engineers engaged in R&D per 1,000 employees 

 and (b) company-funded R&D amounting to at 

 least 3 percent of their net sales, were regarded 

 as "R&D-intensive" products.^- Based on these 

 criteria, the product areas identified as R&D- 

 intensive are (1) chemicals, (2) nonelectrical 

 machinery, (3) electrical machinery, (4) aircraft 

 and parts, and (5) professional and scientific 

 instruments. All other manufactured products 

 were regarded as non-R&D-intensive. 



The U.S. trade balance (exports minus im- 

 ports) associated with these two categories of 

 products is shown in figure 1-19.^-' The 

 favorable balance in R&D-intensive products is 

 clearly indicated; the balance increased fourfold 

 over the 1960-74 period and doubled between 

 1970-74 alone. In contrast, the United States had 

 a large and increasing trade deficit in non-R&D- 

 intensive products. The principal products in 

 this area which accounted for the deficit were 

 motor vehicles, textiles, and metals. ^^ 



The favorable U.S. trade balance in products 

 from R&D-intensive industries is shown in 

 figure 1-20. 



Nnnelectriial machinerxi accounted for nearly 

 one-half of the favorable balance in R&D- 

 intensive products. The recent growth in the 

 balance for this area was largely the result of 

 increased export of electronic computers, 

 construction equipment, and mining and 

 well-drilling machinery. 



Aircraft luui parts contributed approximately 

 one-fifth of the positive balance in R&D- 

 intensive products in 1974. This is the only 



Figure 1-19 



U.S. Trade Balance in R&D-intensive 

 and NonR&D-intensive Manufactured 

 Products, 1960-74 



(Billions of Dollars) 

 25 



-10 — 



R&D intensive products 



NonR&D-intensive products 



.L_L 



-25 



1960 '62 '64 '66 



SOURCE US. Depatlment of Commerce 



I I I I I I 



^- This grouping, of course, is an approximate one. 

 Products and industries, although highly correlated at the 

 gross level, do not perfectly coincide, with the result that not 

 all products manufactured by a high R&D-performing 

 industry can be considered R&D-intensive. 



■■-' The export statistics presented here include all 

 merchandise shipped from the U.S. customs area, with the 

 exception of supplies destined for U.S. Armed Forces abroad 

 for their own use; shipments for relief purposes or under 

 military assistance programs are included. The import 

 statistics cover foreign merchandise received in the U.S. 

 customs area. 



" The trends in U.S. foreign trade presented here were 

 influenced by recent adjustments in the international 

 monetary system. In December 1971, the United States 

 reduced the par value of the dollar; in March 1''74, all of the 

 ma|or world currencies converted to a system of floating 

 exchange rates. The precise impact of these changes on the 

 U.S. trade position is not known, but in general they are 

 thought to enhance the competitiveness of U.S. exports. A 

 detailed discussion of this topic is presented in the Eionomic 

 Report at the Presuient. Council of Economic Advisers, 1975. 



one of the five areas in which imports 

 decreased between 1973 and 1974. 



Chemicah accounted for an additional one- 

 fifth of the positive balance in R&D- 

 intensive products. The recent increase in 

 net exports of chemicals was due largely to 

 growth in the exports of plastics, medicinal 

 and pharmaceutical products, and manufac- 

 tured fertilizers. 



Electrical machinery had the smallest margin of 

 exports over imports, as a result of large and 

 increasing imports in telecommunications 

 apparatus, without comparable increases in 

 exports of other types of electrical 

 machinery. 



25 



