I was intrigued to see one of the more esoteric topics in macroeconomics hit the headlines earlier this week: something known as balance-of-payments (BOP) asymmetries. In this context, ‘asymmetries’ basically refers to discrepancies in bilateral trade figures between the two countries involved. For example, if Country A shows a trade surplus of $100 with Country B, then Country B’s official statistics should show a trade deficit of $100 with Country A.
Of course, it is often the case that Country A and Country B record slightly different figures for a surplus/corresponding deficit—and there are often logical explanations for the discrepancies. For example, countries might classify different transactions in different ways. This issue is more than just a wonky curiosity; it can have serious implications for policymakers’ understanding of crossborder trade flows and, according for trade policy itself. The example that made the news was quite an extreme one: the US and the UK have both reported a bilateral trade surplus.
I mentioned this issue briefly in an earlier blog post, when I cited a presentation by Dr Silke Stapel-Weber, the Director of National Accounts, Prices and Key Indicators at Eurostat. Among the points she made in her excellent, comprehensive presentation was that the biggest challenge for the UK in terms of BOP asymmetries are in services trade rather than goods trade. This is unsurprising; previous research by TheCityUK has highlighted the extent to which services trade continues to be underestimated (compared to merchandise trade), as well as some of the wide-ranging challenges around the measurement of services trade more generally. We noted, for example, that it is often difficult to pinpoint the geographic origin of digital services, and that services trade data are often released with a much longer lag than merchandise trade data.
The US-UK example bears this generalisation out: the discrepancy between UK reported goods imports from the US and its counterpart, US reported goods exports to the UK, is minimal. But the discrepancies in services exports and imports are enormous—our calculations using official data show that the UK reports services exports to the US of $82bn but the US counterpart import figure is just $53bn; UK services imports from the US are recorded as $38bn, whereas US services exports to the UK are nearly double that, at $67bn.
Eurostat data point to the same conclusion about the difficulty of accurately measuring services trade relative to goods trade. Presenting Eurostat data back in February, Dr Stapel-Weber noted that when looking at UK trade with the EU27, the 2015 data on goods showed the UK as a net importer from the UE27 and—as one would expect—the EU27 as a net exporter to the UK. But when looking at services, the UK appeared to be a net exporter to the EU27—and the EU27 also appeared to be a net exporter to the UK.
