International economics deals with international economic transactions and their relationship to domestic transactions in each of the sectors of economic activity. The classification of types of international economic transactions in the SNA is close to the classification of balance of payments items, which is considered in detail in the following lectures. Crucially, according to the theory of international economics, both the SNA and the balance of payments theory treat trade in goods separately from trade in services and separately from the movement of capital and other factors of production (table 2).
The reason for this is the significant differences in the production and trade of goods and services. In the case of goods, production is usually separated from trade: goods are produced by a producer of one country for sale on the world market. The manufacturer in most cases does not know where, who and when will buy his product. It is delivered to buyers in another country, who may also not know where, by whom and when the goods were produced. In the case of services, their export or import means in itself a direct meeting between the producer and the consumer and thus the conclusion of a direct agreement between the producer and the purchaser of the services.
Table 2 Resource requirements by component
International economic transactions in the SNA
Movement | Includes | Means |
Goods | General goods | Most transportable goods that are sold to non-residents or bought from them with a corresponding transfer of ownership |
Goods for processing | Export or import of goods for processing in the territory of another country, followed by re-import or re-export to the first country | |
Repairs of goods | Repair work carried out by non-residents on ships, aircraft and other mobile objects of the resident | |
Goods procured in ports by carriers | Logistics goods (fuel, products, etc.) bought or sold in port to a non-resident carrier (ship, aircraft) | |
Non-monetary gold | Any gold products that are not government reserves | |
Services | Transportation | International transportation of goods and passengers by all modes of transport and provision of related services |
Travel | Goods and services purchased by non-residents for official and personal purposes when traveling abroad for up to 1 year (tourism) | |
Other (other) | Other services provided to non-residents (communications, insurance, construction, etc.) | |
Income | Compensation of employees | Salary paid to non-residents |
Investment income | Income and payments on foreign assets and liabilities | |
Current transfers | General government | Intergovernmental payments, gifts, contributions to international organizations |
Other sectors | Payments between residents and non-residents and non-governmental organizations | |
Capital | Capital transfers | Transfer of ownership of fixed assets and gratuitous cancellation of obligations to creditors |
Direct investments | Acquisition by a resident of a long-term interest in a non-resident enterprise, including all subsequent transactions between them | |
Portfolio investments | Transactions with securities and debt obligations | |
Other investments | Trade credits, loans, including IMF loans, deposits | |
Reserve assets | Transactions with assets that are used to balance the balance of payments (monetary gold, SDR, reserve position in the IMF, foreign currency) |
Trade in goods in all its forms is considered an essential part of the science of international economics devoted to international trade, which includes supply theories, demand theories, the latest theories and tariff and non-tariff methods of regulating international trade. Trade in services in principle is also subject to the laws of theories of international trade in goods, however, due to the specificity of services and their differences from goods, it is usually considered separately.
Brief conclusions. So, residents are all institutional units permanently located in the territory of a given country, regardless of their citizenship or ownership of capital. Non-residents are all institutional units permanently located in the territory of a foreign state, even if they are branches of the institutional units of this country. Residents and non-residents carry out international economic operations – transactions in which ownership of tangible or financial assets is transferred or services are provided. The accounts of the external sector reflect all transactions between residents and non-residents. The classification of types of international economic transactions is based on the general theory of international economics and considers trade in goods separately from trade in services, as well as separately from the movement of capital and other factors of production.