The FRED graph above shows the quarterly evolution of U.S. net exports of technology, from Q1 1967 to Q1 2021. Net exports of technology are measured as royalties and license fees received minus royalties and license fees paid during this period (as a percentage of GDP).
The U.S. has always been a net exporter of technology and, hence, a net receiver of royalty payments. And net exports as a share of GDP have steadily increased from 0.12% in Q1 1985 to 0.48% in Q3 2011—an increase of 300%! But after 2011, there’s been a slow decline, reaching 0.28% in Q1 2021 (its lowest level since Q1 2002). What’s caused this decline?
The FRED graph below shows, separately, exports of technology in terms of royalties received and imports of technology in terms of royalties paid (again, as a percentage of GDP). While U.S. technology exports have steadily fallen from 0.70% in Q3 2011 to 0.51% in Q1 2021, imports have remained fairly stable. Hence, the decline in net exports has been driven exclusively by a decline in exports.
The decline in royalties received by the U.S. throughout the 2010s could be attributed to two factors. First, the rise of Silicon Valley tech giants and their use of royalty payments to shift profits and avoid taxes by moving their intellectual property to tax havens. Second, the U.S.’s standing as the sole global technological power has been rapidly challenged by China over the past few decades. In fact, look for a blog post on that topic in the next week.
How these graphs were created: First graph: Search FRED for “Royalties” and select “Exports of services: Royalties and license fees.” From the “Edit Graph” panel’s “Edit Line 1” tab, use the customize data search box to search for and add “Imports of services: Royalties and license fees” and “Gross domestic product.” Then use the formula box below to type in ((a-b)/c)*100. Second graph: Search FRED for “Royalties” and select “Exports of services: Royalties and license fees.” From the “Edit Graph” panel’s “Add Line” tab, search for and add “Imports of services: Royalties and license fees.” Go to the “Edit Line” tab for each of these series and use the customize data search box to search for and add “Gross domestic product.” Then use the formula box below to type in (a/b)*100.
Suggested by Ana Maria Santacreu and Jesse LaBelle.
