US Leads In Global Service Exports

Aside from earlier evidences where we noted that manufacturing in the US has reclaimed the top spot in the world [see US Manufacturing Update: Separating Fact From Fiction] and where the US still remains the lead recipient of global Foreign Direct Investments [Global Foreign Direct Investments Down; US Still Dominates], we find additional proofs:

1. of a shifting dynamic in the composition of the US economy from the industrial to the information model, [see Statistics Don't Reveal Extent Of The Evolution To The Information Age]

2. of a manifestation that US growth momentum would likely be oriented towards the free trade paradigm in support of the Information Age and lastly,

3. that debunks the myth that US investments and jobs are being sucked out by emerging markets through "low wages"

This from W. Michael Cox, the former chief economist for the Federal Reserve Bank of Dallas who writes at the New York Times, (all bold highlight mine)

``Exports of American services have jumped by 84 percent since 2000, while the growth rate among goods was 66 percent. America trails both China and Germany in sales of goods abroad, but ranks No. 1 in global services by a wide margin. And while trade deficits in goods have been enormous — $840 billion in 2008 — the country runs a large and growing surplus in services: we exported $144 billion more in services than we imported, dwarfing the surpluses of $75 billion in 2000 and $58 billion in 1992.

``Equally important, Commerce Department data show that the United States is a top-notch competitor in many of the high-value-added services that support well-paying jobs.

``One of the brightest spots is operational leasing — a segment of the industry that handles short-term deals on airplanes, vehicles and other equipment — in which exports exceeded imports by eight to one. Our edge was six to one in distributing movies and television shows, and nearly four to one in architectural, construction and engineering services. Royalties and license fees, one of the largest categories in dollar terms, came out better than three to one, as did exports in advertising, education, finance, legal services and medicine.

``All told, the United States is competitive in 21 of 22 services trade categories. It recorded striking surpluses in 12 of them. Only in insurance did America run a significant deficit, a persistent outcome that reflects foreign prowess in reinsurance (that is, policies insurers take out from other insurance companies to protect against catastrophic losses).

Chart from Mark Perry’s Carpe Diem

``This pattern holds over time. The pecking order may change from year to year — for example, industrial engineering had the biggest surplus in 2006 and film and television held the top spot in 2007 — but the data consistently show the United States is highly competitive in a wide range of services categories.

``So, given how well we are selling services abroad already, can we reach President Obama’s five-year goal of doubling exports? Actually, it shouldn’t be that daunting. Our overseas sales of goods and services combined rose nearly 80 percent from 2003 to 2008. In fact, the current weak dollar and continuing economic growth in Asia might be enough to carry us the rest of the way to the goal even if the president’s proposed National Export Initiative fails to get off the ground. That said, there are some concrete measures that should be taken now that will pay off in the longer term, most having to do with free trade.

``The president said he would “reform export controls” and “continue to shape” an agreement that opens global markets during the so-called Doha round of World Trade Organization negotiations. But those talks are in their ninth year, and a final accord is a long way off. For now, we have to look at trade as a two-way street: increasing our opportunities to export entails giving other countries greater access to the American market.

Mr. Cox's zinger to the liberal cavilers,

``We can complain as much as we want about China and other nations stifling domestic sales of our products, but our companies will get nowhere if the United States comes to the bargaining table with a something-for-nothing mindset."

All these has been presciently captured by Alvin and Heidi Toffler in Revolutionary Wealth who wrote,

``Where the Second Wave built ever more-towering- vertical heirarchies, the Third wave tends to flatten organizations and brings a shift to networks and many alternative structures.

``And these only begin the lenghty list of radical changes. Thus, manufacturing things we can touch-the core function of Second Wave economies-has increasingly become an easily commoditized, comparatively simple, low-value-added activity.

``By contrast, such intangible functions as financing, designing, planning, researching, marketing, advertising, distributing, managing, servicing and recycling are frequently difficult and costly. They add more value and generate more profit than metal bending and muscle work. The result is a profound change in the relations of different sectors in the economy."

For us, investments are shaped by the market dynamics and or forward looking consumer trends as the above.