The U.S. economy continues to be a leading global economy and competitor in technology-based industries as measured by its overall performance, market position in KTI industries, and position in patenting and other measures of technological capability. The U.S. economy has grown relatively rapidly and become more productive while sustaining a high and rising per capita income.
The strong competitive position of the U.S. economy is tied to continued U.S. global leadership in many KTI industries. The United States continues to hold the dominant market position in commercial knowledge-intensive service industries, which account for nearly one-fifth of global economic activity. The U.S. trading position in technology-oriented services remains strong, as evidenced by the continued U.S. surplus in commercial knowledge-intensive services and licensing of patents and trade secrets.
Although the United States remains a leader in many KTI industries, its market position in most of these industries has either flattened or slipped. The historically strong U.S. trade position in advanced technology products has shifted to deficit because of the faster growth of imports. This shift is due in part to U.S. companies moving assembly and other routine activities to China and other East Asian countries. However, the U.S. deficit also reflects the development of indigenous capability of East Asian countries in high-technology manufacturing industries.
China and other emerging Asian economies are showing rapid progress in their overall economic progress and technological capabilities. Their market positions in KTI industries—particularly high-technology manufacturing industries—have strengthened, and their shares of U.S. and economically valuable patents have risen, led by South Korea and Taiwan. World Bank indicators of innovative capacity also show that these emerging Asian economies are converging with the United States or are making rapid progress.
China has become a leading global producer and exporter of high-technology manufacturing goods by becoming the world's major assembly center, supplied by components and inputs from East Asian economies. However, China's rapid progress in other indicators of technological capability and the nascent rise of globally competitive Chinese companies suggest that China is moving to more technologically challenging and higher end manufacturing activities.
The EU's position is similar to that of the United States—relatively strong economic performance with flat or slight declines in its market position of KTI industries. Japan's economy has shown less dynamism compared with the United States and the EU, and its market position has declined steeply in many KTI industries. Japan's loss of market position in high-technology manufacturing industries is due, in part, to Japanese companies shifting production to China and other Asian economies.
The severe downturn of the global economy, starting in 2008, has interrupted these trends observed over the past decade. The United States, the EU, and other developed economies have experienced sharp declines in their commercial knowledge-intensive service industries. The steep drop in exports of high-technology manufacturing goods has adversely affected many Asian economies and slowed China's growth. Whether the global downturn will lead to fundamental changes in the market positions of the United States and other major economies in the production and trade of KTI industries remains uncertain.