The U.S. economy continues to be a leading competitor and innovator in the global economy as measured by its overall performance, market position in S&T industries, and trends in patenting of new technologies at home and abroad. The U.S. economy has grown relatively rapidly and become more productive while sustaining a high and rising per capita income. The U.S. gap with Asia on many of these measures is narrowing, however, because of rapid progress by China and several other countries. Although the EU’s economic position is relatively strong, its market position in S&T industries has either flattened out or slipped.

The strong competitive position of the U.S. economy is tied to continued U.S. global leadership in many industries that have extensive ties to S&T. With the service sector increasingly dominating global economic activity, the United States continues to hold the dominant market position in service industries that rely on S&T. The U.S. trading position in technology-oriented services remains strong, as evidenced by the continued U.S. surplus in trade of computer software and manufacturing know-how.

The U.S. position in high-technology manufacturing industries, however, is not quite as strong as in services. The United States continues to be a leading innovator and producer in many high-technology manufacturing industries, but the historically strong U.S. trade position has decreased. Although in surplus for the prior two decades, the U.S. trade balance moved to a deficit during the late 1990s because of faster growth of imports, primarily in computer and communications equipment. The U.S. trade balance in advanced-technology goods has similarly moved from surplus to deficit during this period.

Led by China, South Korea, and Taiwan, Asia is challenging the U.S. market position in S&T industries and reducing the gap on technological innovation. China has rapidly risen to become a leading producer and exporter of high-technology manufacturing goods, as measured by world market share. This rapid ascent shows signs of continuing. South Korea, Taiwan, and other Asian economies have also become leading producers and exporters in S&T-intensive industries.

Various patenting indicators suggest that the United States will remain a leader in technological development within its domestic and foreign markets. The leading source of economically valuable patents known as triadic patents, the United States also leads in U.S. patent applications and is the leading foreign source of European patent applications. Asia shows a strengthening of technological development, however; its share of U.S. and European patents has risen markedly, led by Japan, South Korea, and Taiwan.

In sum, the United States continues to be a world-class competitive and technologically innovative country with a leading position in most high-technology industries. Several Asian economies, however, including China, South Korea, Taiwan, and India, have become global players in some high-technology industries, and their technological capabilities are strengthening. The EU, on the other hand, has lost market share in high-technology industries.

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