June trade in intangibles

This morning’s trade data from BEA shows a widening deficit as imports jumped by $2.8 billion and exports remaining basically flat (dropped by $100 million). The deficit grew from $40.9 billion in May to $43.8 billion in June. The size of the deficit was pretty much in line with economists’ estimates of $43 billion. A major contributor was a big jump in petroleum goods imports, reversing a downward trend for most of this year. [Note that last week the Census Bureau’s advance estimate showed the goods trade deficit jumping from $59.7 billion in May to $62.3 billion in June as export were down and imports up (see earlier posting). Today’s data shows a goods trade data of $63.5 billion.]
However, once again exports of pure intangibles continued to grow. While imports also rose slightly, the intangibles surplus increased to $15.7 billion in June. Business services exports grew faster than imports. However, continuing a worrisome trend, 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. The surpluses in maintenance & repair services and in financial services grew with both exports and imports up. The deficit in insurance services improved slightly, while the very small surplus in telecommunications services declined. (See detailed charts below.)
Our Advanced Technology deficit rose slightly from $7.2 billion in May to $8.8 billion in May. Imports increased in all Advanced Technology industries except Flexible Manufacturing. Exports were generally up in almost every industry but not enough to counter the import surge. The biggest change in the deficit came from an increase in Information and Communications Technology (ICT) 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 $6.9 billion in compared with $8.3 billion in May.
Intangibles trade-June15.png
Intangibles and goods-June15.png
Oil goods intangibles-June15.png
Intangibles trade parts-June15.png
Business services-June15.png
Financial services-June15.png
Maintenance and repair services-June15.png
Insurance services-June15.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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