February trade in intangibles

Partial offsetting this morning news on employment, there is an interesting story hidden in this morning’s release by BEA of the trade data for February. The headline story is the decline of the deficit to $42.96 billion — a $1.5 billion drop in the deficit over January (when the deficit rose) with exports growing by $1.6 billion and imports only up $0.1 billion. Economist surveyed by the Wall Street Journal expected an increase in the deficit to $45 billion). However there are three subtexts: oil, high tech and intangibles. The improvement in the overall deficit was due lower imports of petroleum products whereas imports of non-petroleum products and the trade deficit in non-petroleum products both increased. Counter to that narrative (“it’s all oil”) was the fact that the deficit in advanced technology products dropped dramatically due to a drop in imports. Our intangible surplus continued to increase ever so slightly by $77 million to $14.74 billion. Exports of business services rose while imports dropped and royalty receipts (exports) rose more than royalty payments (imports).
The dramatic story is the huge decline in our advanced technology deficit — dropping by over $2.1 billion. The decline was entirely due to a sharp decline in imports (as exports also fell). That drop was led by a $1.6 billion decline in information and communications technology (ICT) imports. But most other sectors also saw a decline in imports. This is the second month in a row where ICT imports have declined. 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.
Intangibles trade-Feb13.png
Intangibles and goods-Feb13.png
Oil good intangibles-Feb13.png

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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