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Posts tagged with: "B684RC1Q027SBEA"

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U.S. net exports of technology have fallen since 2011

How have tech imports and exports changed?

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.

View on FRED, series used in this post: B684RC1Q027SBEA, B908RC1Q027SBEA, GDP

Royalty payments and the incentives to conduct research and development

Countries are introducing policies to generate stronger intellectual property rights. These policies are aimed at increasing incentives for firms to conduct research and development in the country. One form of intellectual property rights is captured by patent royalty payments—that is, payments made to the owner of a patent for the right to use that asset.

The U.S. has experienced a substantial increase in patent royalty receipts and license fees since the 2000s (blue line on left Y-axis). These data are reported in the balance of payments of the country as exports of services and reflect income that firms in the U.S. receive from other countries to use their intellectual property (e.g., patents, trademarks, copyrights, and franchises).

On top of the increase of net receipts of royalty payments from the rest of the world, there has been an increase in expenditures in research and development in the U.S. during the same period (red line on right Y-axis).

As intellectual property rights become stronger, the incentive of firms to innovate strengthens as well. Part of this research and development translates into patented innovations; along with stronger intellectual property rights, this increases royalty payments by firms in other countries that want to use this knowledge.

How this graph was created: Search for “Exports of services: Royalties and license fees” and click on the series you want to create the first line. Select “Line 1” in “Edit Lines” under the “Edit Graph” tab and add the series “Gross Domestic Product: Implicit Price Deflator” to the existing line. Apply the formula a/(b/100) to deflate exports into a constant year. Use “Add Line” within “Edit Graph” to add line 2 “Real Gross Private Domestic Investment: Fixed Investment: Nonresidential: Intellectual Property Products: Research and Development” to the existing graph. Change the time line to be “2000/01/01-2015/01/01” through the two boxes next to “Edit Graph.” Finally, under the “Format” tab, select “Right” for the “Y-Axis position” for line 2.

Suggested by Ana Maria Santacreu.

View on FRED, series used in this post: B684RC1Q027SBEA, GDPDEF, Y006RX1Q020SBEA


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