Skip to comments.U.S. Loses Its Advantage In Technology Trade
Posted on 04/06/2004 12:49:21 PM PDT by doug9732
For the first time ever, the United States has a negative trade balance in technology goods and services and from royalties on intellectual property and patents.
The superiority the United States has held in technology trade has suddenly vanished. The U.S. Commerce Department tracks foreign earnings and payments for royalties and fees on intellectual property. It tracks trade accounts in technology services such as data processing and engineering. It also maintains a constantly updated list of specific advanced technology products (ATP) and monitors the export and import of these goods.
During the second half of 2003, ATP goods suffered a deficit of nearly $17.5 billion, while the surplus for royalties, fees and technology services was barely $16 billion. This left a small but symbolic deficit for the first time on record in the trade of all U.S. technology goods and services. If recent history is any guide, this U.S. loss in technology will quickly become very large and concentrated in China.
The significance of the U.S. losing advantage to China in technology trade has far-reaching consequences. With less than one-quarter of China's population and a vastly more expensive living standard to sustain, the United States cannot compete without a large technological advantage.
Over the past decade, the United States accumulated global current account deficits -- and debts -- totaling $2.8 trillion. Deficits worsened substantially for manufactured goods and the overall surplus in services declined. Wall Street economists and most politicians ridiculed concerns that the United States was producing so much less than it consumed.
"New economy" advocates said that U.S. technological superiority would provide good jobs and enormous export earnings needed to pay for the trade deficits in traditional industries from autos to textiles. Indeed, in 1997 the U.S. trade surplus in technology goods and services reached a record $60 billion -- $32 billion in ATP and about $28 billion in IP and services.
Now, technology is itself a source of lost U.S. jobs and mounting bills for net imports.
A major change occurred with the end of the technology and financial bubble in 2000 as firms looking to cut costs greatly accelerated the export of technology jobs rather than goods and services. Unlike past recessions, when U.S. trade balances improved sharply, the technology balance began to collapse with the first-ever annual ATP deficit in 2002, worsening by 65 percent in 2003. Spurred by a much weaker dollar, the IP surplus improved only slightly in 2003 after seven years of decline and stagnation.
Last year the United States faced $43 billion in trade deficits just for computers, cell phones and their parts. Fortunately, almost half of this deficit was offset by $21 billion in surpluses for semiconductors, a vital industry that has rebounded in the U.S., but now faces strong new supply-chain and policy incentives to step-up outsourcing abroad. The United States is amassing a current accounts deficit at a rate of $1 million per minute while the country lost 718,000 jobs during the first 27 months of cyclical recovery.
The shift from exporting to outsourcing pits the world's lowest wage countries -- their labor and regulatory policies -- against each other. China, now under its tenth ambitious Five-Year Economic Plan dedicated to technology, usually wins this contest. The world's most powerful global companies have made China the leading choice for productive new foreign investment.
This is entirely different from concerns in the 1980s when U.S. companies were losing the competition with Japanese companies. The concern now is not between companies but that global U.S., European and increasingly Japanese companies are all shedding their national loyalties and outsourcing their best jobs, research and production to China and elsewhere.
Despite constant media stereotypes that low-value products such as shoes and toys make up the bulk of U.S. imports from China, electrical machinery was the major U.S import from China from 1994 until last year, being displaced by non-electrical machinery.
The U.S. has had an ATP deficit with China since 1995 and an overall deficit in technology goods and services trade with China since 1999. Last year, that deficit soared to over $20 billion, almost five times larger than the U.S. technology deficit with Japan.
Technology is driving vital economic changes far too rapidly and far too threateningly for politicians and pundits in the U.S. and elsewhere to continue merely repeating over-simplified 18th Century economic theory. Serious public education and discussion of the dynamics of global commerce is long overdue. The current electoral cycle is a critically important time to begin.
-- Charles W. McMillion is president of MBG Information Services in Washington, D.C. He is formerly an Associate Director of the Johns Hopkins University Policy Institute and Contributing Editor of the Harvard Business Review.
Thanks for donating to Free Republic!
Move your locale up the leaderboard!
Looks like the free traitors are close to accomplishing their goal - the subordination of the U.S. to China.
If you want on or off my offshoring ping list, please FReepmail me!
Coming even sooner than anticipated. It was inevitable given the falloff in US dominance in science the past few years. It's going to be next to impossible to recover the lead unless the new NASA space program inspires the youth.
Or maybe the ice delivery man vs. refrigerators (false) analogy. And don't forget the ever-popular bromides (slaps-in-the-face):
1. Start your own business (with no money)
2. Relocate to where the work is (where is that, India?)
3. Get a job, any job (just throw away everything you ever learned or worked to have)
4. If they can't adapt, screw 'em (i.e., let them eat cake)
See how easy it is to view things from the black-and-white free trade mantra point of view (especially if you are not the one hit...yet)?
When all else fails, denigrate anyone that disagrees with you.
Like all this hasn't happened before.
In the late 60's/70's, it was aerospace workers who were whining and having to find new careers.
There was a huge uptick in IT several years ago. Driven mainly by panic over Y2K and conversions to new Windows systems.
Now the expansion is over, and surprise, surprise, surprise, fewer people are needed in IT. I'm sure the first hit was on the "head hunters", but at least they're salesmen and they can go sell cars now.
If Kerry gets elected, one of the main reasons will be because he promises "10 million new IT jobs" and to fight outsourcing. To that extent, threads like this one look to me to be Kerry advertisements.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.