Economic Report of the President 1994 - The American Presidency ...

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An important sectoral development in recent years has been thegrowth of high-technology products and industries in both U.S. exportsand imports. In 1992, the United States exported $107 billionin advanced technology products, up in nominal terms from $83 billionin 1989. Imports of these products also increased—from $56billion in 1989 to $72 billion in 1992. Aerospace, information andcommunications, and electronics together contributed the predominantshare of U.S. high-technology exports. These sectors, alongwith a few high-technology product lines within other industrialsectors, are considerably more export-intensive than U.S. manufacturingas a whole. Indeed, aircraft and computers and office equipmenthave the highest ratios of export sales to value added amongall manufacturing industries.Heightened foreign competition and the globalization of production(technology respects no border) have made many high-technologyindustries relatively import-intensive as well. In fact, themost export-intensive of America's high-technology industries (withthe marked exceptions of plastics and aircraft) are now also themost import-intensive. The electronics industries have been thearena of the most dramatic penetration of the U.S. high-technologymarket, both because Japanese and East Asian electronics producershave become more formidable competitors, and because Americanelectronics multinationals have spread their own productionaround the world.Just as the commodity composition of U.S. trade has been changing,so has its geographical composition. As shown in Table 6-2,the shares of U.S. exports going to and imports coming from developingcountries have risen, while the shares to and from industrialcountries have fallen. These trends reflect the fact that the developingcountries as a group have been growing more rapidly thanthe industrial countries.TABLE 6-2.—U.S. Merchandise Trade by World Region, 1972 and 1992[Percent of total]RegionExports1972ImportsExports1992ImportsIndustrial countriesJapanEuropean Community 1OtherDeveloping countriesAsiaMiddle EastWestern HemisphereOther ,66.810.026.830.033.28.94.114.65.672.416.324.032.127.69.61.612.63.858.510.723024.941.516.64.516.93.557.718.017.622.142.322.83.113.03.41 Membership as of 1992.Note-Detail may not add to totals due to rounding.Source: International Monetary Fund.210
The fast-growing countries of Asia have provided a rapidly expandingmarket for U.S. exports; their share of the total nearlydoubled from 9 percent in 1972 to 17 percent in 1992. Indeed, by1992 our trans-Pacific trade was 50 percent greater than our trans-Atlantic trade. The increasing importance of Asia in U.S. trade appearsto contradict the common contention that the world is devolvinginto three trading blocs centered on Europe, Asia, and NorthAmerica. Nor is such a conclusion supported by more-sophisticatedevidence. When researchers have modeled the pattern of tradeflows among different countries, they have found no real evidencethat intraregional trade flows in Asia are unusually large once economicfundamentals are taken into account. The observed increasesin intraregional flows can be explained largely in terms of differencesin economic growth rates and geographical proximity.Likewise, when researchers have looked at financial flows, exchange-ratedetermination, and the like, there is little evidencethat a "y en bloc" is developing in Asia.In addition to leading the world in trade, the United States leadsthe world in the stock of foreign direct investment, both as investorand as recipient. In 1992, U.S. firms owned 25 percent, and theUnited States hosted 22 percent, of the world's foreign direct investmentstock. The largest hosts of outward U.S. foreign direct investment(ranked in order of importance) are the United Kingdom,Canada, Germany, Switzerland, and Japan, which together accountfor nearly half the total (Table 6-3). Similarly, five industrial countries(again ranked in order of importance)—Japan, the UnitedKingdom, the Netherlands, Canada, and Germany—account formore than three-quarters of existing foreign direct investment inthe United States. The predominant role of high-wage industrialcountries in both inward and outward foreign direct investment inthe United States refutes the popular notion that such investmentis motivated primarily by the search for lower wages. In fact, manyforeign investment decisions are motivated by other considerations,most often the need to have an active presence in large or rapidlyexpanding markets or the need to overcome trade and other barriersthat impede access.It is sometimes argued that outward foreign direct investment"exports" jobs. However, the parallel expansion of two-way foreigndirect investment and intrafirm trade suggests that such investmentis more likely to complement rather than substitute for trade,creating high-wage jobs domestically rather than destroying them.Several recent studies have concluded that foreign direct investmentis more likely to create trade than reduce it. Another recentstudy found that inward foreign direct investment brings with itcompetition, new technologies, and new management techniques,211
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unitedminds
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Economic Report of the PresidentTo
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the Technology Reinvestment Project
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formed health care system, increase
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CONTENTSPageCHAPTER 1. A STRATEGY F
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PageProviding Comprehensive Benefit
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LIST OF CHARTS—CONTINUEDPage3-5 L
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CHAPTER 1A Strategy for Growth and
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which have left consumers and busin
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that growth in both real compensati
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for inflation was on average roughl
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Box 1-2.—Saving, Investment, and
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investments in human capital; inves
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of the income distribution (Table 1
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Box 1-3.—Credible Deficit Reducti
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Chart 1-7 Correlation of Investment
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Box 1~4*~-A Balanced Budget Amendme
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This educational record is not good
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fallen markedly since the 1960s (Ch
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The development and deployment of n
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Earlier rounds of GATT talks had fo
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Chart 1-10 Projected Real Growth Ra
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are therefore on the public dole. M
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prise communities and be granted sm
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ingredient that should allow the ec
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Chart 2-2 National Defense Purchase
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Chart 2-3 Growth of U.S. Merchandis
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Chart 2-5 Households: Credit Market
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THE HEADWINDS ARE MOSTLY CALMINGAs
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1993, real consumer spending increa
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RESIDENTIAL INVESTMENTResidential i
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smallest annual increase in 20 year
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ments with the Internal Revenue Ser
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safe-harbor rules for underpayment
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Chart 2-9 Alternative Measures of t
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Meanwhile, the Mountain States were
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inflation is measured by the Blue C
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Saving, Investment, and Capital Acc
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the future should be reflected in l
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Chart 2-15 Dynamic Effects of Defic
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joyed healthy average real GDP grow
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Chart 2-16 Personal Income Taxes as
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TABLE 2-2.— Administration Foreca
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TABLE 2-3.— Accounting for Growth
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CHAPTER 3Trends and Recent Developm
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first quarter of 1991, nonfarm payr
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cause defense cutbacks have caused
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UNEMPLOYMENT AND NONEMPLOYMENTThe U
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Chart 3-3 Civilian Unemployment Rat
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Chart 3-6 Employment-to-Population
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Chart 3-8 Ratio of White-Collar to
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than would be expected given its hi
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that the natural rate is falling? M
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SLOW INCOME GROWTHIncome trends hav
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Chart 3-10 Average Annual Growth of
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Box 3-3.—Consequences of Producti
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likely that immigration could expla
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We do, however, know how many worke
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size. No data are available on vola
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BENEFITSOne of the concerns raised
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edented partnership to develop a nu
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CHAPTER 4Health Care ReformTHE UNIT
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make cost-conscious decisions. In a
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A third rationale for universal cov
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Box 4-1.—Moral Hazard and Adverse
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ies depending on one's health statu
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than people in other countries do,
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sumers are ill equipped to bring st
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By itself, the aging of the populat
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TABLE 4-3.- Sources and Uses of Hea
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about 65 to 70 cents for a typical
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THE ARCHITECTURE OF THE HEALTHSECUR
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etary savings for the Federal Gover
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contribution, within limits. Outsid
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salary income, payments from the em
Page 165 and 166: TABLE 4-6.—Caps on Premiums by Fi
Page 167 and 168: An example will illustrate the proc
Page 169 and 170: TABLE 4-9.—Sources and Uses of Fe
Page 171 and 172: Chart 4-9 Business Spending on Heal
Page 173: Health care reform should set the s
Page 176 and 177: and private sectors, addressing env
Page 178 and 179: Box 5-1.—Selected National Perfor
Page 180 and 181: Box 5-2*—Market PowerFirms are sa
Page 182 and 183: ate regulation. For example, State
Page 184 and 185: competitiveness of U.S. industry, a
Page 186 and 187: Box 5-4.—ExternalitiesAn external
Page 188 and 189: in the habitat of the spotted owl r
Page 190 and 191: CLIMATE CHANGE ACTION PLANCertain g
Page 192 and 193: eral, lays a foundation for broader
Page 194 and 195: The Administration's proposal seeks
Page 196 and 197: vances in technical know-how have a
Page 198 and 199: Investments in R&D are risky. Like
Page 200 and 201: 1950s and 1960s, and American compa
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Page 204 and 205: of industry. MOCs will be affiliate
Page 206 and 207: tiveness. Again, the hoped-for resu
Page 208 and 209: forts to cut the massive Federal bu
Page 210 and 211: TECHNOLOGY POLICY, GROWTH, ANDCOMPE
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Page 214 and 215: ses, which take such intersectoral
Page 218 and 219: TABLE 6-3.—Stock of U.S. Outward
Page 220 and 221: technical change has been offered a
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Page 224 and 225: TABLE 6-6.—Intrafirm Trade as Sha
Page 226 and 227: greater access to the Japanese mark
Page 228 and 229: the transparency of its trade regim
Page 230 and 231: that if the states of the former So
Page 232 and 233: Box 6-3.—Mexican Economic Reforms
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Page 238 and 239: Box 6-4.—The Asian "Miracle"Per c
Page 240 and 241: Box 6-5.—The Economic Impact of t
Page 242 and 243: development, and environmental clea
Page 244 and 245: THE TRADE POLICY AGENDABy lowering
Page 246 and 247: ignated monopolies. It also establi
Page 248 and 249: The dollar ended 1993 roughly where
Page 250 and 251: Box 6-7.—Exchange-Rate Volatility
Page 252 and 253: Chart 6-5 French Franc-Deutsche Mar
Page 254 and 255: Besides bringing these endeavors to
Page 257 and 258: LETTER OF TRANSMITTALCOUNCIL OF ECO
Page 259 and 260: Report to the President on the Acti
Page 261 and 262: duction budget package, the North A
Page 263 and 264: Working Group studying cost-benefit
Page 265 and 266: prepares the Economic Indicators an
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Appendix BSTATISTICAL TABLES RELATI
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POPULATION, EMPLOYMENT, WAGES, AND
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AGRICULTURE:PageB-96. Farm income,
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE B-2.—Gross domestic product
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TABLE B-3.—Implicit price deflato
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TABLE B-4.—Fixed-weighted price i
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TABLE B-5.—Changes in gross domes
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TABLE B-7.—Cross domestic product
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TABLE B-9.—Gross domestic product
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TABLE B-ll.—Gross domestic produc
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TABLE B-13.—Gross domestic produc
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TABLE B-15.—Personal consumption
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TABLE B-17.—Gross and net private
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TABLE B-19.—Inventories and final
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TABLE B-21.—Foreign transactions
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TABLE B-23.—Relation of gross dom
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TABLE B-25.—National income by ty
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TABLE B-26.—Sources of personal i
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TABLE B-27.—Disposition of person
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TABLE B-29.—Gross sating and inve
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TABLE B-31.—Median money income (
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TABLE B-33.—Population and the la
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TABLE B-34.—Civilian employment a
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TABLE B-36.—Unemployment by demog
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TABLE B-38.—Civilian labor force
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TABLE B-40.—Civilian unemployment
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TABLE B-42.—Unemployment by durat
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TABLE B-44.—Employees on nonagric
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TABLE B-45.—Hours and earnings in
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TABLE B-47.—Productivity and rela
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PRODUCTION AND BUSINESS ACTIVITYTAB
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TABLE B-51.—Industrial production
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TABLE B-53.—New construction acti
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TABLE B-54.—New housing units sta
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Year or monthTABLE B-56.—Manufact
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TABLE B-58.—Manufacturers' new an
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TABLE B-60.—Consumer price indexe
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TABLE B-61.—Consumer price indexe
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TABLE B-63.—Changes in consumer p
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TABLE B-64.—Producer price indexe
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TABLE B-66.—Producer price indexe
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TABLE B-67.—Changes in producer p
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TABLE B-69.—Components of money s
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TABLE B-70.—Aggregate reserves of
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TABLE B-72.—Bond yields and inter
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TABLE B-73.—Total funds raised in
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TABLE B-74.—Mortgage debt outstan
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TABLE B-76.—Consumer credit outst
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TABLE B-78.—Federal receipts, out
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TABLE B-79.—Federal budget receip
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TABLE B-81.—Federal and State and
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TABLE B-83.—State and local gover
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TABLE B-85.—Interest-bearing publ
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TABLE B-87.—Estimated ownership o
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TABLE B-89.—Corporate profits by
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TABLE B-91.—Sales, profits, and s
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TABLE B-93.—Sources and uses of f
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TABLE B-95.—Business formation an
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19481949195019511952195319541955195
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TABLE B-99.—Indexes of prices rec
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TABLE B-101.— Farm business balan
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TABLE B-103.—U.S. international t
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TABLE B-104.—U.S. merchandise exp
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TABLE B-106.—U.S. merchandise exp
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TABLE B-108.—Industrial productio
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TABLE B-110.—Foreign exchange rat
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NATIONAL WEALTHTABLE B-l 12.—Nati
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SUPPLEMENTARY TABLETABLE B-114.—S
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