Annual input-output accounts of the U.S. economy, 1997

Data Availability

The estimates for 94 industries at the input-output (I-O) two-digit level, including alternative estimates of the make and use tables on an approximate 1987 Standard Industrial Classification (SIC) basis and a discussion of the matrix algebra underlying the derivation of the tables, are available on BEA's Web site. (Estimates for 498 industries at the I-O six-digit level are also available; these estimates are less reliable, but they are made available for research that requires a high level of detail.) Go to <www.bea.doc.gov>, click on "Industry and wealth data;' and look under "Input-Output data."

The two-digit I-O estimates are also available for $20 on diskette-product number NDN-0271. To order, call the BEA Order Desk at 1-800-704-0415 (outside the United States, call 202-606-9666).

An Ownership-Based Framework of the U.S. Current Account, 1982-98

IN THIS REPORT, the Bureau of Economic Analysis (BEA) updates its supplemental, ownership-based framework of the current-account portion of the U.S. international transactions (balance of payments) accounts.1 This presentation was developed in the first half of the 1990's in response to interest in a supplement to the existing international transactions presentation that would provide additional information about ownership.2 This interest arose from the increased interdependence of world economies that occurred as multinational companies (MNC's) have assumed a more prominent role in international markets by integrating production processes on a global scale and as commercial agreements have increasingly covered not only cross-border sales but also sales through locally established affiliates.

The globalization of economic activity can be viewed in a number of ways. From the perspective of MNC's, worldwide sales are aggregated irrespective of the location of the point of sale-for example, irrespective of whether the sale originated from the plant of a company in California or from a plant of that company in Ireland. In terms of the impact on the U.S. economy-- that is, from the traditional balance-of-payments perspective-the location of the seller is significant; moreover, for sales by affiliates, factor costs-such as labor and capital-and other costs must be subtracted from sales. Like the traditional international transactions accounts, the ownership-based framework presented in this report is organized by residency, but it broadens the definition of the balance on trade in goods and services to include net receipts of income by MNC's from the sales and purchases by their affiliates. The ownership-- based account is fully consistent conceptually with the current account of the traditional international transactions accounts and can be viewed as a "satellite" of those accounts.3

Highlights of this presentation for 1998 follow:

Worldwide sales by U.S. companies to foreign persons exceeded sales by foreign companies to U.S. residents by $363 billion. Sales by the U.S. companies to foreign persons were $3,173 billion; $933 billion were from cross-border sales (exports of goods and services), and $2,240 billion were sales by foreign affiliates. Sales by the foreign companies to U.S. residents were $2,810 billion; $1,100 billion were from cross-border sales (imports of goods and services), and $1,710 billion were sales by U.S. affiliates.

After deducting costs, such as those for labor, capital, and purchased goods and services, the income to U.S. companies from the sales by their foreign affiliates was $106 billion; this income combined with the value of U.S. goods and services exports yields a total value of trade accruing to the U.S. economy of $1,039 billion. After deducting costs, the income to foreign companies from the sales by their U.S. affiliates was $39 billion; this income combined with the value of US. goods and services imports yields a total value of U.S. trade accruing to foreign economies of $1,139 billion. The resulting balance of this ownership-based measure is -$99 billion, compared with the -$167 billion balance on trade of goods and services using the traditional balance-of-payments framework based on location of production.

The ownership-based estimates for 1982-97 have been revised to incorporate the results of last summer's annual revision of the U.S. international transactions accounts, and the estimates for 1997 have been revised to incorporate the latest financial and operating data of foreign-owned affiliates in the United States and of U.S.-owned affiliates abroad; new estimates are presented for 1998. Among the improvements that were incorporated last summer into the annual revision of the U.S. international transactions accounts were the following: Revised estimates of direct investment income receipts and payments for 1982 forward that reflect revised estimates of the current-cost adjustment, which incorporated revised estimates of prices for equipment and structures; revised estimates of "other private services" receipts for 1986 forward that reflect the use of improved estimates of international expenditures of international organizations in the United States and newly developed estimates of expenditures of temporary nonagricultural workers in the United States; and revised estimates of "other private services" receipts and payments for 1997 forward that reflect revisions to financial services receipts and payments.4

In the standard presentation of the current-account estimates, U.S. sales (exports) to foreigners (line 3 of table 1) consist only of the sales of goods and services that are delivered to foreign markets directly from the United States. In the ownership-based presentation, U.S. international "sales" (line 2) also includes the income that is received by U.S. companies from their affiliates abroad (line 8). Similarly, in the ownershipbased presentation, U.S. international "purchases" (line 22) includes the income that is paid by foreign-owned firms in the United States to their foreign owners as well as the payments for the goods and services that are directly delivered to the U.S. market from abroad. These additions, which raise the value of total U.S. "sales" and "purchases," provide a more comprehensive basis for assessing the effect of net "cross-border" sales on the U.S. economy.

In the table, the balance on goods, services, and net

receipts from sales by affiliates (line 43) shows the net result of the active participation of U.S. companies, including U.S. affiliates of foreign owners, in international markets. Each year, this balance has been in smaller deficit (or in surplus) than either the balance on goods and services or the balance on current account; in 1998, this balance was -$99.2 billion, compared with the balance on goods and services of -$166.9 billion. The balance was smaller because U.S. parents' receipts of income from their foreign affiliates has been greater than U.S. affiliates' payments of income to their foreign parents.

Additional information on ownership relationships is provided by the disaggregation of trade in goods and in services into trade between affiliated parties (that is, trade within MNC's) and trade between unaffiliated parties. Trade within MNC's is disaggregated into trade between U.S. parent companies and their foreign affiliates and trade between U.S. affiliates of foreign companies and their foreign parent groups. For receipts and payments of direct investment income, the table shows how the income is derived from the production and sales by affiliates.5 To highlight the links between the income and the activities that produce it, the income is designated "net receipts" or "net payments" of direct investment income resulting from sales by affiliates.

The addenda to table 1 provide supplemental information on the U.S. content and the foreign content of affiliates' output; this information can be used to describe affiliate operations and analyze the role of direct investment in supplying international markets. For both foreign and U.S. affiliates, output sold (or added to inventory) is broken down between U.S. content and foreign content; the source of the content is then broken down between the affiliates' own value added and other content.

1. For a review of the sources and methods used to prepare the supplemental estimates, see Obie G. Whichard and Jeffrey H. Lowe, An Ownership-Based Disaggregation of the U.S. Current Account,1982-93,"SURVEY of CURRENT BUSINESS 75 (October 1995): 52-61. For a general review of the issues relating to ownership relationships in international transactions, see J. Steven Landefeld, Obie G. Whichard, and Jeffrey H. Lowe. Alternative Frameworks for U.S. International Transactions, SURVEY 73 (December 1993): 50-61.

2. Among those calling for more information on ownership was a National Academy of Sciences study panel. See Anne Y. Kester, ed., Behind the Numbers: U.S. Trade in the World Economy, National Research Council, Panel on Foreign Trade Statistics (Washington, DC: National Academy Press, 1992).

Note.- Jeffrey H. Lowe prepared this report.

3. According to the international System of National Accounts, satellite accounts are accounts that augment the central national accounts by "expanding the analytical capacity of national accounting for selected areas...in a flexible manner, without overburdening or disrupting the central system"; they may introduce additional information, alternative accounting frameworks, or "complementary or alternative concepts," while maintaining linkages to the central accounts. See Commission of the European Communities, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations, and World Bank, System of National Accounts, 1993 (Brussels/Luxembourg, New York, Paris, and Washington, DC, 1993): 489.

4. See Christopher L. Bach, "U.S. International Transactions, Revised Estimates for 1982-99: SURVEY 80 (July 2000): 70-77.

5. These detailed estimates can only be provided for nonbank affiliates.

Table 1 follows.

1. For an overview of the 1-0 accounts, see Ann M. Lawson, "Benchmark Input-Output Accounts for the U.S. Economy, 1992: Make, Use, and Supplementary Tables, SuRvEy oF CURRENT BusINEss 77 (November 1997): 36-82; and "Benchmark Input-Output Accounts for the U.S. Economy, 1992: Requirements Tables," SuRvEy 77 (December 1997): 22-47. For information on last summer's annual revision, see Eugene P. Seskin and David F. Sullivan, "Annual Revision of the National Income and Product Accounts," SuRvEy 80 (August 2000): 6-139.

2. Sumiye Okubo, Ann M. Lawson, and Mark A. Planting, "Annual InputOutput Accounts of the U.S. Economy, 1996:' SuRvEy 80 (January 2000): 37-86.

3. Tables 1, 2, and 8 are at the end of this article. All eight tables are available electronically; see the box "Data Availability" on page 15.

4. The alternative tables conform more closely to the current SIC establishment-based data collection system by showing the primary and secondary products in the industries that produce them. As a result, the industry definitions, which are used to determine the columns of the use table and the rows of the make table, may differ from those used in the traditional 1-0 tables.

5. Detailed 1997 1-0 estimates for 498 industries have been prepared for use in research (see the box "Data Availability").

6. The benchmark 1-0 tables include 136 categories for personal consumption expenditures, 26 categories for structures, and 30 categories for private fixed investment and software.

7. "Final uses" in the 1-0 accounts are the same as the "product-side" components of GDP in the NIP,'s.

8. Laurence R. Klein postulates that 1-0 measures of deliveries of computer and data-processing services to other intermediate sectors and to final-demand sectors indicate the diffusion of information technology; Lawrence R. Klein, "Sustainability and Global Reach of IT" (paper presented at the WEFA Annual Symposium on International Issues, New York, October 2000).

9. Jiemen Guo and Mark A. Planting, "Using input-Output Analysis to Measure U.S. Economic Structural Change Over 25 Years" (paper presented at the 13,h International Conference on Input-Output Techniques, Macerata, Italy, August 21-26, 2000).

10. Total consumption is defined as total domestic commodity output plus imports less change in private inventories, and it is equal to the sum of total intermediate use and the four final-use sectors-personal consumption expenditures, gross private fixed investment, exports, and government purchases.

11. In real terms, the growth rates of these commodities is much faster because of the declining prices of computers, electronic components, telecommunications services, and software.

12. For a more complete description of the methodology see Okubo, lawson. and Planting, 42-46.