I was intrigued to see one of the more esoteric topics in macroeconomics hit the headlines last week: something known as balance-of-payments (BOP) asymmetries.
In this context, ‘asymmetries’ basically refers to discrepancies in trade figures between the 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 good reasons for the discrepancies (for example, countries might classify different transactions in different ways). But the asymmetry issue is more than just a wonky curiosity; it can have serious implications for policymakers’ understanding of crossborder trade flows and, accordingly, for trade policy itself. The example that made the news this week was quite an extreme one: the US and the UK have both reported a bilateral trade surplus with each other.
I mentioned this issue briefly in an earlier blog post, when I cited a presentation given in February by Dr Silke Stapel-Weber, the Director of National Accounts, Prices and Key Indicators at Eurostat. Among the points she made in her excellent 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). Our research also noted some of the wide-ranging challenges around the measurement of services trade more generally. We explained, 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 large—TheCityUK's 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.
Given the challenges that national statistical authorities have in measuring services trade, perhaps its over-optimistic to imagine that the asymmetry issue is going to be addressed comprehensively in the near future. But the problem, esoteric as it may seem, is a stark example of the need for greater levels of international collaboration and sharing of information. Without this, discrepancies and even contradictions in countries' trade data will continue, impeding understanding of the true state of economic relations between and among nations.