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December 12, 2007
October trade in intangibles
In a reversal of the trend for the past few months, this morning's BEA trade data shows an increase in the deficit by $0.7 billion to $57.82 billion in October. The deficit for September was also revised upwards, meaning the deficit actually increased in that month rather than decreased as previously reported. Much of the increased deficit was due to oil. As the Wall Street Journal reports:
The U.S. bill for crude oil imports was $22.92 billion, up from $20.38 billion in September. The average price per barrel increased $3.98 to a record $72.49 from $68.51. Crude import volumes rose to 316.18 million barrels from 297.50 million.The New York Times points out that imports from China also played a major role:
The deficit with China jumped 9.1 percent to $25.9 billion, a record for a single month.
The rise reflected record imports from China, led by large gains in shipments of toys and games and televisions as retailers stocked their shelves for Christmas. The demand for Chinese imports is still surging despite a string of high-profile recalls of Chinese products from toys with lead paint to defective tires and tainted toothpaste.
The good news is that our intangible trade balance improved by $90 million in October to a surplus of $10.21 billion. The increase was due to royalty receipts and exports of business services growing faster than royalty payments and imports of business services.
The other story on our intangibles trade is the revisions of the data for the past six months. The revised data does not change the overall trend. But it does show constantly higher figures for business service imports and exports and for royalty receipts (exports). Curiously, royalty payments (imports) were consistently lowered in the revisions. In other words, the earlier data appears to systematically underestimate trade in business services and royalty receipts while overestimating royalty payments. This highlights the continued difficulties of measuring trade in the I-Cubed Economy.
The deficit in Advanced Technology Products increased dramatically in October by $1.5 billion, reaching a record monthly deficit of $6.667 billion. This came in spite of a $1.4 billion improvement in aerospace trade as exports surged by almost $1.9 billion. That improvement was overshadowed by increased imports of information and communications technology (ICT), life sciences and opto-electronics. Imports of ICT alone increased by $1.6 billion. The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
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.
Posted by Ken Jarboe at December 12, 2007 9:17 AM
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