March trade in intangibles

The U.S. trade deficit took a big jump in March, according to the latest data from the BEA. The March deficit rose by $15.5 billion to $51.4 billion. February’s revised deficit was $35.9 billion. March imports surged by $17.1 billion while exports were up only $1.6 billion. Economist had expected the deficit to rise by $5.8 billion to $41.7 billion.
Even a drop in the deficit in oil and petroleum products was not enough to counter the surge in the non-petroleum products deficit. As the chart below shows, our deficit in petroleum products continues to improve. But the March deficit in non-petroleum goods fell through the floor.
In large part, the increase in the deficit was due to an import surge as a result of the re-opening of the west coast posts after a dock strike. However, the weakness in exports is also troublesome.
The increased deficit means that the weak GDP numbers for the 1st quarter of 2015 are likely to come in even worse in the next estimate.
One small silver lining is that our surplus in pure intangibles rose sightly as exports grew more than imports. The surpluses in maintenance & repair services and continued to grow with exports up more than imports. The surplus in financial services also grew in March after declining in February with both exports and imports up. The deficit in insurance services improved slightly, as did the very small surplus in telecommunications services. The surplus in business services continued to grow a long string of declines last year. However, net revenues from the use of intellectual property dropped slightly as revenues from foreign sources (exports) were up but charges for the use of intellectual property paid out to foreign sources (imports) increased more.
Unfortunately, our Advanced Technology deficit followed the same course as for goods in general by almost doubling. The deficit grew by $3.2 billion to reach $6.3 billion. The biggest change in the deficit came from a surge of almost $4.5 billion in Information and Communications Technology (ICT). That surge was only partial offset by a $1 billion rise in ICT exports and a $2 billion increase in aerospace exports.
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 $8.7 billion in compared with $11.8 billion in February. Again, much of this was due to the higher ICT imports.
Intangibles trade-Mar15.png
Intangibles trade parts-Mar15.png
Intangibles and goods-Mar15.png
Oil goods intangibles-Mar15.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.”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s