December 2014 trade in intangibles – and annual

This morning’s trade data from BEA has some sobering economic news: the deficit grew by $6.8 billion to $46.6 billion in December. Exports were down $1.5 billion while imports were up $5.3 billion. Economists had expected the deficit to narrow. The larger deficit will likely cause a downward revision in the 4th quarter 2014 GDP estimate. The increase deficit was due to a turnabout in petroleum goods. While the deficit in petroleum goods for the year is the lowest since 2009 as a result of lower oil prices, December saw an unexpected spike in the deficit. Meanwhile, the deficit in non-petroleum goods continues to increase.
Our surplus in pure intangibles, however, improved in December to a level of $14.8 billion as exports grew more than imports. The surpluses in maintenance & repair services and financial services improved while the deficit in insurance services was slightly lower. Net revenues from the use of intellectual property increased as revenues from foreign sources (exports) grew faster than charges for the use of intellectual property paid out to foreign sources (imports). The bad news is that the surplus in business services again declined, for the 11th month in a row. Exports of business services continue to grow but imports of those services grew even faster.
On an annual basis, our intangibles surplus was up by 5% in 2014. All areas showed improvement except business services and telecommunication. The surplus in business services declined by 11% in 2014 and by 6% in 2013. Telecommunications services went from a slight surplus in 2013 to a slight deficit in 2014.
Our Advanced Technology deficit also improved dramatically in December, dropping to $8 billion from $11.4 billion in November. All categories except Advanced Materials saw an improvement. However, the biggest change was an almost $3 billion improvement in the Information and Communications Technology (ICT) deficit as imports dropped by $2 billion and exports were up almost $1 billion.
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 $6.8 billion in December, up from $3.1 billion in November. Again, much of this was due to the lower ICT imports and higher exports.
Intangibles trade-Dec14.png
Intangibles trade parts-Dec14.png
Intangibles and goods-Dec14.png
Oil goods intangibles-Dec14.png
Intangibles trade-2014 pre Jan revisions.png
Intangibles and goods-2014 pre Jan revisions.png

Note: I am now 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. This includes 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.

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. 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. The new category of other business services is a continuation of the older category Other Private Services with those components removed.

Thus, other business services includes categories such as advertising services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; and industrial engineering services. It also includes personal, cultural, and recreational services which includes fees related to the production of motion pictures, radio and television programs, and musical recordings; payments or receipts for renting audiovisual and related products, downloaded recordings and manuscripts; telemedicine; online education; and receipts or payments for cultural, sporting, and performing arts activities.

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.”

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