Source of the definitions
What are services?
International Trade in Services in MSITS 2010
Source of the definitions
The following definitions are taken from the Manual on Statistics of International Trade in Services (MSITS 2010).
What are services?
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 the goods with which they may be associated in varying degrees.
In general, MSITS 2010 respects the 2008 SNA use of the term services, which is defined as follows (2008 SNA, para. 6.17):
Services are the result of a production activity that changes the conditions of the consuming units, or facilitates the exchange of products or financial assets. These types of service may be described as Transformation services and margin services, respectively. Transformation services are outputs produced to order and typically consist of changes in the conditions of the consuming units realized by the activities of producers at the demand of the consumers. Transformation services are not separate entities over which ownership rights can be established. They cannot be traded separately from their production. By the time their production is completed, they must have been provided to the consumers.
The 2008 SNA (paras. 6.18 and 6.19) goes on to qualify transformation services as follows:
The changes that consumers of services engage the producers to bring about can take a variety of different forms as follows:
(a) Changes in the condition of the consumer's goods: the producer works directly on goods owned by the consumer by transporting, cleaning, repairing or otherwise transforming them;
(b) Changes in the physical condition of persons: the producer transports the persons, provides them with accommodation, provides them with medical or surgical treatments, improves their appearance, etc.;
(c) Changes in the mental condition of persons: the producer provides education, information, advice, entertainment or similar services in a face-to-face manner.
The changes may be temporary or permanent. For example, medical or education services may result in permanent changes in the condition of the consumers from which benefits may be derived over many years. On the other hand, attending a football match is a short-lived experience. In general, the changes may be presumed to be improvements, as services are produced at the demand of the consumers. The improvements usually become embodied in the persons of the consumers or the goods they own and are not separate entities that belong to the producer. Such improvements cannot be held in inventories by the producer or traded separately from their production.
The 2008 SNA (para. 6.21) defines margin services as follows:
Margin services result when one institutional unit facilitates the change of ownership of goods, knowledge-capturing products, some services or financial assets between two other institutional units. Margin services are provided by wholesalers and retailers and by many types of financial institutions. Margin services resemble transformation services in that they are not separate entities over which ownership rights can be established. They cannot be traded separately from their production. By the time their production is completed, they must have been provided to the consumers.
The 2008 SNA recommends the use of CPC, Version 2, for the classification of products or outputs (where services products are classified approximately in sects. 5 through 9 thereof) and of ISIC, Rev.4, for the classification of activity. In practice, services activities are mainly taken to be those listed in sections G through S of ISIC, Rev.4, (a) with some exceptions appearing in other sections. In BPM6, the concept of services is essentially identical to that of the 2008 SNA, even though the BOP services components travel, construction and government goods and services n.i.e. include some goods. On the other hand, under certain circumstances, international trade in goods may include, indistinguishably, such service charges as insurance, maintenance contracts, transport charges, intellectual property payments and packaging.
(a) Electricity, gas, steam and air conditioning supply (ISIC, Rev.4, sect. D); water supply; sewerage, waste management and remediation activities (ISIC, Rev.4, sect. E); and construction (ISIC, Rev.4, sect. F) are not covered, since the main production is generally regarded as being related more to goods.
International Trade in Services in MSITS 2021
Before the publication of MSITS 2010, the conventional statistical meaning of international trade in services was that described in BPM6, which defines international trade in services as trade between residents and non-residents of an economy. This corresponds very closely to the concept of trade in services in the "rest of the world" account of the 2008 SNA. Such trade is described in chapter III of MSITS 2010.
This concept of international trade in services is combined with the concept of international trade in goods to create that of international trade in the BPM6 goods and services account. However, as described in box I.1, it is not always possible to clearly separate the value of trade in goods from the value of trade in services.
Services differ from goods in a number of ways, most commonly in respect of the immediacy of the relationship between supplier and consumer. Many services are non-transportable, that is, they often require the physical proximity of supplier and customer: for example, the supply of a hotel service requires the hotel to be where the customer wishes to stay, a cleaning service for a business must be provided at the site of the business, and haircutting requires both hairstylist and client to be present.
For international trade in such non-transportable services to take place, either the consumer must go to the supplier or the supplier must go to the consumer. Suppliers may prefer to provide their services while being present in the country of the consumer rather than cross-border. International trade accords, concerning services, in particular those encompassed by the GATS, make provision for agreement on the subject of suppliers having a presence in the country of the consumer or vice versa.
Accordingly, MSITS 2010 extends the scope of international trade in services to cover the supply of services through foreign affiliates established abroad. Such supply of services and its related statistics, described here as Foreign Affiliates Statistics (FATS), are explained in chapter IV.
MSITS 2010 also covers the supply of services through the presence of foreign individuals, either as foreign service suppliers themselves or as employees of a foreign service supplier, which is either the mother enterprise or a foreign affiliate of the mother enterprise. However, consideration of foreign persons who are employees of host country enterprises that are not owned by a foreign parent is outside the scope of MSITS 2010. Most services supplied through the presence of natural persons are covered by BPM6 (under the services account) and FATS frameworks. An in-depth discussion of this is provided in chapter V.
In MSITS 2010, the component covered by the extended scope of international trade in services is also referred to as international supply of services.
Note: Although MSITS 2010 extends the general scope of the term "international trade in services" to accommodate the GATS provisions, it does not suggest that provision and acquisition of services by foreign affiliates established abroad should be referred to as exports and imports of services. This term, in an international statistical context, is reserved for trade in services between residents and non-residents of different economies.