invisible trade points

8/8/2019 Invisible Trade Points

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Invisible trade can be distinguished from visible trade, which involves theexport, import, and re export of physically tangible goods. Basic categories

of invisible trade include services (receipts and payments arising from

activities such as customer service or shipping); income from foreign

investment in the form of interest, profits, and dividends; private or

government transfers of monies from one country to another; and intellectual

property and patents. (See also intellectual-property law.)

Services account for the vast majority of invisible trade. Such servicesinclude freight and passenger transport; banking, other financial services,

and insurance; scientific-technical exchange; and international tourism.

Income gained by foreign investment is the second largest contributor to

invisible trade, and private and government transfer is the smallest.

In many developing countries, receipts for invisibles are exceeded by payments

for them. This deficit is closely tied to the foreign debt and interest

payments often made by developing countries to the developed countries. The

growing external debt of some developing countriesand their inability to

repay the loans and interestnot only threatens the economies of those

developing countries but also threatens the foreign-investment sector of

invisible-trade earnings for many developed countries. Conditions such asthese have brought calls for creditor countries to offer debt relief to debtorcountries Sent on my BlackBerry from Vodafone


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Invisible receipts for April-June at $8.17 b

Our Bureau

Mumbai , Sept. 30

A 66 per cent increase in invisible receipts helped the country's current account end the April-June2004 quarter with a surplus of $ 1.9 billion as compared to a deficit of $ 636 million in the year-ago

period.

Invisible receipts in the balance of payments data released by the Reserve Bank of India for the April-

June 2004 quarter have risen to $ 8.17 billion as compared to $ 4.92 billion in the corresponding

quarter year ago.

According to the RBI, invisibles receipts were buoyant mainly because of remittances from

expatriate Indians, software exports and travel earnings. A sharp rise in invisibles payments was on

account of growth in outbound tourist traffic, transportation and insurance payments associated

with merchandise trade and expanding demand for imports of business services.

"India emerged as a favoured travel destination with international tourist traffic rising by 26.8 per

cent in the quarter. Software exports were resilient during April-June 2004," the RBI said.

Private transfers, essentially comprising remittances from Indians working abroad constituted about

30 per cent of gross invisible receipts.

Trade deficit widened further to $ 6.3 billion from $ 5.56 billion in the year-ago period. This,

according to the RBI, was the highest in any quarter so far. This was because imports far outstripped

exports. Imports during the April-June 2004 quarter were at $ 23.12 billion ($18.7 billion) and

exports were $ 16.84 billion ($13.151 billion).

Capital account for the quarter stood at $ 5.6 billion as compared to $ 6.1 billion. A year-on-yearcomparison for the April-June quarter shows that during Q1 of 2004/2005 foreign direct investment

(FDI), external commercial borrowings, other banking capital and short-term credits were higher

from the year-ago period.

FDI during April-June 2004 quarter was $ 1.2 billion ($ 0.7 billion). ECBs stood at $ 1.2 billion ($ 0.4

billion). NRI deposits registered net outflow responding to alignment of interest rates on these

deposits with rates of return in the international market.

With foreign exchange reserves of $ 119.5 billion at the end of June 2004, India held the first largest

stock of reserves among the emerging market economies and sixth largest in the world.

According to the RBI data, merchandise imports surged, reflecting the rising crude oil prices and

strong demand for raw materials, intermediates and finished products. Merchandise exports was

robust and well above the target of 16 per cent in dollar terms Sent on my BlackBerry from

Vodafone.


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operations carried out by a country in the conduct of international economicrelations relating to the export and import of services and to the activity of

governments and individual persons. An increase in absolute value and in the

proportion of invisible transactions in international trade is typical of

contemporary economic relations. By the early 1970s, these transactions

constituted two-thirds the value of the trade in industrial goods and raw

materials in the capitalist world.

Three basic categories can be identified among the assorted economicoperations that make up invisible imports and exports: services, receipt of

income from foreign investment, and private transfers by citizens of one

country to those of another. Services account for more than three-fourths of

invisible exports and imports in the capitalist countries. Such services

include freight and passenger transport, various types of insurance,

scientific-technical exchange, and international tourism. Total turnover in

services equals more than three times the income gained from international

investments and is 12 times greater than the turnover in private transfers.

Some capitalist countries become stronger than others in invisible exports and

imports because of certain specific features of the international division of

labour relevant to the trade in services carried out in labour and capitalmarkets. (See Table 1.) Until the 1970s, receipts from invisible exports inthe United States exceeded payments primarily because of major income derivedfrom private foreign capital investment. A number of European countries

achieved major advantages through the export of particular services. Examples

include Norway, Sweden, Denmark, and the Netherlands in shipping; Spain,

Italy, and Austria in tourism; and Switzerland in tourism and particularly in

banking and insurance. In 1971, Switzerland received about 5.7 billion Swiss

francs in net income just from private investments abroad, foreign insurance

transactions, and banking and other intermediary financial operations.

More than two-fifths of Great Britains foreign exchange receipts are gained

through invisible exports. In addition to the major invisible exports known

since colonial times, such as receipts from English capital investment abroadand from the

Table 1. Invisible exports and imports in world capitalist trade (billions of

dollars)

Services

Investment income

Private transfers

Total

Transport

Tourism


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1961

Receipts.................

31.9

8.8

6.8

9.4

2.7

Payments ................

35.7

10.2

5.5

8.7

2.4

1965

Receipts.................

46.7

12.1

11.0

14.1

4.0

Payments ................

49.0

14.4

10.2

13.4

3.9

1969


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Receipts.................

59.8

13.0

14.6

19.8

5.0

Payments ................

61.9

15.1

13.4

18.8

5.4

shipping of foreign cargoes, the City of London derived income in 197172 from

insurance (380 million), banking services (53 million), other intermediary

financial operations (45 million), and brokerage transactions (50 million),

as well as 10 million through the London Commodity Exchange, 24 million

through the Baltic Mercantile and Shipping Exchange, Ltd., and 6 million

through ship registrations placed with Lloyds of London.

For most of the developing countries, invisible imports exceed exports; in the

service sector this deficit exceeds $34 billion. This deficit is linked tothe payment of dividends and interest on foreign capital investments at anannual level of more than $6 billion, and reflects the unequal status of thedeveloping countries in the international capitalist division of labour

invisible trade points

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