The international economic accounts of the United States: a user's guide

Business Economics, April, 2002 by Ralph H. Kozlow, Rosemary D. Marcuss

With the growing importance of cross-border transactions, it is more important than ever for business to have comprehensive and accurate information on international flows of goods, services, and capital. This article describes the detailed content and organization of the official international accounts of the United States as both income statements and balance sheets. ft also describes ongoing and future efforts to make these accounts even more useful in the future.

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The international economic accounts of the United States are produced by the U.S. Bureau of Economic Analysis (BEA). BEA is widely known as the producer of the national economic accounts of the United States but is less well known in its related role as producer of the accounts that provide an economy-wide income statement and balance sheet for the United States vis-a-vis the rest of the world.

In its role as national economic accountant, BEA produces for the United States a set of highly detailed, internationally compatible economic accounts that track production and income economy-wide. The accounts fall into four groups: The National Income and Product Accounts (called the NIPA, or the GDP (1) Accounts); the International Transactions (or Balance of Payments) Accounts; the national Input-Output and GDP-by-Industry Accounts; and the Regional Economic Accounts, which include Gross State Product (state-by-state value added) and other state and local data. To produce these, BEA must depend on other government agencies and on private entities for most of the tens of thousands of information inputs required.

Few of the information inputs on which BEA depends have been collected expressly for the purpose of producing economic accounts. In its role as international economic accountant for the United States, however, BEA breaks that mold: it collects much of the original data for the international economic accounts directly from the economic transactors.

BEA's role in providing the public with up-to-date information on international economic activity is comprehensive. BEA maintains the most complete and sophisticated data collection system in the world on direct investment flows and international trade in services. It combines the data it collects with data from other sources--most importantly, the merchandise trade data from the Bureau of the Census and portfolio financial flow data from the Department of the Treasury--to produce a full set of quickly available and regularly updated statistical accounts of U.S. international economic activity.

BEA essentially has five separate work programs in its international economic accounts area: it compiles (1) the International Transactions and (2) the International Investment Position sets of accounts; and it has work programs devoted to (3) international services, (4) direct investment, and (5) research and analysis. The latter three program areas are cross-cutting, in that their outputs are included in the two sets of accounts and provide supplemental information that is not included in those accounts.

Within the international economic accounts, flows and positions are often characterized according to the following three main types: direct investment, portfolio investment, and official reserves. Direct investment takes place when an investor in one country establishes a lasting interest in, and exercises some degree of control over, the management of a business enterprise in another country. For the accounts, that is defined as ten percent or more ownership interest. An example of U.S. direct investment abroad is the purchase by a U.S. automobile manufacturer of a British automobile manufacturer. An example of U.S. portfolio investment abroad is the purchase by a U.S. resident of shares of stock (limited to less than a ten percent ownership interest) in a French publishing house. Examples of transactions in official reserve assets are the acquisition of Mexican pesos by the U.S. Federal Reserve System and the acquisition of U.S. Treasury bonds by a foreign central bank or monetary authority. All direct inv estment data are collected by BEA by means of mandatory surveys of multinational companies. The U.S. Department of the Treasury collects data on U.S. portfolio investment and on reserve assets.

International Transactions Accounts

The International Transactions Accounts are the most widely recognized U.S. international economic accounts. In these accounts, "transactions" are defined broadly to include all changes in ownership between residents of different countries of things of economic value that can be measured in monetary terms. They are composed and presented according to internationally developed guidelines (2), making them compatible with the accounts for other countries, and are reported quarterly, both in news releases and in articles in the January, April, July, and October issues of BEA's monthly magazine, the Survey of Current Business. The International Transactions Accounts have three principal component accounts: the current account, the financial account, and the capital account. Taken together, the international accounts of the major world economies paint a highly detailed, many-sided picture of all international flows of goods, services, income and investments.