February trade in intangibles

On the surface, this morning’s trade data for February was good news. The deficit dropped by $1.2 billion to $45.8 billion. The bad news, however, was that improvement was due to slower economic activity. Exports were down by $2.4 billion and imports were down by $3.6 billion. And the improvement was due mostly to a better trade flow in petroleum products. The non-petroleum goods trade deficit actually worsened slightly (see Chart 3). But even with petroleum products, both exports and imports dropped. Economist surveyed by the DowJones Newswires had expected an even smaller $44.3 billion deficit.
However, our intangible trade increased in February as both imports and exports grew. With exports growing faster than imports, our surplus increased slightly (as Chart 1 shows). All categories (royalty income and expenses and business services exports and imports) increased. However, the royalty balance did decline slighly. The trade surplus in intangibles is still overwhelmed by the goods trade deficit (Chart 2).
Our Advanced Technology Products deficit also improved dramatically in February, declining $1.2 billion to $5.9 billion in January. But one again, the reason was a decline in both imports and exports. An exception to that trend was in life sciences technology where imports and exports grew — and the deficit increased. The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
Chart 1Intangibles trade-Feb11.gif
Chart 2Intangibles and goods-Feb11.gif
Chart 3Oil good intangibles-Feb11.gif

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.

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