News About US High-Tech Trade: Good, Not So Good, and Really Bad

High-technology trade is one bottom line indicator of the performance of a national S&T establishment, or “innovation ecosystem.”  The OECD has been gathering this data for many years for five kinds of products: pharmaceuticals, aerospace, electronics, computers, and instruments.  While OECD doesn’t tabulate totals, it’s easy to sum these up for overall indicators of imports, exports and trade balance in high-tech products.  Econobabble claims that international trade is always a win-win situation for all nations, but the latest direction of these indicators shows that all is not so rosy for the US and EU.

Individual companies measure sales, profits, and market share to monitor the health of their enterprise.  Nations can do something similar by monitoring imports, exports, and trade balance.  The high-technology product sector is particularly valuable as a measure of the success of a nation’s overall R&D investments.  After all, about the only way one can get any financial return whatsoever on their investments in research is to manufacture the resulting innovations, and sell them in domestic and foreign markets.

First the good news: imports of these products are growing rapidly in the US, EU, and PRC providing a cornucopia of snazzy new products like iGadgets for everyone to enjoy: Figure 1.  Figures Here  There is just that little dip in 2009, presumably because of a slowdown due to the Great Recession.  All these graphs are in current dollars.  

The Obama Administration has a goal of doubling exports, and Figure 2 shows that high-tech products are contributing mightily.  The not so good news is  that while US exports of these products are growing rapidly, China’s, and even Europe’s, are growing much more rapidly.

The really bad news is in Figure 3.  US and Japanese market share in this sector has dropped like a rock as they moved their manufacturing off-shore.  Also, like the market share of a company, the trade balance of a country (Figure 4) is an overall measure of its business strength in relation to its competitors.   Until the 1990s the US was a high-tech powerhouse; a trade surplus in this sector helped balance losses in sectors like automobiles.  Then China started manufacturing high-tech products in quantity and selling them at prices no one could compete with.  (Try finding a PC made anywhere else at Best Buy.)  Unfortunately this indicator is also a measure of the overall ROI on research investments.   Heretical thought: could it be that our herculean efforts to innovate our way out of our economic problems and build up our STEM workforce may actually be counterproductive, if our competitors reap ALL the benefits of making and selling the resulting products?!

 R. D. Shelton