Figure 1-20 



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

 Manufactured Products, by Product 

 Group, 1960-74 



(Billions of Dollars! 

 11 



Electrical machinery * 



3^* -•» 



^ "nstruments ** 

 J I \ I I I I \ \ \ 



1960 '62 '64 '66 '68 70 72 74 



SOURCE: US, Department of Commerce. 



Professional and scientific instruments maintained 

 a steady but small growth in net exports 

 through 1974. 



There have been substantial changes over the 

 last decade in the mix of products underlying the 

 favorable trade balance. Several products have 

 become increasingly important to the 

 maintenance of the positive trade balance in 

 R&D-intensive products (including electronic 

 computers, fertilizers, electronic tubes, tran- 



sistors and semiconductor devices), while the 

 contribution of other commodities (such as 

 telecommunications apparatus) has led to a 

 negative balance. This mixture of growing and 

 declining exports illustrates the complexities of 

 the present U.S. trade position. The underlying 

 dynamics of the position, however, are partially 

 explained by the "product cycle" concept. ^^ 

 Trade in manufactured goods, according to this 

 concept, typically follows a cycle in which the 

 United States initially establishes a net export 

 position with the introduction of a new product, 

 maintains this position until the technologies 

 and skills necessary for manufacturing the 

 product are developed elsewhere, and then 

 becomes an importer as the production is 

 standardized and moves abroad to minimize 

 costs. This concept implies that the product 

 structure of U.S. exports must have a con- 

 tinuous infusion of new products in order for the 

 United States to maintain a favorable trade 

 position. 



The favorable position of the United States in 

 R&D-intensive products is based primarily on 

 exports to developing nations, countries of 

 Western Europe, and Canada. -"^ The U.S. trade 

 balance in these products is shown in figure 1-21 

 for selected areas and countries. In 1973, the 

 developing nations accounted for 44 percent of 

 the positive U.S. trade balance; nonelectrical 

 machinery and chemicals were particularly large 

 net export commodities for the United States in 

 trade with these nations. In the case of trade 

 with Western Europe, the United States had its 

 largest net exports in the areas of aircraft and 

 nonelectrical machinery (particularly in com- 

 puters). U.S. net exports to Canada are concen- 

 trated in the areas of nonelectrical and electrical 

 machinery. 



A trade deficit in R&D-intensive products 

 developed with Japan in the mid-1960's and 

 persisted through 1974. This deficit occurred 

 primarily in electrical machinery products 

 (particularly consumer electronics) and to a 

 lesser degree in professional and scientific 

 instruments and nonelectrical machinery. Only 

 in the areas of chemicals and aircraft does the 



'' Raymond Vernon, "International Investment and 

 International Trade in the Product Cycle", Quarterly Journal of 

 Ecowmici, Vol. 80, May lQo6. 



<" For a more complete discussion of these relationships 

 see Keith Pavitt, " 'International' Technology and the U.S. 

 Economy; Is there a Problem?" in The Effecli of hiternatwnal 

 Technalogii Tramfen on U.S. Economy, National Science Founda- 

 tion, Papers and Proceedings of a Colloquium (NSF 74-21). 



26 



