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Advanced technology trade deficit?

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June 10, 2005

Advanced technology trade deficit?

Michael Mandel

Ben Carliner at Cynic's Delight wonders why the U.S. is running such a big trade deficit in advanced technology products? (a 10.8 billion deficit in the first four months of 2005, compared with a 7.4 billion deficit in the first four months of 2004).

Here's the problem. If Intel builds a chip in its Ireland factory and sells it in Germany, that doesn't get booked as a U.S. export. Where does it show up on the U.S. trade account? Well, it could show up as a one-time transfer of intellectual capital from the U.S. to Ireland. Or it could show up as implied royalty payments from Ireland to the U.S. Or it could show up as profits earned abroad.

Now we're running into the problem that

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