November trade in intangibles

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This morning's trade numbers from BEA come as a bit of a shocker. The deficit jumped by $6.6 billion in November to $48.7 billion. The increase was due to a surge in imports, up $8.4 billion. Exports grew by $1.7 billion. This was in complete opposite to economists' expectations of a slightly shrinking deficit. According to Bloomberg, economists had expected a trade deficit of $41.3 billion (with estimates ranging from $39.8 billion to $45 billion). The surge was lead by a $4.6 billion increase in consumer goods imports. Declines in oil prices actually help moderate the rise in the deficit. As the chart below shows, our deficit in petroleum goods actually decline in November.

A not quite so bad story can be told about our trade in intangibles. Imports of business services and royalty payments (imports) where both up while royalty receipts (exports) and export of business services were down. As a result, our surplus in intangibles dropped by slightly $106 million to $14.4 billion.

The general bad news was mirrored in the $1.7 billion increase in the deficit in Advanced Technology Products. Similar to last month, the biggest change was a $2.1 billion increase in information & communications technology imports. 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.

Intangibles trade-Nov12.png

Intangibles and goods-Nov12.png

Oil good intangibles-Nov12.png


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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Remember that big jump in the trade deficit for November that BEA reported last month? Well, things might have been a little better than normal in December. This morning, the BEA said the December trade deficit was $38.5 billion (compared... Read More

2 Comments

Ken, I'm trying to think through this data.

Starting from the basics, am I right that (1) intangible EXPORTS are the value of services sold plus royalties recieved and (2) intangible IMPORTS are the value of services purchased plus royalties paid? And that in November 2012 we exported $14.4B more than we imported?

If so, that's impressive.

The BEA fact sheet states that "Royalties and license fees ... includes transactions with both affiliated (related parties) and unaffiliated foreign residents." I assume "related parties" includes foreign IP holding company subsidiaries of our U.S. corporations. Am I right that the literally tens of billions of dollars that U.S. corporations pay to their foriegn IP holding company subsidiaries for federal tax avoidance reasons counts in the BEA data as IMPORTS? So that absent this tax-avoidance transfer of money offshore our intangibles trade surplus would be significantly higher?

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