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Chapter 4. R&D: National Trends and International Comparisons

Exports and Imports of R&D-Related Services

Cross-border transactions of business services, published by BEA as part of international transactions accounts, include research, development, and testing (RDT) services under the category of business, professional, and technical services. RDT services include commercial and noncommercial research as well as product development and testing services. In 2009, U.S. RDT exports and imports stood at $18.2 billion and $15.8 billion, respectively, for a balance of $2.5 billion (appendix table 4-27).[19]

Transactions in RDT services provide insights into business R&D-related transactions, including exchanges among unaffiliated or independent companies (unaffiliated trade) and trade within MNCs (affiliated trade). As described below, most transactions in these R&D-related services occur within multinational corporations. Further, the patterns of U.S. RDT exports and imports differ for U.S. and foreign MNCs.

Most RDT trade occurs within companies. Since 2001, when affiliated RDT trade data were first available, transactions among MNCs members (parent companies and subsidiaries) have represented around 85% of total RDT exports annually. This share is consistent with the large role of MNCs (including U.S. parents and foreign-owned companies) in U.S. business R&D performance. (See section "R&D by Multinational Companies.") Likewise, within-company imports accounted for 66% to 78% of total RDT imports annually over the same period. The large share of this affiliated or within-company RDT trade reflects the need for management control and proprietary protection in cross-border transactions involving intangible assets.

Foreign MNCs with operations in the U.S. are exporting more RDT services to their foreign parents (and other members of the foreign MNCs) compared with their level of imports. Foreign MNCs with activities in the U.S. reported average annual net exports of $3.9 billion between 2006 and 2009, with net exports fluctuating between $3.4 billion to $4.5 billion over this period. On the other hand, U.S. MNC parents imported annually about the same or slightly more of those services relative to their exports over the same period (table 4-15).[20] In 2009, U.S. parents imported $602 million more RDT services from their foreign affiliates than they exported to their affiliates.

Europe accounted for about half of U.S. total RDT exports and imports in 2009 (appendix table 4-27). Latin America was the second largest destination of RDT exports (23%) whereas Asia was the second largest origin of RDT imports (about 30%). The latter included 9.1% of RDT imports from India in 2009 (compared with 4.6% in 2006), 8.6% from Japan (compared with 5.9% in 2006), and 5.4% from China (compared with 1.0% in 2006).

Notes

[19] Data in this section cover international transactions in RDT services by U.S.-located companies from BEA's Survey of Transactions in Selected Services and Intangible Assets with Foreign Persons. Separate data for R&D versus "testing" services are not available (further, testing services may have both R&D and non-R&D components). Other fee-based measures on intangibles trade include international licensing and royalty payments and receipts (see chapter 6). RDT services cover activities by companies in any industrial classification, not just companies classified in services or in NAICS 5417 (Scientific research and development services). For further methodological information, see http://www.bea.gov/surveys/iussurv.htm.
[20] U.S. RDT exports by foreign MNCs in 2008 were about 16% of their U.S. R&D performance as reported in the section "R&D by Multinational Companies," whereas the corresponding ratio for U.S. parents was 4%. Thus a substantial share of foreign-owned R&D in the U.S. is apparently devoted to service foreign parents and other members of the foreign MNC. See Moris (2009) for caveats on these cross-survey comparisons.
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