Information for a Visual Age

For first time, Asia matches US high-tech investment expenditure

In Asia on February 9, 2012 at 3:56 pm

This originally appeared on Asia Matters for America.

US has lost over one quarter of high-tech manufacturing jobs in past decade.

Ten countries in Asia together invested $399 billion in S&T research and development, as much as the United States, in 2009. Image Source: National Science Board

For the first time in history, the Asian region in 2009 spent as much on research and development in science and technology (S&T) fields as the United States, the traditional leader in high technology investment. The spending has cost American jobs because multinational companies, many of them US-based, locate more of their knowledge-intensive, research and development jobs in Asia, according to a new report by the US National Science Board. During the last decade, the United States has lost nearly three in ten high-tech manufacturing jobs.

Investments in science and technology (S&T) infrastructure are important for knowledge-intensive economies and high-paying jobs. The report states:

Over time, global S&T capabilities have grown, nowhere more so than in Asia. … Western- and Japan-based [companies] are increasingly joined … by newcomers headquartered in developing nations. In most broad aspects of S&T activities, the United States continues to maintain a position of leadership. But it has experienced a gradual erosion of its position in many specific areas.

The report finds that ten countries in Asia together invested $399 billion in S&T research and development in 2009 and spending is growing at a far more rapid rate than the US or the European Union. China’s investments are growing at a phenomenal pace, up 28% in 2010, even higher than its 22% average from previous years. Growth of R&D expenditures in the US and Japan were about 6%, in Singapore and Taiwan it was about 10%, and in South Korea 12%. (The ten countries considered are China, Japan, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand.)

The last decade has decimated US manufacturing employment. Due to the eight-month recession in 2001 and the eighteen-month recessions in 2007-09, the United States lost 28% of its jobs in high technology manufacturing since 2000, a decline of nearly 687,000 jobs. US high-technology exports, once a source of US trade surpluses, have, since 1997, turned into trade deficits, almost $100 billion in 2010.

Dieter Ernst, an East-West Center specialist who has published extensively on the knowledge economy and innovation patterns in Asia, says there is a danger for America in “the possibility that the United States may lose its core economic strength in the 21st Century economy: U.S. dominance in research and development and innovation.” Ernst says knowledge workers in Silicon Valley, for example, now work directly with colleagues in Seoul, Beijing, Shanghai, Bangalore, Delhi, Hyderabad, and Taiwan’s Hsinchu Science Park, challenging the notion that the US will remain the innovation capital of the world.

Overseas R&D expenditures of U.S.-based multinational corporations shifted toward Asia, whose combined share increased from 11% in 1998 to 20% a decade later, with increases in China, South Korea, Taiwan, and Singapore. Image Source: National Science Board

There is some good news for the US. Exports of knowledge-intensive services have consistently produced a growing surplus, reaching a record $108 billion in 2008. These kinds of exports – in business, financial, and communications services and payments of royalties and fees – netted the US economy $3.6 trillion in 2010, the highest amount ever. The US high-tech manufacturing sector is also extremely productive, and becoming more so. Since 2000, output per employee has more than doubled and total output in the high-technology manufacturing industries increased from $275 billion to $386 billion in 2010 (unadjusted for inflation). “In the past decade, the flow of goods emerging from U.S. factories has risen by about a third. Factory employment has fallen by roughly the same fraction,” Adam Davidson writes in an excellent article in the Atlantic. In other words, America is producing more but with fewer employees.

To counteract these trends, the US Obama administration launched last summer the Advanced Manufacturing Partnership, a $500 million program to bring together the private sector, universities, and government to spur investment in emerging technologies. And the Commerce Department recently released “Competitiveness and Innovative Capacity of the United States,” a comprehensive report that calls for increased federal investment in basic research, education infrastructure, and manufacturing.

Whether these efforts can stem America’s loss of manufacturing jobs remains to be seen. What is certain, however, is that America will face stiff and growing competition from Asia for the technology, money and highly-trained personnel to produce the high value goods and services for the future global marketplace.

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