just intracompany data traffic, multinational firms undoubtedly 

were a contributor. Some firms rely on in-house digital platforms to manage internal communication, 

data sharing, and other management tasks, while others rely on free digital media platforms and 

purchased software.4 Digital tools and networks, such as the cloud, also provide firms with multiple 

locations the ability to centralize the administration of global employees, supply chain management, or 

other back-office operations.5 

Table 4 shows the ways in which firms in all industries are identifying applications of digital 

technologies.6 Cloud-computing is the basis for many digital trade activities and the United States is the 

dominant market for cloud services with $50.8 billion in revenues in 2016, 57 percent of global cloud 

services revenues that year.7 The top U.S. cloud services providers all have operations in various 

locations around the world.8 These activities all require the seamless flow of data across borders in 

North America, and beyond. 

Source: United States International Trade Commission 

3 McKinsey Global Institute (MGI) (2016). Digital Globalization: The New Era of Global Flows. Page 31. Retrieved
 

from http://www.mckinsey.com/business-functions/mckinseydigital/our-insights/digital-globalization-the-newera-of-global-flows. (Last accessed December 6, 2017)
 4 MGI, page 34.
 5 MGI, page 32.
 6 United States International Trade Commission. (2017) Global Digital Trade 1: Market Opportunities and Key
 

Foreign Trade Restrictions. Publication Number: 4716. Investigation Number: 332-561. Page 189. Retrieved from
 

https://www.usitc.gov/publications/332/pub4716_0.pdf. (Last accessed December 6, 2017)
 7 USITC, pages 73, 217-219. Data on cloud services revenues from Marketline.
 8 USITC, page 75. 

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Conclusion 

Digital trade, defined broadly, is changing the way that nations trade services and the way that firms do 

business. As evidenced by data from the BEA, around half of all services traded between the United 

States and Canada and the United States and Mexico are likely delivered through cross-border data 

flows over the Internet or some other data network. U.S. businesses also rely on digital trade to conduct 

business with their overseas affiliates. 

!cknowledgments 

The author would like to thank the following persons who provided comments, suggestions, and other 

contributions to this report. Any errors in the report are solely the author’s responsibility. 

Rob Rubinovitz, Deputy Chief Economist, Department of Commerce 

Rudy Telles, Economist, Department of Commerce, Office of the Chief Economist 

Alexis Grimm, Economist, Bureau of Economic Analysis 

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Digital Trade in North America 

Suggested citation:
 

Nicholson, J. Office of the Chief Economist, Economics and Statistics Administration, U.S. Department of 

Commerce. (2018). Digital Trade in North America (ESA Issue Brief # 01-18). Retrieved from
 

https://www.esa.gov/reports/digital-trade-north-america.
 

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