This morning’s BEA trade data was not good. The overall trade deficit increased by $1.6 billion to $63.4 billion – due to a decline in export and an increase in imports. As the Wall Street Journal put it:
The U.S. trade deficit resumed rising in April after two months of rare declines, pushed higher by surging oil prices, auto imports and a flood of furniture, televisions and toys from China.
However, the data shows our intangibles trade surplus holding steady at $7.9 billion. Increased receipts (exports) of royalties were offset by a decline in exports of business services, increased imports of business services and increased payments (imports) of royalties.
This month’s trade data also includes revisions of services trade data going back to 1997. The revisions show more volatility in the monthly intangibles trade data, especially in 2003 and 2004. It also shows a slightly higher level of the balance than previously reported – with the peak being a surplus of $8.2 billion in November of 2005 rather than $7.5 billion in December 2004. But we see generally the same trend as before with a slow, relatively steady increase in both intangible imports and exports resulting in a relatively stable surplus.
Obviously, this stable surplus is good news – but not good enough to offset our huge deficit in tangible goods. Unless we address that deficit, we will not even begin to bring our international balance of payment in to a reasonable alignment.
There was also some good news in that the deficit in Advanced Technology Products declined in April after surging in March. The decline was due mainly to lower imports of information & communications, life sciences and opto-electronics, but partly offset reduced exports in aerospace.
Note: we define trade in intangibles as the sum of “royalties and license fees” and “other private services”. The BEA/Census Bureau definitions of those categories are as follows:
Royalties and License Fees – Transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights. The term “royalties” generally refers to payments for the utilization of copyrights or trademarks, and the term “license fees” generally refers to payments for the use of patents or industrial processes.
Other Private Services – Transactions with affiliated foreigners, for which no identification by type is available, and of transactions with unaffiliated foreigners. (The term “affiliated” refers to a direct investment relationship, which exists when a U.S. person has ownership or control, directly or indirectly, of 10 percent or more of a foreign business enterprise’s voting securities or the equivalent, or when a foreign person has a similar interest in a U.S. enterprise.) Transactions with unaffiliated foreigners consist of education services; financial services (includes commissions and other transactions fees associated with the purchase and sale of securities and noninterest income of banks, and excludes investment income); insurance services; telecommunications services (includes transmission services and value-added services); and business, professional, and technical services. Included in the last group are advertising services; computer and data processing services; database and other information services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; industrial engineering services; installation, maintenance, and repair of equipment; and other services, including medical services and film and tape rentals.