December trade in intangibles – and 2013

This morning’s data from BEA on the U.S. trade balance is not welcome news. The trade deficit grew in December by $4.1 billion to $38.7 billion. Exports down by $3.5 billion while imports were up $0.6 billion. As the chart below shows, the deficits worsened in both petroleum and non-petroleum goods. Economists had expected a deficit of only $35.9 billion
Nor was the news good for our trade in pure intangibles. Because of a drop in exports of business services, our surplus in pure intangibles declined slightly in December. Imports of business services continued to grow. Royalty receipts (exports) rose faster than royalty payments (imports), so the surplus in royalties was up slightly.
However, our deficit in Advanced Technology improved dramatically in December, dropping by almost $3.3 billion to $6.0 billion. The improvement was due in large part to a $2.4 billion drop information and communications technology imports.
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 $10.3 billion in December, compared to $7 billion in November.
For the year, our surplus in pure intangibles rose to $190.8 billion — an increase of almost 7.5% over 2012. Exports of business services continued to increase in 2013 while imports declined slightly. Royalty receipts (exports) rose faster than royalty payments (imports).
Intangibles trade-Dec13.png
Intangibles and goods-Dec13.png
Oil goods intangibles-Dec13.png
Intangibles trade-2013.png
Intangibles and goods-2013.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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