Feb 19, 2009

US' main exports: Raw Materials?????

I just saw an expert on TV saying because the US' main exports are raw materials (fertilizers, grains, lumber), not manufactured high technology goods such as electronics and semiconductors. The expert infered that therefore the US is like Third World countries (who export oil, intelligent, ambitious, hard-working people), destined for low standards of living and poor prospects. This kind of comment betrays an ignorance or willful denial of how world trade works, and the value of intellectual property.

Are "exports" measured by mass, volume, monetary value, political impact, social impact or by another metric?

US companies manufacture semiconductors or consumer electronics products overseas because they can get higher margins than manufacturing in the US. When the products are sold, say, from Thailand, where the factory or assembly plant are, to Korea, that export is counted as a transaction between Thailand and Korea -- the US doesn't seem to be a participant. However, a part of the revenue is repatriated to the US where Intel and Apple and many of the parent companies live. When a Ford car is exported from say, Germany where it's manufactured, to the UK, that's counted as a German export, but Ford's home office in the US gets some of that money.

Even better than the money from manufactured goods is the money from intellectual property such as software. When a PC is sold anywhere in the world, Microsoft gets a license fee for the operating system, for Microsoft Office Suite and for other applications such as the web browser. In fact the MAJORITY of the cost to make PCs is for license fees, not the hardware.

The US invented the advertising model, the most effective revenue generator for web-based businesses today. Every time a web user, anywhere in the world, clicks on a Google ad, Google gets paid for that click. Without exporting any physical item, Google, a US company, is enabling anyone with web access, anywhere in the world to use its intellectual property and web services.

It would seem that whereever that expert on TV got his data about US exports, that source has neglected to include US exports in the form of graduate students, basic science and technology, financial services, business models (like all those internet businesses) and other high dollar value assets that have 'long tails,' meaning they generate many daughter products and services.

If restricting this discussion to concrete exports only, how about the trucks, tanks, airplanes, bombs, ammunition, medicine, ... used in US and NATO bases around the world? (True, a lot of consumables are sourced locally, but especially weapons and high technology tend to be manufactured in the US or under US license.) Those are US exports. We also export, via the inumerable US-funded or supported NGOs, the vendors that support US bases, our troops who give away candy, toys, personal hygiene products, books, blankets, tents, shoes, construction equipment and materiel... to local populations. Those exports do not generate money for the US economy, but they do stimulate the US economy.

To me, the highest impact US export is content. All the movies, videos, music, web content, t-shirts, chachkis... luridly illustrated in multi-faceted, multi-media -- in every conceivable way -- for the world to see what it's like to live in America and think like an American.

In addition to generating money for the US, the content informs the world on the American culture, attitudes, ways to do things... that have long tails indeed.

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