INVISIBLE TRADE

in economics, exchange of physically intangible items between countries. Invisible trade can be distinguished from visible trade, which involves the export, import, and reexport of physically tangible goods. Three basic categories of invisible trade can be identified: services (receipts and payments arising from services); receipt and payment of income from foreign investment in the form of interest, profits, and dividends; and private or government transfers of monies from one country to another. Services account for the vast majority of invisible trade. Such services include freight and passenger transport; banking, other financial services, and insurance; scientific-technical exchange; and international tourism. Income gained by foreign investment is the second largest contributor to invisible trade, and private and government transfer is the smallest. Great Britain consistently achieved an invisible-trade surplus over the years, which until recently contributed to a balance-of-payments surplus. Services constituted the largest contribution to Great Britain's surplus in invisible-trade transactions. Historically, receipts from invisibles have normally exceeded payments for them in the United States. This surplus was derived primarily from private foreign-capital investment. Several European countries achieve substantial contributions to their balance of payments from invisible exports. Several East Asian countries and Greece, for example, receive income from shipping, and Germany, France, Spain, Italy, and Austria earn receipts from tourism. Switzerland also earns income from tourism as well as substantial contributions from banking and insurance. In many developing countries, receipts for invisibles are exceeded by payments for them. This deficit is closely tied to the foreign debt and interest payments often made by developing countries to the developed nations. The growing external debt of many developing countries, such as Mexico, Brazil, and nations in Africa and Asia, and their inability to repay the loans and interest not only threatens the economies of the borrowing developing nations but also the foreign-investment sector of invisible-trade earnings for many developed countries.