The third section of this chapter examines several trade and globalization measures associated with KTI industries in the United States and other economies. (For an explanation of KTI industries, please see “Chapter Overview.”) In the modern world economy, production is more often globalized (i.e., value is added to a product or service in more than one nation) and less often vertically integrated (i.e., conducted under the auspices of a single company and its subsidiaries) than in the past. These trends have affected all industries, but their impact has been pronounced in many commercial KTI industries. The broader context is the rapid expansion of these industrial and service capabilities in many developing countries, both for export and internal consumption, accompanied by an increasing supply of skilled, internationally mobile workers. (See chapter 3 for a discussion on the migration of highly skilled labor.)
This section focuses on cross-border trade of international KI services and HT trade and on U.S. trade of ATP. (See “U.S. Trade in Advanced Technology Products” later in this chapter for a discussion of how the U.S. Census Bureau's classification of ATP differs from the classification of HT products based on the OECD industry classification.) It will also examine trade and other globalization measures of U.S. multinationals in KTI industries. Trade data are a useful although imperfect indicator of globalization (for a discussion, see sidebar, “Measurement and Limitations of Trade Data”).
This discussion of trade trends in KI services and HT manufactured products focuses on (1) the trading zones of the North American Free Trade Agreement (NAFTA), with a particular focus on the United States, and the EU; (2) China, which is rapidly taking on an increasingly important role in KTI trade; (3) Japan and other Asian countries; and (4) large developing countries, including Brazil, India, and Indonesia.
The EU, East Asia, and NAFTA have substantial volumes of intraregional trade. This section treats trade within these three regions in different ways. Intra-EU and NAFTA exports are not counted because they are integrated trading zones with common external trade tariffs and few restrictions on intraregional trade. This kind of trade is treated as essentially equivalent to trade between China and Hong Kong, which is excluded because it is essentially intraeconomy trade. (Data on trade in commercial KI services between China and Hong Kong are not available.) Intra-Asian trade is counted for other Asian countries because they have a far smaller degree of trade integration.
Exporting goods and services to other countries is one measure of a country's economic success in the global market—the goods and services it produces compete in a world market. In addition, exports have an important advantage over domestic purchases in that they bring in income from external sources and do not consume the income of a nation's own residents.
Global trade in commercial KTI goods and services consists of four services—business, communications, computer and information, and finance—and six HT products—aerospace, communications, computers, pharmaceuticals, semiconductors, and scientific instruments. Global cross-border exports of commercial KTI goods and services were an estimated $3.7 trillion, consisting of $2.3 trillion of exports of HT products and $1.4 trillion of commercial KI services (figure
Global exports of commercial KI made up one-third of all commercial services. Among the commercial KI services, business services was the largest ($800 billion), followed by finance (which includes insurance) ($300 billion), computer and information services ($170 billion), and communications ($80 million).
The United States, the EU, Japan, and other developed countries export $1.0 trillion in commercial KI services, comprising 77% of global exports (figure
Exports of developing countries make up a small share (22%) of global exports of commercial KI services. China and India have the largest global export shares of any developing economy (6%–7% each), and they are tied as the third largest in the world, behind the United States and the EU (table
India is notable for being the largest exporter of computer and information services, attesting to the strong market position of Indian firms providing IT and related services to the rest of the world (table
Between 2004 and 2011, cross-border commercial KI exports of developing countries nearly tripled to reach $296 billion, expanding much faster than in developed countries but from a much lower base (figure
China's exports tripled during this period, resulting in its global export share climbing from 4% to 7% (table
India's exports also expanded rapidly, with its global share rising from 4% to 7%. India's surplus expanded from $11 billion to $50 billion during this period.
The EU is the largest exporter of commercial KI services, with a global share of 32% (figure
Between 2004 and 2011, growth of commercial KI exports of developed economies trailed developing economies, resulting in their global share falling from 83% to 77% (figure
U.S. exports of commercial KI services more than doubled to reach $235 billion; the U.S trade surplus climbed from $33 billion to $52 billion (table
In the EU, commercial KI services grew at a similar pace, reaching more than $400 billion in 2011, with the EU's surplus more than doubling to reach $127 billion (table
Global HT product exports—aircraft and spacecraft; computers; communications; semiconductors; pharmaceuticals; and testing, measuring, and control instruments—were $2.3 trillion in 2012, making up 16% of the $14.7 trillion in exports of all manufactured goods (figure
The bulk of global exports ($1.4 trillion) originate from developed countries—primarily from the EU, the United States, Japan, and several Asian economies, including Singapore, South Korea, and Taiwan (figure
China is the largest exporter of HT products among developing countries and is also the world's largest exporter, with a 28% share of global HT exports (table
Between 2003 and 2012, HT exports of developing countries grew twice as fast as those of developed countries. As a result, the developing countries increased their share of global HT exports from 29% to 40% (figure
China's ICT exports, which dominate China's HT product exports, more than tripled to reach almost $560 billion during this period (table
Trends varied widely among other developing countries (appendix table
The bulk of global exports of HT goods ($1.4 trillion) originate from developed countries—primarily the EU, the United States, Japan, and several Asian economies (figure
Between 2003 and 2012, exports of developed economies nearly doubled to reach $1.4 trillion in 2012 (figure
In the United States, HT product exports grew slightly faster than the average for all developed economies' exports (appendix table
U.S. growth of HT product exports was led by pharmaceuticals and by aircraft and spacecraft (appendix tables
Exports of ICT products, the largest component, grew slower than the average for all HT products to reach $94 billion (appendix tables
The EU exhibited a similar trend, with growth in its HT product exports led by aircraft and spacecraft, pharmaceuticals, and testing, measuring, and control instruments (appendix tables
Other major Asian exporters—Japan, South Korea, and Taiwan—showed divergent trends (appendix table
Taiwan's HT exports doubled during this period, and it surpassed Japan in 2010 to become the largest developed Asian exporter of HT products. South Korea's HT exports also doubled, and it reached Japan's level in 2012. Both of these economies' rapid gains in HT exports were due to growth of ICT product exports, which make up most of their HT exports (appendix tables
The Census Bureau has developed a classification system for internationally traded products based on the degree to which they embody new or leading-edge technologies. This classification system has significant advantages for determining whether products are HT and may be a more precise and comprehensive measure than the product classification based on the OECD classification for HT industry production. It categorizes ATP trade into 10 major technology areas, including aerospace, biotechnology, electronics, ICT, life sciences, and optoelectronics.
U.S. trade in ATP products is an important component of overall U.S. trade, accounting for about one-fifth of combined nonpetroleum exports and imports. Five technology areas—ICT, aerospace, electronics, life sciences, and optoelectronics—account for more than 90% of the total value of U.S. ATP exports and imports (table
In 2012, the United States exported $305 billion in ATP goods and imported $396 billion, resulting in a deficit of $92 billion (figures
Between 2003 and 2012, U.S. ATP imports grew faster than exports, resulting in the trade deficit widening from $27 billion to $92 billion (figure
Aerospace exports grew the next fastest, and outpaced growth of imports, resulting in the trade surplus widening from $27 billion to $66 billion (appendix table
Exports of ICT products grew the slowest among these four technology areas, with much faster growth of imports (appendix table
In electronics, the United States had a surplus of between $16 billion and $25 billion for much of the 2000s. Between 2011 and 2012, the trade surplus fell to $7 billion because of a decline in exports combined with an increase in imports (appendix table
The Bureau of Economic Analysis (BEA) conducts an annual survey of U.S. multinationals that includes firms in KTI industries. The BEA data are not directly comparable with the world industry data used in the previous sections. However, the BEA data provide additional information on the globalization of activity and employment in U.S. multinationals in these industries.
U.S. multinationals in commercial KI services industries generated $1.1 trillion in value added in 2010 (preliminary), of which $873 billion (76%) occurred in the United States (appendix table
U.S. multinationals in commercial KI services industries employed 7.4 million workers worldwide, of whom 5.4 million (72%) were employed in the United States (appendix table
U.S. multinationals in the HT manufacturing industries (excluding aircraft and spacecraft) generated more than $400 billion worldwide in value added in 2010 (preliminary), of which about two-thirds originated in the United States (figure
U.S. multinationals in HT manufacturing employed 2.4 million workers worldwide, with 1.2 million workers (about 50%) employed in the United States in 2010 (preliminary) (appendix table
Foreign direct investment (FDI) has the potential to generate employment, raise productivity, transfer skills and technology, enhance exports, and contribute to long-term economic development (Kumar 2007). Receipt of FDI may indicate a developing country's emerging capability and integration with countries that have more established industries. FDI in specific industries may suggest the potential for these industries' evolution and the creation of new technologies.
This section uses data from BEA on U.S. direct investment abroad and foreign investment in the United States in KTI industries. The rising volume of trade by U.S.-based KTI firms has been accompanied by increases in U.S. direct investment abroad and FDI in the United States. Estimates of U.S. direct investment abroad and FDI in the United States are lower-bound estimates because a substantial share of outward and inward investment is allocated to holding companies that own companies in other industries.
The stock of U.S. direct investment abroad in computer and electronic products, which includes the HT industries of communications, semiconductors, and testing, measuring, and control instruments, was $102 billion in 2012 (figure
The stock of U.S. direct investment abroad in commercial KI services industries was $1.0 trillion in 2012 (figure
The stock of inward FDI in U.S. computer electronics manufacturing industries was $61 billion in 2012, less than the amount the United States invested abroad in these industries (figure
Similarly, the stock of inward FDI in U.S. commercial KI services, at $596 billion in 2011, was less than the amount the United States invested abroad in these industries (figure