According to this morning's BEA trade data, our trade surplus in intangibles declined by 3.75% to $7.8 billion as imports rose and exports declined slightly. Much of the decline was do to higher royalty payments to foreigners and lower exports of business services (where exports failed to keep up with the growth in imports).
The increase in imports of business services is especially worrisome, as it has steadily increased in 2005 and 2006. On the bright side, royalty payments (exports) have also trended upwards while our payments to foreigners (imports) have fluctuated.
The overall trade deficit was essentially unchanged in June, falling by a mere $0.2 billion to $64.8 billion. As expected exports reversed themselves from last month and increased by $2.4 billion. But imports also rose by $2.2 billion. As the Wall Street Journal reports:
The June trade deficit came in precisely where Wall Street expected. The median estimate of 22 economists surveyed by Dow Jones Newswires and CNBC was a deficit of $64.80 billion.
The improvement was due to high enough exports of capitol goods to offset increased energy costs and higher imports of consumer goods.
The deficit in Advanced Technology Products improved slightly in June, falling to $2.5 billion from a deficit of $2.9 billion in May The improvement was largely due to increased exports of aerospace products.
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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