November trade in intangibles

Good news this morning from BEA on the trade deficit. The deficit dropped by $5 billion to $34.3 billion in November as exports grew by $1.7 billion and imports declined by $3.4 billion. The decline caught analysts off guard, as economists had expected a deficit of $40 billion — close to October’s level. Most of the improvement was attributed to a combination of greater exports and a drop in oil imports. As the chart below indicates however, the biggest decline was in petroleum goods whereas the deficit in non-petroleum goods was about the same as the previous month. And, notwithstanding the good news about November, the overall goods deficit (including oil) seems to be bouncing around the $60 billion level for the past few years (see chart below).
The not so good news is that the November trade surplus in pure intangibles was basically the same as October, rising by only $22 million to $16.3 billion. Exports grew only by a small amount, but the increase was still marginally faster than the small growth in imports.
The Advanced Technology deficit was slightly smaller in November, dropping by $500 million to $9.3 billion. An increased deficit in information and communications technology was roughly offset by improvements in other areas, especially in life sciences, opto-electronics and aerospace.
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 shows an overall surplus of $7 billion in November, compared to $6.5 billion in October (revised).
Intangibles trade-Nov13.png
Intangibles and goods-Nov13.png
Oil goods intangibles-Nov13.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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