U.S. Trade Balance in Technology Products

The methodology used to identify high-technology industries relies on a comparison of R&D intensities. R&D intensity is typically determined by comparing industry R&D expenditures or the number of technical people employed (e.g., scientists, engineers, and technicians) with industry value added or the total value of shipments (see sidebar, "Comparison of Data Classification Systems Used"). Classification systems based on industry R&D intensity tend to overstate the level of high-technology exports by including all products shipped overseas by those high-technology industries, regardless of the level of technology embodied in each product, and by the somewhat subjective process of assigning products to specific industries.

In contrast, the Census Bureau has developed a classification system for exports and imports that embody new or leading-edge technologies. The system allows a more highly disaggregated, focused examination of embodied technologies and categorizes trade into 10 major technology areas:

  • Biotechnology. The medical and industrial application of advanced genetic research to the creation of drugs, hormones, and other therapeutic items for both agricultural and human uses.
  • Life science technologies. The application of nonbiological scientific advances to medicine. For example, advances such as nuclear magnetic resonance imaging, echocardiography, and novel chemistry, coupled with new drug manufacturing techniques, have led to new products that help control or eradicate disease.
  • Optoelectronics. The development of electronics and electronic components that emit or detect light, including optical scanners, optical disk players, solar cells, photo-sensitive semiconductors, and laser printers.
  • Information and communications. The development of products that process increasing amounts of information in shorter periods of time, including computers, video conferencing, routers, radar apparatus, communications satellites, central processing units, and peripheral units such as disk drives, control units, modems, and computer software.
  • Electronics. The development of electronic components (other than optoelectronic components), including integrated circuits, multilayer printed circuit boards, and surface-mounted components, such as capacitors and resistors, that improve performance and capacity and, in many cases, reduce product size.
  • Flexible manufacturing. The development of products for industrial automation, including robots, numerically controlled machine tools, and automated guided vehicles, that permit greater flexibility in the manufacturing process and reduce human intervention.
  • Advanced materials. The development of materials, including semiconductor materials, optical fiber cable, and videodisks, that enhance the application of other advanced technologies.
  • Aerospace. The development of aircraft technologies, such as most new military and civil airplanes, helicopters, spacecraft (communications satellites excepted), turbojet aircraft engines, flight simulators, and automatic pilots.
  • Weapons. The development of technologies with military applications, including guided missiles, bombs, torpedoes, mines, missile and rocket launchers, and some firearms.
  • Nuclear technology. The development of nuclear production apparatus (other than nuclear medical equipment), including nuclear reactors and parts, isotopic separation equipment, and fuel cartridges. (Nuclear medical apparatus is included in life sciences rather than this category.)

To be included in a category, a product must contain a significant amount of one of these leading-edge technologies, accounting for a significant portion of the product’s value. In this report, computer software is examined separately, creating an 11th technology area.[23] In official statistics, computer software is included in the information and communications technology area (see sidebar, "Comparison of Data Classification Systems Used").

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Importance of Advanced Technology Products to U.S. Trade

During much of the 1990s, U.S. trade in advanced technology products grew in importance as it accounted for larger and larger shares of overall U.S. trade (exports plus imports) in merchandise, producing consistent trade surpluses for the United States. Beginning in 2000 and coinciding with the dot.com collapse, the trade balance for U.S. technology products began to erode, about the same time the U.S. trade balance in high-technology industries shifted to a deficit (figures 6-19 and 6-21figure.; appendix table 6-20Excel.). [24] In 2002, U.S. imports of advanced technology products exceeded exports, resulting in the very first U.S. trade deficit in this market segment. The U.S. trade deficit in advanced technology products grew larger each year thereafter until 2006, when it contracted somewhat. In 2002, the U.S. trade deficit in advanced technology products was $17.5 billion; in 2003, it increased to $27.4 billion, then again increased to $37.0 billion in 2004 and $44.4 billion in 2005. Contract manufacturing by U.S. companies in Asia and elsewhere may be a factor in this trend. The deficit was smaller in 2006, dropping to $38.3 billion, although still larger than any year except 2005.

The U.S. trade deficit is largely driven by trade deficits with Asia, especially with China and Malaysia. U.S. trade with the rest of the world is either relatively balanced or in surplus (figure 6-22figure.; appendix table 6-21Excel.).

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Technologies Generating a Trade Surplus

Throughout most of the 1990s, U.S. exports of advanced technology products generally exceeded imports in 8 of the 11 technology areas.[25] Since 2000, the number of technology areas showing a trade surplus has slipped to five or six (figure 6-23figure.; appendix table 6-20Excel.).

Trade in aerospace products has consistently produced the largest surpluses for the United States since the 1990s. In 2005, U.S. trade in aerospace products generated a net inflow of $37.2 billion, which rose to $53.6 billion in 2006 (figure 6-23figure.; appendix table 6-20Excel.). U.S. trade classified as electronics products (e.g., electronic components including integrated circuits, circuit boards, capacitors, and resistors) is the only other technology area that has generated large surpluses in recent years. In 2000, U.S. trade in electronics products generated a net inflow of $15.2 billion, which increased to $16.1 billion in 2002, then rose to more than $21 billion in both 2003 and 2004, and rose again to $25.4 billion in 2006. Trade activity in biotechnology, computer software, flexible manufacturing products (e.g., industrial automation products, robotics), and weapon technologies also has generated small surpluses during the past few years.

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Technologies Generating a Trade Deficit

Throughout most of the 1990s, trade deficits were recorded in just 2 of the 11 technology areas: information and communications and optoelectronics. Rapidly rising imports of life science technologies during the late 1990s produced the first U.S. trade deficit in that third technology area in 1999. Since 2000, U.S. imports have exceeded exports in about half of the 11 technology areas; the largest trade deficits continue to be in the information and communications technology area (figure 6-23figure.; appendix table 6-20Excel.). In 2006, imports exceeded exports in five technology areas. U.S. trade in information and communications resulted in a net outflow of $93.2 billion; net outflows in life science technologies and optoelectronics were $15 billion and $14.5 billion, respectively. Small deficits were also recorded in nuclear technologies ($1.4 billion) and advanced materials ($0.8 billion).

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Top Customers by Technology Area

Asia, Europe, and North America together purchase nearly 85% of all U.S. exports of advanced technology products. Asia is the destination for about 40% of these exports, Europe about 26%, and Canada and Mexico together about 17% (appendix table 6-21Excel.). China, Canada, and Japan are the largest country customers across a broad range of U.S. technology products, with China accounting for about 10% of all U.S. exports of advanced technology products in 2006, Canada for about 9%, and Japan about 8% (table 6-13table.; appendix table 6-21Excel.). In 2006, China ranked among the top three customers in 5 of the 11 technology areas, Mexico in 4 areas, Canada in 3 areas, and Japan in 7 areas.

Asia is a major export market for the United States. In addition to the broad array of technology products sold to Japan, the latest data show that China is among the top three customers in aerospace, advanced materials, software, electronics, and information and communications technologies. Taiwan is among the top three customers in optoelectronics, flexible manufacturing, and nuclear technologies, South Korea in flexible manufacturing and weapons technologies, and Malaysia in electronics technologies.

European countries are also important consumers of U.S. technology products, particularly Germany, the UK, France, and the Netherlands. The European market is particularly important in two technology areas: biotechnology and aerospace. The Netherlands, Belgium, and the UK are the top customers for U.S. biotechnology products, together consuming more than half of all U.S. exports within this technology area. Germany is the leading European consumer of U.S. life science technologies and optoelectronics, whereas France and the UK are the leading European consumers of U.S. aerospace technology products.

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Top Suppliers by Technology Area

The United States is not only an important exporter of technologies to the world but also a major consumer of imported technologies. The leading economies in Asia, Europe, and North America are important suppliers to the U.S. market in each of the 11 technology areas examined. Together, they supply about 97% of all U.S. imports across all classes of advanced technology products (table 6-14table.; appendix table 6-21Excel.). In 2006, Asia supplied more than 60%, Europe about 21%, and North America about 16%.

China is by far the largest supplier of technology products to the United States, as the source for 25% of U.S. imports in 2006, followed by Mexico with 11% (table 6-14table.; appendix table 6-21Excel.). By comparison, Japan, the third largest supplier, was a distant second among all Asian sources, supplying 9% of U.S. technology imports in 2006. Malaysia, South Korea, and Taiwan are other major Asian suppliers. In the electronics technology area, the top three suppliers are all in Asia and supply about 38% of total U.S. imports.

Among European countries, Germany, the UK, and France are major suppliers of technology products to the United States. Many smaller European countries also have become important sources for technology products, although they tend to specialize. Ireland was among the top suppliers of life science and biotechnology products to the United States in 2006, as the source for 35% and 11%, respectively, of U.S. imports in these categories (table 6-14table.; appendix table 6-21Excel.). Belgium supplied 9% of U.S. biotechnology imports, and the Netherlands supplied 10% of U.S. flexible manufacturing technology imports in 2006.

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Footnotes

[23] U.S. trade in software products is not a separate National Institute of Standards and Technology Advanced Technology Program (ATP) category in the official statistics but is included in the ATP category covering information and communications products. For this report, trade in software products is examined separately, in effect creating an 11th category (see figure 6-23).

[24] The U.S. dollar rose against other major currencies in the late 1990s and continued to rise until early 2002. The sharp rise in the dollar was a contributing factor in the broad-based decline in exports by U.S. manufacturers from 2000 to 2003. The U.S. export decline was also affected by slower rates of GDP growth experienced by some U.S. trading partners during that time, including the EU and Japan.

[25] Data on U.S. trade balance in advanced technology products during the 1990s is available at appendix table 6-3 in volume 2 of NSB (2002), accessible at http://www.nsf.gov/statistics/seind02/
append/c6/at06-03.pdf.

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