The technology exchange indicator measures the flow of technological know-how and technological services into and out of a country as a share of GDP. It is a good indicator of technology diffusion. It includes money paid or received to acquire and use patents, licences, trademarks, designs, know-how, and closely related technical services, as well as money paid for industrial research and development carried out abroad.
Canada is increasingly trading low-value-added commodities for high-value-added technology. Other countries that are rich in agricultural and other natural resources also have technology exchange ratios on the low side, including the U.S. and Australia. Countries that import raw materials in exchange for technology, like Japan, also have low technology exchange ratios.
Canada, along with 12 of its peer countries, receives a "D" grade for technology exchange performance. Canada devotes 0.3 per cent of GDP to technology exchange and ranks in last place on this indicator. (Recent data were not available for Denmark and the Netherlands). This is a sign that Canada is not getting full value from its resource base—Canada sells raw materials to be processed elsewhere. Nor is Canada keeping up in a global economy that values technology supply chains.
Canada’s performance on this indicator reflects its trade dependence on raw and semi-processed materials. As the commodities boom accelerated in recent years, Canada sacrificed ground in manufacturing and high-end services to meet new demand from high-growth Asian countries for Canada’s hydrocarbon, mineral, and other natural-resource-based exports. These new markets have added significantly to the existing demand for Canada’s commodities from the U.S. and elsewhere. As more and more of Canada’s GDP is made up of resource-based exports, the share of knowledge exports in total trade declines.
While considerable scientific knowledge and technology are required to take these products from discovery to market, the actual exports are categorized as raw materials no matter what it took to find them, release them from the earth, and transport them to their destinations. This is shown in the chart below where Canada’s technology exchange as a share of GDP declines after 2000, while the U.S. share continues to rise.
Unlike technologies that are in high demand and have a high market share, raw materials carry no branding premiums. As well, economic rents—that is, monetary gains—from raw materials can be captured only by increasing efficiency rather than from any added value due to further processing.
Use the pull-down menu to compare the change in the value of Canada’s technology exchange with that of its peers.
With technology exchange at 28 per cent of its GDP, Ireland is miles ahead of its peers—the only country to receive an "A" grade. Ireland’s closest competitors—Finland, Sweden, and Switzerland—have technology transfers (imports and exports) that account for about 5 to 7 per cent of GDP.
Ireland’s ranking reflects its success in finding powerful incentives for multinational enterprises to use Ireland as a platform for their European and global operations. This is in contrast to other small European countries that have developed policies to create their own global economic champions. Ireland focused on improving human resources and its fiscal and regulatory climates, while working to smooth market access to the rest of the European Union. As a result, Ireland modernized, became enormously more cosmopolitan, and raised its standard of living significantly.