Modes of Supply
International guidelines also provide a statistical approach for measuring the value of international trade in services by the mode in which they are supplied.
Mode 1: Cross border supply
This occurs when a service is supplied from one country to another, but only the service crosses the border (i.e. neither the supplier nor the consumer moves).
Examples of cross border supply include:
- an Australian company contracting an Indian company to provide call centre services (service debit);
- an Australian company providing legal advice over the phone to a company overseas (service credit).
Mode 2: Consumption abroad
This mode of supply occurs when the consumer moves across a border to access services (i.e. the supplier does not move).
Examples of consumption abroad include:
- an American tourist consuming travel services (accommodation, food and entertainment) while they are visiting Australia (service credit);
- an Australian who travels to the United Kingdom to complete a university degree (service debit).
Mode 3: Commercial presence
Commercial presence requires the service supplier to set up operations in another country to provide services there. In this mode only the supplier moves from their resident country, establishing an on-the-ground presence in the consumers’ market as a foreign affiliate.
Examples of commercial presence include:
- an Australian university establishing a campus in Asia (service credit);
- a Chinese hotel chain opening a resort within Australia (service debit).
Mode three is not included in ABS international trade in services statistics. The ABS has produced commercial presence trade estimates which can be found in the Australian Outward Foreign Affiliates Trade and Economic Activity of Foreign Owned Business in Australia publications.
Mode 4: Presence of natural persons
In mode four the services supplier moves temporarily from one country to another to deliver services.
Examples of presence of natural persons include:
- an employee of an Australian software company flying to Fiji to deliver training (service credit);
- an architect from an UK-based firm working in New South Wales to provide consulting services for a new development in Sydney (service debit).