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.
The GOP does not see international political adverseries. It sees international commerce markets. In that, it's hand-in-glove with the Fortune 500. That's part of the problem.
While this isn't a bad thing by itself, it does speak to a level of political naivete I would have expected to be wholly confined to the Dems.
I think you're asking for a quality in politicians that is pretty rare. Most just want more special interest money to help them get reelected. It's an even rarer quality in the bureaucrats that the politicians hire to implement policy. Also I generally don't rely on government for anything beyond the needs that can't be satisfied by individuals (e.g. defense, roads).
What it boils down to is I try to have consideration for my neighbors and fellow American taxpayers because if they aren't able to pay taxes because they lose their job, I will have to pick up their share. That means looking for products like chips from my local potato chip factory (Route 11 chips) as just one small example. Personal responsibility, not government protection of politically favored industries. I hope you can see the difference.
Well, when you don't have a cogent argument about the issues, just throw bombs, make accusations and resort to ad hominem attacks. He who yells the loudest wins most of these spitting contests, anyway.
Indeed, it is not "Creative Destruction" for the reasons you stated but I like to call the deleterious effect of our One Way "unFree" trade polices "Senseless Destruction" because it does not have to happen. As you pointed out it has NOTHING to do with Innovation, only the search for cheaper labor to build EXISTING technology.
And the unintended consequence of the race to employ the cheapest world labor is that the practice has the perverse effect of retarding technological development because abundant low cost labor reduces the incentives to further automate a production process and improve on a product. I.E. What incentive is there for a would be inventor to design/build a labor saving device if the price of labor is so low as to make such device non-economic and risky? The Pre-Civil War South is a good example of how slave labor retarded the technological development of the South then.
Good example of how well that state of affairs served them in their Noble Cause. Remember Rhett Butler's point in the debate at Twelve Oaks on the day the War broke out, about how there was not a single cannon factory in the South? Given current trends, I can very well see this happening in this country, but on a far vaster scale. No cannons, no guns, no aircraft, no submarines, no cruise missiles, no (whatever)...
PRECISELY what happened in hand-tools and currently in furniture.
Ahh--actually, you're confusing some issues.
Toyota and Honda manufacture HERE because Ron Reagan told them--no makee, no sellee.
BMW is here, you're right, because of labor arbitrage. US labor is cheaper than German labor.
Your number is wrong. China's growth last year was WAY in excess of 12%, and it's larger YTD 2004.
And, btw, growth is growth, regardless of "starting point."
Just co-incidence that US growth last year was anemic (and YTD04 is also anemic)?
In combination with an earlier comment you made: 'The Pubbies do not see a POLITICAL enemy overseas,' this remark bolsters the case that many of us are making: it AIN'T politics, it's WAR.
PRC cannot defeat this country militarily for at least 10-20 years.
But they can take it down economically...
Yes, our "Bought and Paid For" so-called “Government” is consumed with transferring America’s technology and manufacturing industries to the rest of the world (and all the skilled jobs that goes with it) while plundering away the remaining wealth of this nation. When America has to turn to China and Japan for its military hardware and software needs we will know then that not only are we finished as a Super Power but that the wars of the future will be fought on American soil.
What's going on in the Beltway and in all too many corporate boardrooms in this nation is nothing short of High Treason.
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