Industry and Services Statistics, What Exactly Are Services?

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The term services covers a heterogeneous range of intangible products and activities that are difficult to encapsulate within a simple definition. Services are also often difficult to separate from goods with which they may be associated in varying degrees.

This Manual generally respects the 1993 SNA use of the term services, which is defined as follows: "Services are not separate entities over which ownership rights can be established. They cannot be traded separately from their production. Services are heterogeneous outputs produced to order and typically consist of changes in the condition of the consuming units realised by the activities of the producers at the demand of the customers. By the time their production is completed they must have been provided to the consumers."

However, the 1993 SNA then qualifies this relatively simple definition as follows: "There is a group of industries, generally classified as service industries, that produce outputs that have many of  the characteristics of goods, i.e., those concerned with the provision, storage, communication and dissemination of information, advice and entertainment in the broadest sense of those terms--the production of general or specialised information, news, consultancy reports, computer programs, movies, music, etc. The outputs of these industries, over which ownership rights may be established, are often stored on physical objects--paper, tapes, disks, etc.--that can be traded like ordinary goods. Whether characterised as goods or services, these products possess the essential characteristic that they can be produced by one unit and supplied to another, thus making possible division of labour and the emergence of markets."

The 1993 SNA recommends the use of the CPC for the classification of products, or outputs of industry. Services are classified using sections 5 through 9 of the CPC version 1.0. The 1993 SNA recommends the use of the ISIC for the classification of industry. In practice, service industries (or activities) are taken to be those in sections G through Q of ISIC Revision 3. In the BPM5 the concept of services is, in principle, essentially that of the 1993 SNA, but for practical measurement reasons international trade in services between residents and non-residents includes some trade in goods such as those bought by travellers and those purchased by embassies. On the other hand, under certain circumstances international trade in goods may indistinguishably include service charges such as insurance, maintenance contracts, transport charges, royalty payments and packaging.

Examples of service activities are wholesale, retail, certain kinds of repair, hotel, catering, transport, postal, telecommunication, financial, insurance, real estate, property rental, computer-related, research, professional, marketing and other business support, government, education, health, social, sanitation, community, audiovisual, recreational, cultural, personal, and domestic services.

Before the publication of this Manual, the conventional statistical meaning of international trade in services was that described in BPM5, which defines international trade in services as being between residents and non-residents of an economy. This also corresponds very closely to the concept of trade in services in the "rest of the world" account of the 1993 SNA. Such trade is described in Chapter III of this Manual.

This concept of international trade in services combines with the concept of international trade in goods, to form international trade in goods and services in the BPM5 current account. But …it is not always practical to separate trade in goods from trade in services.

Services differ from goods in a number of ways, most commonly in the immediacy of the relationship between supplier and consumer. Many services are non-transportable; i.e. they require the physical proximity of supplier and customer--for example, the provision of a hotel service requires that the hotel is where the customer wishes to stay, a cleaning service for a business must be provided at the site of the business, and a haircut requires that both hairstylist and client be present.
For international trade in such non-transportable services to take place, either the consumer must go the supplier or the supplier must go to the consumer. International trade agreements concerning services, in particular those embodied in the GATS, make provision for agreement on suppliers moving to the country of the consumer.

To reflect this type of trade, the Manual extends the definition of international trade in services to include the value of services provided through foreign affiliates established abroad, described here as Foreign Affiliates Trade in Services (FATS). Such trade is described in Chapter IV.

Services are also supplied by individuals located abroad, either as service suppliers themselves or employed by service suppliers including those in the host country. A large part of this type of trade in services is covered by the BPM5 and FATS frameworks. The rest is discussed in Annex I.

N.B.  Although this Manual extends the scope of the term international trade in services, it is not suggesting that these extensions be regarded as imports or exports.