May trade in intangibles

In more economic good news, BEA’s trade data for May released this morning shows the trade deficit shrinking by $2.6 billion to $44.4 billion. Exports were up by roughly $2 billion to a record level of $195.5 billion while imports were down by $0.7 billion. Economists had expected a deficit of $45 billion. However, hidden in the good news is the fact that the improvement is due to a drop in petroleum imports. The trade deficit in non-petroleum goods actually increased.
The trade surplus in pure intangibles ticked upward ever so slightly as both imports and exports grew. As the chart below shows, the biggest surplus is in charges for the use of intellectual property, followed by financial services and other business services. The largest deficit is in insurance services. Maintenance and repair services have a slight surplus while trade in telecommunications, computer, and information services is basically balanced.
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. Our Advanced Technology deficit declined somewhat in May to $7.6 billion, down from almost $8.4 billion in April. The improvement was mainly due to an increase in aerospace technology exports. Adding the pure and embedded intangibles shows an overall surplus of approximately $5.8 billion in May, up from $5.0 billion in April.
Note that this is the first month I am reporting the trade data using the new BEA classifications for services trade, which breaks services into more categories. In the past, the intangible trade data was the sum of Royalties and License Fees and Other Private Services. Under the new classification system, intangibles trade data is the sum of the following items: maintenance and repair services n.i.e. (not included elsewhere); insurance services; financial services; charges for the use of intellectual property n.i.e.; telecommunications, computer, and information services; other business services. Charges for the use of intellectual property n.i.e. is simply a renaming of Royalties and License Fees. Maintenance and repair services n.i.e., financial services, and insurance services, were previously included in Other Private Services. Telecommunications, computer, and information services is a combination of those two items (telecommunications and computer & information services) that were also previously included in Other Private Services. Other business services is a renaming of Other Private Services with those components removed.
The reclassification is not a perfect renaming, however. For some reason, the new classifications result in a total intangibles surplus that is significantly lower (17% to 30% depending on the year) than the surplus calculated under the old classification system. The difference is mostly in the export data, with difference in the import data fluctuating within a percent or two. I will try to have more of this later. [Update: a closer reading of the BEA article cited below reveals that three categories previously in Other Private Services — education-related and health-related travel and the expenditures on goods and services by border, seasonal, and other short-term workers — were removed and reclassified to travel. While I can only find quarterly data on these categories, their size is roughly sufficient to explain the difference I found between the old and the new categorizations. As I agree with the shift of these categories from private service to travel, I will continue to use the new categories]
For more information on the changes, see the March 2014 Survey of Current Business article, “The Comprehensive Restructuring of the International Economic Accounts: Changes in Definitions, Classifications, and Presentations.”
Intangibles trade-May14.png
Intangibles trade parts-May14.png
Intangibles and goods-May14.png
Oil goods intangibles-May14.png

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