This morning's BEA trade data shows that our trade deficit declined dramatically in February - down over $10 billion to $26.0 billion. Exports grew by $2.0 billion while import dropped by $8.2 billion. The rise in exports is extremely good news - as it points to a healthier trade balance long term. Notably, goods exports accounted for all of the improvement. The biggest jumps in exports were in a diverse set of industries: soybeans; steelmaking materials; chemicals; semiconductors; telecommunications equipment; pharmaceuticals; artwork; and, gem diamonds.
That leads us to our not so good news: the intangibles balance was essentially unchanged -- as trade in all categories (export and imports; royalties and business services) all declined.
Our deficit in Advanced Technology Products also continued to decline, dropping to $1.5 billion in February as exports grew and imports dropped. 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.
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