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.
Is this a great economy or what? Of copurse, there are a lot of malcontents out there who'd rather be using their brains to make a living instead of merely being bland and affable, but, hey, who needs them anyway? All they can do is design, manufacture, and maintain complex machinery and other complicated things, so they're no fun to be around.
Let's party!!!
My, what a remarkable blanket statement! Have you looked at the author's credentials? I would be very surprised if yours compare favorably.
You sound like a typical supporter of a dying, false religion - the religion of free trade over all. You defend your faith all the more vigorously because you must drive away the demons of doubt your perceive within yourself.
Free trade was supported by Karl Marx, and is supported by the UN. China and India have rapid growth, and trade restrictions - but they surely want the US to have no restrictions at all.
Free trade is just another global welfare scheme - with US taxpayers footing the bill.
My, what a remarkable blanket statement! Have you looked at the author's credentials? I would be very surprised if yours compare favorably.
You sound like a typical supporter of a dying, false religion - the religion of free trade over all. You defend your faith all the more vigorously because you must drive away the demons of doubt your perceive within yourself.
Free trade was supported by Karl Marx, and is supported by the UN. China and India have rapid growth, and trade restrictions - but they surely want the US to have no restrictions at all.
Free trade is just another global welfare scheme - with US taxpayers footing the bill.
Not to mention accusing anyone who challenges them of being socialists.
It's the old alligator syndrome. He won't get it until Indians and Chinese say, "Hey, why are we paying this middleman when we can take on the whole enterprise...we've already got the core, fer' cryin' out loud." Meanwhile, they'll smile in his idiot face and say "Oh, yes...we need you for our US presence."
Last Saturday we went to the USC Trojan Huddle -- the annual spring football scrimmage at the LA Coliseum. We stopped by the concession area just outside the stadium where they had a clearance sale for last year's national championship merchadise. The sale was being overseen by students from the USC School of Engineering. Not one American student anywhere in sight. And I struck up conversations with as many as I could and asked them where they were from. Here's a short list:
India (of course), Pakistan, Bangladesh, China (mainland), Borneo, Sarawak, Sri Lanka, Iran, Egypt. I stayed a lot longer than I indended, talked to a lot of students, just to get some specific information.
It won't matter if American youth are inspired or not. They're not going to get the chance to lead America back to technological dominance, because that profession has already been shipped out lock, stock, and barrel.
Hate to be the droppings in the punch bowl, but I know better. As an MIT aerospace grad, and an Air Force officer working very closely with NASA's space pig program, we're fugued in this department. The National Aerospace Plane, lame as it was, was our last attempt to achieve economical access to space, and we now don't have the time to fantasize about last-minute, marathon pipe dream efforts.
Start your own business.
Quit whining.
If you can't adapt, screw you.
I'd go on, but I'm fresh out of free traitor platitudes.
That having been said - Kerry's wpa plan sucks, and Bush's lassie faire (you lookup the spelling) free market "plan" sucks. The only plan I can see working is a personal plan to get off the teet of big corporate job entitlement, by taking personal responsibility for one's own job prospects - hopefully by starting my own bidness someday.
I didn't say it wasn't suicidal. I actually don't know (surprise), and I don't think any economist knows for sure how this will turn out overall. This outsourcing of office and professional jobs is so new and such a big change, I don't think anyone has a handle or clue about it's effect 5-10 years down the road. Maybe the old models don't apply.
My own personal plan at this point it to be aware of the bad possibilities at the macro level, and to make career plans appropriately (fear globally, plan personally). Beware job interviews where you feel you have to suck up. Empower oneself by taking responsibility. No, this is not an ad for Tony Robbins motivation tapes.
Like all this hasn't happened before
This is precisely the sort of blind complacency and wishful thinking you always see in the ruling elites of rotting empires who refuse to face that the good old days are gone.
Or maybe new Spanish Empire. Or new Polish Commonwealth of XVIIIc
Your analogy is well founded. On the map the Spanish empire was enormous right up to the mid 19th century but around 1650 it stopped being a European great power. And the Polish Commonwealth was huge but with a pitiful excuse for a central government. A great power can become a termite eaten palace that will just one day collapse to the ground. That is what these massive technology transfers are doing to this country.
What are the free trade fools waiting for ? The day when American carrier pilots are slaughtered in a one sided turkey shoot by superior Chinese planes ?
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