ft \ " \ I U.S. Multinational Companies: ttS. Merchandise Trade, Worldwide Sales, and Technology-Related Activities in 1977 U.S. DEPARTMENT OF COMMERCE Bureau of Economic Analysis ▲ U.S. Multinational Companies: U.S. Merchandise Trade, Worldwide Sales, and Technology-Related Activities in 1977 U.S. DEPARTMENT OF COMMERCE Malcolm Baldrige, Secretary Robert G. Dederick, Under Secretary for Economic Affairs BUREAU OF ECONOMIC ANALYSIS George Jaszi, Director Allan H. Young, Deputy Director August 1983 U.S. Depository Cop* Introduction The three articles in this publication analyze U.S. merchandise trade associated with, worldwide sales by, and technology-related activities of, U.S. multinational companies (MNC's) in 1977. The articles are based on data obtained in BEA's 1977 benchmark survey of U.S. direct investment abroad. 1/ They complete a series of articles, published by BEA over the past 2 years, that present the major results of the benchmark survey. Together, the articles in the series provide a broad view of the operations, both domestic and foreign, of U.S. MNC's in 1977. They should promote a better understanding among Government, business, labor, academic researchers, and the general public of the role MNC's play in U.S. and foreign economies. U.S. direct investment abroad exists when one U.S. person (U.S. parent) has a direct or indirect ownership interest of 10 percent or more in a foreign business enterprise (foreign affiliate). A U.S. MNC is a U.S. company that has direct investment abroad; each MNC consists of a U.S. parent and all of its foreign affiliates combined. The 1977 benchmark survey was a census, and, in terms of value, its coverage of the direct investment universe was virtually complete. 2/ It was the first benchmark survey of U.S. direct investment abroad conducted under authority of the International Investment Survey Act of 1976. The act requires that such surveys be conducted at least once every 5 years. Each article in this publication is limited in coverage to nonbank MNC's, i.e., to nonbank U.S. parents of nonbank foreign affiliates, and their nonbank foreign affiliates. In the benchmark survey, little financial and operating data were collected for bank parents and affiliates, because they already had to report most of the information needed for policymaking purposes to other U.S. Government agencies. H Detailed data and the methodology of the benchmark survey were published in U.S. Department of Commerce, Bureau of Economic Analysis, U .S. Direct Investment Abroad, 1977 (Washington, D.C.: U.S. GPO, April 1981 ). a limited numoer ot copies are available from the Office of the Chief, International Investment Division (BE-50), Bureau of Economic Analysis, U.S. Department of Commerce, Washington, D.C. 20230. The postpaid price is $10.00 within the United States; postage extra outside the United States. 2. To ease the reporting burden on companies, very small affiliates— those whose total assets, sales, and net income were each less than $500,000--were exempted from the survey. Reports covering 3,540 U.S. parents and their 24,666 foreign affiliates were received; 11,123 foreign affiliates were exempted. Although the exempt affiliates accounted for 31 percent of the number of all affiliates, they accounted for only 1 percent of the total assets, and less than 1 percent of the sales and net income, of all affiliates. in Nonbank parents of nonbank affiliates accounted for 97 percent of both the number and employment, but for only 73 percent of the total assets, of all U.S. parents. Their nonbank affiliates accounted for 96 percent of the number and 98 percent of the employment, but for only 59 percent of the total assets, of all foreign affiliates. The total assets of nonbanks, on average, tend to be lower than those of banks, because the assets of the latter usually reflect substantial financial claims arising from the banks' lending activities (their liabilities also tend to be high because of their sizable borrowing activities and customers' deposits). For simplicity, in the articles and accompanying tables in this publication, the term "U.S. MNC's" refers only to nonbank MNC's, "U.S. parents" refers to nonbank parents of nonbank affiliates, and "foreign affiliates" refers to nonbank affiliates of nonbank parents. Portions of each article are further limited in coverage to the larger majority-owned foreign affiliates (MOFA's) and their U.S. parents. This limitation is necessary because, in the benchmark survey, the most detailed financial and operating data were collected only for the larger MOFA's, i.e., for affiliates that were owned more than 50 percent, directly or indirectly, by all U.S. parents combined and that had assets, sales, or net income over $3 million in 1977. MOFA's, so defined, accounted for 50 percent of the number, 72 percent of the total assets, and 75 percent of the employment of all nonbank affiliates of nonbank parents. The other articles in the series on the 1977 benchmark survey data have appeared in various issues of the Survey of Current Business , BEA's monthly journal. The other articles are! International Investment Division, "1977 Benchmark Survey of U.S. Direct Investment Abroad," Survey 61 (April 1981): 29-37, which gave a brief description of the survey and highlights of the data; Betty L. Barker, "A Profile of U.S. Multinational Companies in 1977," Survey 61 (October 1981): 38-57, which discussed industry characteristics of MNC's, their size, the location of their operations, the U.S. parent's percentage of ownership in their foreign affiliates, and the form of organization of parents and affiliates; Obie G. Whichard, "Employment and Employee Compensation of U.S. Multinational Companies in 1977," Survey 62 (February 1982): 37- 49, 60; and Ned G. Howenstine, "Growth of U.S. Multinational Companies, 1966-77," Survey 62 (April 1982): 34-46, and "Gross Product of U.S. Multinational Companies, 1977," Survey 63 (February 1983): 24-29. The three articles in this publication examine several additional aspects of U.S. MNC's. The first article analyzes U.S. merchandise trade—exports and imports—associated with the MNC's. It covers trade between U.S. parents and their foreign affiliates, between these affiliates and other U.S. persons, and between U.S. parents and unaffiliated foreigners. To the extent data are available, the article disaggregates MNC trade by industry of U.S. parent or affiliate, by product, by country of destination or origin, and by intended use. The second article analyzes worldwide MNC sales— of both merchandise and services— disaggregated by area of origin (the location of the MNC seller), by area of destination (the location of the purchaser), by industry of U.S. parent, and by affiliation between seller and customer. iv The third article discusses research and development (R&D) activities of U.S. MNC's, as measured by their R&D expenditures and the number of R&D scientists and engineers they employed. It also discusses royalty and license fee transactions between U.S. parents and their foreign affiliates and between these members of the MNC and other U.S. or foreign persons. By BETTY L. BARKER U.S. Merchandise Trade Associated With U.S. Multinational Companies U.S. multinational companies (MNC's) accounted for very large shares of total U.S. merchandise exports and imports— 84 percent and 58 percent, respectively — in 1977. These and other data from the 1977 benchmark survey indicate the nature and magnitude of MNC-associated trade. They also should shed light on the question of the impact of U.S. direct investment abroad on U.S. trade. As noted in the Introduction to this publication, the article covers only nonbank MNC's. However, trade of bank MNC's was probably insignificant. MNC-associated U.S. trade consists of (1) trade between U.S. parents and their foreign affiliates, (2) trade between these same foreign affiliates and other (unaffiliated) U.S. persons, and (3) trade between U.S. parents and unaffiliated foreigners. Total U.S. trade of foreign affiliates is equal to (1) plus (2); total U.S. trade of parents is equal to (1) plus (3). Note that total U.S. trade of affiliates and total U.S. trade of parents are not mutually exclusive, because both contain (1), trade between parents and their affiliates. Following an overview of MNC-associated U.S. trade, MNC-associated exports and imports are analyzed in two separate sections. In each, the amount of detail varies, depending upon the availability of data. In the benchmark survey, significantly more detail was obtained for exports than for imports. Also, more detail was obtained for U.S. trade with majority-owned foreign affiliates (MOFA's) than for U.S. trade with other foreign affiliates or for trade of U.S. parents with unaffiliated foreigners. 1/ Thus, the section on exports discusses (1) total MNC-associated U.S. exports, by country of destination and by industry of U.S. parent, (2) U.S. exports associated with MOFA's and their U.S. parents, by product, (3) U.S. exports to MOFA's only, by product and intended use crossclassified by country of destination and by industry of affiliate, and (4) growth, from 1966 to 1977, of U.S. exports associated with MOFA's and U.S. parents for which comparable data were available from the 1966 and 1977 benchmark surveys. The section on imports discusses (1) total MNC-associated U.S. imports, by industry of U.S. parent, and (2) U.S. imports from MOFA's only, by product crossclassified by country of origin and by industry of affiliate. Where possible, the article compares MNC-associated U.S. trade with total U.S. trade. The MNC trade data were defined in the benchmark survey to be as comparable as possible with all-U.S. trade data compiled by the Census Bureau. In practice, however, the two data sets are not strictly comparable. The technical note discusses the differences between the MNC and all-U.S. data. 1. MOFA's are defined as affiliates that were owned more than 50 percent by all U.S. parents combined and that had assets, sales, or net income over $3 million. NOTE. --Arnold Gilbert and Richard Mauery were responsible for computer generation of tables for this article. Overview In 1977, MNC- associated U.S. exports were $101.8 billion, 84 percent of total U.S. exports; MNC-associated U.S. imports were $86.8 billion, 58 percent of total U.S. imports (table 1). U.S. MNC's accounted for significantly larger shares of U.S. trade than of domestic business activity. For example, their share of all-U.S. business employment was only 35 percent. 2/ Their trade shares may have been larger because, compared with other U.S. firms, MNC's were more heavily concentrated in goods-producing industries. Thus, on average, they tended to have larger exports and imports of goods than other U.S. firms. Even within given industries, however, MNC's probably accounted for larger shares of trade than of domestic business activity—one indication of their greater international orientation compared with other firms. The very large share of U.S. exports accounted for by the MNC's probably reflected the fact that the MNC's were among the largest and most technologically advanced U.S. firms. They may have had a competitive edge over other U.S. firms in exporting because they could take greater advantage of economies of scale, produce technically superior or more sophisticated products, or more readily adapt their products to the needs and tastes of foreign customers. The extent to which the existence of their foreign affiliates contributed to the export performance of U.S. MNC's is unclear. On the one hand, the affiliates may have offered advantages, such as firsthand knowledge of foreign markets, direct contacts with foreign customers, closer control over worldwide distribution via their use as sales outlets for the MNC's, and provision of local after-sales servicing for exported goods. Also, affiliates' purchases of goods from U.S. parents for use or for further manufacture abroad may have boosted the parents' exports relative to those of other U.S. firms. On the other hand, affiliate production may have displaced U.S. exports, particularly from U.S. parents, by supplying foreign markets from abroad rather than from the United States. Such displacement would have occurred only if affiliate production was at the expense of U.S. exports; it would not have occurred if U.S. exports had been constrained instead by, for example, foreign tariffs or quotas, erosion of U.S. firms' foreign market shares because of the emergence of rival firms, or prohibitively high transport costs. The data in this article cannot by themselves provide estimates of the net effect of direct investment on the export performance of U.S. MNC's; they cannot answer the question of whether, in the absence of direct investment, these companies' exports would have been larger or smaller than they actually were. They indicate only the magnitude of MNC-associated exports, given present levels of such investment . 3/ ~2. See Whi chard, "Employment and Employee Compensation," p. 39. 3. For a review of the literature on, and further discussion of, the impact of U.S. direct investment abroad on U.S. trade, see C. Fred. Bergsten, Thomas Horst, and Theodore H. Moran, American Multinationals and American Interests (Washington, D.C.: The Brookings Institution, 1978), chapter 3. *\ ■s Table 1. --Total U.S. Trade and U.S. Trade Associated With U.S. MNC's, 1977 _. __ exports imports Balance Millions of dollars Total U.S. trade 1/ 121,293 150,390 -29,097 U.S. trade associated with U.S. MNC's 101,846 86,759 15,087 U.S. trade not associated with U.S. MNC's-- 19,447 63,631 -44,184 Percent of total U.S. trade Total U.S. trade » lOOTO lOOTO 101570 U.S. trade associated with U.S. MNC's 84.0 57.7 n.m. U.S. trade not associated with U.S. MNC's- 16.0 42.3 n.m. MNC Multinational company, n.m. Not meaningful. 1. Census basis, valued f.a.s. at the port of exportation, after adjustment to include ship- ments between the Virgin Islands and foreign countries. (In 1977, exports from the Virgin Islands to foreign countries were $81 million; imports to the Virgin Islands from foreign countries were $2,705 million.) Exports include reexports and military grant shipments. Imports include goods for immediate consumption as well as goods entering into Customs bonded \\rarehouses . NOTE. --In this table, data for U.S. MNC's are only for nonbank MNC's. Although large, the MNC share of total U.S. imports was considerably smaller than their share of total U.S. exports. Their import share would have been even smaller were it not for the large share--probably over four- fifths--of total U.S. petroleum imports accounted for by the MNC's. The smaller MNC import share may have partly reflected the significant portion of total U.S. imports that normally is imported by independent wholesalers and retailers rather than by U.S. MNC's. In fact, U.S. parents that require imported goods in their production processes often purchase the goods domestically from independent wholesalers instead of importing the goods directly from foreigners. Such domestic purchases of imported goods are excluded from U.S. parents' imports, which, by definition, consist only of goods imported directly by the parents. Thus, U.S. parents' imports probably understate their total purchases of imported goods. 4/ A sizable share of U.S. imports is also typically imported by the U.S. affiliates of foreign MNC's. In 1977, these affiliates accounted for $41.4 billion (28 percent) of U.S. imports. In contrast, they accounted for only $24.0 billion (20 percent) of U.S. exports. 5/ If trade of foreign MNC's with unaffiliated U.S. persons (for which data are not available) could have been included as well, the difference between the U.S. import and export shares associated with foreign MNC's might have been even larger. Many foreign MNC's, particularly those in wholesale trade, have actively and aggressively sought unaffiliated U.S. customers for their countries' goods. 4. Similarly, U.S. parents' exports tend to understate the total value of the parents' goods that are sold abroad, because goods produced by the parents may be purchased and exported by other U.S. firms; however, because U.S. parents usually sell their goods directly to foreign customers, the understatement for exports was probably much less than that for imports. 5. These data are from BEA's annual sample survey of foreign direct investment in the United States, and were published in Ned G. Howenstine, "Selected Data on the Operations of U.S. Affiliates of Foreign Companies, 1978 and 1979," Survey 61 (May 1981): 35-52. It should be noted that, if U.S. exports and imports of the U.S. affiliates of foreign MNC's, as reported in the 1977 annual survey, are added, respectively, to U.S. exports and imports associated with U.S. MNC's, as reported in the 1977 benchmark survey, the resulting total for exports would exceed 100 percent of all U.S. exports and that for imports would be 85 percent of all U.S. imports. Both shares are overstated because of duplication in the data reported in the two surveys. To the extent U.S. affiliates of foreign MNC's, in turn, had affiliates abroad, they would have been considered U.S. parents of those foreign affiliates in the 1977 benchmark survey, and their U.S. exports and imports would have been reported in that survey as well as in the 1977 annual survey. A match between companies reported in both surveys indicated that the overlap for exports and imports was roughly $10 billion each. In addition, trade between unrelated U.S. affiliates of foreign MNC's and foreign affiliates of U.S. MNC's would have been counted in both surveys; the amount of this type of duplication is unknown. MNC-associated U.S. exports exceeded imports by $15.1 billion. This large MNC trade surplus is in sharp contrast to the $29.1 billion deficit for all-U.S. trade in 1977. As noted earlier, the question of whether the better-than-average trade performance of the MNC's was the result of these companies' direct investments abroad or of other factors is beyond the scope of this article. MNC-Associated U.S. Exports Of total MNC-associated U.S. exports of $101.8 billion, $32.4 billion (32 percent) were shipped to foreign affiliates by U.S. parents, $8.4 billion (8 percent) were shipped to foreign affiliates by unaffiliated U.S. persons, and $61.1 billion (60 percent) were shipped to unaffiliated foreigners by U.S. parents (table 2). Total exports to affiliates, the sum of the first two components, were $40.8 billion, of which about four-fifths were by U.S. parents and one-fifth by unaffiliated U.S. persons. Total exports by U.S. parents, the sum of the first and third components, were $93.5 billion, of which about two-thirds were to unaffiliated foreigners and one-third to foreign affiliates. By country of destination Of total MNC-associated U.S. exports, at least 65 percent were to developed countries and at least 31 percent to developing countries. 6/ Most of the remainder consisted of low- value shipments that did not have to be allocated by area in the benchmark survey. 7/ Exports to "international" — i.e., to affiliates that had operations spanning more than one country and that were engaged in petroleum shipping, other water transportation, petroleum trading, or the operation of oil and gas drilling equipment that was moved from country to country during the year — were negligible. 6. The country of destination of U.S. exports to an affiliate is defined to be the same as the affiliate's country of location. Although some of the goods shipped to an affiliate eventually may be resold and shipped to other countries, the amount is believed to be small. For U.S. parents, the country of destination of exports to unaffiliated foreigners is defined as the country where the parent knew, at the time of exportation, the goods were to be consumed, further processed, or manufactured. If the parent did not know the ultimate destination, the shipment was credited to the last country to which the parent knew the merchandise would be shipped in the same form as when exported. 7. In disaggregating exports to unaffiliated foreigners, a U.S. parent was permitted to sum all exports to countries to which its exports were less than $100,000 and report the sum as a single item; thus, in countries or areas shown separately in table 2, exports by U.S. parents to unaffiliated foreigners are understated by the amount of these unallocated exports. Table 2. --U.S. Trade Associated With U.S. MNC's* 1977 , by Country of Destination or Origin CMi Llions of dol larsH MNC— associated exports Shipped to affiliates To ta I By J. S. By un Shipped t c unaffi- pa ren t s pe unaf- Li a ted I i a ted f ore i gne rs U.S. by U.S. rsons parents MNC -associated imports Shipped by affiliates Total To U.S. To unaf- par en t s filiated U.S. persons Addenda Shipped by Total Total unaffi- exports import: Liated snipped by shipped foreigners U.S. U.S. to U.S. parents parents parents IV (= col. 3 (= col. ~~ + col. 5) * col. II Cl> (2) (3) (4) (5) (6) (7) (8) C9) 1 01 .846 40,787 32,397 8,390 61,059 86,759 41 ,525 32,639 8,887 66.392 32,522 26,050 6,472 33,871 — 22,089 15,91 2 6,176 23/138 17,303 1 2,887 4,41 5 5,835 — 1 5,641 11,212 4,429 31.145 12,335 10,547 1,788 18,81 1 — 5,097 3,649 1,448 22,590 10,313 8,974 1 ,338 1 2,277 4,328 3,294 1,034 2.481 1 ,595 1 ,494 100 886 (0) (D) CD) 431 89 87 2 342 32 30 2 3.072 1 ,556 1,407 149 1,516 CD) (0) 39 4.685 1 ,932 1 .762 170 2,753 899 831 68 239 1 72 1 55 1 7 68 125 (0) CO) 2.269 789 533 207 1 ,479 1 49 130 19 71 68 66 2 3 68 68 1 4.404 1 ,426 1.062 364 2,978 195 161 34 4,939 2,686 2.358 328 2,253 — 2,267 1 ,441 826 8.556 2,022 1.573 449 6,533 _-- 769 355 41 4 196 85 34 1 1 11 18 13 5 404 57 56 1 347 ( 0) 1 (0) 432 1 23 Cl>) (6) 309 C 0) CD) CO) 438 (0) (D) (0) (D) 11 CD) co) 1,336 601 336 265 1 ,235 ( D) 90 CO) 774 238 10) (0) 536 32 (0) CD) 1,267 790 719 71 477 308 86 222 402 < D) (0) CD) 3 3 2,808 54 45 9 2,754 (D) (0) CD) 8.547 1 ,215 1,1 56 59 7,432 — 1 ,162 897 265 3.462 1 ,669 1,459 210 1,795 139 155 34 2.183 1 ,2 04 1 ,040 163 979 ( D) CD) CD) 269 94 87 7 1 75 2 (0) CO) 1.010 371 332 39 639 ( D) (0) CO) 31.964 8,1 42 6,257 1 ,885 23,822 — 1 9.400 CD) CO) 13.005 4,7 30 3,578 1,151 8,276 — 5.834 4,928 906 7.858 2,732 2,034 648 5,1 25 1.011 831 180 662 2 00 176 24 483 13 10 3 2,233 797 671 126 1.436 415 31 5 101 351 58 37 21 -303 1 1 671 204 1 52 42 467 (0) CD) CD) 358 58 47 11 299 < D> (D) C* ) 351) 93 44 48 257 < D) (D) CD) 2,591 1 ,2 40 906 335 1 .651 (0) (0) CO) 31 2 32 41 41 230 ( 0) (D) CD) 4,116 1 ,628 1,310 318 2.488 1.211 - 939 272 3,045 1 ,309 1,098 211 1.736 807 612 194 291 1 32 38 44 1 59 CD) (D) CO) 780 188 1 24 64 593 "-- CD) (D) (0) 1,032 369 1 84 185 662 „- 3.612 3,1 58 454 1 1 1 82 40 42 29 1,191 CD) CD) 5U 19 1 7 1 32 22 1 7 5 1 1 9 39 25 15 80 (0) CD) 82 257 53 30 23 204 (0) (0) CD) 494 1 77 73 104 318 514 CD) CD ) 3,028 418 240 178 2.610 __. 4,723 CD) CD) 1,676 1 24 68 56 1 .552 1,862 CD) ( D) 649 32 1 1 20 617 ( 0) CD) C" ) 228 47 CD) CD) 182 1 ,749 CD) CD) 798 45 CD) CD) 753 (0) CD) 4 1,353 2 94 1 73 122 1 ,058 2,861 CD) CD ) 80 CO) 13 (D) (0) (0) CD) CO) 606 89 37 52 516 2,336 CD) CO) 668 ( D) 1 23 (0) (D) CD) --" (D) CD) CD) 7,532 1 ,882 1,576 306 5,650 5,928 5,51 5 41 4 61 9 3 60 333 21 259 1,917 1,710 207 561 23 21 2 538 (0) CD) 1 71 9 1 37 40 97 582 1,665 CD) CD) 465 242 21 7 25 223 < 0) CO) 1 663 277 237 40 386 1 91 180 1 1 771 3 86 355 32 385 735 733 2 1,539 160 1 18 42 1 ,379 CD) CD) CO) 1,396 1 81 1 55 27 1,214 535 477 58 367 82 72 I ..i 285 (D) CD) (0 ) 434 35 24 1 1 399 — " 10 8 2 123 1 23 90 33 36 CD) CD) 3,366 3,366 12,01 8 2,608 1 ,873 734 9,410 ... 9,221 7,978 1 ,244 C10) C11 ) (12) 45,234 93,456 77,8 59,920 18,723 29,358 21,252 2,380 428 2,923 4,515 223 2,062 69 4,039 4,611 8,106 194 402 CO) 413 1,571 CD) 1,196 398 2,799 8,588 3,252 2,019 262 971 30,079 11,854 7,209 658 2,106 340 629 346 301 2,557 271 3,798 2,834 247 717 847 105 234 391 2,851 1,620 629 < D) CO) 1,231 CO) 554 C D) 8,148 1,108 6,574 2,608 3,966 466 7,227 598 559 622 440 623 739 1 ,497 1,369 357 423 90 3,366 1 1 ,283 ALL countries Developed countries Canada Europe Com jropea Be I yi urn b e n in a r k France . Ge rma ny Ireland Italy . . Lu x em bou Net he r la Oni ted K Other Eur ope Austria Greece .... Sweden Swi tz er land ust r Vev , I i Neu id Soutn Afr il ■ l« South Africa ? ve I pi n j. countr Latin America . South America A ryen t i na . . drazi I Chile Co lombi a Ecuador .... Per lezi ;la tqy pt Sub-Saharan Dther - - MNC Multinational company. D Suppressed to avoid disclosure of data of individual companies. * Less than $500,000 (+). 1. U.S. imports shipped by unaffiliated foreigners to U.S. parents were not disaoqreoated by country in the 1977 benchmark survey; thus, data in column 10, and hence, in columns 6 and 12, are available only for all countries combined. 2. Consists of U.S. parents' exports to unaffiliated foreigners in all countries to which the parents' exports were less than $100,000. NOTE. --In this table, data for U.S. MNC's are only for nonbank MNC's; data for U.S. parents are only for nonbank parents of nonbank affiliates; and data for affiliates are only for nonbank affiliates of nonbank parents. 6 MNC-associated U.S. exports to Canada accounted for 23 percent of the MNC global total; at $23.1 billion, they were larger than those to any other single country. Over two-fifths of these exports were shipped, largely by U.S. parents, to affiliates in the transportation equipment industry. Exports to these affiliates have been boosted since 1965 by the U.S. -Canadian automotive agreement, which, by reducing tariffs, stimulated automotive trade in both directions across the U.S. -Canadian border. Also boosting U.S. exports to Canada were Canada's physical proximity, which resulted in relatively low transportation costs, and similarity of consumer tastes, which lessened the need for U.S. companies to produce special products for the Canadian market. Among the remaining developed countries, Europe accounted for 31 percent, Japan for 8 percent, and Australia, New Zealand, and South Africa for 3 percent, of total MNC-associated U.S. exports. Within Europe, exports to the United Kingdom, Germany, and the Netherlands were particularly large. Among developing countries, Latin America accounted for 13 percent, the Middle East for 8 percent, "other Asia and Pacific" for 7 percent, and "other Africa" for 3 percent, of total MNC-associated U.S. exports. Within Latin America, exports to Mexico, Venezuela, and Brazil were largest. MNC's accounted for a large share of total U.S. exports to most countries (table 3). Their share of U.S. exports to developed countries was 86 percent. Among developed countries, their share of exports to Canada was 90 percent; to Europe, 83 percent; to Japan, 82 percent; and to Australia, New Zealand, and South Africa, 91 percent. The MNC share of U.S. exports to developing countries--74 percent — was somewhat smaller than that to developed countries. 8/ Among the developing countries, the MNC share of exports to Latin America was 72 percent; to the Middle East, 84 percent; and to "other Africa" and "other Asia and Pacific," 69 percent each. The shares of total MNC-associated exports that were shipped to foreign affiliates and, thus, the shares that were shipped to unaffiliated foreigners varied considerably among destinations. Nearly one-half of the MNC- associated exports destined for developed countries were to affiliates, compared with only one-fourth of those destined for developing countries. Among developed countries, the share of exports going to affiliates was particularly large — 75 percent--for Canada. 8. It probably would have been closer to the developed-country share if the unallocated exports by U.S. parents to unaffiliated foreigners could have been distributed by country. However, even under the unrealistic assumption that all unallocated exports were to developing countries, the MNC share of total U.S. exports to those countries would still have been below that for exports to developed countries--81 percent compared with 86 percent. -Total U.S. Exports and U.S. Exports Associated With U.S. MNC's, 1977, by Country of Destination Amount MNC- __ associated Total MNC- exports U.S. associated as a exports 1/ exports percentage of total Millions of dollars U.S. exports in m [33 All cm eve Loped coj Canada . . . . jropean CoMunitiSS (9) 3 e I g i u m tenaa rk F ranc e German/ Ireland Italy Luxembourg Nether la. iris Un i te d <\ ngdou , 121,293 77,562 25,773 37,437 27,113 3/ 3,137 534 3,502 5,984 378 2,801 1/ 4,828 5,949 "h" Eur°pe 245 10,323 245 538 ' reece 544 fgoru " ; 558 U3:11 1,960 Spa Swltierli Turkey .. Ot her . .. 1,093 4/ 1,749 421 3 217 Jaoan 10 . 538 3,815 Australia Australia. N;» Zealand/ and South Africa . _, 2,355 Sduth Africa Developing countries 43,405 Latin America 17 - 978 South America 9 ^? * r ' 1' 520 c ;:: b ;r::::::::::::::::::::::::::::: ™ ""- iss Venezuela 3 ' 171 Other 5 " •"tr.l -erica 6,6 *,:Vt: "ill 2,006 Bahamas 5t her Western Hemisohere ;;;;;;;;;;;;; 87 Netherlands Antilles ^06 306 Ot he 6ii and Tobajo 1,083 -- ar r- S:3S E?ypt :::::::::::::::::::::::::::::::: ^ 0;°:: :::::::::::::::::::::::::::::::: i.« Sub-Saharan Liberia 2,101 91 958 Nigeria other 1.052 Kiddle East 10,039 Israel M47 OPEC 7,695 Iran 2,731 Other 4,964 Other 897 Other Asia and Pacific 10,982 rtonq Koni ........................... 1 jtsc India 779 Indonesia 7 <>2 Malaysia 561 Philippines 876 S i ng apo r 1,172 South Korea 2,370 Taiwan 1,798 Thailand 509 Other 863 I nternat ion al 2/ Jnallocated £/ 329 Addendum: OPEC 14,020 101,846 84.0 66,392 85.6 23,138 90.0 31,145 83.2 22,590 83.3 ' 2 552 3/ 81.4 431 80.7 3,072 87.7 4,685 78.3 239 63.2 2,269 81.0 3/ 3/ 4,404 91.2 4,939 83.0 8,556 82.9 196 80.0 404 75.1 432 79.4 438 78.5 1,836 93.7 774 70.8 1,267 72.4 402 95.5 2,808 87.3 3,462 90.8 2,183 92.7 269 66.8 1,010 95.6 31,964 73.6 13,005 72.3 7,858 84.6 682 93.3 2,233 89.6 361 69.4 671 85.8 358 63.5 350 70.0 2,891 91.2 312 59.4 4,116 61.6 3,045 63.0 291 84.1 780 51.7 1,032 51.5 111 49.6 50 57.5 119 38.9 257 84.0 494 45.6 3,028 68.7 1,676 72.7 649 66.1 228 72.6 798 79.1 1,353 64.4 80 87.9 606 63.3 668 63 5 8,398 83.7 1,146 79.2 6,775 88.0 2,659 97.4 4,116 82.9 478 53.3 7,532 68.6 619 47.9 561 72.0 719 94.4 465 82.9 663 75.7 771 65.8 1,539 64.9 1,396 77.6 367 72.1 434 50.3 123 6/ 3,366 7/ 12,018 85.7 MNC Multinational company. 1. See footnote 1, table 1. 2. Includes U.S. exports to affiliates that had operations spanning more than one country and that were engaged in petroleum shipping, other water transportation, petroleum trading or oil and gas drilling. The precise destination of these exports was not obtained in the 1977 benchmark survey. 3. In the all-U.S. export data, Belgium and Luxembourg are shown together; thus, to be comparable, exports to Luxembourg are included with those to Belgium in the MNC data in this table as well. 4. Includes Lichtenstein, which is in "other" "other Europe" in the MNC data. 5. Includes exports of commodities to countries to which total shipments of the commodities averaged less than $5,000 per month. 6. See footnote 2, table 2. 7. Not calculated because of differences in definition of "unallocated" between the MNC and all-U.S. data. NOTE. --In this table, data for U.S. MNC's are only for nonbank MNC's. One reason for the larger affiliate share in developed countries was the much greater use of affiliates in those countries as distribution channels for finished products exported by U.S. parents. In particular, manufacturing affiliates served to a greater extent in developed than in developing countries as sales outlets for their U.S. parents' exports, in addition to engaging in their own manufacturing activities. Also, fewer affiliates in developed than in developing countries were subject to performance requirements, imposed by host governments, that limited imports as a condition for the affiliates' operating in those countries. 9/ Exports by U.S. parents were very large shares, and exports by unaffiliated U.S. persons very small shares, of total MNC-associated exports to nearly e\/ery destination. For most countries, the parents' share exceeded 90 percent. A major exception was Canada, where the parents' share was 81 percent. A large portion of the exports to Canada by unaffiliated U.S. persons was automotive parts and supplies for further processing and assembly by Canadian affiliates in motor vehicle manufacturing. By industry of U.S. parent In this section, MNC-associated U.S. exports are disaggregated by industry of U.S. parent. The parent's industry, rather than the industry of the MNC as a whole, is used because an industry code based on the worldwide consolidated activities of the MNC was not available from the 1977 benchmark survey. In a majority of cases, however, the industries of the parent and MNC were probably the same. 10/ A U.S. parent's industry is not always indicative of the type of products being exported. Parents that are highly diversified may produce and export products outside the single, major industry in which they are classified. In addition, MNC-associated U.S. exports include goods produced by others, but purchased and exported by U.S. parents, as well as goods shipped by unaffiliated U.S. persons directly to affiliates. In either case, the goods may not be products of the U.S. parent's industry of classification. In examining the composition of the exports themselves, a breakdown by product is preferable to one by industry of U.S. parent; however, such a breakdown is not available for total MNC-associated U.S. exports. That portion of the total for which a product breakdown is available will be discussed in the next section. By industry of U.S. parent, manufacturing accounted for a very large share--72 percent--of total MNC-associated exports (table 4). Most of the remainder was accounted for by trade (19 percent) — mainly wholesale—and petroleum (5 percent). Finance (except banking), insurance, and real estate 9. In the 1977 benchmark survey, 582 affiliates indicated that they were subject to such import limitations; of these, about two-thirds were in developing countries. 10. See Barker, "A Profile," p. 41. Table 4. --U.S. Trade Associated With U.S. MNC's, 1977, by Industry of U.S. Parent [Millions of dollars] MNC -a ssoc i ated exports Shipped to aff i I i Tota I By U. S. E fill ated U.S. Shipped to unaffi- liated foreigners by U.S. MNC-assoc lated imoorts Shipped by affiliates Iptal To U.S. To unaf- parents filiated U.S. persons Addenda Shipped by Total Total unaffi- exports imports tiated shipped by shipped to foreigners U.S. U.S. to U.S. parents parents parents <= col. 3 (- col. 3 ♦ col. 5) ♦ col. 101 Copp 3aux 3l[ Oi I and gas extraction . Crude petroleum (no re 3 i I and gas field serv Petroleum and coal proju Integrated refining an Refining without extra Petroleum and coal pre Petroleum wholesale trju (D) ( * ) 729 4,042 3.848 (0) (2) 40,787 (4) 8,390 (0) 399 322 298 (5) (6) (7) <8) 61 ,059 86,759 41,525 32,639 752 52 (0) (0) 700 310 ( D) ( 0) (0) (0) ID) CD) (D) CO) CD) CO) 3,076 38,372 17,602 13,672 CD) ID) 38 CD) CD) CD) 2 1 C 0) CO) 32,823 CD) 1 CD) 12,568 CD) CD) CD) CD) CD) 3.930 (0) CD) 2,315 2,315 (10) 45,234 CD) CD) CD) CD) (D) (0) (0) (0) 17,939 (0) (•) (11 ) (D) (D> (0) (O) (•) (0) (D) CD) CD) (12) 191 (D) (0) (D) 34,442 CD) (0) (0) (O) 30,508 (D) 1 CD) Soap, Agric chemicals and synthet iers/ and toilet goods 3.261 1,27 1 1 6b 1,823 9,904 6,51 9 1,402 751 562 610 135 226 CD) 5,773 503 (D) CD) CD) (0) 1,087 1 .321 406 1,057 1 .368 731 1,058 1 ,056 631 7,1 78 2 .428 1 ,509 (0) 592 CD) 3,315 5S7 29? 628 772 (0) (D) 507 355 5,076 3 ,587 2,229 436 11 1 (D) 1,060 1 .130 523 9S0 892 3,056 1 .396 (D) 0,474 13 ,436 10,161 3,313 11 ,959 9,423 7,161 1 ,477 738 6,046 5 ,385 3.473 888 347 53 459 595 180 979 666 430 870 1 ,318 CD) 158 569 296 352 1 084 725 397 558 16 .398 11 ,691 16 .515 9 .402 2 891 6 .71 1 ( D) (0) 1 64 (D) (0) 775 504 271 237 337 (0) ( D) < D) 266 333 143 1 .675 1.091 (D) CD) CD) CD) (D) (0> CD) 260 615 363 190 CO) 280 569 867 CO) 399 1 .752 195 CD) 201 250 122 1,249 678 372 306 571 CO) CD) CD) (0) CD) (D) 531 263 147 1 16 268 210 (0) 107 CO) 167 CD) CO) 1,721 CD) CO) 285 ( D) 142 CD) CD) (D) 141 272 CD) CD) (D) (0) (0) CO) 1,975 1,551 918 (D) 260 1 ,357 (D) So 10,016 8,311 6,197 CD) ID) (D) (D) (D) CD) (D) (D) CD) 4,21 5 2,712 1 ,205 1 ,508 1,503 912 4,328 3,309 3,855 7,748 635 1 ,798 21,019 13,280 7,739 10,100 (0) 657 1 ,064 1,445 294 958 153 348 398 3,124 CD) 18,020 17,773 3,050 14,722 248 (D) MNC Multinational company. D Suppressed to avoid disclosure of data of individual companies. * Less than 5500,000 ( + ). NOTE. --In this table, data for U.S. HNC's are only for nonbank HNC's; data for U.S. parents are only for nonbank parents of nonbank affiliates; and data for affiliates are only for nonbank affiliates of nonbank parents. and "other industries" each accounted for only 2 percent of the MNC total, largely because MNC's in these industries were engaged primarily in performing services, rather than in producing goods. The share in mining was less than 1 percent. This small share mainly reflected the small size of U.S. mineral exports generally. With the major exception of coal, minerals in crude form are not usually exported because their high waste content makes transport uneconomical. 11/ Of total MNC-associated exports in manufacturing, nearly one-third were in transportation equipment--21 percent in motor vehicles and equipment and 11 percent in "other" transportation equipment; 17 percent were in nonelectrical machinery, 14 percent in chemicals, and 11 percent in electric and electronic equipment. Among industries, as among areas, the shares of total MNC-associated exports that were shipped to affiliates, rather than to unaffiliated foreigners, varied considerably. In manufacturing and petroleum, exports to affiliates were 46 and 41 percent, respectively, of total MNC-associated exports. In trade, they were 13 percent; this relatively low share may have reflected the practice by wholesale trade parents of distributing goods-- largely bulk shipments of agricultural products and raw materials-- directly to unaffiliated foreign customers rather than through their foreign affiliates. Within manufacturing, affiliates' shares were particularly large-- roughly two-thirds or more--in drugs; soap, cleaners, and toilet goods; office and computing machines; electronic components and accessories; motor vehicles and equipment; and instruments and related products. In these industries, affiliates' operations may have been more highly integrated with those of their U.S. parents, so that above-average shares of their parents' exports were channeled to or through them, either for resale or for further manufacture abroad. Also, in several industries--such as electronic components and instruments—exports to affiliates may have been stimulated by U.S. tariff provisions that permitted import duties on items sent abroad for processing, and then returned to the United States, to be paid only on the value added abroad rather than on the full value of the imported goods. As noted earlier, exports to Canadian affiliates of MNC's manufacturing motor vehicles and parts were stimulated by the U.S. -Canadian automotive agreement. In most industries, as in most areas, exports by U.S. parents were very large shares (and exports by unaffiliated U.S. persons very small shares) of total MNC-associated exports. The parents' shares generally exceeded 90 percent. TT! Also, in the 1977 benchmark survey, parents engaged in smelting or refining, in addition to mineral exploration and extraction, were classified in manufacturing, if — as was often the case--their sales of smelted or refined products exceeded their sales of crude minerals. In such cases, the parents' exports of crude, as well as smelted or refined, minerals would have been shown in manufacturing instead of in mining. 11 By product A product breakdown is available for $93.2 billion, or 92 percent, of total MNC-associated exports (table 5). These data cover U.S. exports associated with MOFA's and their parents only. 12/ Such exports accounted for very large shares of total MNC-associated exports to nearly all major areas of destination and in most major industries of U.S. parent. By area, the lowest share was in Japan (86 percent), where majority-ownership by foreigners was often restricted. By industry of U.S. parent, the lowest shares were in finance (except banking), insurance, and real estate (roughly two-thirds) and in primary and fabricated metal manufacturing (over four-fifths). Based on the Standard International Trade Classification (SITC) system, more than one-fourth of U.S. exports associated with MOFA's and their parents consisted of machinery, both electrical and nonelectrical (table 6) ,1_3/ Road motor vehicles and food, beverages, and tobacco each accounted for 14 percent and "other manufactures"--which includes leather, rubber, wood, and paper products; textiles; nonmetallic mineral manufactures; and miscellaneous manufactured articles—accounted for 12 percent. Chemicals and inedible crude materials, except fuels, accounted for 9 percent each, "other transportation equipment" for 7 percent, metal manufactures for 5 percent, and mineral fuels for 3 percent. Exports of road motor vehicles and other transportation equipment are probably significantly overstated (and exports of other products, particularly machinery, understated) because survey reporters had difficulty classifying parts and accessories for such equipment. The SITC requires that parts — such as tires and tubes, engines, and electrical parts for engines—that are shipped separately, and certain accessories not attached to the vehicle chassis, be excluded from road motor vehicles and parts and "other transportation equipment," and included in other SITC categories (e.g., tires and tubes in "other manufactures," engines and engine parts in machinery, etc.). Reporters, however, often erroneously included all such parts and accessories in road motor vehicles and parts or "other transportation equipment." In table 6, U.S. exports associated with MOFA's and their parents, by product, are crossclassif ied by industry of U.S. parent. In most goods- producing industries, the exports tended to be products either of the industries in which the U.S. parents were classified or of closely related 12. Total U.S. exports associated with MOFA's and their parents, as previously published in U.S. Direct Investment Abroad, 1977, were $96.9 billion. However, one part of the total --exports by the parents of MOFA's to their minority-owned foreign affiliates—is not available by product. Such exports were relatively small— $3.7 billion, or 4 percent of the total; therefore, their omission here probably has little effect on the analysis. 13. See United Nations, Statistical Office, Standard International Trade Classification, Revised (United Nations Statistical Papers, Series M, No. 34), lybl. 12 Table 5. — U.S. Exports Associated With MOFA's and Their U.S. Parents for Which a Product Breakdown Is Available Compared With Total MNC-Associated U.S. Exports, 1977, by Area of Destination and Industry of U.S. Parent (Millions of dollars or percent) Total MNC- associated exports Exports associated with MOFA's and their U.S. parents for which a product breakdown is available 1/ Column (2) as a percentage of column (1) (1) (2) (3) All areas, all industries By area of destination; Developed countries Canada Europe European Communities (9) Other Europe Japan Australia, New Zealand, and South Africa Developing countries Latin America Other Af r ica Middle East Other Asia and Pacific International Unallocated By industry of U.S. parent: Mining Petroleum Manufacturing Food and kindred products Chemicals and allied products Primary and fabricated metals Machinery, except electrical Electric and electronic equipment- Transportation equipment Other manuf actur ing Trade Finance (except banking) , insurance, and real estate Other industries 101,846 66,392 23,138 31,145 22,590 8,556 8,647 3,462 31,964 13,005 3,028 8,398 7,532 123 3,366 784 5,227 73,228 3,261 9,904 4,634 12,809 8,159 23,566 10,894 18,932 1,856 1,819 93,232 61,035 21,709 28,719 20,860 7,858 7,441 3,166 28,996 11,665 2,854 7,656 6,822 115 3,086 (D) 4,802 67,807 2,908 9,237 3,889 11,866 7,458 22,593 9,856 17,083 (D) 1,619 91.5 91.9 93.8 92.2 92.3 91.8 86.1 91.4 90.7 89.7 94.2 91.2 90.6 93.5 91.7 (D) 91. .9 92. ,6 89. .2 93. .3 83. .9 92. ,6 91. ,4 95. ,9 90. ,5 90. ,2 (D) 89. MOFA Majority-owned foreign affiliate. MNC Multinational company. D Suppressed to avoid disclosure of data of individual companies. 1. Excludes $3.7 billion of U.S. exports to minority-owned foreign affiliates of the U.S. parents of MOFA's. See footnote 12 in text for further discussion. NOTE. — In this table, data for U.S. MNC's are only for nonbank MNC's; data for U.S. parents are only for nonbank parents of nonbank affiliates; and data for affiliates are only for nonbank affiliates of nonbank parents. MOFA's are defined as affiliates that were owned more than 50 percent by all U.S. parents combined and that had assets, sales, or net income over $3 million in 1977. 13 Table 6. --U.S. txpo Indust ry With MOF by Produ .S. Parents to Is available. Food, b ewer age !l othe ital I 1 Petrol eum Oil and gas extract Crude petro leum C 3i I and gas field Petroleum and coal products Integrated refining and e Refining without e X t r a c t i Petroleum and coal pro due Petroleum wholesale trade . Other ed products nd bakery pr fining) and ga ices cals and syntheti and toilet goods Fabr Machin Of f i Othe eo metal pr ry , except elec and ga rde n ma c h 699 4,802 CO) 322 CO ) 3.671 ID) 3,8tS9 2,639 1,250 1 1 ,006 (D ) 4,268 CD) 3,525 (2) 13,114 (•) 67,80? 3,703 2,908 2,222 (0) <0) 161 11 3 (0) ( D) 9,23? 31 3 6,1 27 (0) 1,384 49 712 ( 0> ( 3) 8,233 <4 ) 3,230 CD) (0) (0) CD) 1,3 60 1 1 (»> (0) CD) 3,967 1,1 03 (0) CD) (0) CD) (0) 435 (0) CD) (•) 231 627 208 388 CD) 168 CD) 220 23 239 39 10,143 1 CD ) CD) 3,321 5 2,932 CD) CD ) C«) (•) 13,303 CD) C8> 6,693 (*) CD) C«> C«> C9) 4,337 CD) 1 CO 3,316 CD) 1 C D) 20 127 74 CD) CD) C *) CD) 1 ,90 3 1,332 71 7 61 4 571 470 CD) 271 CD) 181 C10) 1 1,010 CD) CD) CD) O) CD) CD) C D) CD) 38 1,206 750 192 CO) CD) 217 CO) 166 C11 ) 352 ( •) C*> C») CD) CD) C * ) Jthe loba jf acturin. manuf act- lex t i le oroduc ts Lumber, wood, furniture Paper and allied produc Printing and publishing Rubber products ....... li seel I aneous plastics ppa cts clay. ept banking), xcept banking 1 ,665 1 1,271 CD) C*> CD) 22,593 CD) 10 15,139 l») 4 7,454 CD) 6 9,856 1 ,076 1,214 CD) 1 ,054 1 670 1 CD) 1,027 CD) 1,543 CD) 254 CD) 990 2 92 1 36 1 336 5 418 C*) 43 2-861 CD) CD) CD ) C D) 9 17,083 9,3 .3 5,280 CD) CD) 5,279 2,133 C D) 372 CD ) 8,928 4,908 CD) CD) 1 Ser 85? C*> 540 CD) 250 CD) 290 1 71 CD) C») CO) CD) CO) CO) 1,570 CO) 940 CD) 2,696 106 3,610 CD) 1 ,867 CO) 1,743 415 857 3 6 10 54 CO) 5 CD) 47 C •) 2 CD) CD) CD) C D } 1 C * ) CO) 5 560 60 CD) 4 1 7 501 CD) 4 17 468 ( ) 189 415 CO) C*) CD) 1 1 3 CD) 303 7o 227 CD) CD) CD) CD) CD) CO CO) 27? 306 1 12 254 5,522 CD) 500 346 1,186 230 405 CD) 264 1 ?1 1 ,991 335 873 355 518 107 CD) CD) CD) C D) <«) C O CO) CD) CO CD) HOFA flajori ty-owned foreign affiliate. Suppressed to avoid disclosure of data of individual companies. * Less than $500,000 (+). 1. Excludes $3.7 billion of U.S. exports to minority-owned foreiqn affiliates of the U.S. parents of MOFA's. See footnote 12 in text for furthe discussion. NOTE. — In this table, data for U.S. parents are only for nonbank parents of nonbank affiliates and of nonbank parents. MOFA's are defined as affiliates that were owned more than 50 percent by all or net income over $3 million in 1977. data for affiliates are only for nonbank affiliates !.S. parents combined and that had assets, sales, industries. This tendency mainly reflected the large shares of exports in these industries that were shipped by U.S. parents and the large shares of the parents' exports that were their own products. In mining, over four-fifths of the U.S. exports associated with MOFA's and their parents were mineral fuels, mainly coal; the remaining exports were largely inedible crude materials, except fuels. In petroleum, 40 percent of the exports were mineral fuels and 28 percent were chemicals; a large share of the latter was probably petrochemicals. Among manufacturing industries, 85 percent of the exports in nonelectrical machinery, 81 percent of those in motor vehicles, and 76 percent of those in both foods and electric and electronic equipment were products of the parents' industries of classification. In "other transportation equipment" and chemicals, the shares of exports that were products of these same industries were 64 and 63 percent, respectively; in the former, most of the remaining exports were machinery, and, in the latter, most were "other manufactures" and inedible crude materials, except fuels. In "other manufacturing," 56 percent of the exports were "other manufactures" and, in primary and fabricated metals, 49 percent were metal products. The former share may have been somewhat understated because "other manufacturing" includes several industries whose major products are not classified in "other manufactures"--for example, in the SITC, tobacco products are in food, beverages, and tobacco, lumber is in inedible crude materials, except fuels, and plastic materials are in chemicals. In non-goods-producing industries—trade; finance (except banking), insurance, and real estate; transportation, communication, and public utilities; and services — the products shipped were, by definition, from industries other than those of the U.S. parents. In trade, most of the exports were food, beverages, and tobacco or inedible crude materials, except fuels. These products tended to be marketed abroad by trade MNC's, rather than by the producers of the goods themselves. (Trade MNC's handled large shares of total exports associated with MOFA's and their parents in both product categories--71 and 64 percent, respectively.) In finance (except banking), insurance, and real estate, exports were scattered among several product categories; however, nearly 40 percent were machinery. A few highly diversified companies classified in this industry, but with significant operations in machinery, accounted for most of the machinery exports. Machinery exports were also a large share—over 40 percent— of exports in transportation, communication, and public utilities. In construction, which is generally considered a goods-producing industry, but which has a significant services component, the final products normally do not cross national borders. The exports in this industry were, therefore, mainly products of industries that supply goods used in construction activities. They consisted largely of machinery, "other manufactures," and metal products. U.S. exports associated with MOFA's and their parents for which a product breakdown is available accounted for 77 percent of all U.S. exports (table 7). (As noted earlier, total MNC-associated exports accounted for 84 15 Table 7. --Total U.S. Exports and U.S. Exports Associated With MDFA's and Their U.S. Parents for Which a Product Breakdown Is Available, 1977, by Product Exports associated Exports associated with Total U.S. exports 1/ with MOFA's and their parents for which a product breakdown is available 2/ Mi 1 1 ions of dol lars (2) MDFA's and their parents for which a product breakdown is available as a percentage of total U.S. exports m Total , Food, beverages, and tobacco , Inedible crude mater ials, except fuels , Mineral fuels, lubricants, and related materials, Chemicals , Machinery , Road motor vehicles and parts , Other transportation equipment , Metal manufactures , Other manufactures Other , 121,293 93,232 16,536 13,114 12,926 8,233 4,200 3,230 10,992 8,745 32,975 24,086 11,908 3/ 13,433 6,747 3/ 6,693 5,285 4,337 14,042 11,010 5,682 352 76.9 79.3 63.7 76.9 79.6 73.0 3/ 112.8 '3/ 99.2 82.1 78.4 6.2 MDFA Majority-owned foreign affiliate. 1. See footnote 1, table 1. 2. Excludes $3.7 billion of U.S. exports to minor ity-owned foreign affiliates of the U.S. parents of MDFA's. See footnote 12 in text for further discussion. 3. For MOFA's, and their U.S. parents, exports of road motor vehicles and parts and of "other transportation equipment" are probably significantly overstated because of inclusion by reporters of certain parts and accessories for transportation equipment in these categories rather than in the appropriate other SITC category. See text for further discussion. NOTE. --In this table, data for U.S. parents are only for nonbank parents of nonbank affiliates and data for affiliates are only for nonbank affiliates of nonbank parents. MDFA's are defined as affiliates that were owned more than 50 percent by all U.S. parents combined and that had assets, sales, or net income over $3 mi 1 1 ion in 1977. 16 percent of all U.S. exports; thus, about 7 percent of all U.S. exports were associated with MNC's, but cannot be compared with all U.S. exports by product.) In most product categories, the MNC's accounted for between 64 and 82 percent of the U.S. totals. There were, however, a few major exceptions. MNC shares of U.S. exports of road motor vehicles and of other transportation equipment were extraordinarily high--over 100 percent and 99 percent, respectively. These high shares partly reflected the previously mentioned misclassif ication of parts and accessories by reporters. They also may have reflected underreporting in the all-U.S. trade data, particularly with regard to overland shipments to Canada. The very low MNC share of total U.S. exports of "other" products (6 percent) probably reflected the large portion of these products that were of a type not normally produced, handled, or sold by U.S. MNC's--such as nonmonetary gold, which is shipped mainly by independent gold dealers; arms or other military equipment, a large share of which is shipped by U.S. Government military agencies; live animals; and commodities donated for relief or charity by individuals or private agencies. U.S. exports shipped to MOFA's As previously mentioned, more detail was obtained in the 1977 benchmark survey for U.S. exports to MOFA's than for those to other foreign affiliates or to unaffiliated foreigners. In particular, exports to MOFA's are available by product and intended use, crossclassif ied by country of destination and by industry of affiliate. U.S. exports shipped to MOFA's were $35.8 billion--35 percent of total MNC-associated exports (table 8). Compared with the total, they were more heavily concentrated, by product, in road motor vehicles and parts and machinery; by area, they were more heavily concentrated in developed countries, particularly Canada. In all product categories except one--mineral fuels — over 70 percent of the exports to MOFA's were to developed countries. For mineral fuels, only 49 percent were to developed countries. In every product category, including mineral fuels, exports to Canada far exceeded those to any other single country. Canadian MOFA's accounted for a particularly large share--85 percent--of total exports of road motor vehicles and parts. By industry of affiliate, 70 percent of exports to MOFA's were to MOFA's in manufacturing and 23 percent were to MOFA's in trade. Within manufacturing, transportation equipment accounted for a particularly large share of the total. "Other manufacturing," electric and electronic equipment, nonelectrical machinery, and chemicals accounted for most of the remainder. In most manufacturing industries, exports to MOFA's were generally products of the affiliates' own industries. Ninety percent of the exports to MOFA's in transportation equipment were road motor vehicles and parts or other transportation equipment; 86 percent of those to MOFA's in nonelectrical machinery and 82 percent of those to MOFA's in electric and electronic equipment were machinery exports. In chemicals and food, the 17 1 L 1 1 • £ 1 «- 1 O cu ( *- I *-> 1 o E TO w 3 73 O W t_ Of a. 1 t- t TO D 3 X. C *~> .0 i a- TO U i s: E TO Qt TO 1 4-1 t- C oca. a o e 1 0) l/> — Q C *J •- *j to T3 c TO x C o ID C TO '2 c w " ^ ttJ t o to *♦- w to o o u T3 m e rtj o e: Of J) o *-> XI ti « a tn t3 •«- 0> — ' T TJ "3 U ._» CU A) flj u o CO 3 1 1 - TO ra *-* o CU 4-> -o h>- I s - o ' i/i i/> nJ O i^ ro t— r\j o r\j O -O O O f*i r^ n*i co o r^ o r- ro O no r\J CO sj (O rvjr- M O O M i- f\j O GO rsj ro iT< O ■ -J- (\i ■ c\jO ry «- ru *— -^ m ^* *-» * a o v o o t) oo on .- »j n o ■M «- O >T O *0 O n«-M\i^i-00't\J •" I s - r-o *- co --* — . t- ro i^. *n *- 1^ CO i- CO^T'— U"i 0C O -O O O O vT lA >j r- ro i- >J- <- i- O -O I •- 00 IO r- «0 1 o o o O «- O O i i O ^T O O ■ rn -j- t~ r*. o o o m ro «- ro M M r\j 00 O no CO O ^ r- -J -J O i^ >j MA ^O -o u~\ i~ r«**j O f\j OM-j\0>Jro<-0'OMf\jco «— Of— OOCOOi^loO"— »— o r^ r\s t— t^i CO O 1J O T c _l O E O o HI fll 3 3 *-> U CT tn "O v •*- cu *j O E t. w t> U *-- u C 3 an <_>•'- c «-* i "O T3 •*- X O o C C 0) "O ■*- ffl CT»- TS "O C ±* H- C .« C v TO T) D •«- Ul TO X *-• C 1- T3 -w i- «J U TO dc TOxa»»-oe ♦- to u i- c u a CU U r- TO •- *-- Wl t. rj)_*TO"D P E -C "J C (U co«*-oai-F-oaiTOj=oj ■f. fc. 3 O JC t- (0 — < U *-» "D C *-< C^UlEHll-O TO .- a> to i- s: q. s h- a> as T5 c ■D tn c - Q. r E JD CT C_> . — •i- • l/l <0 r— S- + |"0 fO O-— ' -o >> M- -O J3 O -r- - "O O O 0J +-> HO >r- C c * njii aj 3 o nj u o o o 4-» i- QJ LD 18 corresponding percentages were 79 and 64 percent, respectively. In metals, in contrast, only 38 percent of the exports were metal manufactures; a large portion of the remainder was inedible crude materials, except fuels, and machinery. Over 40 percent of all exports to MOFA's in trade were machinery, 19 percent were "other manufactures," and 18 percent were food, beverages and tobacco. Less than 15 percent of exports to MOFA's in mining and about one- fourth of those to MOFA's in petroleum were products of their own industries. Large shares of the remaining exports in both industries were machinery. By intended use, 57 percent of total exports to MOFA's were for resale without further manufacture, 4 percent were capital equipment or other goods charged to fixed assets, and 38 percent were for "other" uses--mainly for further processing or assembly by affiliates (table 9). The small share for capital equipment reflected the fact that MOFA's obtained most of their capital equipment from local and other non-U. S. sources; U.S. exports of such equipment were less than 7 percent of total plant and equipment expenditures by MOFA's in 1977. Exports for resale without further manufacture, most of which were from U.S. parents, were probably nearly all distributed by the MOFA's to unaffiliated foreign customers. In addition, the U.S. parents of MOFA's exported $57.4 billion of goods directly to unaffiliated foreigners. Thus, U.S. exports that reached unaffiliated foreigners without further manufacture by MOFA's could have been as much as $77.9 billion, more than four-fifths of total U.S. exports associated with MOFA's and their parents. Over one-fourth of these exports were channeled through MOFA's. Exports for resale were a significantly larger share of total exports to MOFA's in developed countries than in developing countries. As noted earlier, MOFA's in developed countries served to a greater extent than those in developing countries as distributors of their U.S. parents' exports. By industry of affiliate, exports for resale accounted for almost one-half of total U.S. exports to MOFA's in manufacturing. Within manufacturing, they were a particularly large share (64 percent) of exports to MOFA's in transportation equipment. These exports were primarily shipments of road motor vehicles and parts from U.S. parents to MOFA's in Canada. In trade, nearly al 1--92 percent—of the exports to MOFA's were for resale. Capital equipment and goods for "other" uses were both larger shares of total U.S. exports to MOFA's in developing than in developed countries. MOFA's in developing countries may have had more difficulty obtaining such goods locally or from other non-U. S. sources. Capital equipment exports were particularly large shares of total exports to MOFA's in the Middle East and "other Africa." By industry of affiliate, capital equipment was 39 percent of total exports to MOFA's in mining, 30 percent to MOFA's in petroleum, and less than 3 percent to MOFA's in manufacturing. The much larger shares in mining and petroleum partly reflected the greater capital intensiveness of these industries; also, a larger proportion of the MOFA's in these industries were located in developing countries, where the required capital equipment may not have been available locally. Within manufacturing, the share of 19 •O £X> -O O -O i ■j 1 o in 00 r-. -j- o -o in *— •omo-o-j'-J-O'-mr^ O 3 ■*- •*- C0<-0>O^ON'?'0(\|(MNO ^ CO O i^ ■- m ru ■- N ^ t> nj o o r*. m •"■ r\J O fO r- (\J r- f\J \ r- r~ C\l OM4 0< O f> rg ro t> roO-o- r- r- f\j f\j O O CM «k x v *l C2, O O \ t- N O N nj i i O ro ro Ki ^ i . r- m in *» ^» i O 3 ^ v- LTir*-or^r\j to 0> ^) (\j m i i"^J m -j O -j" N o in oo fl ■Of\jf\jrg « /s m i- r\j oor*-r>-0"Or v -i s oomof v - i -o -o m •— oo in ' in -J O -j O oj i no > 00 t- r- I inrvjoor-ooNiroi lAKl«-COCOO(\Jt-l ■O -O oo o -J- fOvfNO^ni-o«o^ii r-Oi-O^OOOOrOOOf— *- i> -O O 0> < a l_ a» o a> a i- j= o 3 *-> D HI D *- o cr a, ■■- iu +-. O S *• 3 a -o u ■»- "3 0> 0; C O T3 «- — ' c a L Jj fl ll I. -r Ol a -r- \~ Q CU 3 c *-- •«- TJ «D 3 +j c O E O *-< 3 *-> TJ CD — < T) TJ r n >*- n ■r- L. 3 O ■ C *- C u. i ■ p- q> IB 5^ Q. 5T ' C -C > 4- >>■*-■ ■u O ■n c 4-> o l •"" X) (i) o o 4- ■a i — ■r- (D Cn4 O-— rt5 "O TJ r^ n c 01 m (1) c 1 fl> 1- n o o O o o +-> in +j +J >,*/* 1 ' C 4-> r- 0J (1) c (.J +j l_ o c- +j 0) n 4- y i i n o (/) t.i (D i U3 20 total exports accounted for by capital equipment was largest--9 percent—for MOFA's in nonelectrical machinery. The equipment, which was shipped mainly to MOFA's manufacturing computers, consisted largely of computers for lease or rental to others. Exports for "other" uses accounted for 56 percent of total exports to MOFA's in mining, 49 percent to MOFA's in manufacturing, and 26 percent to MOFA's in petroleum. Growth from 1966 to 1977 This section discusses growth of exports associated with MOFA's and their parents from 1966 to 1977. The 1966 data are from the 1966 benchmark survey of U.S. direct investment abroad. 14/ They differ somewhat in concept, coverage, and methodology from the 1977 data; therefore, data for both years have been adjusted to improve comparability. The net effect of the adjustments was quite small--1966 exports were adjusted downward about 2 percent and 1977 exports were revised upward about 1 percent. 15/ Growth rates were calculated by country of destination and by industry of U.S. parent; they could not be calculated by product because a product breakdown of the 1966 data is not available. U.S. exports associated with MOFA's and their parents grew at a compound annual rate of 16.2 percent, from $18.8 billion in 1966 to $97.9 billion in 1977 (table 10). During the same period, total U.S. exports grew at a significantly slower rate--13.4 percent—from $30.4 billion to $121.3 billion. Ij3/ Consequently, the share of total U.S. exports that were associated with MOFA's and their parents rose from 62 percent to 81 percent. 14. See U.S. Department of Commerce, Bureau of Economic Analysis, U.S. Direct Investment Abroad, 1966, Final Data (Washington, D.C.: U.S. GPO, n.d.), tables E-l through E-16. 15. The adjustment for 1977 was applied to $96.9 billion of total exports associated with MOFA's and their U.S. parents, as published in U.S. Direct Investment Abroad, 1977 . This total differs from the one that appears in tables 5-7, which disaggregate U.S. exports associated with MOFA's and their parents by product. The difference occurs because this total includes, but the one in tables 5-7 excludes, $3.7 billion of U.S. exports to minority- owned foreign affiliates of the U.S. parents of MOFA's for which no product breakdown is available. In the adjusted data for both years, MOFA's are defined as affiliates owned more than 50 percent by a single U.S. parent, regardless of the size of each affiliate's assets, sales, or net income. (In previously published data for 1977 and in the rest of this article, they are defined as affiliates that were owned more than 50 percent by all U.S. parents combined and that had assets, sales, or net income over $3 million.) The adjusted data exclude data for parents and affiliates in finance, except banking, and in insurance, because 1966 export data were not collected for them. 16. Growth rates for a period that are calculated from initial- and terminal -year data may differ from an average calculated from data for each year in the period if the initial- or terminal-year values have been affected by circumstances atypical of the period as a whole. For the 11-year period covered here, however, the initial- or terminal-year values of U.S. exports associated with MOFA's and their parents, or of total U.S. exports, would have had to differ by about 10 percent from those cited in order to change the growth rates by 1 percentage point. 21 CO \ pped other igner U.S. nts 2 w S o -° £ •u a JZ T3 (0 H) c Z ■W Qi >n-i 0) to co ---i a *€ £4 . &4 0) o c • £ 3 3 u ,_l to 4J c 3 C 01 0) u C a Q, QJ a a, T3 C to a -H Qj (D E 4-1 EH to u -a - w m S 5 o K ; 2 o -c u a V Si g 4J fl -n o a, ° m 3 4J c . 4J Hj *r4 (d CO ca ro 3 • (0 Eh D 10 \ •O m m ' ^ * x: C W CO % -h P c !3 ° >i * u-i a •D to 01 C ■P (0 to >iH 1) co < £} ■ Cm C ■ fl 3: •« Eh O c Lpped other igner U.S. nts 2 E <4-i a 13 W qj c 4-» O (0 to >. -H QJ to CQ -h Q, < iw • fa (0 Uj o c • E 3 D ** « 1 CQ • JJJ i-H 4J Eh xports .ated OFA'S heir rents, usted „ E J- 1 fO -r-» o a, '° 4J 2 -H IT] Ul CO ra 3 • (0 EH a o a n m 3 c 4- r C. 4- C a § C i • • a T3 o . H ai r fi, n o) n QJ rr -H 3 c o rr (i) Q) ra J3 01 H Bj x m in QJ 3 -H'D > J O E O C 4J E cu ; QJ -H O QJ nj J= QJ £ u iDH 14 iJ 'D CJ Cu E W Eh O ai -a g tj tr o c i -H 10 O ■ QJ -H -rt i U TJ tO ' a o a o) -h ja fO o E QJ qj n tn O H C >i£ tn tn 0) c jj 01 c c 01 r 4)J QJ in o j-i r >i Rt i tn 4J 4J a* to c C en fll tn Q) n C Q QJ C m f= V r. o T) o a 3 W H 0) <: QJ O u U T3 c c: (0 0) at •H 3 0> I4 m iJ CO m 4-1 r- I) r* ai tu- T3 ^ rn c QJ r Jj jj c ■H E (0 -H *3 a 01 c > O ■^ c 04 c (0 B fO >i 4J -D a qj Lh (0 3 O IW 01 1: * >1 in c u 4J fj) M c fO c U 9 to C QJ •a Exports shipped to unaffiliated foreigners by the U.S. parents of MOFA's grew at a 16.5 percent rate. Exports shipped to MOFA's, both by U.S. parents and by other U.S. persons, grew at a 15.7 percent rate. Exports associated with MOFA's and their parents that were destined for developing countries grew at a slightly faster rate than those destined for developed countries--17.4 percent compared with 16.6 percent. 17/ In the developing countries the growth rate was highest--29.3 percent—for the Middle East, where members of the Organization of Petroleum Exporting Countries (OPEC) used sizable portions of their growing oil revenues to purchase U.S. goods. The growth rate was lowest—at 14.4 percent—in Latin America. The low rate partly reflected policies in several countries that limited the import content of production by foreign-owned firms or encouraged foreign investment in import-competing industries. In "other Asia and Pacific," where the growth rate was 15.8 percent, yery rapid growth of U.S. exports to some countries— particularly Singapore, Indonesia, South Korea, Taiwan, and Malaysia, whose economies were expanding rapidly — was partly offset by slower growth in exports to other countries. Among the developed countries, growth rates ranged from 14.7 percent for Australia, New Zealand, and South Africa to 19.1 percent for Japan. The relatively high rate for Japan probably reflected the rapid growth of the Japanese economy, which is highly dependent on imported raw materials, and the gradual relaxation of Japanese import restrictions and foreign investment controls. Growth rates for Canada and Europe were 16.0 and 16.6 percent, respectively. The growth in exports to Canada was probably concentrated in transportation equipment. Within Europe, the growth rate for the European Communities (9) was significantly slower than that for "other Europe"— 15.8 percent compared with 18.9 percent. The gradual elimination of internal tariffs and imposition of common external tariffs by the EC(9) encouraged U.S. companies to produce in, rather than export to, member countries. Also, relatively slow economic growth in the United Kingdom may have dampened U.S. exports to that country and, thus, to the EC(9) as a whole. 18/ By industry of U.S. parent, the growth rate of U.S. exports associated with MOFA's and their parents was 18.8 percent in trade, 16.1 percent in petroleum, and 15.7 percent in manufacturing. In trade, growth was concentrated in wholesale trade of farm product raw materials and electrical IT. Growth rates tor "international" were not calculated because the definition of the "international" category differed in the 1966 and 1977 benchmark surveys. As noted earlier, in the 1977 survey, "international" consisted of affiliates that had operations spanning more than one country and that were engaged in petroleum shipping, other water transportation, petroleum trading, or the operation of oil and gas drilling equipment that was moved from country to country during the year. In the 1966 survey, "international" was defined more broadly to include, in addition, affiliates in finance, nonpetroleum trading, insurance, and construction that were engaged in activities in more than one country. No adjustments could be made for these definitional differences. 18. For these comparisons, 1966 as well as 1977 data are for the EC(9), even though the United Kingdom, Denmark, and Ireland did not become members of the Communities until 1973. 23 goods. Within manufacturing, growth was highest in transportation equipment — probably in response to the U.S. -Canadian automotive agreement — and in electrical machinery. MNC-Associated U.S. Imports Of total MNC-associated U.S. imports of $86.8 billion, imports shipped by foreign affiliates to U.S. parents were $32.6 billion (38 percent), imports shipped by foreign affiliates to unaffiliated U.S. persons were $8.9 billion (10 percent), and imports shipped by unaffiliated foreigners to U.S. parents were $45.2 billion (52 percent) (table 2). Total imports shipped by affiliates, the sum of the first two components, were $41.5 billion, of which nearly four-fifths were to U.S. parents and just over one-fifth were to unaffiliated U.S. persons. Total imports shipped to U.S. parents, the sum of the first and third components, were $77.9 billion, of which 58 percent were from unaffiliated foreigners and 42 percent from foreign affiliates. As noted earlier, significantly less detail was obtained in the 1977 benchmark survey for imports than for exports. Specifically, imports shipped to U.S. parents by unaffiliated foreigners were not obtained by country of origin or by product. Because such imports accounted for more than one-half of total MNC-associated U.S. imports, generalizations about total MNC- associated imports, and comparisons of such imports with all U.S. imports by country of origin or by product are not appropriate. Also, the growth of MNC-associated U.S. imports from 1966 to 1977 cannot be calculated because no import data were obtained in the 1966 benchmark survey. 19/ As a result of these limitations, this section will cover only total MNC-associated imports disaggregated by industry of U.S. parent and U.S. imports shipped by MOFA's disaggregated by product and crossclassified by country of origin and industry of affiliate. 19. A very rough estimate of U.S. imports associated with MOFA's and their parents in 1966 was given in a previous article on MNC trade. (See table 21 in Betty L. Barker, "U.S. Foreign Trade Associated with U.S. Multinational Companies," Survey 52 (December 1972): 20-28.) The estimate was made using preliminary data on MOFA sales to the United States, as reported in the 1966 benchmark survey, together with a universe estimate of 1966 U.S. parent imports from unaffiliated foreigners, based on data for a very small sample of MNC's from a special 1970 survey conducted by BEA. (Note that MOFA sales to the United States differ from U.S. imports from MOFA's. The sales data include both goods and services that were charged to U.S. customers by MOFA's; the import data include only goods and only to the extent they were physically shipped to U.S. customers by the MOFA's, regardless of to or by whom they were charged.) Using the same procedure as in the previous article, but with revised data on 1966 MOFA sales to the United States, a rough estimate of 1966 U.S. imports associated with MOFA's and their parents of $12,489 million is obtained. In 1977, U.S. imports associated with MOFA's and their parents were $82,363 million, 95 percent of total MNC-associated U.S. imports. Ignoring comparability problems, the approximate compound annual growth rate of these imports from 1966 to 1977 was 18.7 percent. During the same period, total U.S. imports grew from $25,618 million to $150,390 million, or at a 17.5 percent annual rate. 24 By industry of U.S. parent By industry of U.S. parent, petroleum accounted for 44 percent and manufacturing for 40 percent of total MNC-associated U.S. imports (table 4). Trade accounted for 13 percent, "other industries" for 2 percent, and mining and finance (except banking), insurance, and real estate for less than 1 percent each. In general, a U.S. parent's industry is probably not a good indicator of the types of products being imported. Manufacturing parents, for example, may import raw materials and supplies that are products of nonmanufacturing industries, or parts and capital equipment that are products of manufacturing industries other than the one in which they are classified. In petroleum, however, most of the MNC-associated imports were probably crude petroleum, petroleum products, or natural gas. The large share of total MNC-associated imports accounted for by MNC's with petroleum parents primarily reflected the heavy U.S. dependence on foreign petroleum. In 1977, this dependence was exacerbated by strong U.S. economic expansion, an exceptionally cold winter, a drought in the West that led to a significant loss of hydroelectric power, and substantial private stockpiling of oil in anticipation of OPEC price increases. Of total MNC-associated imports in manufacturing, the transportation equipment industry accounted for the largest share--39 percent. This large share probably reflected the stimulus that the U.S. -Canadian automotive agreement provided to U.S. imports, as well as exports, of road motor vehicles and parts. Primary and fabricated metals accounted for 11 percent, electric and electronic equipment for 10 percent, and chemicals and allied products for 9 percent, of the imports in manufacturing. The shares of total MNC-associated imports that were shipped by foreign affiliates varied significantly by industry. They ranged from 14 percent in trade to roughly 80 percent in finance (except banking), insurance, and real estate. The shares in manufacturing and petroleum were 61 and 46 percent, respectively. Within manufacturing, imports shipped by affiliates were a particularly large share (76 percent) of MNC-associated imports in transportation equipment. In most industries, imports shipped to U.S. parents were very large shares, and imports shipped to other U.S. persons very small shares, of total MNC-associated U.S. imports. The major exceptions were in industries--such as coal mining, paper, lumber, and glass--in which affiliates were engaged primarily in production of raw materials or other inputs that were often shipped directly to unaffiliated U.S. customers. U.S. imports shipped by MOFA's U.S. imports shipped by MOFA's were $38.0 billion in 1977 (table 11). They accounted for 44 percent of total MNC-associated U.S. imports. 25 r^r*Or*nix,r\jr>nr\jm tn in n- ro ^j- oo ^ o in fsi O- -J -J CO N. t- ^ ■>-» >0 *■* in ^ in t/N O o -o ro r-oo rs. o in o o *■» « ^- >j « ^-. >o no <\i 00 O O O »oi o r\j no i/> t O rn r\j i\i I >» f\l «- O P-. CO O •j- o r*. *- o -4- o O % \ O Q O Q \ \ V \ x Q ^ CO « ~ «— (vjajN-o-jMivjD hO co «— Kl M N O 1- T- Qv (M " «~ Q O O <2> O r^-inor-^' s nfv^ r ioooof\io>r in M N O O f> »- ■*» f\J -OCO-O O O >J uO 00 -J "D cu C E o T3 o a CO v. CO IB ij Qj 3 "O •U o u o m a 3 0, C k. — » t, fl *J O r 0) "O U r» in — * +-> c tj .c i O E O *-< E 3 C rt) X Ov i CD — i <0 "O E E . r oh- n U'k 'f- k. 3 O -C U C *-< C u_ u J. . •«- a, T3 (— D. CD E -* o *4- i_ -n O fO CD *o ■*-> Q) (O +J b CD T3 IO o !- -O + | O •— ■ 4- -O ■i- O ■o o o CD > O . C 03 ". ■n cu +J Z CLVl 26 By product, 44 percent of the imports shipped by MOFA's were mineral fuels, 22 percent were road motor vehicles and parts, 13 percent were machinery, and 5 percent were inedible crude materials, except fuels. Imports of other products were relatively small. As with exports, imports of road motor vehicles and parts were probably overstated, and imports of other goods understated, because of reporters' incorrect classification of transportation equipment parts and accessories. Imports from developed countries accounted for 51 percent, and those from developing countries for 49 percent, of total U.S. imports shipped by MOFA's. 20/ Among developed countries, Canada accounted for 38 percent and Europe for 12 percent of the global MOFA total. Among developing countries, "other Asia and Pacific" accounted for 15 percent, Latin America for 14 percent, "other Africa" for 12 percent, and the Middle East for 8 percent of the total . Imports from MOFA's in developed countries exceeded those from MOFA's in developing countries in all product categories except mineral fuels and "other." For mineral fuels, more than four-fifths of the imports, probably mainly crude petroleum, were from developing countries--54 percent from members of OPEC alone. Imports of "other" products, which were very small in value, were mainly from "other Asia and Pacific." Also, for all products except mineral fuels and "other," U.S. imports from MOFA's in Canada were larger than those from MOFA's in any other single country. Imports from Canadian MOFA's were particularly large shares of imports of road motor vehicles and parts (92 percent), "other transportation equipment" (89 percent), and inedible crude materials, except fuels (62 percent). By industry of affiliate, 46 percent of total imports shipped by MOFA's were from MOFA's in manufacturing and 44 percent were from MOFA's in petroleum. More than one-half of the imports in manufacturing were from MOFA's in transportation equipment. In goods-producing industries, large shares of the U.S. imports shipped by MOFA's were products of the affiliates' own industries of classification. Virtually all of the imports shipped by petroleum MOFA's were of mineral fuels, and 71 percent of those shipped by mining MOFA's were of inedible crude materials, except fuels (probably mostly minerals). Within manufacturing, the shares of imports that were products of the MOFA's own industries were highest in electric and electronic equipment and in nonelectrical machinery — over 90 percent in each. Corresponding shares were 87 percent in food and kindred products, 86 percent in transportation equipment, 75 percent in "other manufacturing," and 73 percent in chemicals. In primary and fabricated metals, in contrast, only 43 percent of the imports shipped by MOFA's were of metal manufactures; the remainder was mostly road motor vehicles and parts. Some of the latter may actually have been metal parts and accessories for road motor vehicles, which should have been classified as metal manufactures instead. 20. In all cases, the country of location of a MOFA was considered to be the country of origin of the U.S. imports shipped by it. 27 In non-goods-producing industries, imports shipped by MOFA's in trade were mainly machinery; inedible crude materials, except fuels; food, beverages, and tobacco; and "other manufactures." In services — which is part of "other industries" and which was the only other non-goods-producing industry with imports of any size—nearly all imports were of "other manufactures." Technical Note U.S. trade is defined by the Census Bureau as the physical movement of goods between the customs area of the United States and the customs area of a foreign country. The all-U.S. trade data in this article are as compiled by Census, except that they have been adjusted to include shipments between the Virgin Islands and foreign countries. (The 1977 Census data excluded these shipments, but the MNC data included them.) All-U.S. exports and imports are valued f.a.s. at the U.S. or foreign port of exportation; thus, they include all costs incurred up to the point of loading the goods aboard the export carrier at the port of exportation, including the selling price at the interior point of shipment (or cost if not sold), packaging costs, and inland freight and insurance. All-U.S. exports include reexports and military grant shipments; all-U.S. imports include goods for immediate consumption as well as goods entering into U.S. Customs bonded warehouses. The MNC data were defined to be as comparable as possible with the all- U.S. trade data. In practice, however, the MNC and all-U.S. trade data are not strictly comparable because they came from two different sources. The MNC data were based on company records, whereas the all-U.S. trade data were compiled by the Census Bureau from shippers' declarations filed with U.S. Customs on each transaction. Although the MNC data, like the all-U.S. data, were required to be reported on a "shipped basis"--i.e. , on the basis of when, where, and to (or by) whom the goods were physically shipped—most reporters maintained their books, and probably, in many cases, reported to BEA, on a "charged basis"-- i.e., on the basis of when, where, and to (or by) whom the goods were billed or charged. Data on the two bases can differ significantly. For example, if a U.S. parent buys goods from an affiliate in country A and sells them to an affiliate in country B, but the goods are shipped directly from country A to country B, a U.S. import or export would not be recorded on the shipped basis, because the goods never physically entered or left the United States; however, on the charged basis, both a U.S. import (to show the purchase charged to the U.S. parent from country A) and a U.S. export (to show the sale charged by the U.S. parent to country B) would be recorded. The MNC data may also contain duplication. For example, if one U.S. parent exported goods to an affiliate of another U.S. parent, the goods would be counted twice in total MNC-associated U.S. exports--once as goods shipped by U.S. parents to unaffiliated foreigners and once as goods shipped to 28 affiliates by U.S. persons other than their U.S. parents. This duplication would cause the MNC data to be overstated relative to the all-U.S. data. The amount of any such overstatement is unknown, but believed to be small. The MNC and all-U.S. trade data may also differ because the timing, valuation, origin or destination, shipper, or product involved in a given transaction may have been recorded differently on company records than on the Customs export and import documents. Other comparability problems are noted in the text, including the misclassif ication of certain parts and accessories for transportation equipment in the MNC data disaggregated by product, and the use of the "unallocated" category in the data on MNC-associated U.S. exports disaggregated by country of destination. 29 By L.A. LUPO Worldwide Sales by U.S. Multinational Companies This article analyzes sales by U.S. nonbank multinational companies (MNC's) in 1977, by area of origin and destination, by industry of U.S. parent, and by affiliation between seller and customer. As noted in the Introduction to this collection of articles, only sales by nonbank U.S. MNC's are covered; thus, the term "MNC's" refers only to nonbank MNC's, and MNC sales--def ined as the sum of sales by U.S. parents and their foreign affiliates — refers only to sales by nonbank MNC's. Total MNC sales could be disaggregated by area of origin (the location of the seller) because the location of each seller, that is, of each parent and foreign affiliate, was reported in the 1977 benchmark survey. In contrast, as explained below, only sales by U.S. nonpetroleum parents and by majority- owned foreign affiliates (MOFA's) could be disaggregated by area of destination (the location of the customer). For sales disaggregated by industry, unless noted otherwise, the industry used for MNC's, parents, and affiliates was that of the parent. 1/ The first section of the article discusses total MNC sales by industry and by area of origin. The second section discusses the destination of sales by U.S. nonpetroleum parents of MOFA's, and by all MOFA's. Sales are distributed into local sales (those where the customer is located in the same country as the seller) and nonlocal sales (those where the customer is located in a different country from the seller). In the third section, sales by U.S. nonpetroleum parents of MOFA's and by all MOFA's are distributed according to whether or not these sellers and their customers were affiliated—that is, were members of the same MNC. The technical notes discuss (1) the use of U.S. parents' export shipments as an estimate of their nonlocal sales, which were not reported in the 1977 benchmark survey, (2) the effect on the sales data of the consolidation rules applied in the 1977 benchmark survey, (3) the relationship between sales data in this article and BEA's earlier published data on sales by MNC's, and (4) the extent to which the distribution of affiliate sales by industry of affiliate differs from that by industry of U.S. parent. 1. In the 1977 benchmark survey, each parent and each affiliate was classified in the one industry in which its sales were largest; the U.S. MNC as a whole was not classified by industry because the data needed to assign an industry code based on the worldwide activities of the MNC's were not secured. In most cases, however, the MNC-wide industry code would have been the same as the parent's because each U.S. parent normally accounted for a much larger share of total sales by an MNC than did its foreign affiliates, and most affiliates were classified in the same industry as their U.S. parent (see the technical notes). 30 Highlights In 1977, U.S. MNC's had worldwide sales of $2,060 billion; $1,412 billion were by U.S. parents and $648 billion were by foreign affiliates. Of the $1,412 billion of sales by parents, more than two-thirds were by parents in goods-producing industries—mainly manufacturing and petroleum; the remainder were mainly in trade, insurance, and communication and public utilities. Although fewer than 1 in 2,000 U.S. businesses were parents, the parents accounted for more than 35 percent of sales by all U.S. businesses, and nearly 62 percent of sales by U.S. businesses in goods-producing industries. Sales by affiliates were concentrated more heavily in goods-producing industries than were sales by their U.S. parents, mainly because petroleum accounted for a much larger share of the affiliates' than of the parents' total sales. Of the $648 billion of sales by affiliates, 15 percent originated in Canada, 35 percent in the European Communities (9), 8 percent each in "other Europe" and Japan, 11 percent in Latin America, and 17 percent in developing areas other than Latin America. Worldwide sales by U.S. nonpetroleum parents of MOFA's, and by all MOFA's, can be distributed both by destination and origin. Worldwide sales by the parents were $1,106 billion. By destination, only 8 percent were to foreigners; the remaining 92 percent were local. In contrast, of worldwide sales of $507 billion by all MOFA's, 62 percent were local, 19 percent were to the United States, and nearly 20 percent were to third countries (that is, to countries other than the United States or the country of the MOFA) . Both for U.S. nonpetroleum parents and MOFA's, the bulk of worldwide sales were to unaffiliated customers. Sales by U.S. nonpetroleum parents to unaffiliated customers were 97 percent of their worldwide sales; the share was high because most of their sales were local (i.e., were sold in the United States), and all of their local sales were, by definition, to unaffiliated customers (see footnote 8). In contrast, the share of their nonlocal sales that were to unaffiliated customers was only 67 percent. 31 Sales by all MOFA's to unaffiliated customers were about two-thirds of their worldwide sales. In most areas and industries, over 90 percent of their local sales, but markedly lower shares of their nonlocal sales, were to unaffiliated customers. Sales by Industry and by Origin By MNC's as a whole In 1977, worldwide sales by U.S. MNC's totaled $2,060 billion. Of this amount, $1,412 billion (69 percent) were by U.S. parents and $648 billion (31 percent) were by their foreign affiliates. When each MNC was classified by industry of U.S. parent, nearly three- fourths of sales were in goods-producing industries--mainly manufacturing and petroleum. Most of the remainder was in trade, insurance, and communication and public utilities (table 1). 2/ MNC's in manufacturing had sales of $1,037 billion, about one-half of worldwide sales by all U.S. MNC's. Within manufacturing, sales were largest, at $241 billion, in transportation equipment; although most of these sales were by automobile manufacturers, sales by U.S. aircraft companies also were substantial . MNC's in petroleum had sales of $475 billion. Most of these sales were by a few large integrated companies engaged in all stages of the petroleum industry — extraction, refining, and marketing. MNC's that specialized in only one aspect of the industry, such as petroleum trade, tanker or pipeline operations, or refining without extraction, together had sales of only $66 billion. MNC's in trade had sales of $229 billion; these sales were split about equally between retail and wholesale trade. In finance (except banking), insurance, and real estate, sales were $145 billion; they mainly consisted of gross operating revenues of MNC's in insurance. In "other" industries-- mainly transportation, communication, and public utilities—sales were $168 billion; in mining, they were less than $7 billion. 2. In this article, goods-producing industries cover mining (table 1, line 2), petroleum (line 8), manufacturing (line 18), agriculture, forestry, and fishing (line 71), and construction (line 72). Oil and gas field services and petroleum trade are considered part of the petroleum industry as shown on line 8, even though they are not "goods-producing" industries; because they constituted less than 3 percent of the petroleum total, however, their inclusion has little effect on the analysis. Non-goods-producing- industries cover trade (line 59), finance (except banking), insurance, and real estate (line 64), transportation, communication, and public utilities (line 73), and services (line 76). 32 Table 1. --Sales by U.S. MNC's, 1977, by Industry of U.S. Parent Mi 1 1 ions of dol lars Total By By U.S. foreign parents aff i 1 iates Total Percent distribution by industry By By U.S. foreign parents affiliates Line 647,969 100.0 100.0 .3 .2 (D) 'Li; (0) .1 39.0 .4 .3 (*) 35.5 35.5 (D) (D) 3.1 .1 45.9 4.2 .7 .5 3.0 7.6 4.1 1.7 1.4 .1 .4 3.9 2.5 .9 1.6 1.3 7.1 .4 1.4 3.7 1.7 3.8 .5 .6 .5 2.2 11.6 10.1 1.5 7.8 .6 .7 .4 1.4 .4 1.4 .1 .4 .5 1.5 .4 7.0 4.7 1.3 3.4 2.2 3.9 .3 2.4 (*) .5 .7 3.9 (D) (D) 1.3 .6 .7 .9 All industries 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 Mining Metal mining Iron Copper, lead, zinc, gold, and silver Bauxite, other ores, and services — Coal and other nonmetallic minerals — Petroleum Oil and gas extraction Crude petroleum (no refining) and gas Oil and gas field services Petroleum and coal products Integrated refining and extraction — Refining without extraction Petroleum and coal products, nee Petroleum wholesale trade Other Manufacturing Food and kindred products Grain mill and bakery products Beverages Other Chemicals and allied products Industrial chemicals and synthetics Drugs Soap, cleaners, and toilet goods Agricultural chemicals Other Primary and fabricated metals Primary metal industries Ferrous Nonferrous Fabricated metal products Machinery, except electric Farm and garden machinery and equipment Construction and related machinery Office and computing machines Other Electric and electronic equipment Household appliances Radio, television, and communication equipment Electronic components and accessories Other Transportation equipment Motor vehicles and equipment Other Other manufacturing Tobacco manufactures Textile products and apparel Lumber, wood, furniture, and fixtures Paper and allied products Printing and publishing Rubber products M' -r°l laneou? plastics products j,-.ss products 3 .one, clay, cement, and concrete Instruments and related products Other Trade Wholesale trade --- Durable goods — Nondurable goods Retail trade Finance (except banking), insurance and real estate Finance, except banking Insurance Real estate Holding companies Individuals, estates, and trusts 1/ Other Agriculture, forestry, and fishing Construction Transportation, communication, and public utilities Transportation Communication and public utilities Services 2,060,262 1,412,293 6,866 4,986 2,672 1,467 (D) (D) 1,850 (D) (D) 4 4,194 3,519 474,635 221,757 8,547 6,131 6,140 4,144 2,407 1,987 411,457 181,568 409,123 179,389 (D) (D) (D) (D) 42,252 22,321 12,379 11,736 1,037,157 739,460 110,762 83,422 19,132 14,497 12,958 9,679 78,672 59,245 145,821 96,474 80,203 53,985 27,464 16,423 23,729 14,790 4,066 3,303 10,360 7,974 119,639 94,563 82,575 66,152 52,897 46,902 29,678 19,250 37,064 28,411 126,403 80,174 9,178 6,559 27,025 18,211 47,859 23,950 42,342 31,455 87,103 62,631 11,928 8,436 20,442 16,723 9,176 6,247 45,557 31,225 240,716 165,681 181,105 115,877 59,611 49,804 206,713 156,516 14,559 10,845 30,054 25,342 20,493 18,218 31,496 22,570 16,071 13,734 25,256 16,401 4,122 3,251 8,868 6,053 13,912 10,409 28,832 19,087 13,049 10,607 228,750 183,706 108,215 77,683 37,516 29,252 70,699 48,431 120,536 106,023 144,650 119,596 11,178 9,051 123,446 108,088 587 517 5,118 1,940 4,321 168,204 142,789 (D) 1,533 (D) 17,165 108,710 100,314 39,217 35,202 69,493 65,112 29,752 23,777 1,880 .3 1,205 .1 (D) (0) (D) 675 (D) .1 (D) .2 252,878 23.0 2,416 .4 1,996 .3 420 .1 229,889 20.0 229,734 19.9 (D) (D) 19,930 (D) (D) 2.1 642 .6 297,697 50.3 27,340 5.4 4,635 .9 3,279 .6 19,426 3.8 49,347 7.1 26,218 3.9 11,042 1.3 8,939 1.2 762 .2 2,386 .5 25,076 5.8 16,423 4.0 5,996 2.6 10,428 1.4 8,652 1.8 46,228 6.1 2,619 .5 8,814 1.3 23,909 2.3 10,887 2.1 24,472 4.2 3,493 .6 3,719 1.0 2,929 .5 14,332 2.2 75,035 11.7 65,228 8.8 9,807 2.9 50,198 10.0 3,715 .7 4,712 1.5 2,276 1.0 8,927 1.5 2,337 .8 8,854 1.2 872 .2 2,815 .4 3,503 .7 9,745 1.4 2,442 .6 45,044 11.1 30,532 5.3 8,264 1.8 22,268 3.4 14,513 5.9 25,054 7.0 2,127 .5 15,358 6.0 70 (*) 3,178 .2 4,321 .2 25,416 8.2 (D) (D) (D) (D) 8,396 5.3 4,015 1.9 4,381 3.4 5,974 1.4 100.0 .4 .1 (D) (D) (D) .2 15.7 .4 .3 .1 12.9 12.7 (D) (D) 1.6 52.4 5.9 1.0 .7 4.2 6.8 3.8 1.2 1.1 .2 .6 6.7 4.7 3.3 .7 2.0 5.6 .5 1.3 1.7 2.2 4.4 .6 1.2 .4 2.2 11.7 8.2 3.5 11.1 .8 1.8 1.3 1.6 1.0 1.2 .2 .4 .7 1.4 13.0 5.5 2.1 3.4 7.5 8.5 .6 7.7 (*) .1 10.1 .1 1.2 7.1 2.5 4.6 1.7 companies. MNC Multinational company. D Suppressed to avoid disclosure of data of individual * Less than 0.05 percent. 1. Consists of U.S. parents that are individuals, estates, and trusts. Data for such U.S. parents appear as zero because those parents were not required to report financial and operating data in the 1977 benchmark survey. Foreign affiliates were not classified in this category; however, when data for affiliates are classified by industry of U.S. parent, the data for the affiliates of such parents are shown against this category. NOTE. --In this table, data for U.S. MNC's are only for nonbank MNC's; data for U.S. parents are only for nonbank parents of nonbank affiliates; and data for affiliates are only for nonbank affiliates of nonbank parents. 33 By U.S. parents Of the $1,412 billion of sales by U.S. parents, more than two-thirds were by parents classified in goods-producing industries--mainly manufacturing (52 percent of the total) and petroleum (16 percent). Sales by parents classified in the other goods-producing industries (mining, agriculture, forestry and fishing and construction) together were less than 2 percent of the total. The main non-goods-producing industry was trade, which accounted for 13 percent of total sales by the parents. The finance (except banking), insurance, and real estate and the transportation, communication, and public utilities industries each accounted for less than 8 percent, and services for less than 2 percent, of the total. Table 2 compares sales by U.S. parents with sales by all U.S. businesses, by industry and by size of sales per company. The all-U.S. -business data are from the Bureau of the Census' 1977 Enterprise Statistics , and differ in industry scope (coverage) from the U.S. parent data. 3/ After adjustment for these differences, $1,180 billion (84 percent) of sales by parents were in industries that were also within the scope of the 1977 Enterprise Statistics (lines 11 and 12). Although fewer than 1 in 2,000 of U.S. businesses were parents of foreign affiliates, the parents accounted for more than one-third of the sales by all in-scope U.S. businesses. The industry distribution of the U.S. parents' sales differed markedly from that for all U.S. businesses. 4/ For parents, manufacturing, petroleum, and mining together accounted for over 80 percent of sales, with 3. For the all-U.S. -business data, see U.S. Department of Commerce, Bureau of the Census, 1977 Enterprise Statistics (Washington, D.C.: U.S. GPO, 1981). The industry scope of the U.S. parent data as reported to BEA was greater than that of all U.S. businesses as shown in the 1977 Enterprise Statistics . Differences in scope were resolved essentially by eliminating from the comparisons in table 2 the parents that were within the scope of BEA, but were out-of-scope of the 1977 Enterprise Statistics . Lines 11-13 of table 2 give a reconciliation of the parent data in table 2 to the BEA total for parents given in table 1, and the footnotes to table 2 describe the main items in the reconciliation. 4. Some of the differences between the BEA and the Census industry distributions reflected differences in statistical practices. In the 1977 Enterprise Statistics , each U.S. business was a consolidation of domestic enterprises under "common ownership or control." In contrast, in the BEA data, each U.S. parent was essentially a consolidation of the owning U.S. business and all of its majority-owned domestic (U.S.) subsidiaries (see the technical notes). Control of a company could be conferred by less than majority ownership positions; therefore, the Census consolidation rule may have been more inclusive than the BEA rule. Another source of difference between BEA and Census industry distributions arose because BEA assigned an industry code based on sales, but Census assigned one based mainly on payroll data. The impact of these differences in statistical practices upon the industry distribution of the data is not known. 34 Table 2. --Sales by U.S. Parents Compared With Sales by All U.S. Businesses, 1977 Number of companies Mi 11 ions of dollars Percent distribution Mi 11 ions of dollars per company U.S. All in- parents scope U.S. businesses V Sales by U.S. parents Sales by all in- scope U.S. businesses V Sales by Sales by U.S. all in- parents scope U.S. businesses .1/ Sales by Sales by U.S. all in- parents scope U.S. businesses V Line 29 8,875 4,986 37,565 .4 1.1 172.0 4.3 148 198,595 210,530 263,805 17.9 7.9 1,422.5 1.4 1,841 295,060 739,460 1,275,174 62.7 38.4 401.7 4.4 375 1,885,749 183,706 1,332,093 15.6 40.1 489.9 .7 307 3,201,523 40,942 415,914 3.5 12.5 133.3 .1 1 All industries covered in the 1977 benchmark survey and in 1977 Enterprise Statistics 1/ - 2,700 5,589,802 1,179,625 3,324,550 100.0 100.0 436.9 .6 By industry: 2 Mining 3 Petroleum 2/ 4 Manufacturing 5 Trade 6 Other 3/ By sales size class, millions of dollars: 7 $250 and over 8 $100-249.9 - 9 $50-99.9 10 Less than $50 Addenda: Reconciliation of U.S. parent data: 11 U.S. parent total from 1977 benchmark survey 3,425 n.a. 1,412,293 n.a. n.a. n.a. 412.4 n.a. 12 U.S. parents in industries covered in 1977 Enterprise Statistics 2,700 n.a. 1,179,625 n.a. n.a. n.a. 436.9 n.a. 13 U.S. parents not in industries covered in 1977 Enterprise Statistics 4/ — 725 n.a. 232,669 n.a. n.a. n.a. 321.0 n.a. 665 1,060 1,065,763 1,293,663 90.3 38.9 1,602.7 1,220.7 393 1,293 63,402 199,864 5.4 6.0 161.4 154.6 371 2,186 26,580 150,132 2.2 4.5 71.7 68.7 271 5,585,263 23,879 1,680,891 2.0 50.5 18.8 .3 n.a. Not applicable. i. The "scope" — coverage by industry--of U.S. parents, as reported in the 1977 benchmark survey, was broader than that for all U.S. businesses, as shown in the 1977 Enterprise Statistics . The industry groups given in lines 2-6 include only those industries that are in scope of both BEA's 1977 benchmark survey and the 1977 Enterprise Statistics . Data for direct investment industries that are out of scope of the 1977 Enterprise Statistics are shown in line 13 (see footnote 4). 2. Petroleum excludes petroleum tanker operations; pipeline transmission, including natural gas; petroleum storage for hire; and lessors of gasoline service stations and sites. These categories, which are part of the direct investment petroleum industry, are out of scope of the 1977 Enterprise Statistics . Several parents, accounting for $11,227 million in sales in 1977, were excluded. 3. "Other" consists of construction and services that are in-scope of the 1977 Enterprise Statistics . 4. Parents not within the scope of the 1977 Enterprise Statistics consist of the U.S. petroleum parents cited in footnote 2 plus those classified in agriculture, forestry, and fishing; finance (except banking), insurance, and real estate; and transportation, communication, and public utilities. See text for further discussion of comparability of sales between the benchmark survey and 1977 Enterprise Statistics . NOTE. --In this table, data for U.S. parents are only for nonbank parents of nonbank affiliates. 35 manufacturing the major industry; trade and "other" industries together accounted for less than 20 percent of the total. In contrast, for all U.S. businesses (which include the parents), trade accounted for the largest share--40 percent; manufacturing, petroleum, and mining together accounted for less than one-half of the total. Sales per company were far higher for parents than for all U.S. businesses, both in total and in each industry shown. In terms of number, parents accounted for nearly two-thirds of the U.S. businesses with sales of $250 million or more (the largest size class in table 2), but a negligible proportion of those with sales of less than $50 million (the smallest size class). In terms of sales, parents accounted for most of the sales in the largest, but a negligible proportion of sales in the smallest, size class. In the largest size class, most U.S. businesses in goods-producing industries, but relatively few of those in other industries, were also U.S. parents. U.S. parents were predominant in the largest size classes for several reasons. First, investments abroad often involved significant commitments of capital and management, both of which could be mobilized more readily by large than by small businesses. Second, a U.S. business that already had a major share of the U.S. market may have needed access to foreign markets in order to obtain further sales growth or economies of scale in production. In contrast, many medium- and small-scale U.S. businesses may have needed to use most of their resources domestically, in order to remain competitive in U.S. markets. Moreover, many small businesses were in trade or services and therefore mainly served local markets. By foreign affiliates L When sales by foreign affiliates were classified by industry of U.S. parent, the sales were chiefly in goods-producing industries. Of the $648 billion of sales, manufacturing accounted for 46 percent, petroleum (including petroleum trade) for 39 percent, and other goods-producing industries for only 2 percent of the total (table 1, column 6). The main non-goods-producing industry, trade, accounted for 7 percent of total sales by affiliates. The finance (except banking), insurance, and real estate industry accounted for less than 4 percent, and the transportation, communication, and public utilities and the services industries each accounted for roughly 1 percent, of the total. The share of petroleum was markedly higher, and the shares of non-goods- producing industries markedly lower, in sales by foreign affiliates than in sales by U.S. parents (table 1, columns 5 and 6). The share of petroleum was higher for affiliates, partly because they supply a large portion of the petroleum needed by both the U.S. and foreign customers of the petroleum MNC's. Also, the affiliate sales data are more likely to contain duplication than are the parent sales data: crude petroleum may be sold by an extractive affiliate to a refining affiliate, which may resell refined petroleum products to an unaffiliated customer; each of the sellers is a foreign affiliate of a U.S. petroleum parent and, therefore, sales by each are 36 correctly included in affiliate sales. In contrast, as explained in the technical notes, domestic sales by U.S. parents were reported on a consolidated basis; thus, only a petroleum parent's sales to unaffiliated customers would be counted in the parent's domestic sales. Further, for petroleum that was both produced and consumed locally, the U.S. Government held prices below world market levels. This policy, since dropped, tended to reduce the dollar volume of sales by U.S. petroleum parents, and, thus, the U.S. petroleum parents' share of total sales by U.S. parents. The relatively low shares of sales by foreign affiliates in non-goods- producing industries—in particular, retail trade, insurance, and transportation, communication, and public utilities--ref lected a tendency for the markets served by these industries to be fragmented by country-to-country differences in commercial practices, regulatory framework, and language. Overcoming these differences can be expensive and can inhibit investment; in some countries, formal and informal restrictions on foreign investment particularly affected these industries. In table 3, affiliate sales by major industry of U.S. parent are classified by area of origin (the seller's country of location). Affiliates in developed countries accounted for 69 percent of total sales by the affiliates, those in developing countries for 28 percent, and those in "international", which mainly were engaged in international petroleum transportation, for 2 percent. Among developed countries, Canada and the European Communities (EC (9)), accounted for 15 and 35 percent, respectively, "other Europe" and Japan for about 8 percent each, and Australia, New Zealand, and South Africa for 4 percent, of worldwide sales by affiliates. Among developing countries, Latin America accounted for 11 percent, and other developing areas ("other Africa," the Middle East, and "other Asia and Pacific") for 17 percent, of the worldwide affiliate total. In both developed and developing countries, most of the sales originated in a few countries. Ranked according to size of affiliate sales originating in each, the top five developed countries were Canada, the United Kingdom, Germany, Japan, and France (table 3, line 81). Together, they accounted for sales of $307 billion, more than two-thirds of the developed country total. More than one-half of the sales were by affiliates of U.S. manufacturing parents. Except in Japan, transportation equipment was the largest manufacturing industry. In Japan, the largest manufacturing industry was electric and electronic equipment; this mainly reflected sales by a very large Japanese affiliate in which a U.S. parent held a minority ownership position. Affiliates of U.S. petroleum parents accounted for roughly one-fourth of affiliate sales originating in the five countries. In Japan, these affiliates accounted for nearly one-half of sales by all affiliates, a much higher proportion than in any of the other four countries; sales were especially large because these affiliates were the major importers of petroleum into Japan. In oil and gas extraction, affiliate sales originating in Canada and in the United Kingdom (mainly the North Sea area) were particularly large; in refining and distribution, affiliate sales originating in each of the five countries were a significant part of the total. 37 Table 3.--MNC Sales, 1977, Area of Origin by Industry of U.S. Parent Mi 1 lions of dol lars Percent distribution by industry Total Petroleum Manufac- Trade turing Petroleum Manufac- turing Trade Other Line 1 All areas 2,060,262 2 Sales by U.S. parents 1,412,293 3 Sales by foreign affiliates 647,969 Located in: 4 Developed areas 449,015 5 Canada 94,876 6 Europe 276,275 7 European Communities (9) 225,909 8 Belgium 16,998 9 Denmark 3,452 10 France 34,747 11 Germany 60,435 12 Ireland 2,009 13 Italy 15,899 14 Luxembourg 696 15 Netherlands 27,008 16 United Kingdom 64,666 17 Other Europe 50,366 18 Austria 3,180 19 Greece 1,498 20 Norway 3,945 21 Portugal 803 22 Spain 12,202 23 Sweden 4,921 24 Switzerland 21,373 25 Turkey 1,079 26 Other 1,364 27 Japan 51,895 28 Australia, New Zealand, and South Africa 25,970 29 Australia 18,125 30 New Zealand 1,393 31 South Africa 6,453 32 Developing areas 183,219 33 Latin America 73,287 34 South America 35,331 35 Argentina 4,075 36 Brazil 19,340 37 Chile 610 38 Colombia 2,410 39 Ecuador 629 40 Peru 1,021 41 Venezuela 6,436 42 Other 810 43 Central America 15,083 44 Mexico 10,833 45 Panama 1.681 46 Other 2,569 47 Other Western Hemisphere 22,873 48 Bahamas 2,425 49 Bermuda 14,414 50 Netherlands Antilles 2,160 51 Trinidad and Tobago 1,395 52 Other 2,478 53 Other Africa 16,662 54 Saharan 6,758 55 Egypt 839 56 Libya 5,068 57 Other 850 58 Sub-Saharan 9,904 59 Liberia 268 60 Nigeria 4,808 61 Other 4,828 62 Middle East 66,607 63 Israel 995 64 OPEC 63,660 65 Iran 11,675 66 Other 51,984 67 Other 1,952 68 Other Asia and Pacific 26,664 69 Hong Kong 5,301 70 India 2,287 71 Indonesia 5,605 72 Malaysia I. 245 73 Philippines 3,080 74 Singapore 2,554 75 South Korea 3,511 76 Taiwan 1,304 77 Thailand 1,070 78 Other 707 79 International 15,734 Addenda: 80 OPEC 75,204 221,757 739,460 183,706 252,878 297,697 45,044 39,474 9,895 80,403 67,968 4,147 1,926 (D) 19,971 (D) 4,374 105 12,718 17,157 12,436 (D) 898 1,852 (D) 3,586 1,493 2,491 (D) (D) 24,176 5,067 (D) (D) 1,748 148,516 125,935 10,159 1,323 23,846 33,373 1,458 9,488 569 10,554 35,165 22,581 1,599 475 1,298 524 7,100 2,891 7,690 342 662 26,080 17,459 12,893 845 3,721 50,431 27,446 15,987 1,256 27 1,710 2,487 28 794 17 2,652 7,017 11,459 (D) (D) 16 (0) 801 53 10,265 (D) 210 1,286 1,157 16 113 5,393 319,721 267,371 52,350 36,717 13,859 19,910 16,020 1,436 177 (D) 4,604 (D) 1,243 5 1,084 5,327 3,891 (D) (0) 780 48 716 484 926 (0) (D) ,158 (D) (D) 871 15.7 39.0 28.1 17.4 29.1 30.1 24.4 55.8 (D) 33.1 (D) 27.5 15.0 47.1 26.5 24.7 (D) 60.0 46.9 (0) 29.4 30.3 11.7 (D) (D) 46.6 19.5 (D (D) 27.1 61.7 52.4 45.9 55.0 57.6 53.8 55.8 59.8 38.3 68.6 55.2 72.6 59.7 81.8 39.1 54.4 44.8 50.3 31.7 32.9 65.2 58.2 58.8 36.0 31.7 48.5 50.3 67.2 71.1 60.7 57.7 27.5 13.0 7.0 19.0 8.1 7.1 7.1 7.4 8.5 .8 5.1 4.9 (D) 4.1 7.6 1.4 (D) 5.0 7.8 2.4 .8 9.8 4.0 10.9 8.2 22.8 7.7 (D) (D) (D) (D) .4 19.8 (D) 5.9 6.6 5.9 1.1 9.8 48.0 4.3 (D) (D) 15.4 (D) 1.6 1.5 5.0 8.3 6.4 (D) 1.1 (D) 1.8 13.5 7,397 23,702 2,032 2,201 20.9 67.1 5.8 6.2 505 2,748 597 225 12.4 67.4 14.7 5.5 4,376 13,019 892 1,053 22.6 67.3 4.6 5.5 (D) 315 (D) 71 (D) 51.7 (D) 11.6 643 1,322 174 271 26.7 54.8 7.2 11.2 (0) 255 (D) (0) (D) 40.5 (D) (D) 148 774 55 45 14.5 75.8 5.4 4.4 1,041 4,839 200 357 16.2 75.2 3.1 5.6 198 431 (D) (D) 24.4 53.3 (D) (0) 1,969 10,641 1,067 1,407 13.1 70.6 7.1 9.3 510 8,772 840 711 4.7 81.0 7.8 6.6 736 728 41 177 43.8 43.3 2.4 10.5 724 1,141 186 519 28.2 44.4 7.2 20.2 16,010 2,636 1,145 3,081 70.0 11.5 5.0 13.5 1,953 244 78 149 80.5 10.1 3.2 6.2 10,384 582 950 2,499 72.0 4.0 6.6 17.3 1,775 275 27 83 82.2 12.7 1.3 3.9 1,229 92 14 60 88.1 6.6 1.0 4.3 670 1,442 76 290 27.0 58.2 3.1 11.7 13,010 2,124 87 1,441 78.1 12.8 .5 8.7 5,897 372 (D) (D) 87.3 5.5 (D) (D) 665 31 1 143 79.2 3.7 .1 17.0 4,931 113 (0) (D) ■ 97.3 2.2 (D) (0) 301 228 (D) (D) 35.4 26.8 (D) (D) 7,114 1,752 (D) (D) 71.8 17.7 (D) (D) 25 192 51 9.4 71.5 19.1 4,227 269 (D) (D) 87.9 5.6 (D) (D) 2,861 1,291 (D) (D) 59.3 26.7 (D) (D) 60,238 2,131 132 4,105 90.4 3.2 .2 6.2 (D) 263 59 (D) (0) 26.4 6.0 (D) 58,614 1,519 72 3,456 92.1 2.4 .1 5.4 (D) 774 (D) (D) (D) 6.6 (D) (D) (D) 745 (D) (D) (0) 1.4 (D) (D) (D) 350 1 (D) (D) 18.0 (*) (D) 14,408 9,197 931 2,128 54.0 34.5 3.5 8.0 2,784 1,816 283 419 52.5 34.3 5.3 7.9 821 1,385 (D) (D) 35.9 60.6 (0) (D) 4,240 455 4 905 75.7 8.1 .1 16.2 521 612 52 60 41.9 49.2 4.1 4.8 (D) 1,300 210 (D) (D) 42.2 6.8 (D) 877 1,492 24 160 34.3 58.4 1.0 6.3 2,807 590 76 39 79.9 16.8 2.2 1.1 (D) 890 169 (0) (D) 68.3 12.9 (D) (D) 459 87 (0) (D) 42.9 8.2 (D) 425 197 (D) (D) 60.2 27.8 (D) 10) 63,614 4,514 Sum of top 5 countries, ranked by amount of sales by affiliates located in each country: Developed countries--Canada, United Kingdom, Germany, Japan, and France Developing countries--Saudi Arabia, Brazil, Bermuda, Iran, and Mexico (D) (D) 173,125 21,956 (D) (D) (D) (0) (D) (D) (D) 56.5 7.2 (D) (D) (D) (D) MNC Multinational company. OPEC Organization of Petroleum Exporting Countries: consists of Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, - Venezuela, and the United Arab Emirates. Nigeria, Qatar, Saudi Arabia, Venezuela, and the United Arab Emir Suppressed to avoid disclosure of data of individual companies - Less than 0.05 percent. NOTE. --In this table, data for U.S. MNC's are only for nonbank MNC's; data for U.S. parents are only for nonbank parents of nonbank affiliates and data for affiliates are only for nonbank affiliates of nonbank parents. 38 Affiliates of U.S. parents in trade and in "other" industries together accounted for less than one-fifth of affiliate sales originating in the five countries. Sales were particularly large in Canada and the United Kingdom, and particularly small in Japan, where commercial practices and policies may have inhibited foreign investment, especially in these industries. The top five developing countries were Saudi Arabia, Brazil, Bermuda, Iran, and Mexico. Together, they accounted for well over one-half of total affiliate sales originating in developing countries. Sales originating in each country except Saudi Arabia are shown separately in table 3. Sales for Saudi Arabia separately, and, hence, the sum of sales for the five countries combined, are not shown in order to avoid disclosure of data for individual companies (one affiliate accounted for most of the sales originating in Saudi Arabia). Sales originating in Saudi Arabia, however, accounted for a yery large share of the $52 billion of sales in "other" Middle East OPEC (line 66); these sales, of course, were almost entirely by affiliates of U.S. petroleum parents. Affiliates of petroleum parents accounted for well over 60 percent of affiliate sales originating in the five developing countries. (In contrast, in the top five developed countries, petroleum accounted for about one-fourth of the total.) In both Saudi Arabia and Iran, which are members of OPEC, the share of petroleum exceeded 90 percent. In Bermuda, petroleum accounted for 72 percent of the total; this large share reflected sizable sales by affiliates of petroleum parents that were engaged in financial activities on behalf of their U.S. parents. (In Bermuda, the largest industries after petroleum were trade, and finance and insurance (included in "other"); Bermuda is one of the several countries that, for various business reasons, including tax minimization, were favored by U.S. parents as locations for their captive trade, finance, and insurance affiliates.) In Brazil, the share of petroleum was 23 percent, and, in Mexico, it was less than 5 percent, respectively, of affiliate sales originating in each country. The share of affiliate sales in Mexico was particularly low because most petroleum activity there is reserved to a government-owned company. Affiliates of U.S. manufacturing parents accounted for roughly 20 percent of total affiliate sales originating in the five countries. In Brazil and Mexico, the shares of manufacturing were 67 and 81 percent, respectively, and in each of the other three countries, less than 7 percent. In both Brazil and Mexico, the largest manufacturing industry was chemicals, with transportation equipment almost as large. Except in Bermuda, the share of affiliate sales in the remaining industries (trade and "other") was less than 10 percent of the total. In Bermuda, affiliates of parents in the finance (except banking), insurance, and real estate industry (part of "other") accounted for 17 percent of affiliate sales originating there. Sales by Destination As noted previously, all MNC sales could not be distributed by destination, because the benchmark survey obtained sales by destination only 39 for MOFA's, but not for minority-owned foreign affiliates or for U.S. parents. For U.S. nonpetroleum parents, however, sales by destination could be derived. This section first discusses the effect on the data of excluding minority-owned affiliates, and explains the derivation of sales by destination for U.S. nonpetroleum parents of MOFA's. For those parents and for all MOFA's, it then analyzes sales to the United States and to major foreign destinations. The data Exclusion of minority-owned foreign affiliates . --Table 4 shows that, after excluding minority-owned affiliates, and, for consistency, parents that had only minority-owned affiliates, from the MNC's, the remaining affiliates (the MOFA's) and their parents accounted for well over three-fourths of total MNC sales in each major industry group, and in each major area of origin except Japan. In Japan, coverage was only 26 percent, reflecting barriers there to majority foreign ownership of Japanese businesses. Derivation of sales by destination for U.S. nonpetroleum parents . -- Because data on nonlocal sales by U.S. parents were not available from the benchmark survey, data on the parents' merchandise export shipments (which were available) were used as a rough approximation of their nonlocal sales. The U.S. parents' local sales then were estimated by subtracting their export shipments from their total sales. The resulting estimates by destination of U.S. parents' nonlocal sales are rough. Parents' exports cover physical shipments of goods across the U.S. customs frontier, irrespective of to whom the goods were charged. Parents' nonlocal sales, in contrast, cover all sales of goods and services charged to foreign countries, irrespective of whether the goods were actually shipped from the United States to, or the services were actually performed in, those countries. This method of estimating the destination of U.S. parents' sales was used in each industry except petroleum. The destination of sales by U.S. petroleum parents could not be estimated by this method, because the evidence indicated that these parents' nonlocal sales generally were much larger than their export shipments. Their nonlocal sales were often resales of petroleum previously purchased from foreign sources. In many cases, the petroleum was shipped directly from a foreign supplier to a foreign purchaser, but was charged (sold) by the foreign supplier to the U.S. parent rather than to the foreign purchaser directly; the parent, in turn, billed the foreign purchaser. (This was particularly likely if the foreign supplier or the foreign purchaser, or both, were affiliated with the parent.) The sale by the parent to a foreigner would have been recorded in the benchmark survey as 40 Table 4.— Comparison of Sales by U.S. MNC's With Sales by U.S. Parents of MOFA's and Their MOFA's, 1977, by Industry of U.S. Parent and by Area of Origin Mil 1 ions of dol lars U.S. MNC's Line (1) 1 Total sales 2,060,262 2 By U.S. parents 1,412,293 3 By foreign affiliates 6^7,969 By industry of U.S. parent: 4 Petroleum 474,635 5 Manufacturing 1,037,157 6 Trade 228,750 7 Other 319,721 By area of origin: 8 United States 1,412,293 9 Canada 94,876 10 Europe 276,275 11 Japan 51,895 12 Australia, New Zealand, and South Africa 25,970 13 Latin America 73,287 14 Other 125,667 U.S. parents of MOFA's and their MOFA's Other U.S. parents, and all minority-owned foreign affiliates as m Column 2 a percentage of column 1 (4) 1,832,565 1,325,546 507,019 421,754 930,209 190,795 289,805 1,325,546 84,659 220,213 13,232 20,233 58,208 110,475 227,700 86,747 140,950 52,881 106,948 37,955 29,916 86,747 10,217 56,062 38,663 5,737 15,079 15,192 88.9 93.9 78.2 88.9 89.7 83.4 90.6 93 89, 79, 25 77.9 79.4 87.9 MNC Multinational company. MOFA Majority-owned foreign affiliate, NOTE. --In this table, data for U.S. MNC's are only for nonbank MNC's; data for U.S. parents are only for nonbank parents of nonbank affiliates; and data for affiliates are only for nonbank affiliates c nonbank parents. MOFA's are defined as affiliates that were owned more than 50 percent by all U.S. parents combined and that had assets, sales, or net income over $3 million in 1977. 41 part of total sales by the parent; however, no export to or from the United States would have been recorded, because the petroleum did not cross the U.S. customs frontier — it was not actually shipped to or from the United States. 5/ Sales by U.S. petroleum parents were $220 billion. When these sales were excluded from total parent sales, sales by the remaining (nonpetroleum) U.S. parents were $1,106 billion. Sales by all MOFA's (whether of petroleum or of nonpetroleum parents) were $507 billion. Thus, sales by those two subsets— which are analyzed in this and subsequent sections of the article—together covered $1,613 billion, or 88 percent, of sales by all U.S. parents of MOFA's and their MOFA's. Industry and destination of sales by U.S. nonpetroleum parents Local sales (sales to U.S. customers) accounted for 92 percent of nonpetroleum parents' total sales of $1,106 billion (table 6). In each major nonpetroleum industry, the bulk of sales—about 90 percent in manufacturing and in trade, and nearly 99 percent in "other" industries—were local. The larger share in "other" reflected the inclusion of large service-type subindustries— mainly insurance, communication, public utilities, and services. Most sales in these subindustries probably were local because they often depended on proximity to customers and familiarity with local customs and opportunities. Also, because parents' local sales were calculated as the difference between the parents' total sales and their exports of merchandise, all parent sales of services were forced into local sales. Nonlocal sales by U.S. nonpetroleum parents were $84 billion. Of the total, sales to Canada were $18 billion, nearly all in manufacturing (tables 7A and 7B). Within manufacturing, sales in transportation equipment— mainly automotive- -were by far the largest (table 7B, line 62, column 4). (These sales— mostly to Canadian MOFA's of U.S. automotive parents— were approximately offset by sales by the Canadian MOFA's to the United States. The fact that these automotive sales to Canada were approximately equal to those from Canada is attributed to the operation of the 1965 U.S. -Canadian automotive agreement, which encouraged expansion of automotive trade in both directions.) Sales to Europe were $27 billion, larger than those to any of the other major foreign areas (table 7A, line 17, column 5). Within Europe, sales to 5. The dollar amounts involved in transactions in which U.S. parents sold petroleum to foreigners, but did not ship the petroleum from the United States, apparently were large. Partial data by area of destination provided informally by some large petroleum parents during a prepublication review of the benchmark survey results showed that they charged $57 billion of sales to foreigners; in contrast, export shipments reported by all petroleum parents were less than $5 billion. Thus, at a minimum, there were $53 billion of parent sales to foreigners that did not result in parent export shipments of petroleum (table 5). Because of their partial coverage, the data on petroleum parents' sales probably seriously understated actual nonlocal sales by all petroleum parents. 42 Table 5. — Partial Estimates of Nonlocal Sales and U.S. Export Shipments by U.S. Petroleum Parents, 1977 (Millions of dollars) Total Known nonlocal sales by U.S. petroleum parents that were not shipped from the United States Reported U.S. export shipments of U.S. petroleum parents Line (1) (2) (3) All areas — - 57,506 Canada 1,466 Europe — — 21,920 Other — - 26,625 Not distributed by area — 7,495 52,710 1,040 20,659 23,516 7,495 4,796 426 1,261 3,109 — None. NOTE. --Data in column 3 are from the benchmark survey. They were known not to overlap with the data on nonlocal sales by U.S. petroleum parents shown in column 2. The latter were obtained informally from some, but not all, U.S. petroleum parents during the prepublication review of the benchmark survey data. Because of their partial coverage, these data underestimate U.S. parent sales abroad to some unknown extent. 43 IX. o r— O 0J OJ o t- ro O c +J r- ID UO ■ — CO fO CD O i— r XX in a> C S_ O ro 4- 4-> to "O c C m +J lA CD 00 -a ID IB +->+-> S- OJ OJ 0) r- O-P-P IB +->•!- IB I/) C +-> =1 Li_ c OJ 0) r— O +J +J <0 t— -i- IB o C +-> c +-> ib co ■ ,— O) 0) OJ A) O -l-> 4-> S- IB +J *i— IB o OO C +-> 4- zd on ■ r-. oo o ■— wr^coioin «* in Kt- •— o t-» co >* «a- lo oo oo . • ■ i >* o- oo ur> . • • i r-. 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C 4- c •■- O +-> -I- .4- • X-Plo Jjrv 0) 0) lo • "O h*. s- -P aj =) oo 3 -o a> i— L0 CD S_ S_ O OJ 4- O IB C r— O0 O 4- 1- • 1— L0 IB IB - c OJ • aj +-> ct o s- ■o c s- ro Li_ o O IB -a O 4- "O ■>-> >, TD o •i- X) 0) E QJ OJ > C C ro •r- C X) L0 ro 3 X) 4- O 10 +J <=0- O ro O 0) -r- 4-> C ■!-> -O 4-> 0) S- >i 3 CO s- 0) +J ro "O >)X) •r- ro > > OJ X) ■!- x: Q. o S- ro CO s_ 4-> o CO . +-> J4 a> ■1-3 4-> OJ CD LO c c E ro O S- C 1- •— ■ IB o g- ■21 D- o -o 1 X) o CL 1 c c 3 ^ =t • o =E CO LU C Lu IB 1 1— +J o 1 O 4- OJ rz £= a Z O c 44 Table 7A. --Sales by U.S. Parents of MOFA's and by their MOFA's. 1977, Selected Industry of U.S. Parent and Area of Origin by Area of [lit Horn of dollars] All industries Tot*l .. By U.S. parent By MOFA' s .. .. 68,025 206,44 19, 940 45, 0J1 70,000 66, Si, 442 54,503 1?,860 19,802 47,1 17 51,244 27,353 45,005 21,727 1,576 1,587 56,253 768 38,462 4,391 ' ■ 620 12 2,204 66 4,576 191 55,833 275 60 2,274 3,995 1 3,473 37,875 49,269 1 ,936 3,711 4,042 10.589 2,060 9,761 33,833 38,880 42,559 10,344 32,215 40,956 18,832 22,125 22,073 36,133 9,919 ,257 53,805 9,243 32,882 36 «nd So Other d 92 28,453 55,758 17,031 36,727 156,210 20,535 8,929 28,838 1,709 5,300 7,219 25,538 289,806 2 50,94 3 38,863 40,354 5,067 37,287 15,868 1,305 2,241 7,973 26,370 9,473 3,462 1,4 00 54D 1,3 69 20,057 774 309 250 6,448 602 1,120 405 593 1,022 372 1,659 2,521 933 5,012 68 1,933 4,952 9,1 31 592 1 ,460 1,354 3,600 1 47 416 1,097 2,961 3.555 3,394 3,267 3,5. 1,435 3,450 69 367 1,366 3,082 77 219, SS6 13,323 56,743 ,940 12,54 ,070 10,492 ,743 12,817 33,233 and South Africa .. Ot her deve lop i ng are 90 94,01 12,743 54,277 (D) ( D ) 14,662 13,293 (0) (D) 15,003 37,241 2,597 63 57 51,441 11,653 5 3,533 (0) 1 3,264 16 1 2,676 MOFA Majority-owned foreign affiliate. n.a. Not available. See text for explanation. * Less than $500,000 ( + ) . D Suppressed to avoid disclosure of data of individual companies. NOTE. --In this table, data for U.S. parents are only for nonbank parents of nonbank affiliates and data for affiliates an for nonbank affiliates of nonbank parents. HOFA's are defined as affiliates that were owned more than 50 percent by all l parents combined and that had assets, sales, or net income over $3 million In 1977. ,555 12,623 (0) 276 (0) 377 ,367 1 ,027 794 10,651 ,075 2,77 Table 78. --Sales by U.S. Pai , of MOFA's and by The by Area Of Dest MOFA's, 1977. Selected Manufacturing Industry of U.S. Parent and Area of Origin -038 198 840 1 0,786 1.874 2,398 ands kingdom . New Zealand lands Kingdom Europe a, New Zealand lands K'ngdo-n Europe a. New Zealand 1 ,820 3,308 1 ,021 #788 ,864 .003 .373 .973 ,013 101 ,092 87,266 13,826 I 79,99S 141 ,747 38,248 711 1 2,040 4 53 36,920 5 38 4,623 5 77 24,827 82 3,829 1 69 S,703 53 1,760 5,781 3,802 3.454 847 1,978 2,607 973 1,298 560 32,885 2,878 30,005 8,026 4 66 7,560 1,822 183 1,638 ,928 126 .802 248 600 .227 ,750 432 .318 950 2,52 622 48 328 2,04 1 ,892 1 ,259 633 3,233 1,226 2,008 MOFA Majority-owned foreign affiliate. n.a. Not available. See text for explana * Less than $500,000 ( + ) . D Suppressed to avoid disclosure of data NOTE. --In this table, data for U.S. parent for nonbank affiliates of nonbank parents. parents combined and that had assets, sale nonbank parents of nonbank affiliates and data for affiliates eflned as affiliates that were owned more than 50 percent by a me over $3 million in 1977. Germany, the United Kingdom, and the Netherlands were particularly large. In most major European countries, the bulk of the sales were by U.S. manufacturing parents; however, in the Netherlands and Switzerland (part of "other Europe"), trade parents accounted for a sizable part of the total; sales by parents in other nonpetroleum industries were small. Sales to Japan were $7 billion; manufacturing and trade parents each accounted for nearly one-half. Sales to Australia, New Zealand, and South Africa were $3 billion, and were mostly by manufacturing parents. Sales to Latin America were $10 billion, and were mostly by manufacturing parents; trade parents accounted for most of the remainder. Within Latin America, the destinations with the largest sales--more than $2 billion each--were Mexico, Venezuela, and Brazil. Sales to "other developing" areas were nearly $19 billion: manufacturing parents accounted for about three-fourths, and trade parents for most of the remainder. Within the "other developing" areas, roughly one-half of the sales were to members of OPEC; most of the remainder were unclassified by area of destination, but were included in this article in "other developing" areas (these were low-value export shipments for which destination data were not obtained in the benchmark survey in order to reduce the reporting burden) . 6/ Industry and destination of sales by MOFA's Of the $507 billion of sales by all MOFA's, $202 billion were by MOFA's of U.S. petroleum parents and $305 billion were by MOFA's of nonpetroleum— mainly manufacturing—parents (tables 6 and 7A) . In petroleum, the distribution between local and nonlocal sales differed sharply from that in nonpetroleum industries. In petroleum, one-half of sales were local, roughly one-fourth were to the United States, and one-fourth to third countries (countries other than the United States or that of the seller). In contrast, in nonpetroleum industries, 69 percent of sales were local, 7 percent were to the United States, and 23 percent were to third countries. In each of the nonpetroleum industries, nonlocal sales were a much higher proportion of total sales by MOFA's than by their U.S. parents. The higher proportion for MOFA's may have reflected several factors. First, MOFA's may need to produce for external markets, in order to attain more efficient scales of operation than would have been possible by producing mainly for their local markets. In contrast, many parents could attain efficient scales of operation by producing mainly for the U.S. market. Second, a major part of MOFA's nonlocal sales were by affiliates located in Europe, particularly in the EC(9). Preferential trade arrangements among the EC(9) member countries encouraged sales among the members. This contributed to a relatively high ratio of nonlocal to total sales by European MOFA's. Third, 6. These low-value shipments are discussed separately in Betty L. Barker, U.S. Merchandise Trade Associated with U.S. Multinational Companies , in this collection of articles. 47 Table 7B.--Sale by U.S. Parents of MOFA's and by Their MOFA's, 1977, Selected Manufacturing Industry of U.S. Parent and Area of Origin by Area Of Destination <4) (5) (7) (8) (10) (1 lands Europe a. New Zealand 1,337 3 4,2B9 2 28 696 100 4,720 86,214 4,168 85,052 0,552 1,163 6 1 ,823 1 38 5,683 96 2,095 163 48,960 711 12,040 453 36,920 S38 4,623 577 24,327 82 3,829 7,052 1,404 5-648 3,859 369 3,489 2,465 115 2.350 4,358 128 3,023 5,766 61 1 5,155 ,038 198 840 2,959 775 2,184 5,169 1 ,783 3,385 1 -830 3,208 1 .021 1,003 1,360 745 8,026 466 7,S60 7,094 4,973 2,121 3 732 6 00 5 710 01 092 87 266 HOFA Majority-owned foreign affiliate, n.a. Not available. See text for explana' * Less than 5500,000 (+). D Suppressed to avoid disclosure of data i NOTE.— In this table, data for U.S. parent: for nonbank affiliates of nonbank parents, parents combined and that had assets, sale: c individual companies. are only for nonbank parents of nonbank affiliates and data for affiliate: MOFA's are defined as affiliates that were owned more than 50 percent by i , or net income over $3 million in 1977. Germany, the United Kingdom, and the Netherlands were particularly large. In most major European countries, the bulk of the sales were by U.S. manufacturing parents; however, in the Netherlands and Switzerland (part of "other Europe"), trade parents accounted for a sizable part of the total; sales by parents in other nonpetroleum industries were small. Sales to Japan were $7 billion; manufacturing and trade parents each accounted for nearly one-half. Sales to Australia, New Zealand, and South Africa were $3 billion, and were mostly by manufacturing parents. Sales to Latin America were $10 billion, and were mostly by manufacturing parents; trade parents accounted for most of the remainder. Within Latin America, the destinations with the largest sales--more than $2 billion each--were Mexico, Venezuela, and Brazil. Sales to "other developing" areas were nearly $19 billion: manufacturing parents accounted for about three-fourths, and trade parents for most of the remainder. Within the "other developing" areas, roughly one-half of the sales were to members of OPEC; most of the remainder were unclassified by area of destination, but were included in this article in "other developing" areas (these were low-value export shipments for which destination data were not obtained in the benchmark survey in order to reduce the reporting burden) . 6/ Industry and destination of sales by MOFA's Of the $507 billion of sales by all MOFA's, $202 billion were by MOFA's of U.S. petroleum parents and $305 billion were by MOFA's of nonpetroleum— mainly manufacturing—parents (tables 6 and 7A) . In petroleum, the distribution between local and nonlocal sales differed sharply from that in nonpetroleum industries. In petroleum, one-half of sales were local, roughly one-fourth were to the United States, and one-fourth to third countries (countries other than the United States or that of the seller). In contrast, in nonpetroleum industries, 69 percent of sales were local, 7 percent were to the United States, and 23 percent were to third countries. In each of the nonpetroleum industries, nonlocal sales were a much higher proportion of total sales by MOFA's than by their U.S. parents. The higher proportion for MOFA's may have reflected several factors. First, MOFA's may need to produce for external markets, in order to attain more efficient scales of operation than would have been possible by producing mainly for their local markets. In contrast, many parents could attain efficient scales of operation by producing mainly for the U.S. market. Second, a major part of MOFA's nonlocal sales were by affiliates located in Europe, particularly in the EC(9). Preferential trade arrangements among the EC(9) member countries encouraged sales among the members. This contributed to a relatively high ratio of nonlocal to total sales by European MOFA's. Third, 6. These low-value shipments are discussed separately in Betty L. Barker, U.S. Merchandise Trade Associated with U.S. Multinational Companies , in this collection of articles. 47 to obtain approval to operate in certain countries, some foreign affiliates agreed to sell part of their output abroad; also, in certain countries, some affiliates were offered incentives, such as increased availability of foreign exchange, to purchase imported parts and supplies, if they would meet export goals. Sales by Canadian MOFA's were $85 billion. The destinations of about three-fourths of the sales were local. Most of the remainder were to U.S. customers; sales to Europe were only 2 percent, and sales to other destinations were even smaller. By industry of U.S. parent, sales by MOFA's of U.S. manufacturing parents were more than one-half of the total; within manufacturing, sales in transportation equipment were particularly large, chiefly because of the previously noted U.S. -Canadian automotive agreement. Petroleum accounted for about 16 percent of the sales, which were primarily local; most of the remainder were to the United States. Sales by MOFA's located in Europe were $220 billion. The destinations of nearly two-thirds of their sales were local. More than one-third were nonlocal, and were mostly to other European countries. 7/ The main destinations of sales outside Europe were the OPEC members in "other developing" areas, which accounted for less than 5 percent, and the United States and Latin America, each of which accounted for roughly 2 percent, of the total. By industry of U.S. parent, manufacturing accounted for nearly three- fifths of total sales by European MOFA's; these sales were chiefly local. Petroleum accounted for nearly one-fourth of the sales (table 7A, lines 5 and 80); most of these sales were local, partly because major refining and distribution affiliates were located in Europe specifically to serve European markets. Also, some of the crude petroleum and natural gas produced in Europe, especially in the North Sea area, was sold to European customers. Sales to the United States were relatively small and, for the most part, consisted of petroleum that was subsequently resold to foreign customers by U.S. petroleum parents. (In such cases, the European MOFA's usually would not actually ship the petroleum to the United States, but instead would ship it directly to foreign customers of the U.S. parents.) Sales in trade and "other," which were much smaller than the sales in petroleum, were also chiefly to European destinations. Sales by MOFA's located in Japan and Australia, New Zealand, and South Africa were, respectively, $13 and $20 billion; in each area, the bulk of the sales were local. By industry of U.S. parent, roughly three-fifths of sales 7. Because local sales covered only the sales where seller and customer were in the same country (as opposed to the same area or region), local sales in Europe would have included, for example, sales by a French MOFA to a French customer, but would have excluded sales by a French MOFA to a German customer. 48 by Japanese MOFA's were in petroleum, and three-fifths of sales by MOFA's in Australia, New Zealand, and South Africa were in manufacturing. Sales by Latin American MOFA's were $58 billion, of which nearly two- thirds were local and one-fifth to U.S. customers. Sales to European customers and to nonlocal customers in Latin America each were less than 8 percent of the total. By industry of U.S. parent, nearly one-half of total sales by Latin American MOFA's were in manufacturing; these sales were chiefly local. Petroleum accounted for 40 percent of the total; of these sales, 60 percent were nonlocal. (In contrast, sales by European and Canadian MOFA's of petroleum parents were chiefly local.) The nonlocal sales in petroleum were primarily to parents, by MOFA's in Bermuda and the other Caribbean islands, for resale to foreign customers (most of the petroleum was shipped directly to the foreign customers rather than to the United States). The local sales in petroleum were mainly by MOFA's in South America — chiefly Brazil. Sales by MOFA's located in "other developing" areas were $110 billion; more than two-thirds were nonlocal. These nonlocal sales were mainly to the United States and, to a lesser extent, to third countries in "other developing" areas. Most of the nonlocal sales originated in the African and Middle Eastern members of OPEC. By industry of U.S. parent, petroleum accounted for 85 percent of the sales originating in "other developing" areas. More than one-half of these sales were to U.S. parents; as was the case with sales by European MOFA's to their U.S. petroleum parents, most of the petroleum from "other developing" areas was not actually shipped to parents, but instead was shipped directly to the parents' foreign customers. Manufacturing and "other" accounted for 8 and 5 percent, and trade for less than 1 percent, of the total. Sales by Affiliation Between Seller and Customer This section distributes sales by U.S. nonpetroleum parents of MOFA's, and by all MOFA's, (the same subset just discussed by area of destination) into sales to affiliated and to unaffiliated customers. Affiliated customers are those that are members of the same MNC as the seller; all other customers are unaffiliated. To affiliated customers By' U.S. nonpetroleum parents . — Sales by U.S. nonpetroleum parents to affiliated customers were only $28 billion, or 3 percent, of their sales to all customers. All of these sales were to their own MOFA's because, by 49 definition, a U.S. parent has no sales to affiliated U.S. (domestic) customers. 8/ The sales to MOFA's were roughly one-third of the parents' total sales to foreign customers (table 8). About one-third of the sales to MOFA's were by U.S. auto manufacturers to their Canadian MOFA's; very few sales to other foreign areas were to affiliated customers. By MOFA's . --Sales by MOFA's to affiliated customers—either their U.S. parents or other foreign affiliates of the parents—were $168 billion, about one-third of their total sales. 9/ The share of total sales to affiliated customers varied considerably by industry and area of destination. In petroleum, more than one-half of sales were to affiliated customers; this large share reflected the high degree of vertical integration in the operations of the petroleum MNC's, from crude oil production through refining, marketing, and distribution. By destination, a relatively small portion of their local sales, but most of their nonlocal sales, were to affiliated customers. Most of their sales to the United States were to parents, and most of their other nonlocal sales were to other affiliates. The large shares of MOFA sales that were to affiliated customers, both in the U.S. and third countries, primarily reflected an industrywide practice of channeling petroleum sales from MOFA's in petroleum-exporting areas through the parents, or through refining or distribution affiliates, to final customers in petroleum-importing areas. In nonpetroleum, about one-fifth of the $305 billion of sales by MOFA's were to affiliated customers. By destination, nearly all of the U.S. sales by MOFA's were to their own parents, and more than two-fifths of their sales to third countries were to other affiliates. (In contrast, most of their local sales were to unaffiliated customers.) Some of the nonlocal sales to affiliated customers probably reflected use of the customers' knowledge of local conditions and established marketing arrangements to penetrate markets in those areas. Also, they reflected specialization of production among members of an MNC in different countries. Thus, a German affiliate may produce some components and a British affiliate other components of a product; the components may be exported to yet a third country for assembly into a finished product. Such specialization tends to result in larger production runs, and more efficient operations, in each affiliate than otherwise would be possible. 8. In conformance with U.S. generally accepted accounting principles, each U.S. parent was asked to consolidate fully its domestic (U.S.) operations in reporting in the benchmark survey; the full consolidation was to include all domestic subsidiaries in which the parent had, directly or indirectly, a majority-ownership interest. Such consolidation eliminated sales among the domestic companies that were part of the consolidated parent. Domestic enterprises that were minority-owned by a parent were treated in the benchmark survey as unaffiliated. A parent, therefore, by definition, had no affiliated U.S. customers. 9. Sales to minority-owned foreign affiliates were included in MOFA sales to affiliated customers, but, for consistency with the treatment of sales to affiliated customers by U.S. parents, they should have been excluded. Unfortunately, sales by MOFA's to minority-owned foreign affiliates could not be separated in the benchmark data from their sales to other affiliates. 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UJ jQ Ll_ ra 1 1— C -a o • 1 o o c s: c 1 SI c r0 51 To unaffiliated customers Sales to unaffiliated customers accounted for the bulk of total sales, both by U.S. nonpetroleum parents of MOFA's, and by all MOFA's. They are, therefore, only summarized here because most of the points already made about total sales also apply to sales to unaffiliated customers. In some individual areas and industries, however, differences between sales to unaffiliated customers and total sales were substantial. To show these differences, table 9A gives sales to unaffiliated customers in the same detail by area and by industry as did table 7A for total sales; table 9B gives, for each area-industry cell, the sales figure in table 9A as a percentage of the comparable total sales figure in table 7A. By U.S. nonpetroleum parents . — Sales by U.S. nonpetroleum parents to all unaffiliated U.S. and foreign customers were $1,078 billion, 97 percent of total sales by the parents. The share was high because almost all of the parents' total sales were local and, as noted earlier, all of their local sales were, by definition, to unaffiliated customers. In contrast, the share of the parents' nonlocal sales that was to unaffiliated customers was considerably smaller — 67 percent. Sales to unaffiliated customers were especially large shares of parents' sales to Japan and "other" areas, and especially small shares of their sales to Canada and the United Kingdom. By MOFA's .— Sales by MOFA's to all unaffiliated U.S. and foreign customers were $339 billion, 67 percent of their total sales. For most of the areas and industries shown in tables 9A and B, well over 90 percent of total local sales were to unaffiliated customers. 10/ In general, the shares of their nonlocal sales that were to unaffiliated customers were markedly smaller. This was particularly true, by area, of sales to the United States and, by industry, of sales by affiliates of petroleum parents. Technical Notes Estimation of U.S. parents' nonlocal sales In this article, U.S. nonpetroleum parents' export shipments were used as an estimate of their nonlocal sales; however, export shipments differed in concept, and could differ in amount, from sales. Exports were physical shipments of goods to foreign countries, irrespective of to whom the goods were charged. In contrast, nonlocal sales were all sales of both goods and services charged on the parent's books to foreign customers, irrespective of whether the goods were actually shipped from the United States or of where the services actually were performed. 10. For individual countries, local sales are given in the line and column intersections in table 9A (the "diagonal" of the table). For example, for Canada, local sales were $64 billion (table 9A, column 4, line 4). 52 Table 9A.--Sal< to Unaffiliated Customers by U.S. Parents of MGFA's and by their MOFA's, 1977, Selected Industry of U.S. Parent and Area of Origin by Area of Destination {Millions of dollars) n . in! . nv 1., New Zea a i rlci and* ,,,, eve toping ar eas .. 995 9,4 19 329 5?6 858 3,593 66 265 205 1.888 168 317 54 5 51 22 >94 388 76 38 312 50 5 18 12 (.66 881 30 10 35 1 804 6 84 41 120 28 2 1.008 43 274 74 5 129 1 8,616 279 1 ,765 40,51 4 92 8 2,025 23,903 356 156,550 22,251 3 21,514 20,074 37,527 1 2,005 10,300 335 (D) 2,551 277 1,267 203 ,911 13 .600 9,934 36 983 39 528 258 86 89 327 263 ,041 13 06 1 9,454 36 .060 37 .677 337 181 106 124 691 ,658 265 323 169 1 687 107 1 1 .370 26 63 315 848 261 7.406 319 1 126 510 223 298 34 282 2 190 .560 768 1.295 1 102 31 669 2 2 11,836 17,655 39,482 29,5*2 its s in: ce New le Af r i ca aland. deve Loping jri ng. areas and So Latin A Other d By M0FA' • Lot ated Othe 3y U.S. By M0FA* in: .. ny rope New Zea Af rica a id. loping a e s I r e ,„: e r>y nyd rope Af r op- Zea and. eve ■eas 16 1 ,324,631 1,026,238 17 1 ,078,144 1,021,560 18 246,457 4,678 57 354 (0) 127 95 4 6 06 16 74 5 CO) 27 824 73 8 700 (D) 8 453 (0) 32 673 (0) 33 5S7 3 57 4 733 20 14 716 1 29 30 11 019 712 3 83 (D) 8S3 257 636,398 672 035 632,99! 181 252 5,4 05 38 804 2,704 96 036 2 32 5,944 24,189 22,582 12,184 24,502 5,593 185,756 155,799 29,957 7,087 18,073 947 2,173 (0 ) 1 096 2 809 62 9 285 589 250 310 35 .279 298,393 57,371 56,534 5,378 241,809 51,994 ( 0) 127,348 27,751 (0) (D) (0) !3,200 4,713 216.888 39,593 39,042 4,847 177.846 34,745 14,152 2 21,962 8 7,155 2 5,938 12 24,108 124 22,511 18 4,124 <•> 12,073 3 24,237 35 5,508 9 44,594 7,004 15,108 256 29,485 6,768 (0) ( ) (0) ( > 7,269 253 ( 0) 2,796 157,464 1 7,691 119,970 26,970 8,240 7,894 29,597 101,718 10,4 00 91,317 825 89,546 1 3,521 2 1,358 6,771 5,561 21,747 20,588 24 36 <1 ! 10 775 13.525 2 4 5! 294 575 34 478 10 480 12,750 1 1 043 10 393 211 13 770 (D) 1 2,227 15,26 1,25 14,01 30 56' 11 ,007 10,096 2 566 1 .402 2,732 27 .999 9 ,605 7,364 (0) 85 (0) 27 217 9 ?61 7,044 5 55 174 (0) 24 266 254 509 103 7 ,688 21 730 44S 259 (D) 5,325 1 77 1 538 (D) {0} 50,719 36,788 23,316 1,645 21,671 21,284 272 19,587 89 407 255 872 3,922 836 3,086 3.08 (D 2,94 ,290 760 ,530 ,997 15.608 57,198 56,555 ,755 1 ,841 7,601 17,317 ,243 15,767 29.597 19,239 6.144 22,573 26,129 8,289 13,101 30,453 988 1,654 4, '20 2,944 1,722 6,068 5,155 20,939 22,009 5.346 11,379 24,386 254 205 155 100 0,551 1,400 140 383 96 567 11 22 1 17 1,185 36 36 57 222 6 9 105 775 14 43 9,774 1,358 27 139 706 10,812 16 234 92 11 21,245 169 217 29 5 5,0S0 4,192 1,155 3,617 5.985 5,164 85 1 ,245 1.462 828 1,071 2,595 2.523 .516 1 ,352 1,107 6,856 447 16 288 793 ,069 1 ,116 2.819 6,043 |ff in: . ny ids ngdo ,',?; New Af ri ea and. ner eve ■eas 90 12.504 42,251 5,600 10-564 1,804 2,428 9,111 10,725 4,029 12,260 14,216 0,224 CD) 10,824 ( ) ( D) 2 0,557 19 10,192 5,765 9 4 2,406 25 118 8,570 (0 ) ( D) ( D) 65 242 ( 0) CD) (D) (D) H0FA Majority-owned foreign affiliate. n.a. Not available. See text for explanation. * Less than $500,000 (+). Suppressed to avoid disclosure of data of Individual companies. NOTE. --In this table, data for U.S. parents are only for nonbank parents of nonbank affiliates and data for affiliates are only for nonbank affiliates of nonbank parents. MOFA's are defined as affiliates that were owned more than 50 percent by all U.S. parents combined and that had assets, sales, or net income over $3 million in 1977. -Sales to Unaffiliated Customers as a Percentage of Total Sales by U.S. Parents of MOFA's and by Their MOFA's, 1977, Selected Industry of U.S. Parent and Area of Origin by Area of Destination (Millions of dollars) Total Canada atin Other loping (6) < 7) (9) (10) (11 ) (12) (13) (14) parent d in: ly her land 82.5 24.5 94.7 95.8 67.6 77. 3 24.2 79.? 53.8 80.1 78.4 13.6 79.2 7.4 79.5 79.9 6.8 81.7 12.8 82.2 88.9 11 .2 90.8 51.3 91.7 63.7 2.2 69.1 71.7 72.8 74. B 28.3 76.9 66.4 79.0 78.1 46.3 79.4 67.9 78.3 30.0 15.9 3.4 14.0 38.7 56.0 60.3 37.6 6.9 99.3 90.4 43.0 53.5 39.1 32.2 (0) ( 0) 65 .6 89.0 ( 0) (0 > 67.0 75.4 14.6 38.0 75.2 85.9 47. 1 24.4 55.7 87.4 57.7 45.6 43.9 78.2 63.8 53.6 (D) ( D) 61 . 7 26.6 55.4 64.5 (0) (0) ( D) (0) 96. 3 11.9 19.5 28.8 87.5 94 .9 85.5 81.7 82.5 ( 0) 35.9 ( 0) 91 .3 40.1 47.2 Italy ... Netherlan United Ki 1 .4 79.1 77.9 7.0 30.1 65.6 5.7 95.0 83.1 81. 1 CO) C D) 95.9 66.6 85.2 91 .7 79.0 16.2 80.5 (D) 60.7 78.9 83.4 75.9 9.6 76.9 7.4 77.0 9? .6 21 .7 76.9 CD) CD) 12.8 79.3 26.1 97.1 87. 7 8.8 88.9 (D) 34.6 38.1 72.3 7.3 74.0 72.3 74.3 43.1 48.7 82.3 (D) (D) (0) 85.2 31 .9 35.4 79.3 32.0 80.6 (D) (D) 48.1 43.5 61.8 ( D) (0) 13.3 23.1 26.1 (0 ) 94. 5 CD) (D) U .7 32.5 93.5 (0 ) 87.3 16.9 92.3 ( D) 67.1 88.8 76.9 71.2 CD) CD) 48.1 54.7 69.6 57.7 91.7 97.5 78.1 73.6 74.7 74 .3 77.7 96.3 100.0 60. 2 28.5 56.7 55.8 54.1 78.0 17.3 33.6 94.6 77.5 76.6 80.4 32.1 45.5 58.0 10 7 22.6 93 93.3 69 ? 99.8 95 9 ( D) 96 2 (D) 93 8 99.6 95 8 87.1 94 4 80.0 82.2 6.3 87.1 ( D> ( D> 98.8 63. 6 13.5 75.6 40.6 (D) 100.0 98. 5 99 .7 91 .5 93.9 89.6 90.8 99.7 100.0 79.3 70.3 71.0 ( D) 90.8 50.8 92.5 94.8 90.6 ( D> 93. 5 67.9 94.8 94.9 89.0 91 .7 89.5 24.7 90.8 81.1 91 .1 92.0 (0) 14.8 94.3 CD) 94.2 96.7 92.7 61 .1 93.1 (D) 92.9 ( D> 88.4 48.6 88.6 (0) 96.0 ( D) 79. 3 9.5 ?1 .6 100.0 93.1 66.5 92. 9 55.5 93.2 35.5 92.8 61 .4 (D ) CD) 35.2 6.8 84.3 43.9 92.0 ( D) ( D ) ( D) 42.5 — 98.0 98.1 98.0 99.0 99. 2 ( D) 84.4 31 .6 90.5 41.8 CD) 98.0 90.2 60.5 91.7 99.8 87.4 97.4 100.0 98.9 74.9 81 .1 74.7 89.9 73.6 52.0 CD) 91.2 (0) 40.4 (D) (D) ( D) ( D) 42.5 57.0 94.3 ( D) CD) 99.5 95.7 60.5 63.5 ( D) 79.7 34.5 37.6 54.5 70.9 26.4 91 .7 85.9 87.1 89.2 84.0 81.0 87.1 65.0 94.0 88.3 87.0 92.2 6.8 19.8 (D) 99.6 57.8 59.9 98. 7 (D) 87.6 CD) 97.4 83.5 (D) 90.0 96.6 96.6 00.0 (D) 97.5 92.0 64.7 89. 1 91 .9 88.8 86.4 84.7 86.6 91 .6 56.2 93.0 97.9 44. 1 58.0 (0) ( D ) 64.4 49.3 88.0 94.0 99.2 90.3 56.5 87.4 94 .9 81 .7 50.1 75.0 59.2 CO ) CD) (0) ( Dl f ) 74.6 76.2 ■ 68.8 78.3 70.5 86.3 65.6 57.8 49.5 59.9 82.6 77.5 71.4 82.0 73.0 88.5 82.5 79.7 80.3 73.3 83.9 77.4 72.2 82.4 73.5 37.9 28.8 24.8 16.2 38.8 20.1 21.8 25.2 8.6 32.9 41 .9 97.4 33.8 39.1 53.5 56.8 51 .7 94.7 28.0 50.2 37.8 25.9 32.1 93.7 45.9 27.2 45.4 57.3 28.9 90.3 57.9 85.6 87.4 89.3 60.4 73.5 92.0 90.6 91.9 87.0 50.8 65.5 88.1 39.9 68.5 (0) 38.4 75.2 87.4 (0) 55.6 87.6 42.4 42.5 78.4 53.8 (D) 83.8 ( D ) ( 0) 90.7 97 3 86 4 40 8 95 5 21 9 6 9 83 9 86 7 60 70 1 89 3 92 1 48 59 35 56 6 35 74 8 21 3 52 7 42 9 28 3 47 34 3 87.2 91.0 83.0 99.o 97.0 95.5 81 .0 58.4 37.9 95.7 62.3 65.2 20.2 3.9 80.8 97.4 96.3 91.7 95.2 99.2 76.1 94.6 98.2 90.7 98.3 90.2 91 .4 99.6 99. 7 (0) 93.3 91 .8 ( 0) 79.1 (D) (0> 100.0 55.3 CD) 100.0 100.0 100.0 (0) (0) 94.7 100.0 97. 1 100.0 99.0 99.8 64.9 99.9 93.2 CD) (D ) 73.2 99.5 91 .7 83.4 92.9 D) 98 9 86.0 CD) 93.3 D) 98 6 ( D > 84.2 90. S 80 Q 30.1 90. 1 98.0 ( ( ) )) 74.9 (D ) 94 .6 ( D ) 98.8 47.1 99 9 100.0 54.6 92.9 .6 98 7 ( ) 92.0 97.6 .8 99 7 42.2 87.0 94.0 92 1 100.0 100.0 CD) .8 100 97.9 100.0 99.2 . 1 100 97.2 93.1 97.3 .4 79 4 (D) ( D) CD) Ot t elo i ■. -j 90 75. 5 CD) 37.3 95.6 CD) 56. 1 65.7 CD ) 99.9 75.8 (0) CD) — (0 ) 100.0 72.5 6.7 CD) 4. 1 87.4 91 .9 93.6 62.4 ( 0) 62.1 68.1 52.1 63.1 35.0 97 2 98.6 97.1 100.0 99.8 52 2 83.6 72.2 22.7 74.2 22 6 33.3 18.4 CD) ( D) ( D) CD) 45.1 99.8 93.9 97.9 .0 MOFA Majority-owned foreign affiliate. n.a. Not available. See text for explanation. D Suppressed to avoid disclosure of data of individual companies. NOTE. --In this table, data for U.S. parents are only for nonbank parents of nonbank affiliates and data for affiliates are only for nonbank affiliates of nonbank parents. MOFA's are defined as affiliates that were owned more than 50 percent by all U.S. srents combined and that had assets, sales, or net income over $3 million in 1977. Although comparison of data on the two bases is not available for parents, it is for MOFA's (table 10). The MOFA data show that, for manufacturing and trade, percent differences between the two bases were small, but for petroleum and "other", they were quite large; whether or not a similar relationship holds for parent data is not known. Consolidation rules applied in the benchmark survey The benchmark survey defined a U.S. parent as a fully consolidated U.S. domestic business enterprise. If incorporated, it consisted of (1) the U.S. parent corporation not owned more than 50 percent by another U.S. corporation, and (2) in each ownership chain under that parent corporation, any U.S. corporation more than 50 percent owned by the U.S. corporation above it in the ownership chain. All other U.S. corporations and all foreign business enterprises were excluded from the consolidation. In the reported sales of the consolidated U.S. parent, sales among the U.S. business enterprises included in the consolidation were eliminated, so that a parent's sales to U.S. persons consisted of its sales to U.S. business enterprises in which it had a minority ownership interest, plus its sales to U.S. persons in which it had no ownership interest. Both types of sales were considered sales to unaffiliated U.S. customers. Sales by a U.S. parent to foreigners consisted of its sales to foreign affiliates and to all other foreigners. Each foreign affiliate had to be reported on an unconsolidated basis, unless the recordkeeping system of the affiliate made this extremely difficult. In that case, foreign business enterprises could be reported on a consolidated basis if they were in the same country and industry, or were integral parts of the same business enterprise. Relationship of sales data in this article to BEA's earlier published MNC sales data A previous article, "Worldwide Sales by U.S. Multinational Companies," published in the January 1973 Survey , presented sales for MOFA's and their parents for a sample of 298 U.S. MNC's; those data are not comparable with the data in the current article, which cover the direct investment universe. Also, an annual time series of universe estimates of sales by MOFA's covering years prior to 1977 was published in various past issues of the Survey . The universe estimates, obtained by expanding annual sample data to universe levels based on data from prior benchmark surveys, may not be fully comparable with data in the current article for 1977 because of the improved methodology applied in the 1977 benchmark (see the Methodology to U.S. Direct Investment Abroad, 1977 , cited in the Introduction to this " 55 Table 10. — Comparison of Export Shipments With Sales to the United States by MOFA's, 1977, by Industry of U.S. Parent (Millions of dollars or percent) Total Petro- Manufac- Trade Other leum turing Line 1 Sales to United States by MOFA's 93,573 70,848 19,680 1,470 1,575 2 Export shipments to United States by MOFA's 38,000 16,552 18,816 1,493 1,138 3 Difference: sales less export shipments 55,573 54,296 864 -23 436 4 Percent difference (line 3 * line 1) — 59.4 76.6 4.4 -1.6 27.7 MOFA Majority-owned foreign affiliate. NOTE. --In this table, data are only for nonbank affiliates of nonbank parents. MOFA's are defined as affiliates that were owned more than 50 percent by all U.S. parents combined and that had assets, sales, or net income over $3 million in 1977. 56 collection of articles), and because some of the changes in the benchmark survey sales universe were not reflected in the annual sample for years prior to 1977. Affiliates' sales by industry of affiliate and by industry of U.S. parent In this article, each MNC was assigned the industry code of the U.S. parent, that is, the code of the industry in which the parent's sales were largest. In effect, this meant that sales by the affiliates were also classified by industry of the parent. Table 11 compares the distribution of sales by affiliates (including minority owned) by industry of parent (lines) with that by industry of affiliate (columns). The intersection of a line and a column for the same industry gives sales by affiliates that were in the same industry as their parents. In general, most sales were by affiliates that were in the same industry as their parents. For example, in petroleum, sales by all affiliates of petroleum parents were $253 billion (line 3, column 1); of this total, $232 billion were supplied by petroleum affiliates of petroleum parents (line 3, column 3). Only $20 billion were supplied by affiliates that were not themselves classified in petroleum. A comparison of the distribution of sales by industry of seller with that by type of product or service rendered is not given. The two distributions would differ because parents and affiliates often are diversified and have product or service lines outside their own major industries of classification. 57 <1> , — < ) n3 CD c Q)+J rc) i_ TO 4-> ~i "O l/l tfl c x>r-^rocncor^cnLn QNLnHfOyD-- iOCOC\JC\J O LT) r—f CM r ■ ....-.-. ^ .— i <— i <^- m k£> CMOi£>r^rsHnco>H^cri ix»coi-Oi— i un cm >x> o cm cxjr-.rococM<3-cnocncn »— ■ *, — -I-* m ld - — -- — -— - r^ >^j- .— i OO^COkOOOO.— ir^O - — - — CO U"> C\J - — --~^- — -^O CO lO i - — -cm — ■-— .ro - — in rn co n QNQQCOCHMCOCNJCT> — to co — 'C\j to ro -^ r*- CM UO .— I <^|-^H -— ^lo conincnotDLncMrs. - — .t, - — ro r^ in i£> cm ro ^o co in — c o^r^oo-^i-n — .-— % cm co inNNCOCO^OQQfir^ CT> hN CO ^O LT) CM - — -> — -CM CO o — om co — CD o — en .—i O C\J CO — en "=d- cm -— -cm cm i— i <^t - — in onco *— ■- — -— cr> - — ro Q ^ C\J C\J Q Q Q CO Q i^5-— -en ro CM "» — ocor^or^*-DcocMLnco , ^r cofvcn^ , ^Txc\jixfoch«a- COCOlD^rOOOJ'd-OHO i— i cm nn cti true ^ m o in inoicM'd-c\j's)-CMrsLf)'^ CM CM o Rl rfl 3 3 4J it rp ■I) 0) 0) u Hi ■u 4J u c a, 'v u a) 01 0) c E •o 4-> H o P 0) (d CD IJ U 4J 3 ■P rv H Vj U, ft) 1 jj •-\ u rfl >1 CI) y n r. u id ■M m E e -C u c c OM-i o o ■«-• o a> rc .c a> c ■H >-i 3 OJ^U'fl'HwJJ'OflJ vd (^ co en o 01 rfl •H c c OJ CT o (i) 4-» > Tl o (1) in en en .u (i) ? o •^ si ■B-g co i i .O fO +-> O) <_> s_ a) a. o 00 ro OO CD 5- 3 +-> a • i— o8 -a C£ c O) CL X in 4- O Q. CO c CL) ZD Oj * s- JZ Of £. ro * in ro O r- 1 o ID o 00 CO o CO Ol O CO CTt CM N OHMiniNCOHfO CON COO-3-OirvO en cm o i >*■ .—I O CO CM CO LO "3- en CO r^ •=d- o C0 r-- . — . CO #» Q * CM ro LO CM >* LT> O Co MOOrO OlrH oit\j CMCOi— l«t OimOM cnmcM«*t— icmcooo i— i co in m co «3 r». n CO LD f— I ID >* C^> "3" ro rsHroHwinH^t o tlO^ONCONlO i—l r^-*omiocMinn co HHIO*I»)OOW CM CO >H lOrH N Ln rHin Lr>coaicMcr>r-~cMCM IDlDNnCOMOlfl lo ro i-h in cm cr> ro lo LD CO >* O0 *— i LO in en H<*HO\OCOCOO ncoiOHincfiHO tsrOCOtsMH OM LD CM CO CM in CM CO CM CM LD O LD O CM CM en O insOHcjiinow Co"*«tmror^coiO m «t oo Mn cm in O E (-> 4- 3 O.T3 "O CD OTI4J s_ ai re a.-!- o CTl 3 ai CT) i— c o •i- s_ C 4-> ■i- cu s a. ■o i— i_ S- fO T3T3M- _: c: cot- ro -u c: -^ c •r— 00 (O S- T3 t— 3 C to >. +-> r0 (j i- (_) •!- ro ro -O E E 4- O CD -r- 3 O .E S- C U. (_) CL- IO cr O C •.- CD C E O Q. S- -i- +j 3 e o cr->- CU CD S- i — 3 CD C +J O O "O •<- (O C -4-> l(_ (O (O 3 +J C U S- <0 ■.- O E s- o. +J OO s- O C CD cd UJ I— O 0) ■a J3 CD +J +J IX) CL+J CD oo O CD X CD l— - — ITS a) CD S- o 3 ■a c rd Q. E O T3 rr • f- M- O ro +J • ro CD ■o +-> ro <4- •i— o • t— cu M- s_ 4- 3 • (0 00 +J o c c: i — CD • CD u E >> •c— W) Cl c CD •i — o 03 S- T3 1 — Cl O 0) E 4- -a > O •i — CD u ■a o T3 0) > 1 — c ro -a ro 3 c: C O O n O i +J •i— >j ^z +J 4-> T3 <_) 03 ■(— CD s_ c s. 00 « •»— o oo CD -l-> •■-J CD L0 r^ f0 S_ CD 3 s: Q. cn s: Q. 3 < oo a C_) u_ o3 z o asz a 61 manufacturing, expenditures were high in transportation equipment, both electrical and nonelectrical machinery, chemicals, and "other manufacturing," and low in metals and in food. R&D scientists and engineers employed by U.S. MNC's worldwide totaled 470,000, less than 2 percent of total MNC employment. The distribution of R&D scientists and engineers between U.S. parents and MOFA's and among industries was similar to that of R&D expenditures. Thus, although both R&D expenditures and employment are shown in table 1 and subsequent tables, discussion will focus mainly on expenditures to avoid repetition. R&D of U.S. parents, by industry R&D expenditures by U.S. parents totaled $18.6 billion. As with MNC's worldwide, 90 percent of the spending by U.S. parents was in manufacturing. About 5 percent was in petroleum, 3 percent in "other industries," and less than 1 percent each in finance (except banking), insurance, and real estate and in trade. In mining, spending was insignificant. Within manufacturing, three industries—transportation equipment, nonelectrical machinery, and chemicals—accounted for more than two- thirds of the total, and five industries—the above three, plus electrical machinery and "other manufacturing" — accounted for more than nine-tenths. Food and metals accounted for only about 2 and 4 percent, respectively. Spending in transportation equipment was $5.0 billion, or 30 percent, of the manufacturing total. About two-thirds was by U.S. parents manufacturing automotive products and most of the remainder was in aerospace. The spending in the automotive industry was probably mainly for body design and for development of fuel-efficient engines, pollution abatement equipment, and vehicle safety devices. It was partly in response to the shift in consumers' preferences toward smaller cars in the wake of soaring petroleum prices. Spending in nonelectrical machinery was $3.4 billion. Nearly two- thirds was by U.S. parents manufacturing office and computing equipment. The high spending reflected the rapid technological progress in this industry and strong competition that U.S. parents faced both in the United States and abroad. In chemicals, $2.9 billion was spent on R&D. The spending was concentrated in industrial chemicals— especially in the fast-growing petrochemical and plastic products industries — and in drugs — probably largely for development of new products. In electrical machinery and in "other manufacturing," $2.2 billion was spent. More than four-fifths of the spending in electrical machinery was accounted for by U.S. parents manufacturing radio, television, and communication equipment; in electronic components and 62 accessories, spending was relatively small. Nearly one-half of the spending in "other manufacturing" was accounted for by U.S. parents manufacturing instruments and related products, particularly photographic equipment and scientific instruments; spending was also sizable in paper and in rubber products. R&D of U.S. parents and all U.S. businesses compared Table 2 shows R&D expenditures and the number of R&D scientists and engineers employed by all U.S. businesses and by U.S. parents. The data for all U.S. businesses are from the National Science Foundation (NSF). 3/ They differ significantly from the BEA data for U.S. parents in definition, industry coverage, and survey methodology. (See the technical notes for a discussion of these differences.) Consequently, the U.S. parent data exceeded the all-U.S. business data in several industries for R&D expenditures, and in total and most industries for the number of R&D scientists and engineers employed. However, these differences do not negate the primary conclusion of a comparison of the two data sets--i.e., that U.S. parent companies accounted for the bulk of both the R&D expenditures and R&D scientists and engineers employed by all U.S. companies. U.S. parents accounted for 96 percent of the $19.4 billion of R&D expenditures by all U.S. businesses. Within manufacturing, parents' shares were particularly large in transportation equipment, nonelectrical machinery, and chemicals. In no industry within manufacturing was the parents' share below 90 percent. The data on R&D expenditures for all U.S. businesses and for U.S. parents discussed thus far cover only those expenditures that were company-funded. In addition to company-funded R&D expenditures, BEA's benchmark survey also collected data on federally funded R&D expenditures by U.S. parents. Such data are compared with NSF data for all U.S. businesses in table 3. Federally funded R&D expenditures by all U.S. companies were $10.5 billion in 1977; U.S. parents accounted for three-fourths--$7.9 billion--of the total. Parent shares varied among industries. They were relatively high in primary and fabricated metals and in nonelectrical machinery, and low in chemicals and in transportation equipment. It is not surprising that U.S. parent companies dominated R&D activity in the United States. U.S parents are among the largest and most technologically advanced companies in the United States. Exploitation of technological advantages has enabled them to expand their markets, often by investing abroad. Also, because of their size, U.S. parents, to a greater extent than other U.S. firms, can derive the benefits of economies of scale in their R&D activities. 3. See footnote to table 2 for data sources. 63 Table 2.--R&D Expenditures and R&D Scientists and Engineers of All U.S. Businesses and U.S. Parents, 1977, by Industry R&D R&D expenditures J/ scientists and engineers (Millions of dollars) (Thousands of employees) All U.S. U.S. businesses parents All U.S. U.S. businesses parents All industries 19,407 Manufacturing 18,059 Chemicals and allied products 2,956 Primary and fabricated metals 856 Machinery, except electrical 3,391 Electric and electronic equipment 3,238 Transportation equipment 4,520 Other manufacturing 3,098 Nonmanufacturing 1,348 Petroleum extracting and refining 842 Other 3/ 506 18,595 393 407 !/ 17,100 369 2/ 371 2,861 47 55 719 15 13 3,350 57 63 2/ 2,567 85 2/ 86 5,018 108 98 2,584 56 56 1,495 25 36 964 10 21 531 15 15 R&D Research and development. 1. The definition of R&D expenditures by all U.S. businesses differs from that by U.S. parents. See the technical notes for discussion. 2. These numbers differ from those in other tables due to the reclassification by industry of two U.S. parents in order to improve comparability of BEA and NSF data. 3. Data for both all-U.S. businesses and U.S. parents include mining; trade (including petroleum wholesale trade, retail trade, etc.); finance, insurance, and real estate; and "all other industries." Within finance, banking is included in the data for all U.S. businesses, but excluded from those for U.S. parents; within "other industries," the data for all U.S. businesses exclude, but those for U.S. parents include, "agricultural production," and "motion pictures." Source: Data on R&D expenditures for all U.S. businesses were obtained from National Science Foundation, Research and Development in Industry. 1978: Detailed Statistical Tables (NSF 80-307), p. 14, except that da1 for "transportation equipment" were from the 1977 issue of the same publication (NSF 79-313), p. data for this industry were incomplete in the 1978 issue. 12, because 64 Table 3. --Federal ly Funded R&D Expenditures by All U.S. Businesses and U.S. Parents, 1977, by Industry (Millions of dollars) All U.S. U.S. businesses parents All industries 10,521 7,938 Manufacturing 10,030 V 7,501 Chemicals and allied products 300 66 Primary and fabricated metals 70 163 Machinery, except electrical 576 1,083 Electrical and electronic equipment... 2,699 1/ 1,302 Transportation equipment 5,977 4,679 Other manufacturing 408 208 Nonmanufacturing 491 437 Petroleum extracting and refining 76 53 Other 415 384 R&D Research and development. 1. These numbers differ from those published in U.S. Direct Investment Abroad, 1977 due to the reclassification by industry of two U.S. parents in order to improve comparability of BEA and NSF data. Source: Same as in table 2, except that data are from p. 17, instead of p. 14. 65 R&D of MOFA's, by industry and area Worldwide, MOFA's spent $2.1 billion on R&D and employed 63,000 R&D scientists and engineers. In table 1, these R&D data are disaggregated by industry of U.S. parent. In tables 4 and 5, they are disaggregated by each MOFA's own industry. By industry of U.S. parent, 75 percent of MOFA spending was in manufacturing, 12 percent in finance (except banking), insurance, and real estate, 6 percent each in petroleum and "other industries," and less than 1 percent each in trade and mining. By industry of affiliate, 86 percent of the spending was in manufacturing, 5 percent in petroleum, 4 percent each in trade and "other industries," and less than 1 percent each in mining and in finance (except banking), insurance, and real estate. The distributions of MOFA spending on the two bases differ significantly. Spending by trade MOFA's was ten times as large as that by MOFA's of trade parents. Nearly all of the difference was accounted for by trade MOFA's of manufacturing parents, which served as distributors of goods produced by their parents and other foreign affiliates of their parents. Spending by mining MOFA's was three times as large as that of MOFA's of mining parents, because a large share of U.S. direct investment in mining was by parents not classified in that industry. Spending by manufacturing MOFA's was slightly larger than that by MOFA's of manufacturing parents. Manufacturing MOFA's of parents in finance (except banking), insurance, and real estate accounted for most of the difference. In contrast, spending by petroleum MOFA's was smaller than that by MOFA's of petroleum parents, mainly because petroleum parents had a number of MOFA's in chemicals with large expenditures. Also, spending by MOFA's in finance (except banking), insurance, and real estate was much smaller than spending by MOFA's whose parents were classified in this industry; as noted above, parents in this industry had several manufacturing MOFA's with sizable expenditures. 4/ By area, 92 percent of R&D expenditures by MOFA's were in developed countries and about 7 percent were in developing countries. The small share in the latter may have partly reflected the limited technical absorptive capacity of these countries, due to the generally low levels of education among the population, low rates of capital formation, and the limited size of these countries' markets. Within developed countries, R&D expenditures were highly concentrated. Expenditures by MOFA's in 4 countries—Germany, the United Kingdom, France, and Canada—accounted for almost three-fourths of the total, and that in 10 countries—the above 4, plus Australia, Belgium, Italy, the Netherlands, Switzerland, and Japan—accounted for nearly all— 94 percent. Within developing countries, expenditures were also concentrated in a few areas, primarily Brazil, Mexico, and "other Asia and Pacific." 4. One such parent was a large conglomerate that was classified in insurance but engaged in a wide range of other activities, both in the United States and abroad, including telecommunications, engineering services, and consumer products. 66 0) QJ 3 i— -— cr ■ ■ o «a- •-> < .—I Q O O Q O Q O O Q O * O .— t O C*1 O .-H .-H o o o o r-* ro O C v£) (£> .-H O f-l O tH ) co o ^h "d- co cri ■ .-4 OOrHUlrHC 0J en E c E ■— r— 0> -C 4-> Q.<— C'OS-OJ'OX+J-^ l_ ..i.i oiua;La>s~4->3aic cu Q. S-Q3QU_C3'-''-'_IZ^3 -C 3 +J -— c 0) "O O T- O) "O O O ■o (UO > X ro LD LD -3- CO— O ID Cn Ifl H — . lD — — .—^ro M *-, ^ ^ H N . n , QQ,HCN ' a<3-.-H.-<.-i,— toaoo Q i— i «T u"> ro ro «3" ro oo O N s ro «t "3- ld o o «d- r*. CM ro r*« —en- — -cold- — w-*> -— . — cm - — - in ld «a- ro >c3- -— .— o- — -id- — -- — — - — - co ro a. COlO CO o o o o en a i— i r-. cm co co ld ro o ld udld_ _r-» lo i-i lo Q.-WQ.-Q cn<-< *3- co ^r «d- ld o en ID o CM *r cn cm *3- ^j- id cocm^t ^h _ ■— i r-. o •— i <3- id CO — "— .<-h CO — ro O f-s CO COQQ^HCMO nrs •-i O LD O O LD LD .—H «=r CO O LO CM CM — o — • Q <3~ CO CM H QrHQQ Q CT> LD CM CT. CO co o ld cm o cn .— i c en «-h *d- <=r en en en t r-i co cn ^ co cm cz> o cn O Q O O O > O O O O O O OOOOOOOO O QQQQO OO Q CO CO ro (MO LDCOror-- r-.ro .— i O cn ^ ld en o „co id co ld ^cn o f** ld - OiO tLDm csjr c o o (J X) >»*a C 3 I- CU C C QJ D>E C Er- i— Ot -C +J O '<- Ol '•- O J- L= -l->r ai ' -'_IZO -C r- O <0 O 3 ■!-> C_J O a> "o ai a> a> i- O 01 CT> U n at t- o i- -o o n_ -o ai ■o o T3 O) > Q Ll_ o3 O q: e: o 68 R&D intensity of U.S. parents and MOFA's The R&D intensity of parents or MOFA's in an industry can be measured as the amount of R&D expenditures per $1,000 of sales or the number of R&D scientists and engineers per 1,000 employees in that industry (table 6). (Unless otherwise specified, parent expenditures hereafter refer only to company-funded, not federally funded, expenditures; no affiliate expenditures were federally funded.) In all industries combined, the intensity ratio for U.S. parents based on expenditures was 14, i.e., out of every $1,000 of sales, U.S. parents spent $14 on R&D. Among the six major industries, manufacturing was the most R&D intensive, with a ratio of 24. In contrast, the ratios were only about 4 or 5 in "other industries," petroleum, and mining, and about 1 in finance (except banking), insurance, and real estate and in trade. Within manufacturing, ratios were between 30 and 44 in four industries; in two industries, they were 8 or lower and, in one, the ratio was 16. Nonelectrical machinery, with a ratio of 44, was the most R&D intensive, primarily because of the very heavy investment in R&D by U.S. parents manufacturing office and computing equipment. In electric and electronic equipment, the ratio was 38. The ratios for U.S. parents manufacturing electronic components and radio, television, and communication equipment were especially high. In transportation equipment and chemicals, ratios were 31 and 30, respectively. The high ratio in the former was attributable mostly to U.S. parents manufacturing aerospace equipment, and, in the latter, to those manufacturing drugs. Within "other manufacturing," the ratio for U.S. parents manufacturing instruments and related products was particularly high. MOFA's were, overall, much less R&D intensive than their U.S. parents. In all industries combined, MOFA's spent $4 on R&D per every $1,000 of sales. Among the six major industries, the ratio for MOFA's was relatively high in manufacturing — 9. It was 3 in each of "other industries" and mining and about 1 in each of trade, petroleum, and finance (except banking), insurance, and real estate. Within manufacturing, MOFA's were relatively R&D intensive in electric and electronic equipment (17), transportation equipment (13), and chemicals (11), and less intensive in food and kindred products (3), primary and fabricated metals (4), nonelectrical machinery (6), and "other manufacturing" (7). In all industries combined, U.S. parents employed 23 R&D scientists and engineers out of every 1,000 employees, compared with 12 for MOFA's. The industry distribution of the employment ratios was similar to that of the expenditure ratios for both parents and MOFA's, except in petroleum. In petroleum, the expenditure ratios for both parents and MOFA's were relatively low compared with their employment ratios. The expenditure ratios were lower, perhaps due to the overstatement of 69 C CO W CD -i- O CD ■i- cno ai U C « >> ^ Gd ft! Q. ( CNJOrouDror-cocNj •— " roNtjconcooo r^. r^ro<=j-c\iLOMDr-^co ud OLDiDt-iOOlD^r-i inromcncncO'-irN LT><^-C\JC\JC\JCriCOyDOioinyDH oinc^yDOLOCO«t ^t m cj h a) co od cj ud en irno^ocvicTirNcjrH i— i i3 °o c at E mi — i— «— OJ ^4 =J O .,- l/> TD CD OJ >, Q.O X-— LU Q. e»0 X CD 4- cc a> a. o i^O «3" O CO CJD i T-i<^-r-Hcnococoo co rOCOkOrHLnCTKHO CNJ NmODINOIrHOOJ t— I +- re 4- +- C a E C z c en _■> T3 • +J O E X- +-» u i- +J u c: r3 O-td a •«- ai ■a a> ai c e O T3 +-> r— O Q. s- qj ro ai s- -i— _ CL'i- O -M 3 C ,_ .,- 4_> u cr-r- ■ "Di — S- CL O) CD S- CD rtJ -O CD i — 3 ' S- B U CU C+J • T3 "0 4- X O O ' C C CU'Dt- n3 ■r- rOTD C ■*-> 4- -x. c « C rtJ c O O LO fO >> U L nj +-> CD CL-M ai co u -p 4- U_ C_> Q_ SI I CD CD •<— ZJ CD o3 O 70 petroleum sales that results from sales among members of the same MNC being counted more than once; as noted in the Lupo article, sales among members of the same MNC often occur in petroleum. Thus, for this industry, the employment ratio is perhaps a better measure of R&D intensity than the expenditure ratio. The much lower R&D intensity for MOFA's than for their U.S. parents and the small share of total R&D expenditures by MNC's that was accounted for by MOFA's reflected their apparent dependence on parents for technology. This dependence was attributable to several factors. First, R&D facilities tended to be concentrated in U.S. parents, because supplies of scientific and technical talents were more readily available in the United States than in many areas abroad. Also, because more than two-thirds of total sales by MNC's worldwide were by U.S. parents, and because most of the parents' sales were to U.S. customers, a very large share of the worldwide R&D activities of MNC's was located in the United States to serve U.S. markets more efficiently. Furthermore, U.S. parents can minimize R&D costs of the MNC as a whole if they assume the major burden of investment in R&D. MOFA's may benefit from the technology but spend only a fraction of what their parents spend on R&D because use of technology by an affiliate abroad will involve only small additional cost. Growth in R&D expenditures Table 7 presents data on growth of R&D expenditures by MNC's for 1966-77, by industry of U.S. parent. Growth in expenditures by U.S. parents and MOFA's is separately discussed, 1966 data are from BEA's 1966 benchmark survey of U.S. direct investment abroad. 5/ The definition of a MOFA differs in the 1966 and 1977 surveys. To improve comparability, the 1966 data have been adjusted to be as consistent as possible with the 1977 data. Details of the adjustments are presented in the technical notes. R&D expenditures by MNC's increased from $8.9 billion in 1966 to $20.7 billion in 1977, or at a compound annual rate of 7.9 percent. In contrast, the growth rate of MNC total assets was 11.1 percent. Apparently, MNC spending on R&D has failed to keep pace with the growth of total assets in 1966-77. 6/ 5. See U.S. Department of Commerce, Bureau of Economic Analysis, U.S. Direct Investment Abroad, 1966, Final Data (Washington, D.C.: U.S. G.P.O., n.d.). 6. See Howenstine, "Growth," p. 35. Note that the data coverage of affiliate assets differs from that of affiliate R&D expenditures. For assets, affiliates are defined to include "allied affiliates"--those in which U.S. parents had equity ownership of 25 percent or more; for R&D expenditures, they are defined to include only MOFA's. The effect of this difference in coverage is not likely to be large, because the total assets of "allied affiliates" that were not MOFA's accounted for less than 10 percent of total affiliate assets in 1977. 71 o s: T3 to CO c d) -t-> s_ c to cu Cu S- to . Q- OO rDoo 1/1 4- o o ?E f ^ S- +-> OO to 13 => ■a c >1 I— 1 .O >> CO -O CI) <- ^ 3 r-^ 4-> r^ •i — i ■a co c CO cu ra -d ■a i. -i-i c 5 3 r— o o tO S- Q. 3 Cn E C O C 4- CJ> to r-«. o~« i — i . — i CO CO Ol I — 1 O 1 to _£I T3 S_ 4J c 3 3 i — O o to S- D. 3 cn E C o C 4- <-J> to r-^ r\ o^ i — i < — i CD CO o-i t— 1 at O tO -C T3 S- -U c 5 3 1 — O o ro i- O- 3 cn E C o C 4- o to ai . — i ^ co co en i — i O CO CM LD O o CO CO CO CNJ oo c\jLncocsj CM rvsciinincoi — *3- COi— I O ■— iLDi— ICOCTv O CM O-i id t--. CO CO CTi O CO o CM CTi CO o co CM <3" co C7> CT> CM C7> O Lnoooocr>r--cO'd-oo r-^ cr> r^ i^ «d- ■— icocji r— ^hoiococoo oo oo co ■— iinoii — o rsncoNMHocsi CO CM CO CO CM UO CM tOlfl-^-^)-LOOOr-~COlO O co CM CM co ai ■—I LO CM .— I oo o CO co CO CO CM LO CM CM CM «d- omPscoLorN^co r-^ HLninMcncMNN *d- i— !•— icooor-^a-icoco CO I CM Cfl IO +-> I— r— <_) IO t0 3 +-> O t/) "O CD -i- +J O E S- O S_ +-> 3 Q.1D CJ -o a> cu O "O +-> i— s_ cu to a> Q.T- U Q. •t- 05 3 C i— ••-+-> <_> CT-i- ■a r- i- a ai cu s. O) IO -Q CU i — 3 S- to O CU C +-> "0 T3 4- X o U C C CU "O t- IO •r- to T3 C +-> 4- Ol-ii C « to IO 3 C 10 to >> •^ X) i— CU cn r— c o ■•- s- c: +J •r- CU B>)fflT o s_ c s- 'r- +J O IO X +-> CU CO ^_^ cu CU i— O IO c cu to S- 3 -o c to cu cu 00 to T3 T3 CU -O 3 Q. >, CO 3 O •t— > cu to •i- -a IO -C D-+-> E •■- O 2 o to -i- 3 i — ■O -i- •r- _a > to •r- S_ "O IO C Q- • •.- E co O +J o c: cu cu E > +-> o IO S- 3 Q.-I-) E -O •r- to 4- O to cu 0) • CD E >,-r- Q. C O) O f0 S- .— Q- O CU E 4- > o cu o -a -o cu r— c -a to S ceo to o I •r- >> -£=+->+-> O IO •!- S- C S- f0 "■- o cu +-> ••—. 10 I — IO CU 3 S 3 "O tO CU 4- o +-> o i — to O 3 to 10 t->i — •■- -D •!- ■o fO IO +-> XJ CU CU •t- S- T3 O CU > S S- tO o CD 4- O CO +-> CTl to f— I CU T3 +-> CU S- O to O C to 4- CU .— S- to tO CL+-> O Q. (O •!- 3 Q C oo x: o • cu Q f-H +J 72 R&D expenditures by U.S. parents grew from $8.4 billion to $18.6 billion, or at a 7.5-percent rate. About nine-tenths of the growth was in manufacturing. R&D expenditures by U.S. manufacturing parents, which more than doubled, grew at a 7.5-percent rate. Within manufacturing, growth was widespread. By far the fastest growth--14.7 percent—was in nonelectrical machinery. The growth was largely accounted for by U.S. parents manufacturing office and computing equipment, whose expenditures increased more than sixfold over the period. Expenditures grew at a 9.8-percent rate in both food and "other manufacturing." Nearly one- half of the growth in the latter was accounted for by U.S. parents manufacturing instruments, particularly photographic equipment and scientific instruments. Also strong was the growth in both paper and rubber products. R&D expenditures in primary and fabricated metals grew at a 7.9- percent rate. The growth was largely in primary metals. In chemicals, expenditures grew at a 7.8-percent rate. The growth was accounted for mainly by U.S. parents manufacturing drugs and industrial chemicals. In drugs, spending more than tripled over the period. In transportation equipment, the growth rate was 6.4 percent. Much of the growth was in spending by U.S. parents manufacturing automotive products. In aerospace equipment, where federally funded R&D spending was large, company-funded spending grew relatively slowly. The slowest growth--!. 8 percent a year—was in electrical machinery. Spending actually declined in radio, television, and communication equipment, because a few large companies classified in this industry group in 1966 were in other industries in 1977. Among industries other than manufacturing, growth was unusually strong in finance (except banking), insurance, and real estate and trade. Growth in each industry was from a small 1966 base. Also, a number of companies in these industries were either new in 1977 or were classified in these industries in 1977, but not in 1966. R&D expenditures by U.S. petroleum parents grew at a 7.4-percent rate, to $1.0 billion. In contrast, R&D expenditures by mining parents, which were small in both 1966 and 1977, declined at a 1.7-percent rate. The decline was attributable mainly to several large companies that were classified in this industry in 1966, but in primary metals manufacturing in 1977. R&D expenditures by MOFA's, at $2.1 billion, grew faster than those of their U.S. parents— 12.3 percent as compared with 7.5 percent— over 73 1966-77. The faster growth for MOFA's was attributable to several factors. First, during the period, inflation rates were higher abroad than in the United States. Second, when the expenditures for 1966 and 1977 were translated from foreign currencies into U.S. dollars, a given unit of foreign currency could be translated into more dollars after the 1971 depreciation of the dollar than before. Third, the 1966 bases for the MOFA data in many industries were small. By industry of U.S. parent, more than two-thirds of the growth in R&D expenditures by MOFA's was in manufacturing. 7/ The remainder was mostly in finance (except banking), insurance, and real estate, "other industries," and petroleum. In trade and mining, growth was rapid, but spending remained small in 1977. R&D expenditures by MOFA's of manufacturing parents grew at a rate of 10.2 percent per annum, to $1.6 billion. Among industries, more than four-tenths of the growth was in transportation equipment and most of the remainder was in chemicals, nonelectrical machinery, and "other manufacturing." In transportation equipment, MOFA spending increased at a 13.7- percent rate. This rapid growth was mostly attributable to MOFA's in France, Germany, and the United Kingdom whose U.S. parents were in automotive manufacturing. Spending by MOFA's in Canada, Australia, and Latin America also grew rapidly. In chemicals, MOFA's increased their R&D expenditures at a 12.6- percent rate. More than one-third of the growth was in drugs, largely in several EC(9) countries, Canada, and Japan. R&D expenditures in food grew at a 12.5-percent rate from a small base in 1966. In nonelectrical machinery, the growth rate was 11.9 percent. About one-half was accounted for by MOFA's in the EC(9) and "other Asia and Pacific" whose parents manufactured office and computing equipment. In "other manufacturing," expenditures grew at a 9.8-percent rate. The growth, which was mostly in instruments and rubber products, was largely accounted for by MOFA's in Europe and Canada. In metals, MOFA expenditures increased at a 7.2-percent rate, from a small base in 1966. Expenditures in electrical machinery declined at a 3.7-percent rate, partly because a number of affiliates whose U.S. parents were classified in this industry in 1966 were in other industries in 1977, as noted earlier. Outside manufacturing, R&D expenditures in petroleum grew at a 13.1-percent rate, from a small 1966 base. MOFA's in Canada and EC(9) largely accounted for the growth. Growth in finance (except banking), insurance, and real estate and "other industries" was unusually rapid. 7. Affiliate data in this table are classified by industry of U.S. parent in order to be consistent with the classification of the MNC and parent data in the table. 74 This rapid growth was partly due to a number of affiliates whose parents were classified in these industries in 1977 but not in 1966, as noted above. Royalties and License Fees Royalties and license fees are fees, arising from licensing agreements, that are received by licensors in return for providing licensees with access to a particular technology. The technology transferred may include trademarks, copyrights, patents, know-how (e.g., designs, formulas, industrial processes, and other unpatented private technology), or any combination of the above. Royalties and license fees are frequently viewed as a measure of technology transfer because they arise from licensing agreements, which facilitate such transfers; however, for the following reasons, they are, at best, an imperfect measure. First, royalties and license fees do not include all compensation that can arise from licensing agreements. Other compensation may take forms such as cross-licensing, buy-back agreements in which goods produced by licensees are received by licensors at a discount, or sale of material inputs to licensees by licensors. Second, technology can also be transferred through means other than licensing agreements, such as the sale of turnkey plants, joint ventures, product inspection, etc., all of which do not give rise to royalties and license fees. 8/ Despite these shortcomings, data on royalties and license fees are useful because they constitute one of the few statistical series available on this subject. Matrix of flows The 1977 benchmark survey collected most of the data needed to construct a matrix of royalties and license fees of U.S. parents and MOFA's with all transactors. 9/ As shown in table 8, data are available for transactions between U.S. parents and all affiliated and unaffiliated foreign persons, and between MOFA's and all affiliated and unaffiliated U.S. and foreign persons. No data are available for one component—transactions between U.S. parents and other U.S. persons. 8. For discussion of other limitations, see Mary Frances Teplin, "U.S. International Transactions in Royalties and Fees: Their Relationship to the Transfer of Technology," Survey 53 (December 1973): 14-18. 9. Data on royalties and license fees presented in this article are just one of several components of the account, "fees and royalties with affiliated foreigners," in the U.S. international transactions accounts. The relationship between this component and the account is discussed in the technical notes. 75 i. -a E 4-> re u TO en UO cu c • r— (T3 +-> S- i — 1— re >>>> o.a QC #1 4- r^ r^- CT> 00 r— 1 -*-> c r\ CD 00 E4-> >> e 03 cu D. ^ TCS -a a. e re • co »* • 00 => +-> Q. t- •r~ •1 — CD OJ CJ-E CDI— Ct -a n £Z OO fX3 +-> SD_ OO *r— — CD ! cd .a ^ 00 1 ai 1 CD u_ 00 a> 00 ai e 1 — cu -Q u fD •1— 00 +-> e (1) E >> (O Q. -M CU 00 -M E O) E re a. 00 Q. *r~ CU u cu cc cu o O) s_ +J cu • • C\J t— 1 CO CO t— 1 IB lOOLO^t LO • • CD CM E E CNJ CO CM LO CO -^- CT> 00 oio>*t^nn LO 1— I CT> •— I «=t" CM C\J CM CM 1— I • • O CO CM CD CM tO (O t— • O LO ■=}- O • • i— < CM CTi CM CT> f C~ »* «n r\ CO CM 1— I CO ^" CO LO «3" CT> LO <* LO «3" i— I CO CO CT> LO ^f <— I CM o -a 4- o 00 e o O) • 'Cors^roH re njoir>H«t in • • CO 1— i en cm lo e e " " *> CM CM ^H n in <* o cm lo id co ^d- «— t co .— 1 «^- lo o o cr> 1— 1 1 cm cm <— 1 1 1 1 00 00 +j e e o cu 00 E S- >> a» re a. a. 00 CO +-> • a.^ a> s- o OJ CD -E s- +-> o ' 00 o +-> +-> e CD S- S- O re Q. 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O C re e ^ re •I-3 •!— -O Q. re 2: +-> cu s: 00 00 • :s CD -M CO , r- -i- r— Q) Si UD UDCOO^-^f-Ht— unco oo co en i— i ro O <— I VD OJ i— < LT) CO CO <3" LD -co o i— • iHrHCOr- I .— I O CO kO co o n oi in co m oj LD ■— t m «— I CM -— • <=3" -I u ro ra ^ - 3 +J u cr co -a aj •»- cli ■M O u s- 4-> O C _ a. -o u - TJ CLI r— O s- a* ro qj i- Q.M- O 4-> ZJ C ^- -r- +-> U CT-r- "O ■— t- O- S- (1) ro 1} (Ui — CD f0 U CD *0 "O 4- X C C O U at -o -r- .„ C 4-> 4- O E to "O c to fO ■i- T3 i— i- C *U >j to S- u"OEE-cuca> id O Qt'r* U 01 nl£ M-OJ=i-rOr— S_-t-> 3LLUQ.SliJhO Q.-t-> a> to c -a C f0 u , — c rti 3 T> ■n 01 > c fO in 4-> ■n m c ■a a -5 ■a 4- D CIJ O +-> Q) S- (0 i/l o 4-> o O. rn C CI) ■o +J S- <*- E >^ c> o 5- 1 — o 0) ■ C i— !- en u -a o o t. d) o > la C « fO 3 o V) o o o i- U"> +-> 0» (O •r- c a» 3 o i- (O w c o .c to c ■n-P CD cy o fO S_ tO *r- e: to a. a> +-> to Q-jt u : * a .-i u 78 allied products, and textiles and apparel. In chemicals, nearly two- thirds of net receipts by U.S. parents were from MOFA's by U.S. parents manufacturing industrial chemicals and soap, cleaners, and toilet goods. In drugs, large receipts by U.S. parents from MOFA's were partly offset by payments by U.S. parents to unaffiliated foreigners. Royalties and license fees of U.S. parents, by country Parent data on royalty and license fee transactions with foreign affiliates, by country of affiliate, are shown in table 10. Transactions with unaffiliated foreign persons are excluded, because such data were not available by country in the benchmark survey. Of the $2.2 billion net receipts by U.S. parents from foreign affiliates, more than nine-tenths were from affiliates in developed countries and 7 percent from those in developing countries. The small share from developing countries reflected the smaller amount of technology embodied in goods and services in these markets and a smaller share of the operations of U.S. MNC's in these countries. Net receipts from developed countries were highly concentrated. Five countries—Germany, France, the United Kingdom, Canada, and Japan- accounted for more than two-thirds of the total, with shares ranging from 17 percent for Germany to 11 percent for Japan. In each country, except Japan, net receipts from MOFA's accounted for most of the receipts. In contrast, a large share--about two-f ifths--of net receipts from Japan were from minority-owned foreign affiliates (MINOFA's). A large number of Japanese affiliates were minority owned because, until the early 1970' s, the Japanese Government restricted equity participation in Japanese firms by foreigners to less than a majority share. KV Most of the net receipts from developing countries were from a few countries in Latin America and "other Asia and Pacific," where economic growth was rapid. Royalties and license fees of MOFA's, by industry and country By industry of affiliate, MOFA's in manufacturing accounted for 87 percent of the net payments of royalties and license fees by MOFA's worldwide (table 11). Particularly large were net payments in nonelectrical machinery, chemicals, and "other manufacturing." By area, nearly nine-tenths of the total was payments by MOFA's in developed countries. As shown in column 3 of table 11, most of the net payments arose from transactions with U.S. parents, which were discussed in the last section. This section will focus on transactions with U.S. persons other than U.S. parents and with all foreign persons. Net payments to "other U.S. persons" were $0.1 billion. They consisted mostly of payments; receipts were small. The payments were largely by MOFA's in manufacturing and trade in the EC(9) and Canada. 10. See Barker, "A Profile," p. 53. 79 Table 10. --U.S. Parents' Net Receipts of Royalties and License Fees From Foreign Affiliates, 1977, Country of Affiliate by Transactor (Millions of dollars) Total From MOFA's From other affil iates Net Receipts Payments Net Receipts Payments receipts receipts (1) (2) (3) (4) (5) (6) (7) 2,157 1,914 1,962 48 243 246 3 1,999 1,790 1,835 45 209 212 3 266 258 (D) (D) 8 8 (*) 1,419 1,328 1,347 18 90 91 1 1,253 1,178 1,191 13 75 75 (*) 102 94 94 (*) 9 9 21 19 19 2 2 281 242 244 1 38 38 338 331 333 2 7 7 (*) 10 9 9 1 1 (*) 124 116 117 1 7 7 (*) 2 2 2 (*) (*) 107 104 106 2 3 3 269 261 266 5 8 8 (*) 166 150 156 6 16 16 (*) 226 126 (D) (D) 99 102 2 89 78 78 1 11 11 (*) 158 124 127 3 34 34 (*) 99 75 78 3 24 24 (*) 25 17 17 (*) 9 9 (*) 7 7 7 (*) (*) (*) 5 4 4 (*) 1 1 14 6 6 8 8 (*) 68 (D) (D) 3 (D) (D) (*) (D) (D) (D) 1 12 12 (*) (D) (D) (D) 2 1 1 (*) 6 (D) (D) (D) (D) (*) 4 3 4 (*) (*) (*) 10 7 7 3 3 45 38 38 (*) 7 7 17 (D) (D) (D) (D) All countries , Developed countries , Canada Europe European Communities (9) , Belgium , Denmark , France , Germany Ireland , Italy Luxembourg , Netherlands , United Kingdom , Other Europe , Japan , Australia, New Zealand, and South Af r i c a , Developing countries , Latin America South America Argentina Brazil Other , Central America Mexico Other Other Western Hemisphere , Other Africa , Middle East , Other Asia and Pacific International Addendum: OPEC MOFA Majority-owned foreign affiliate. * Less than $500,000(+), D Suppressed to avoid disclosure of data of individual companies. 80 Table 11. --Net Receipts of Royalties and License Fees by MOFA's from U.S. and Foreign Persons, 1977, Industry and Country of Affiliate by Transactor (Millions of dollars; (-) indicates net payments) Net receipts from all persons From all U.S. persons Tom other U.S. perso'ns Total From U.S. parents Net receipts From all foreign persons TotaT From other foreign affiliates From unaffiliated foreigners Receipts Payments Net Receipts Payments , Net Receipts Payments receipts receipts 01 ~m~ ur TT3T (*) (D) -67 -5 -6 -3 -7 -6 -1 -39 T5T" 15" 16]- ~1M~ "UY TFT T9T TTfiT mr 1W TW Total -2,033 By industry: Mining -19 Petroleum -112 Manufacturing -1,770 Food and kindred products -73 Chemicals and allied products -352 Primary and fabricated metals -44 Machinery, except electrical -816 Electric and electronic eguipment -118 Transportation eguipment -28 Other manufacturing -339 Trade -296 Finance (except banking), insurance, and real estate 25 Other industries 138 By area: Developed countries 1,819 Canada -309 Europe -1,302 European Communities (9) -1,211 Belgium -89 Denmark -20 France -268 Germany -360 Ireland -13 Italy -112 Luxembourg -3 Netherlands -84 United Kingdom -264 Other Europe -91 Japan -116 Australia, New Zealand, and South Africa -92 Developing countries -213 Latin America -79 South America -8 Argentina -9 Brazil 2 Other -2 Central America -55 Mexico -37 Other -18 Other Western Hemisphere -15 Other Africa -5 Middle East (D) Other Asia and Pacific (D) International -2 Addendum: OPEC -85 ^Ott -1,914 1,658 -1,590 -66 -61 -279 -273 -40 -38 -823 -817 -125 -119 -19 -18 -305 -265 -312 2 3 -59 (D) 1,903 -1,790 -288 -258 1,400 -1,328 1,246 -90 -19 -258 -347 -10 -121 -4 -107 -290 -1,178 -94 -19 -242 -331 -9 -116 -2 -104 -261 -154 -150 -127 -126 -89 -78 -142 -124 -87 -75 -19 -7 -6 -6 -17 -7 -4 -6 (D) -33 (D) (0) (D) (D) (D) (D) -5 -3 -7 -7 -43 -38 (*) 2 13 (*) 5 (*) (*i 7 (*) (*) (*) (*) (*) (0) (*) -113 16 -30 1 -71 14 -68 14 3 5 (*) -15 (D) -16 (D) -1 -4 -3 -4 -29 (*) -4 (*) (*) (*) -11 (*) -18 (*) -11 (*) -2 (*] (*) (*) -2 (*) (*) (*) -6 (*) (D) (*) (D) -3 -1 (*) -5 (*) (*) -2 (*) (D) -IS -94 -112 -7 -74 -4 -9 -35 (*) 23 (D) 196 129 84 32 -21 85 98 82 1 34 2 (*) (D) (0) 1 5 3 4 29 -10 -13 -3 8 1 23 26 4 63 (*) 11 11 -3 18 -71 11 7 2 (*) 2 (*) 10 -2 8 5 6 (D) (D) (D) -4 (D) 3 (D) 1 (*) (*) (D) 5 (D) (*) -1 2 (D) -106 -3 -76 -3 10 -8 -11 -16 22 24 -41 -9 -11 -65 -6 (*) -22 -36 -2 -6 1 (D) (D) 54 -6 -15 -3 -3 -4 -1 -1 -2 2 -2 3 (*) (*) 3 -3 -1 -3 189 83 9 18 1 (D) 16 6 (D) 22 30 175 9 163 81 4 1 9 8 3 1 (D) (D) 83 1 1 14 8 2 (*) 1 1 5 1 5 (*) 4 2 1 ?34 189 12 94 4 (D) 24 16 (D) (*) 6 175 146 10 1 30 44 2 9 27 21 16 17 10 6 1 2 3 4 2 1 (*) 1 173 125 -12 109 99 8 (*) 1? 23 -1 14 (*) (D) (0) 10 17 12 14 -1 9 7 :d) -2 (D) (D) (*) (D) (*) -1 (D) T9~r 73 1 23 1 7 22 (D) (0) 265 30 193 168 9 (*) 25 49 21 (*) !D) (D) 25 20 22 30 30 19 (*) !D) (D) 10 (D) (D) (*) (*) 1 (D) 1W (D) (D) 140 42 85 69 1 (*) 13 26 1 7 (*) 2 20 15 3 10 5 1 (D) o; (D) (D) (*) (0) (*) (D) (D) -1 (D) M0FA Majority-owned foreign affiliate. * Less than $500,000 (+). D Suppressed to avoid disclosure of data of individual companies. Transactions between MOFA's and all other foreign persons were nearly in balance, as net receipts of $0.2 billion by MOFA's in "other industries" were nearly offset by net payments of $0.1 billion each by MOFA's in manufacturing and petroleum. In "other industries," the net receipts were largely from unaffiliated foreigners to MOFA's located in Europe and Canada. 11/ A sizable share of the net payments by MOFA's in manufacturing were by chemical MOFA's located in Europe. The net payments in petroleum were largely to unaffiliated foreigners by MOFA's in the Middle East. Technical Notes BEA and NSF data on R&D activities The U.S. parent data used in this article were obtained from BEA's 1977 benchmark survey, or census, of U.S. direct investment abroad. The data for all U.S. businesses were universe estimates derived from an NSF sample survey. Both surveys used the business enterprise as the reporting unit, and both covered calendar year 1977. The two surveys, however, differed in several important respects. Company-funded R&D expenditures were defined differently in the two surveys. In accordance with Financial Accounting Standards Board Statement No. 2, "Accounting for R&D Costs," the BEA data for U.S. parents were defined on the basis of for whom the R&D was performed. They included the cost of R&D performed by U.S. parents for their own account and the cost of R&D performed for U.S. parents by others on contract, but excluded the cost of R&D performed by U.S. parents for others on contract. In contrast, the NSF data for all U.S. companies were defined on the basis of who performed the R&D. They included the cost of R&D performed by the companies for their own account and for others on contract, but excluded the cost of R&D performed for the companies by others on contract. For example, if a U.S. company contracted out R&D to its foreign affiliates, such expenditures would have been included in BEA's parent data but excluded in NSF's data for all U.S. businesses. The number of R&D scientists and engineers employed was also defined differently in the two surveys. In the BEA survey, it was defined as the average number of full-time and part-time R&D employees for the year; in the NSF survey, it was defined as the number of full- time R&D employees, plus the full-time equivalent of part-time R&D employees, on the payroll in January of the year. Partly because part- time employees were each counted as a whole employee in the BEA data, but were converted to a full-time equivalent basis in the NSF data, the BEA data for U.S. parents were higher than the NSF data for all U.S. companies in total and in most industries shown in table 2. 11. Net receipts of royalties and license fees by MOFA's in "other industries" included a substantial amount of fees for leasing film and television tapes. If such fees had instead been excluded from this account, transactions of MOFA's with unaffiliated foreigners would have shifted from net receipts to net payments. 82 Industry coverage also differed in the two surveys. As noted in table 2, footnote 3, both surveys covered most major industries. However, within finance, banking was excluded in the BEA data, but included in the NSF data. In addition, within "other industries," the BEA data included, but the NSF data excluded, agricultural production and motion pictures. It should be noted that unlike company-funded R&D expenditures, federally funded R&D expenditures were defined similarly in both the BEA and NSF surveys. They included the cost of R&D performed by companies on contract or subcontract with the Federal Government, but excluded the cost of R&D subcontracted to others. Because the BEA data on federally funded R&D expenditures were defined on the basis of who performed the R&D, but the BEA data on company-funded expenditures were defined on the basis of for whom the R&D was performed, the two expenditure categories for U.S. parents are not additive. Adjustments to 1966 data to improve comparability with 1977 data Data collected in BEA's 1966 benchmark survey of U.S. direct investment abroad are not strictly comparable with the 1977 benchmark survey data because of changes in concept and definitions between the two surveys. To improve comparability, the 1966 data were adjusted to be as consistent as possible with the 1977 data. In the 1966 survey, MOFA's were defined to include foreign affiliates in which U.S. parents had equity ownership of 50 percent or more. However, in the 1977 survey, the definition was revised to include foreign affiliates in which U.S. parents' equity ownership exceeded 50 percent. Thus, as shown in table A, data for foreign affiliates owned exactly 50 percent were removed from the 1966 total. Table A. --Adjustments to 1966 Data to Improve Comparability With 1977 Data on R&D Expenditures by MOFA's and Their U.S. Parents (Millions of dollars) U.S. parents MOFA's of MOFA's [TJ [21 Published 1966 total — 8,386 590 Less: Data for affiliates owned exactly 50 percent 12 Less: Data for U.S parents that did not have at least one MOFA— 25 Plus: Data for affiliates owned more than 50 percent solely by virtue of combined ownership by more than one U.S. parent 3 Equals: Adjusted total- 8,361 580 __ R esearcn and development. MOFA Majority-owned foreign affiliate. 83 Further, the parent data for 1977 included only U.S. parents that had at least one MOFA; in contrast, the 1966 data included, in addition, parents that had only MINOFA's and no MOFA's. Therefore, data for parents that had only MINOFA's were subtracted from the 1966 parent data. Finally, in 1977, MOFA's were defined as affiliates owned more than 50 percent by all U.S. parents combined . In 1966, in contrast, a single-owner criterion was used in defining a MOFA for purposes of reporting data on R&D expenditures. Thus, the 1966 data for affiliates were adjusted to include data for MOFA's owned more than 50 percent solely by virtue of combined ownership by more than one U.S. parent. The net effects of these adjustments were small --previously published 1966 data on R&D expenditures were adjusted downward by less than one-half of 1 percent for U.S. parents and by about 2 percent for MOFA's. Relationship between royalties and license fees and total fees and royalties - Royalties and license fees from foreign affiliates to U.S. parents, which are discussed in this article, constitute just one component of "fees and royalties from affiliated foreigners," which appears in the U.S. international transactions accounts. In addition to this component, total fees and royalties also include: (1) rentals for the use of tangible property, (2) film and television tape rentals, and (3) service charges, which are fees for services rendered—including management, professional, and technical services — and allocated expenses. Amounts for the total and for each component are shown in table B for 1977. Table B.--Fees and Royalties From Affiliated Foreigners, 1977, Total and by Component (Millions of dollars) Net receipts by U.S. persons Amount Total 37881 Royalties and license fees 2,173 Rentals for use of tangible property -221 Film and television tape rentals 300 Service charges 1 ,631 84 7 / ,7 SELECTED DMA ON U.S. DIRECT INVESTMENT ABROAD, 1950-76 A new publication by the Bureau of Economic Analysis provides historical estimates on U.S. direct investment abroad for the years 1950-76. 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