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Chapter 6. Industry, Technology, and the Global Marketplace

Conclusion

The U.S. economy continues to be the leading global economy in technology-based industries as measured by its overall performance, market position in KTI industries, and position in patenting and other measures of innovation-related activities.

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 KI 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 KI services and licensing of patents and trade secrets. The United States is the leading source of RD&D and venture capital financing of clean energy and technologies.

The overall U.S. ranking notwithstanding, its market position in most of these industries has either flattened or slipped. Productivity growth of the U.S. economy has slowed in the 2000s relative to the 1990s. The historically strong U.S. trade position in advanced technology products has shifted to deficit because of the faster growth of imports than exports. This shift is due in part to U.S. companies moving assembly and other activities to China, other East Asian countries, and elsewhere. However, the U.S. deficit also reflects the development of indigenous capability by China and other East Asian countries in HT manufacturing industries.

China and other emerging Asian economies are showing rapid progress in their overall economic growth and technological capabilities. Productivity growth has accelerated, coinciding with an increase in the concentration of KTI industries in many of their economies. Their market positions in KTI industries—particularly HT manufacturing industries—have strengthened, and their shares of U.S. and economically valuable patents have risen, led by South Korea and Taiwan. The number of Chinese patents has soared, with Chinese and non-Chinese inventors each having a 50% share, suggesting the expansion of technological activity by domestic and foreign companies in China's rapidly growing economy.

Among individual large countries, China's progress clearly stands out. China has become a leading global producer and exporter of HT manufacturing goods. It has become a major global 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. China has become the world's largest source of commercial financing for clean energy and is home to rapidly growing wind and solar industries.

The EU's position has been similar to that of the United States for much of the 2000s—relatively strong overall economic performance with a slowdown in productivity and flat or slight declines in its market position in KTI industries. However, the EU has suffered more severe losses in its market position in KTI industries than the United States during the worldwide recession in part because of the EU's debt and fiscal problems. 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 HT manufacturing industries is due, in part, to Japanese companies shifting production to China and other Asian economies.

The global recession had a disproportionately severe impact on the United States, the EU, and other developed economies, with production of their technology-intensive industries declining in 2009. In contrast, technology-intensive industries of developing economies, led by China, continued to grow during the global recession and increased their market positions relative to developed economies. Worldwide output of technology-intensive industries recovered in 2010, with much faster growth by China and other developing economies. Recovery of technology-intensive industries in the developed economies in 2010 was more evident in the United States and Japan than in the EU. Whether the global downturn will lead to fundamental changes in the market positions of the United States and other developed economies in the production and trade of KTI industries remains uncertain.