Generating a Trade Surplus with Intangible Assets

In another sign that the world economy is shifting to an intangible economy, the Bureau of Economic Analysis (www.bea.gov) recently released the July trade figures for September. While the the trade deficit was up — rising $4.6 billion to $39.1 billion, the US trade surplus in pure intangibles rose by $166 million to $16.2 billion.

 

So how does the government measure intangible assets? Here is summary as defined by the BEA/Census Bureau:

  • 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.

Over the last few decades, there has been a shift from tangible assets, such as machines, equipment, and real estate, to intangible assets such as trademarks, copyrights, patents and trade secrets. Increasingly, the value of intellectual property is much higher than the physical assets of a business. In fact, intangible assets now account for over 70 percent of the value on corporate balance sheets.

Leave a Reply

Your email address will not be published. Required fields are marked *