A Significant Gap Exists between U.S. and Indian Trade-in- Services Data

U.S. data show a significantly smaller volume of trade in BPT services  between India and the United States than Indian data show. For 2003, the total  unaffiliated U.S. imports of BPT services from India increased to about  $420 million. India reports exports to the United States of similar services  of about $6.5 billion for 2002 and $8.7 billion for 2003. These  factors relate to (1) the treatment of services provided by foreign  temporary workers in the United States; (2) the definition of some services,  such as computer programs embedded in goods and certain information  technology-enabled services; (3) the treatment of transactions between  firms in India and the overseas offices of U.S. firms; (4) the reporting of  country-specific data on trade in affiliated services; and (5) the sources of  data and other methodological differences in the collection of services  trade data. For example,  Indian data on trade in services include software embedded on computer  hardware, which the United States classifies as trade in goods. Unlike the United States, India counts the sales of  services from firms in India to U.S.-owned firms outside the United States  as exports to the United States. BEA reports country-specific data only for unaffiliated U.S. imports of BPT  services, while Indian data include both affiliated and unaffiliated trade in  services but do not separate the two. BEA has taken action to improve survey coverage and responses  through outreach to survey respondents and by attempting to collaborate  with other federal agencies, but it has not been able to access data that  could assist in identifying the universe of firms importing services. In the case of BPT services,  both the United States and India have reported a rapid increase of exports  to the United States and BEA may be undercounting U.S. firms importing  such services from India due to this growth. Test of Firms Importing from India Confirms Challenges to Collecting Services Data

To test for potential undercounting of U.S. imports, we provided BEA with  lists of firms that we identified through publicly available sources as likely  to be importing BPT services from India. This is because BEA has concerns over the  quality of responses it receives from firms when they allocate affiliated  imports to detailed types of services. Scope and Methodology

This report discusses (1) the extent of the difference between U.S. and  Indian data on trade in business, professional, and technical (BPT)  services, (2) the factors that explain the difference between U.S. data on  imports of BPT services and India’s data on exports of those same services,  and (3) the challenges that the United States has faced in collecting  services data. To obtain information on the extent of the difference between U.S. and  Indian services trade data, we analyzed and compared U.S. and Indian data  and interviewed U.S. and Indian government officials from the relevant  agencies, including the U.S. Bureau of Economic Analysis (BEA), and the  Reserve Bank of India (RBI). We  discussed the results of this review with BEA officials.
Why GAO Did This Study

Trade in business, professional, and technical (BPT) services associated with offshoring needs to be accurately tracked, but a gap exists between U.S. and Indian data. The extent of and reasons for this gap are important to understand in order to address questions about the magnitude of offshoring and to analyze its future development. Under the authority of the Comptroller General of the United States, and as part of a body of GAO work on the issue of offshoring of services, this report (1) describes the extent of the gap between U.S. and Indian data, (2) identifies factors that contribute to the difference between the two countries' data, and (3) examines the challenges the United States has faced in collecting services trade data. GAO has addressed this report to the congressional committees of jurisdiction.

What GAO Found

The gap between U.S. and Indian data on trade in BPT services is significant. For example, data show that for 2003, the United States reported $420 million in unaffiliated imports of BPT services from India, while India reported approximately $8.7 billion in exports of affiliated and unaffiliated BPT services to the United States. At least five definitional and methodological factors contribute to the difference between U.S. and Indian data on BPT services. First, India and the United States follow different practices in accounting for the earnings of temporary Indian workers residing in the United States. Second, India defines certain services, such as software embedded on computer hardware, differently than the United States. Third, India and the United States follow different practices for counting sales by India to U.S.-owned firms located outside of the United States. The United States follows International Monetary Fund standards for each of these factors. Fourth, BEA does not report country-specific data for particular types of services due to concerns about the quality of responses it receives from firms when they allocate their affiliated imports to detailed types of services. As a result, U.S. data on BPT services include only unaffiliated imports from India, while Indian data include both affiliated and unaffiliated exports. Fifth, other differences, such as identifying all services importers, may also contribute to the data gap. The U.S. Bureau of Economic Analysis (BEA) has experienced challenges in identifying all U.S. services importers and obtaining quality survey data from importers. To test BEA's survey coverage, GAO provided BEA with lists of firms identified from public sources as likely importers of BPT services from India. The results of this test showed that some services importers were not included in BEA's mailing lists. However, BEA has taken action to address these challenges, including collaborating with other federal agencies, such as the U.S. Census Bureau and the Internal Revenue Service, to better identify firms to survey. However, data-sharing restrictions hamper BEA's efforts.