SERVICE TRANSACTIONS 9 The substantial increase in net payments by the United States on service transactions from $133,000,000 in 1938 to $201,000,000 in 1939 had as its principal factor a sharp rise in payments to foreigners on freight and shipping account. (See table III.) The rise in payments for freight and shipping services resulted in turn largely from an increase in gross payments to foreign vessels for the carriage of United States imports from $140,000,000 to $225,000,000,10 the highest figure of record. The heavier volume of merchandise imports, the larger proportion of imports arriving in foreign bottoms (arising in part from the restrictions and prohibitions placed upon the operations of American vessels under the provisions of neutrality legislation)," and the jump in ocean freight rates following the outbreak of the war in Europe all contributed to this development. Table III. International Receipts and Payments on Freight and Shipping Account, 1938-39 1 [In millions of dollars] Item RECEIPTS Ocean and lake: Rail: Receipts of United States vessels from carriage of United States exports 2. Net ocean and lake receipts.... Receipts of United States railroads from carriage of goods in transit across United Receipts of United States railroads from carriage of exports to Canada from inland Receipts of American-owned railroads from carriage of intra-Canada freight Receipts of American-owned railroads from carriage of United States exports from 5 33303 2 2 Receipts covering operating deficits of Canadian-owned railroads located in the Payments to Canadian railroads for the carriage of United States imports from inland Canadian shipping points to border or lake ports. Operating expenses of American-owned railroads in Canada Payments to Canadian railroads for carriage of United States goods in transit across The estimates in this table are based upon the preliminary results of a special study by Elenor Gould of the Finance Division. Freight earnings by United States and foreign vessels in the carriage of United States merchandise exports and imports in 1939 are given in appendix A-II, table 2. The income from foreign investments, classified among service transactions in the summary of the balance of payments, is discussed below in connection with the treatment of the creditor-debtor position of the United States. 19 As estimated by the Division of Research, Maritime Commission. (See appendix A-II, table 2.) The proportion of import tonnage which arrived in foreign bottoms was 74.3 percent of total imports in 1939, as compared with 67.3 percent, 66.9 percent, and 69.4 percent in 1938, 1937, and 1936, respectively. An increase in dry-cargo export tonnage carried in American bottoms, coupled with a substantial rise in dry-cargo freight rates and offset in part by a decrease in United States tanker receipts, was responsible for an increase also in receipts by United States vessels from export trade; but the change was small as contrasted with that in payments to foreigners in import trade. Freight revenues paid by Canadians to United States railroads for the carriage of United States exports from inland shipping points to the border or lake ports rose slightly in 1939 in conjunction with the increased volume of exports to Canada. Other smaller international receipts by domestic railroads, consisting of revenues of Americanowned lines from the movement of freight wholly within Canada and from the transportation to Canadian destinations of goods originating in this country and revenues from the carriage of goods in transit across United States territory, as well as the operating deficits of Canadian-owned railroads located in the United States (which, while not, strictly speaking, a return for freight services rendered, involve a transfer of funds from Canada), were unchanged from 1938. Payments to Canada for rail freight increased somewhat in 1939 as compared with 1938, partly because of larger imports from Canada and the consequent larger payments to Canadian railroads for the carriage of goods from inland shipping points to the border or lake ports and partly because of higher earnings by Canadian lines for their share of United States in-transit freight hauled through Canadian territory by Canadian-owned railroads. Operating expenses incurred by American-owned railroads operating in Canada, entered in the freight and shipping account as an international payment, were unchanged in the 2 years.12 Total outlays by United States residents for foreign travel, although reduced as compared with those during 1938, were not drastically 12 Data covering these expenses have been made available for the first time through the cooperation of American railroads operating lines in Canada. affected by the virtual stoppage of outbound travel to Europe in September after travel to the Continent had passed its seasonal peak. (See table IV and fig. 5; trends in foreign travel are shown in fig. 4.) The limited significance of this disruption, which was largely responsible, nevertheless, for the decline in aggregate expenditures from Table IV. International Travel Account of the United States, 1938-39 The tabulated expenditures of United States travelers to oversea areas exclude fare payments to, and expenditures on board, United States vessels. Gross expenditures, including these amounts, were as follows in 1938 and 1939, respectively (in millions of dollars): Europe and Mediterranean area, 143 and 90; Asia, Africa, and Oceania, 15 and 17; South America, 11 and 16; Central America, 6 and 7; West Indies, 66 and 58; total, 241 and 188. The expenditures of United States travelers within oversea countries (that is, their expenditures exclusive of fare payments to, and expenditures on board, both United States and foreign vessels) were as follows in 1938 and 1939, respectively (in millions of dollars); Europe and Mediterranean area, 78 and 48; Asia, Africa, and Oceania, 7 and 8; South America, 6 and 7; Central America, 3 and 4; West Indies, 36 and 32; total, 130 and 99. Gross revenues of United States and foreign vessels from passenger traffic between the United States and Oversea countries are given in detail in appendix A-III, table 13. Estimated expenditures of United States residents in selected oversea countries are shown in appendixes A-III, table 9. $532,000,000 in 1938 to $469,000,000 in 1939, is attributable to the greatly reduced relative importance of outlays for European travel in recent years. In 1939, expenditures for travel to Europe constituted less than a fifth of the total cost of travel outside the United States, whereas they comprised a fourth in 1938 and almost a half in the late 1920's. These relationships indicate that a comparatively small diversion of travel expenditures to Canada and Mexico, as well as to other oversea areas, would maintain total outlays for foreign travel at the 1939 level, despite the cessation of travel to Europe. Expenditures in other oversea areas, with the exception of the West Indies, were larger in 1939 than in 1938, primarily as a result of increases in the volume of travel ranging from 10 percent in the case of Asia, Africa, and Oceania, to 13 percent in the case of Central America, and to 32 percent in the case of South America.13 Travel to the West Indies and outlays for West Indian travel were reduced apparently as a consequence of a drop in travel to the area after the beginning of the European war. Figure 6.-United States-Canadian travel account, 1929-39. Expenditures by United States travelers in Canada and Mexico, which together accounted for two-thirds of total payments to foreigners on international travel account in 1939, were not much changed from the preceding year. Expenditures in Canada decreased from $267,000,000 to $256,000,000 (see fig. 6) because of a falling off in outlays by motorists. Expenditures in Mexico were placed at $52,000,000 and $53,000,000, respectively.14 Foreigners visiting the United States spent a larger aggregate sum in 1939 than in 1938, entirely as a result, however, of larger disbursements by visitors from overseas. Expenditures by residents of Canada declined from $101,000,000 to $93,000,000, and those by residents of Mexico were unchanged at $14,000,000. The rise in outlays by visitors from oversea countries accompanied an increase in their 13 Detailed data on oversea travel and travel expenditures in 1938-39 are given in appendix A-III, tables 3-13. A comprehensive study of the subject covering the entire post World War period was issued in 1939 as Economic Series No. 4 (Oversea Travel and Travel Expenditures in the Balance of International Pay ments of the United States, 1919-38), U. S. Department of Commerce, Bureau of Foreign and Domestic Commerce, U. S. Government Printing Office, Washington, 1939. 95 pp. Price, 15 cents. 14 Detailed data and descriptions of methods used in estimating the United States-Canadian and United States-Mexican travel accounts, prepared by Allen H. Lester of the Finance Division, are given in appendixes A-IV and V. number to an all-time high. At $63,000,000, their expenditures in this country exceeded those in any other year since 1929, at the same time that United States residents were spending less for oversea travel than in any other year since 1933. These opposing trends had the effect of reducing net payments to foreigners on oversea travel account to $97,000,000, the smallest balance since 1919; of raising total receipts from foreign travelers to $170,000,000, the largest amount in more than a decade; and of bringing net payments to foreigners on international travel account below $300,000,000 for the first time since 1935. Among other service transactions, personal remittances to foreign countries by alien and other residents of the United States declined moderately during 1939 from the 1938 level, with a general decrease in transfers to the countries of northern, central, and southeastern Europe being offset only in part by a notable increase in transfers to China and Palestine. Receipts were augmented, on the other hand, by a striking increase in the average known amounts brought in by immigrants. Institutional contributions to foreign countries rose as a consequence of larger gifts through Jewish organizations destined for Europe and Asia. Government transactions resulted in net payments to foreigners approximately equal to those in 1938. Available data covering miscellaneous services and merchandise adjustments indicated a considerable decline in net receipts from these sources. A drop in motion-picture royalties from abroad and a larger net outflow of insurance funds were the principal factors of decrease.15 Detailed data covering various types of service transactions are given in appendix A-VI. Institutional contributions are shown by class of institution for the entire post World War period in table 21 and by geographic areas for the years 1931-39 in table 22. Government transactions are reported in table 23 for 1938-39. Data on international insurance transactions in the same years appear in tables 24 and 25. |