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Changes in U.S. imports and exports of intellectual property

The U.S. creates many technological innovations that the rest of the world wants to use. The FRED graph above tracks how much technology the U.S. exported to the rest of the world from 2002 to 2018 (blue line), as measured by payments the world made for the use of U.S. intellectual property (IP). These payments, in the form of royalties and licensing fees, increased from $67 billion to about $118 billion, showing that the U.S. has substantially increased the knowledge it shares globally.

The U.S. also seeks out technology it doesn’t produce at home. So our graph also displays what the U.S. imported from the rest of the world (red line), as measured by the royalty payments the U.S. made to all other countries for the use of their IP. Take care to connect the exports with the left axis and the imports with the right axis, and you can see that the U.S. transfers much more knowledge than it receives from the rest of the world. But the graph also reveals some finer points.

  1. During the Great Recession of 2008-09, real U.S. exports of IP decreased slightly but real U.S. imports of IP kept increasing. In fact, the U.S. has been on a largely continuous trajectory of technology imports, even during periods when its technology exports have declined.
  2. The U.S. has imported IP from the rest of the world at a faster pace than it has exported it. During 2002-2018, real royalties from U.S. technology exports increased by 75%, but real royalties from U.S. technology imports increased by 113%. The last four years of the sample are largely responsible for this faster pace: Since 2015, royalties from U.S. technology imports have grown by 30%, considerably faster than the -2.5% rate for exports.

So, is foreign technology increasing its contribution to U.S. innovation?

Data from the OECD provide some highlights: The main contributors of technology transfer to the U.S. are the European Union and Japan, accounting for 45% and 21% of payments, respectively, in 2017. Although a much smaller contributor, China has increased its technology transfer to the U.S. In 2002, China’s share of U.S. royalties for foreign IP was 0.1%; by 2017, its share had increased to almost 2%—which could be an indication China will become one of the leaders in global innovation and knowledge sharing.

How this graph was created: Search for and select the annual series “Real exports of services: Royalties and license fees”; from the “Edit Graph” panel, use the “Add Line” option to search for and select the annual series “Real imports of services: Royalties and license fees.” In the “Format” tab, for Line 2, click “Right” under the “Y-Axis position” label to shift its y-axis to the right side of the graph.

Suggested by Makenzie Peake and Ana Maria Santacreu.

View on FRED, series used in this post: B684RX1Q020SBEA, B908RX1Q020SBEA

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