Geopolitics and international technology trade

The FRED Blog has described how the value of technology exports from the United States to the rest of the world has steadily declined. This post adds geopolitical characteristics to the discussion.

The FRED graph above uses Bureau of Economic Analysis data to track the inflation-adjusted value of US technology services exported to other countries, measured in royalties and licensing fees. The data are presented as a fraction of the total value of exported services to more easily observe their change over time.

Between 2007 and 2019, the relative value of US technology exports shrank. After a short-lived reversal in 2020-2022, likely related to economic disruptions from the COVID-19 pandemic, that value continued to decline.

Recent research from the Federal Reserve Bank of St. Louis could help explain at least part of this trend. Ana Maria Santacreu and Samuel Moore use country-specific trade data and a measure of foreign policy preferences to discuss how countries' geopolitical characteristics affect their purchase of US technology services:

Countries that don't share the same foreign policy priorities and values espoused by the US are less likely to have robust international trade relations with the US than countries that do share these priorities and values. So, contentious political relations and shifting strategic alliances do erode the economic ties that bind countries. Although geopolitical tensions don't drive the overall relative decline of US technology exports, they do offer a relevant context for telling the stories behind the numbers.

For more about this and other research, visit the publications page of the St. Louis Fed's website, which offers an array of economic analysis and expertise provided by our staff.

How this graph was created: Search FRED for and select "Real exports of services: Royalties and license fees." Click on the "Edit Graph" button and select the "Edit Line" tab to customize the data by searching for "Real exports of services." Don't forget to click "Add." Next, type the formula (a/b)*100 and click "Apply."

Suggested by Diego Mendez-Carbajo.