1790-1860, Douglass C. North, "The United States Balance of Payments, 1790-1860," Studies in Income and Wealth, Princeton University Press, vol. 24, 1960; 1861-1900, Matthew Simon, "The United States Balance of Payments, 1861-1900," Studies in Income and Wealth, Princeton University Press, vol. 24, 1960; and 1901-1918 (with the exception of exports and imports of merchandise trade and silver), Paul D. Dickens, "The Transitional Period of American International Financing, 1897-1914" (unpublished doctoral dissertation, George Washington University, 1933), and C. J. Bullock, John H. Williams, and Rufus S. Tucker, "The Balance of Trade of the United States," Review of Economic Statistics, July 1919. Data on merchandise trade and silver for 1901-1918 were taken from Department of Commerce, Monthly Summary of Foreign Commerce, various issues.

The estimates for 1901-1918 were revised primarily to make them consistent with, and to link them to, data prepared for subsequent years. The revised estimates were published by Raymond W. Goldsmith in Study of Savings in the United States, Princeton University Press, 1956, vol. 1, pp. 1078, 1080, 1081, 1084, and 1086.

The Department of Commerce began its series in 1922, later extending the data backward to cover 1919-1921. Data for quarterly U.S. international transactions, total and with individual regions of the rest of the world, are available currently in the March, June,

September, and December issues of the Survey of Current Business.

The balance of payments statement reflects all the exchanges of goods, services, gold, and capital claims between residents of the United States and residents of all other areas of the world. Since 1919, residents of the United States comprise residents of conterminous United States, Alaska, Hawaii, Puerto Rico, American Samoa, and Virgin Islands. Beginning 1940, residents of the Panama Canal Zone are also included. As noted above, international organizations are not regarded as residents of the United States.

Transactions entering into the balance of payments are divided into four categories-goods and services, unilateral transfers, capital movements, and transactions in U.S. official reserve assets. The balance of payments statement is built on a double entry system, whereby, in principle, every transaction is recorded both as a debit and a credit. Debits represent increases in assets or decreases in liabilities, and credits represent decreases in assets or increases in liabilities. Thus, an export of merchandise in return for a check drawn on a foreign account in a bank in this country results in a credit for the export (a reduction in an asset) and a debit for the reduction in foreign-held bank deposits (a reduction in a liability). Unilateral transfers to foreign countries (payments) are debits (as are expense items in accounting), and unilateral transfers from foreign countries (receipts) are credits (as are income items in accounting). While all transactions have a debit and credit phase which are necessarily equal, both sides are not estimated simultaneously nor from the same sources; hence, the possibility of error. The resulting discrepancy, referred to as "errors and omissions," series U 25, is given a plus or minus sign, depending upon which is necessary to make the accounts balance.

The procedure generally followed by North and Simon in their studies was to estimate receipts and payments on account of merchandise trade, transportation, travel, interest, dividends, and remittances. The authors then assumed that the balance indicated net flows of U.S. and foreign capital. For 1790-1900, series U 18-23

represents this balance which, of course, includes any errors and omissions in the estimates.

Data on exports and imports of merchandise used in the study by North are reported to include gold and silver prior to 1821 (see Statistical Abstract of the United States, 1957, p. 890). A separate estimate, however, was made by North for net movements of gold, because he concluded on the basis of his research that specie movements were in fact not included in the merchandise trade figures prior to 1821. (See "The United States Balance of Payments, 1790-1860," pp. 24-25.) This estimate is included in series U 2 and U 9. Although the annual amounts are small, varying from net exports of $1 million to $2.5 million to net imports of $1 million to $4 million, the residual item, or net movement of capital, may be in error by the same amount.

The

North indicates that the reliability of the data on exports prior to 1820 is doubtful and that data on imports are incomplete. paucity of information also made the estimates for other transactions for this period considerably less satisfactory than for subsequent years. Consequently, North suggests that 5-year averages may be more reliable than the annual data. Such averages are included in his study.

For the classification and contents of series U 1-25, 1900-1918, see Raymond W. Goldsmith, cited above. Three transactions have been entered which did not appear in this study. See text below for series U 17 and U 18.

For methods of estimating later data, see Balance of Payments of the United States, 1949-1951, a supplement to the Survey of Current Business, Office of Business Economics. Continued changes and improvements in the methods of collecting data have been made and the figures have become progressively more reliable over time. For an evaluation of data for recent years, see Report of the Review Committee for Balance of Payments Statistics to the Bureau of the Budget, The Balance of Payments Statistics of the United States: A Review and Appraisal, April 1965.

U 2 and U 9, merchandise. The estimates for ship sales for 1790-1900 are included in exports, series U 2. For 1790-1819, the net export or import of specie is included in series U 2 or U 9, respectively. The gross movements of specie were not available. For 1820-1860, exports of specie are included in series U 2 and imports in series U 9. Exports and imports of gold for 1861-1873, of nonmonetary gold for 1874-1900, and of silver for 1861-1900 are included in series U 2 and U 9, respectively.

The data for 1901-1918 include merchandise trade proper, silver, and nonmonetary gold. The basic data on merchandise trade for 1919-1970 are the official trade statistics published until 1965 in Foreign Commerce and Navigation and since then in the foreign trade reports of the Bureau of the Census. For 1919-1970, adjustments in both exports and imports have been made to correct for known overvaluation or undervaluation, to exclude noncommercial items, to include an estimate for unrecorded trade, and to adjust for certain differences in territorial coverage, e.g., to exclude the trade with the Panama Canal Zone, beginning with 1940. For World War II and early postwar years, data on Government purchases were substituted for certain import data. For Government-financed transfers of merchandise, the figures based on fiscal records were used instead of the figures appearing in the recorded export statistics. For the years after World War I and World War II, sales and other transfers of surplus property located abroad were added to recorded export statistics. Prior to 1946, series U 2 also includes the transfers with or without compensation to allied countries of military equipment, including that purchased abroad under the Mutual Defense Assistance Program. A small amount of services connected with these transfers was also included. Series U 2 and U 9 include nonmonetary movements of gold. For the treatment of gold, see series U 24 below.

U 3 and U 10, transportation. For 1790-1819, series U 3 represents gross earnings on freight carried in U.S. ships. Some adjustment was made to eliminate earnings from ships carrying U.S. imports.

For 1820-1860, series U 3 includes earnings by U.S. ships from carrying U.S. exports and from carrying freight between foreign ports. It also includes American port charges paid by foreign ships. Transportation payments, series U 10, consist of freight payments to foreign ships for carrying U.S. imports, and expenditures of American ships in foreign ports. Port expenditures and receipts are estimated as a percentage of freight earnings by American and foreign ships, respectively. (Fare payments to American ships by immigrants are included in the estimate for immigrant funds. See discussion of series U 16, private unilateral transactions. For fare payments of tourists, see discussion of travel, series U 4 and U 11.) For 1861-1900, series U 3 includes ocean freight earnings from carrying U.S. exports and from carrying freight between foreign ports, and port expenditures in the United States of the foreign merchant marine and of passenger steamships. The estimates for the years 1871-1900 also include earnings from carrying overland freight. Payments for transportation, series U 10, includes ocean freight payments on U.S. imports, and expenditures in foreign ports by the U.S. merchant marine. Passenger fares are included in the travel account (series U 4 and U 11). The data for 1900-1918 include receipts and payments on account of ocean freight, and port charges. For 1916-1918, payments for charter hire were added.

For 1919-1970, the transportation category includes international freight, fares and shipboard expenses of travelers, revenues and expenditures resulting from the charter of vessels and the rental of freight cars, and the expenses of U.S. transportation companies abroad and foreign transportation companies in the United States. The data cover air and surface transportation.

U 4 and U 11, travel. For 1790-1819, no estimate was made for international travel expenditures. For 1820-1860, series U 4 includes tourist expenditures in the United States and their fare payments to American ships; series U 11 represents American tourist expenditures abroad. North assumed that American tourists going abroad and, for the most part, foreigners coming to the United States traveled on American ships during this period. The method employed in the source study for estimating tourism precludes the transfer of fare payments to the transportation account. For 1861-1900, series U 4 includes outlays of foreign travelers in the United States. It was assumed that alien travelers came to the United States on foreign lines and, therefore, no estimate was made for receipt of fares. Series U 11 includes payments abroad by American tourists for maintenance and for ocean fares. Simon assumed that the bulk of the travel during 1861-1900 was on foreign ships. The outlays for procurement of sundry items and luxury consumption goods were not included in his estimate for expenditures abroad by American tourists.

The data for 1900-1918 include fares paid to U.S. ships by foreign tourists and to foreign ships by U.S. tourists.

For 1919-1970, all expenditures made in the United States by foreign residents, except those of diplomats and other official personnel stationed here, are included in the travel receipts. Expenditures made in foreign countries by U.S. travelers for food, lodging, amusements, gifts, and other personal purchases constitute travel payments. Expenditures for transportation within or between foreign countries when purchased abroad are, in general, included as travel expenditures. However, passenger fares for overseas transportation to the ultimate destination (even if the ticket permits stopovers enroute) when paid to foreign carriers by U.S. residents, and when paid to U.S. carriers by foreign residents, are included in the transportation account.

U5, U 6, and U 13, income on investments. For 1790-1900, series U 13 represents net payments of income on investments by the United States. The income was computed by applying an assumed yield rate to the net indebtedness of the United States.

For 1900-1918, separate estimates were made for receipts and payments. Series U 5 for 1915-1918 includes income on private and Government war loans. See Goldsmith, cited above, p. 1078.

For 1919-1970, income includes all interest, dividends, and branch