Stats NZ has a new website.

For new releases go to

www.stats.govt.nz

As we transition to our new site, you'll still find some Stats NZ information here on this archive site.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
New Zealand's international trade in services - article

Key Statistics - article, March 2000, p7

New Zealand’s international trade in services1

Introduction

New Zealand’s international trade in services activity has grown significantly in the last 10 years (see Figure 1) and has been characterised by an increasing range and diversity of service types. In the June 1999 year New Zealand exported $7,608 million of services and imported services worth $8,561 million.

Graph, New Zealand's Trade in Services.

This article provides an overview of New Zealand’s international trade in services, as published in New Zealand’s quarterly balance of payments (NZBOP) statistics.

The overview includes:

  • a detailed breakdown of the services categories available
  • service type descriptions
  • collection methodologies
  • conceptual issues.

Definitions and categories

Broadly speaking services are products other than physical goods. They range from provision of legal advice, to emailing of customised software, to payments made for the right to use a trademark or the rights to distribute a movie.

The difference between a service and a good is that for a service:

  1. There is no physical object over which ownership rights can be established; and
  2. It cannot be traded separately from its production.

New Zealand’s international trade in services is the export and import of services between New Zealand residents and non-residents.

A resident is any individual or enterprise ordinarily domiciled in New Zealand. This includes the New Zealand branches and subsidiaries of foreign enterprises. Non-residents are individuals or enterprises usually domiciled in a country other than New Zealand. This includes the foreign branches and subsidiaries of New Zealand enterprises.

This concept of residency underlies the whole NZBOP system.

New Zealand’s international trade in services in NZBOP is classified into the following 11 main categories:

  1. Transportation
  2. Travel
  3. Communication services
  4. Construction services
  5. Insurance services
  6. Financial services
  7. Computer and information services
  8. Royalties and licence fees
  9. Other business services
  10. Personal, cultural and recreational services
  11. Government services n.i.e.

Transportation and Travel are the two largest service categories. The other nine categories are frequently grouped together and referred to as Other Services.

(For a more comprehensive breakdown see Table 2.)

Conceptual basis

Services statistics are collected on the conceptual basis contained in the fifth edition of the Balance of Payments Manual (BPM5).

Statistics New Zealand introduced BPM5 as the official methodology for balance of payments statistics from the June 1999 quarter.

The three main principles applied to the compilation of New Zealand’s balance of payments services statistics are:

  • transactions occur between a New Zealand resident and a non-resident
  • transactions are recorded when the service is performed
  • transactions are recorded at their market value.

The NZBOP current account measures New Zealand’s transactions in real resources (goods, services and income) and current transfers.

As can be seen in Table 1, services is the second largest contributor to the current account, following goods. In the June 1999 year exports and imports of services made up 24 percent of current account exports and 22 percent of current account imports respectively.

The services statistics are collected through a variety of sources. These are noted later under their respective categories.

Table, Current Account Components.

Service categories

Transportation

This item measures the value of transactions in transportation services between residents of different economies. Transportation services are those services provided through carriers (eg ships and aircraft) by their operators, and the goods and services consumed by carriers in the course of their operations.

The types of services provided through carriers include the carriage of freight (exports and imports) and passengers. Other transportation services covered include the charter of carriers, and airport and harbour fees.

Data are sourced from quarterly and annual surveys of resident airlines and shipping companies, non-resident airlines through their New Zealand offices, and New Zealand agents acting for non-resident shipping operators.

Travel

Travel includes the expenditure of New Zealanders while travelling overseas (imports), and the expenditure of overseas visitors while travelling in New Zealand (exports). In general terms, a “traveller” for balance of payments purposes is a person who intends to stay in an economy for less than twelve months. The one year rule does not apply to students and medical patients. These visitors remain residents of their own economies even if they stay for longer than 12 months. The reason for this is because their centre of economic interest is still their own economy.

Travel is split into two items: business and personal. Personal expenditure is further divided into education, health and other.

Data on the expenditure of overseas visitors in New Zealand have been derived from the International Visitors Survey, conducted by the New Zealand Tourism Board. Estimates of the expenditure of international students studying in New Zealand uses data from other government departments, and the year ended 30 June 1999 Census of English Language Providers. Estimates of health expenditure are extrapolated from data supplied by Crown Health Enterprises.

Information on the expenditure of New Zealanders while travelling overseas has been obtained from a benchmark sample survey of returned New Zealand travellers.

Other Services

As mentioned earlier, refers to the following nine service categories.

Communication services

Covers both telecommunication services and postal and courier services, between residents and non-residents.

Construction services

These cover work performed on construction projects and installations by employees of an enterprise in locations outside their resident economic territory. The work is performed for a short period, ie usually less than one year.

Insurance services

These are an estimate of the value of the insurance services supplied to (export) or purchased from (import) non-residents. All types of insurance are covered in the insurance item: life; life reinsurance; freight; marine hull; fire and general; and reinsurance.

Table, Exports and Imports of Services.

Financial services

These cover financial intermediary and auxiliary services conducted between New Zealand residents and non-residents. They include: financial management consultancy and advisory services; intermediary service fees, such as those associated with letters of credit, bankers’ acceptances, lines of credit, financial leasing and foreign exchange transactions.

Computer and information services

Computer services includes: the development and maintenance of database facilities; hardware consultancy; software implementation; the installation, maintenance or repair of computer hardware; and data entry, processing, outsourcing and facilities management. Excluded are the exports and imports of computer hardware.

News and information services includes: the provision of news, photographs and feature articles to the media; database information services; and direct non-bulk subscriptions to newspapers and periodicals.

Royalties and licence fees

These cover the exchange of payments and receipts between residents and non-residents for the authorised use of intangible, non-produced, non-financial assets and proprietary rights (such as patents, copyrights, trademarks, industrial processes, franchises, etc) and with the use, through licensing agreements, of produced originals or prototypes (such as manuscripts and films). Also included are royalties paid and received for computer software.

Other business services

Other business services is broken into two components: merchanting and other trade-related services; and miscellaneous business, professional, technical and other services.

Merchanting and other trade-related services

The two categories of this component are:

  • Commission Agents’ Services Related to Trade in Goods, which includes commission and brokerage on international trade in goods where the agent involved does not acquire ownership; and
  • Merchanting. This is the purchase of a good by a New Zealand resident from a non-resident and the subsequent resale of the good to another non-resident; during the process, the good does not enter or leave New Zealand. The difference between the value of goods when acquired and the value when sold is recorded as the merchanting service provided.
Miscellaneous business, professional, technical and other services

This component covers the transactions between residents and non-residents for the following services:

  • Legal: legal advice, representation, documentation etc.
  • Accounting: accounting, bookkeeping, tax consultant, auditing services etc.
  • Management consultancy services and public relations: the provision of advice or guidance to business; and public relations.
  • Advertising: the design, creation and marketing of advertisements; the purchase and sale of advertising space; and exhibition services provided by trade fairs etc.
  • Market research: market research and public opinion polling abroad on various issues.
  • Research and development: basic and applied research; basic development of new products and processes which represent technological advances.
  • Architectural, engineering and other technical services: the architectural design of projects; planning and project design; surveying; product testing and certification; and technical services.
  • Agricultural, mining and on-site processing services: services associated with agricultural crops and animals; forestry services; mining-related services; and on-site processing of, or work on, goods that have been imported but not re-exported or vice versa.
  • Other services: this includes operational leasing of equipment; management services not included elsewhere; membership subscriptions; photographic services; printing services; and consultancy services not elsewhere classified etc.
Personal, cultural and recreational services

Although not separately presented the two main categories of this component are:

  • Audiovisual and related services: services and associated fees related to the production of radio and television programmes, musical records and motion pictures.
  • Other personal, cultural, and recreational services: fees for other personal, cultural, and recreational services such as those associated with museums, sporting activities etc; and services, including provision of correspondence courses rendered abroad by teachers or doctors.
Government services n.i.e.

Covers defence and diplomatic transactions where at least one party to the transaction is either the New Zealand or a foreign government.

Export entries include estimates of sales of overseas capital assets excluding land, estimated expenditure of foreign embassies in New Zealand, the portion of the New Zealand government’s international aid spent in New Zealand, and the government’s receipts from immigration fees.

Import entries comprise the operational expenses of New Zealand’s embassies overseas, and the costs of New Zealand defence forces stationed overseas.

Collection sources

The bulk of Other Services is collected in the Quarterly Survey of International Trade in Services and Royalties, the insurance services data are collated from the international insurance questionnaires, while government current transactions data are sourced from government departments, and a 1998/99 benchmark survey of the expenditure of foreign embassies in New Zealand.

Issues

Three major conceptual issues can arise with the treatment and classification of some specific service activities and situations. These issues are as follows:

Distinguishing between service types

Services of one type may be included in transactions of another service type. For example if a New Zealand enterprise borrows money from overseas it may utilise both legal and financial services from non-residents but may not be able to separately distinguish these two service transactions. This will be particularly so, if one non-resident company provides both services.

When there is a combination of services which cannot be separately valued, respondents are asked to record the whole amount under the service type which has the greatest value.

Services within goods

This is a common problem that occurs when the value of a good includes the element of a service. An example would be if a New Zealand resident imported a piece of machinery to be installed. This transaction would include the value of the machinery (import of a good) and the installation service (import of a service). If the value of the service component cannot be distinguished separately then the transaction is classified to goods.

Services transactions versus financial flows

In a number of cases New Zealand’s earnings from construction services or film production are not included as service transactions. They are instead recorded as investment flows in the financial account of the NZBOP statement.

This is because of the residency concept of BOP, whereby an activity undertaken outside the economic territory of a resident enterprise is treated as part of the host country production and the enterprise is treated as a resident unit (branch or subsidiary) of that country.

For example, if a New Zealand resident construction company gets a contract to build a bridge overseas, they are likely to set up a branch, subsidiary or site office in the country where the work will occur. The work will then be attributed to the host economy and so won’t be treated as the export of a construction service from New Zealand.

The same principle can apply to film production. If a Canadian film company sets up a company while filming in New Zealand, the set up company would be treated as a resident, and any transactions would be excluded from New Zealand’s international trade in services.

The financial investment from Canada to the New Zealand company would be treated as direct investment and would be included in the NZBOP financial account. Any subsequent flows such as capital financing, profits or dividends would also be recorded
there.

Conclusion

New Zealand’s international trade in services contains a wide variety of service types indicative of the broadness of New Zealand’s service industries.

The data are primarily collected via the use of sample surveys and thanks must be given to all of the respondents that contribute.

The services data are available on a quarterly basis within the quarterly balance of payments release. For further information please contact Richard Hall or Rochelle Barrow (04) 495 4600.

Footnote

1 This paper was prepared by Richard Hall, Economic Statistician of the Balance of Payments Division of Statistics New Zealand.

Printable version

The downloadable file is in Adobe Acrobat format. If you do not have the Adobe Acrobat Reader you may download the reader to view or print the contents of this file.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
Top
  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+