Content provided in partnership with

Business Services Industry

Reconciliation of the U.S.-Canadian current account, 1994 and 1995

Survey of Current Business, Nov, 1996 by Anthony J. DiLullo, Lucie Laliberte

THE RECONCILIATION of the U.S.-Canadian current account resulted in increases in the U.S. deficit, or the Canadian surplus, for both 1994 and 1995. Before reconciliation, the U.S.-published current-account balance with Canada showed a deficit of $6.0 billion for 1994 and a deficit of $8.4 billion for 1995. After reconciliation, the U.S. deficit increases to $6.7 billion for 1994 and to $10.4 billion for 1995 (chart 1, table 1). The corresponding Canadian-published balance showed a surplus Of $3.1 billion for 1994 and a surplus of $6.5 billion for 1995; after reconciliation, the surplus increases to $6.7 billion for 1994 and to $10.5 billion for 1995.

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

This article presents the results of the reconciliation of the bilateral current-account estimates of Canada and the United States for 1994 and 1995.(1) The reconciliation is undertaken because of the extensive economic links between the two countries and the need to explain differences in the published Canadian and U.S. estimates of the bilateral current account. In principle, the bilateral current account of one country should mirror the bilateral current account of the other country.

Differences occur in the bilateral U.S. and Canadian current accounts as published by the Bureau of Economic Analysis (BEA) and by Statistics Canada because of differences in the definitions, methodologies, and statistical sources used by each agency. In addition, some of the differences for 1995 are in components of the current account for which data are still preliminary and subject to revision; these differences may be eliminated when final data for these components become available. The reconciled estimates are intended to assist analysts who use both countries' statistics and to reflect how the current-account estimates would appear if both countries used common definitions, methodologies, and data sources.(2) (A few differences, mainly related to investment income transactions, cannot be satisfactorily reconciled, because of differences in accounting conventions and survey methods in each country.)

The longstanding Canadian-U.S. current-account reconciliation is among the leading examples of the benefits that can be derived from international data sharing. The reconciliation process and the exchange of data have resulted in greater accuracy of the published estimates o transactions between Canada and the United States and in increased efficiency in producing the estimates. Exchange of data between Canada and the United States for transactions such as trade in goods, travel and passenger fares, Canadian and U.S. Government transactions, and some transportation transactions covers over 80 percent of the value of the Canadian and U.S. current account and has led to the elimination of some differences in Canadian and U.S. published estimates. Wider opportunities for international data sharing may result from the upcoming 1997 yearend coordinated benchmark survey of international portfolio investment to be undertaken by more than 30 countries, including Canada and the United States, under the auspices of the International Monetary Fund.

Although the U.S. and Canadian published estimates are reconciled and there is extensive exchange of data between Canada and the United States, differences in the published estimates remain. Complete substitution of reconciled estimates for published estimates and complete exchange of data are not feasible for several reasons. For trade in goods, imports in the U.S. accounts would be affected because the United States attributes Canadian reexports to the country of origin rather than to Canada, the last country of shipment. For direct investment data, protection of the confidentiality of source data bars the exchange of data. Finally, some requirements, such as valuation adjustments, for the integration of the international and national (domestic) accounts in each country differ.

The details of the current-account reconciliation for 1994 and 1995 are presented in the following tables. Tables 2.1 and 2.2 show the major types of reconciliation adjustments - definitional, methodological, and statistical - made to the major current-account components. Tables 3.1 and 3.2 present the published estimates, the reconciled estimates, and the amounts of adjustments for each major component. Tables 4-8 present the reconciliation details for each current-account component.(3)

Reconciled Current-account Balances for

1994 and 1995

In the U.S. current account, the reconciliation adjustments resulted in an increase of $0.7 billion in the deficit for 1994 and in an increase of $2.0 billion in the deficit for 1995. The changes reflect larger adjustments to the U.S. southbound estimates (payments) than to the northbound estimates (receipts) (tables 2.1 and 2.2).(4) The largest increases in the U.S. southbound estimates result from the addition of Canadian reexports to U.S. imports of goods (a definitional adjustment) and from increases in transportation and "other services" for undercoverage (statistical adjustments). The largest adjustment to the U.S. northbound estimates was an upward statistical adjustment to investment income, which was partly offset by a downward adjustment to transportation.

Business Services Industry

Reconciliation of the U.S.-Canadian current account, 1994 and 1995

Survey of Current Business, Nov, 1996 by Anthony J. DiLullo, Lucie Laliberte

Find Research Guides for:

Find Featured Titles for: Health

Most Popular Articles in Business

Most Popular Publications in Business