July trade in intangibles

The July trade figures are out and the trade deficit is up somewhat — rising $4.6 billion to $39.1 billion. Exports were down by $1.1 billion and imports were up $3.5 billion. This slightly more than the $38.6 billion deficit economists had predicted. The deficit increased for both petroleum and non-petroleum goods as imports of cars and fuel rose.
In good news, our trade surplus in pure intangibles rose by $166 million to $16.2 billion as exports of business services rose slightly more than imports and royalty receipts (exports) rose slightly more than royalty payments (imports). Year over year, imports of pure intangibles have down slightly for the last 7 months while exports have grown at a healthy rate.
The really bad news however is the surge in the Advanced Technology deficit to $8.3 billion from June’s dramatic low of $3.4 billion. It is beginning to look like June’s level was an aberration and the Advanced Technology deficit is returning to its unhealthy normal level. Every category showed a deterioration with exports down and imports up, led by a $1.6 billion drop in aerospace exports. 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.
Advanced Technology goods also represent trade in intangibles. These goods are competitive because their value is based on knowledge and other intangibles. While not a perfect measure, Advanced Technology goods serve as an approximation of our trade in embedded intangibles. Adding the pure and embedded intangibles reveals an overall surplus of $7.9 billion.
Intangibles trade-Jul13.png
Intangibles and goods-Jul13.png
Oil goods intangibles-Jul13.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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