Thank you, and good morning. I'll just take a few minutes to briefly run over the balance of payments program.
The balance of payments program covers the full range of transactions between Canadian residents and residents of the rest of the world. That covers basically everything. Important elements of these transactions are the international trade in goods, which my colleague has just described, but also international trade in services; income flows; cross-border investments; and transactions and financial instruments, including equity and both long-term and short-term debt, which are covered in the balance of payments.
The financial transactions are further grouped into three principal areas, one being foreign direct investment, the second being portfolio investment, and the last one being what we would term “other investment”, which is dominated basically by banking deposits and loans and is basically a reflection of the financial sector.
This data is published on a quarterly basis. As it happens, my fourth quarter estimates for 2006 were released this morning at 8:30, so I've provided copies to the members through the clerk.
That's generally what we do, so I'll just say a few words about our data sources, because ours are somewhat different from those of my colleague.
As you've heard previously, for the merchandise goods, we use a lot of administrative data from other ministries or departments. That's particularly true for merchandise trade. We also use the administrative data, in some part, for travel expenditures and for transportation expenditures. For the vast majority of the rest of the balance of payments, we depend on survey data. This is the major difference on the source of these data from the merchandise exports, which are mostly administrative data.
Primarily, trade in services comes from surveys, and we focus there on commercial or business services. These are services between one business or for businesses in the other country.
In terms of financial transactions, we cover the full range of financial transactions, with a particular emphasis on those by Canadian businesses. On the financial transactions, I should maybe just note that most of the interbank transactions are collected for us by the Bank of Canada, through a cooperative agreement with them, so as to reduce the number of points of data collection.
Let's turn for a moment to talking about some of the challenges we face on these BOP surveys that we use for the survey-related data. One of the first challenges we have is simply the lack of independent indicators on which businesses or households in the country are undertaking cross-border transactions. Whereas for merchandise trade we have an administrative source that tells us who's actually trading internationally, there's no equivalent source for services. I don't have any independent indicator that tells me who's actually trading services, who's buying and selling, or who's transacting large financial transactions either.
Another major concern for us is that business accounting does not necessarily separate out transactions with non-residents from transactions between Canadians. Therefore, what that implies is that if we start asking businesses and households to split their transactions between those with residents and those without other Canadians, this imposes a certain burden, because their records may not have them readily available in that form. That's a major concern we have, because we don't want to inflict more than a necessary burden on the respondents to respond.
It often takes considerable effort by our respondents to be able to split the data into the categories we are asking for. This is particularly true for service inputs. For outputs, they tend to have a better idea of where they're selling their goods, but when they're buying service inputs internationally, they tend to get mixed up with their domestic inputs a lot in their accounting records.
What are other quality initiatives that we've undertaken over the years to try to address some of these issues? First of all, we have an annual Canada–U.S. reconciliation program. This has been going on for over thirty years now, with the cooperation of the United States government's Bureau of Economic Analysis, which is responsible for the balance of payments in the U.S. We reconcile the flows between Canada and the U.S., our largest trading partner, once a year, and we learn from those experiences and we actually now trade data. We use each other's reflection.
I might just pause for a moment and note that Craig mentioned that for the goods trade, the imports are always trusted more than the exports.
For services, it's the exact opposite. Generally, when we ask people on a survey, they have a pretty good idea of where they're selling their services and who their market is because that's important information for the business to understand. But it's less important some of the time to know exactly where your inputs are coming from, so the records often aren't quite so detailed, or they're less willing, or it's less readily available on that side.
In general, we trust the statistics on the export side more than the import side. A key example might be software. Over the years we've found that the data really is different between ourselves and the U.S. So right now we use the export data from the U.S. to improve our import data because it's much more accurate. And it works the other way around. They take our export data on software from Canada to the U.S. as a better measure of imports into the U.S. in that sense.
Other things have been going on. Countries around the world have very similar problems to the ones we have on the survey-based international data. So there have been some efforts to try to regulate this at the international level. One of the first of these initiatives was what is called the coordinated portfolio investment survey, which is now an annual survey that's organized by the IMF. Approximately 70 countries around the world conduct an annual survey simultaneously, and then we share the data.
We focus on what we can measure better ourselves and then try to use the data from the other countries to improve our data, particularly data outside of our own borders, which they can measure better than we can, and then we look at their data and try to improve the estimates for Canada that way. That's already under way.
A similar survey for foreign direct investment is in development right now, with the IMF in the lead again, and we'll be participating in that as it hopefully moves on in the next couple of years.
Finally, we're currently redesigning the trade in services survey that we use. This is the survey focusing mostly on commercial or business services, an area of growing interest. We have a program over the next couple of years to try to redefine the sample process we use for that and to redesign the questionnaires. We'll be doing that in conjunction with our respondents and our clients, such as DFAIT, and others over the next year or two.
With that, I'll turn it back to you for questions.
