“Legislative efforts face an uphill climb,” WSJ writes. “Republican leaders, including Speaker John Boehner, have voted against China currency bills in the past. But that doesn’t make the anti-China fervor in Washington irrelevant To the extent that protectionists present Chinese exporters as a threat to U.S. prosperity despite the more pressing problems America faces, the argument over China’s exchange-rate policy is a distraction the economy can’t afford.”
“How much of a distraction is suggested by a paper out last month from the Asian Development Bank Institute. Economists Yuqing Xing and Neal Detert examined the supply chain of the iPhone to reach a surprising conclusion: Technically, the iPhone contributes to America’s trade deficit with China,” WSJ writes. “The basic explanation is that data on bilateral trade are calculated assuming that the entire value of a traded good is created in the exporting country. If that ever made sense, it certainly doesn’t in a global economy marked by increasingly complex supply chains.”
“In the case of the iPhone, Messrs. Xing and Detert note that the device was invented in America by an American company, Apple. The components are manufactured, either inside or out of China, by companies based in several other countries. The only part of the process that is unambiguously ‘Chinese’ is the final assembly—a process that, in the estimation of Messrs. Xing and Detert, adds only $6.50 to the $178.96 wholesale value of an iPhone,” WSJ writes. “Yet that entire $178.96 value ends up attributed to China in official trade statistics. As a consequence, the iPhone contributed nearly $1 billion to China’s bilateral trade surplus with America in 2008, and nearly $2 billion in 2009, the authors conclude. If the trade data had been based solely on the $6.50 cost of assembling each unit, the iPhone would have added only $34 million and $73 million in those years to China’s surplus.”
WSJ writes, “The ADBI study ought to be required reading on Capitol Hill.”
Read more in the full article here.
MacDailyNews Take: $2 billion vs. $78 million in 2009. Makes you wonder what the numbers were for 2010 and what they’ll be for 2011 and beyond!
[Thanks to MacDailyNews Readers “Fred Mertz” and “Lynn W.” for the heads up.]
$2B – $78M = $1.922B which was gathered from around the world and returned to the US economy. This does not count other Apple hardware, accessory, and software profits flowing into our nation.
“it raises the question of how much anyone really knows about what America’s trade with China is”
Which begs the question of how much anyone really qualifies for their professional assertions…
Spin it…
Nice cherry picking MDN….
“The report’s main potential flaw is that Messrs. Xing and Detert may not have been able to account for the source of some of the inputs. While many companies that supply iPhone components are American, Japanese, Korean or German, those companies may manufacture some of the components in China.”
…stick to apple love MDN as economics and trade balances are complex. In the end it is about jobs….As a nation do you want to make stuff or sit at a retail counter selling stuff?
Because the iPhone is the ONLY product sold in the US that is made in China.
Hey buttheads, how about taking a close look at Walmart. I guess evaluating their contribution to the US trade deficit isn’t attention grabbing as much as throwing the name Apple around.
About the only thing Made in USA is debt. Maybe if Apple totally automated an assembly line with robots they could set up in USA and hire…. Oh scnizzle, well, maybe 10 or 12 people.
Global economics is complex. Trying to make policy decisions based on data from a flawed model is foolish. Ignoring analyses you don’t like is dangerous. Government needs to do the work to built meaningful data sets and make data driven policy. It is the only way forward, because no matter how much you ignore the truth, it remains the truth.
Of course political theater based on flawed data which ignores inconvenient outcomes will be the norm for the House for at least the next couple of years.
Google, China and Islam are today’s great enemies.
Flame away…
Cassidspy you commie. The reason the US doesn’t manufacturer much any more is because of the hellish unions that are out for destruction of the US along with their allies, the democrats. Sick people. Too many laws, too much red tape. Get rid of unions and vote out democrats and the US will return to greatness. Maobama and scum are trying to collapse the system. You sheeple think he’s great. We will vote much more of you out in 2012 you sick bastards.
Jimbo – nice attitude. Well informed too! I forgot that Obama was a communist. I didn’t see the fine print on the election ballot. Thanks for refreshing our memories.
“The only part of the process that is unambiguously ‘Chinese’ is the final assembly—a process that, in the estimation of Messrs. Xing and Detert, adds only $6.50 to the $178.96 wholesale value of an iPhone,” WSJ writes.
In other words, WSJ is ignoring all that it can’t quantify to reach a false conclusion. What about the overhead to that labor, the myriad part and accessories that go into that iPhone that are also made in China, the machines that are associated with the manufacturing that are made in China, the packaging and transportation overheads, etc.
And of course, the iPhone, while a major product, is hardly the only Apple kit that’s sourced in China. Virtually every piece of hardware and accessory that carries their name is made there.
Apple is led by a Buddhist. The products are manufactured in China. Sold and consumed around the world with excitement. Apple is just beyond boundaries. That’s why I like it.
Possibly the most misleading piece of pro-globalisation propaganda one could write.
The only meaningful way to measure the trade deficit is by recording the fully built-up cost of the iPhone, the Mac or the flat screen TV; just as the only way to measure the benefit to the the US economy from selling an iPod in the UK is to send the entire internal cost back to the US so that Apple can deduct the added value in its quarterly accounts.
All of the intellectual property benefits are accounted for in the internal transfers between Apple’s global accounts and its various end-markets including the US. And the benefits to the US or other economies for components and sub-assemblies are accounted for in the same way.
So, in each stage, the accounting takes care of the added-value so that the measurements accurately report where the money landed up: so make no mistake, the trade deficit with China is real.
They’re not building those empty cities or their own stealth fighter using Monopoly money, they’re paying Sudan for its oil and Zimbabwe for its minerals using real money, because mass-murdering despots tend to prefer things they can hide in their Swiss bank accounts.
Let’s get rid of minimum wage, the employer-based health care system, burdensome corporate taxes, and payroll taxes. Then the American manufacturing sector could compete with China.
Made in the USA.
Yes, $78M of $2B is for final assembly, but the other $1.922B is coming from countries like Japan, South Korea, Taiwan, and China, etc., etc., etc. but it’s difficult to break it all down to its original value-added source.
So, final assembly is easiest to visualize as the source of a product, particularly if the product says, “Made in China” on it, but that’s oversimplifying the value-added process.
Now, if you take those iPhones and sell them in a foreign country, then we generate a trade surplus of several hundred dollars a phone. Since roughly 80% of iPhones made are sold overseas, I’d wager that the iPhone generates billions in trade surplus.
@ Ubermac,
“Google, China and Islam are today’s great enemies.”
Yes, but Google does not have Nukes, the others do.
Outsourcing is not a bad thing (normally). It reduces costs, frees up labor to do skilled work, and/or innovate. It also helps create new markets that can buy products.
As long as the labor in China is effectively slave labor, then American labor can’t be competitive.
Steve Jobs should be a good Syrian-American and manufacture Apple’s products in the U.S.A.
No more Apple products assembled by slave labor!
Al,
The poison the tastes sweet and is undetected is more dangerous. That’s why Google is on top of the list.
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Hey wait a minute…
Apple sells iPhones back to China with least a $600 per unit fee. Therefore even if the majority of the manufacturing costs are in China, Apple generates a healthy revenue back from them.
We know that overseas sales for the iPhone make up more than 50% of the total. Therefore although the units are manufactured outside of the US they are generating a positive trade for the US.
I know we don’t like seeing manufacturing jobs go overseas but Apple is a great example where the export value far outweighs import value. The US needs to stay ahead by focusing on technology leadership rather than manufacturing.
“Yes, but Google does not have Nukes, the others do.”
Eric Schmidt is working on that.
All these anti union bozos need to STFU. Unless you are willing to work for 300 US a month, your whining is utterly irrelevant.
“Apple sells iPhones back to China with least a $600 per unit fee. Therefore even if the majority of the manufacturing costs are in China, Apple generates a healthy revenue back from them.”
I think at the end of the day that’s the real story. This won’t be the case for a lot of goods, but with the iPhone I think it’s pretty clear that manufacturing them all in China, and then selling a large number right back to China, works in America’s favour.
Here’s a question. If iPhones were assembled in Ohio, could Apple sell as many as they do around the world? Would Apple bring more value back home, or less?
@Ubermac: I’m with you 100%. And I’m not American.
What ever happen to China being a Communist country? They seem to be beating the US at our own Capitalist game.
China? Currency manipulation? Compared to the machinations of the Federal Reserve, China’s actions are child’s play.