Invisible Exports and Imports

operations carried out by a country in the conduct of international economic relations 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 1970’s, these transactions constituted two-fifths the value of the trade in industrial goods and raw materials in the capitalist world.

Three basic categories can be identified among the assorted economic operations 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 labor relevant to the trade in services carried out in labor and capital markets. (See Table 1.) Until the 1970’s, receipts from invisible exports in the United States exceeded payments primarily because of major income derived from 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 Britain’s 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 abroad and from the

shipping of foreign cargoes, the City of London derived income in 1971–72 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 Lloyd’s of London.

For most of the developing countries, invisible imports exceed exports; in the service sector this deficit exceeds $3–4 billion. This deficit is linked to the payment of dividends and interest on foreign capital investments at an annual level of more than $6 billion, and reflects the unequal status of the developing countries in the international capitalist division of labor.