Apple deprivileged as India bows to Washington D.C. consensus on mobile phone import tariffs

“The most recent Indian budget contained a provision about import tariffs upon mobile phones and their components which was seen as giving Apple a certain privilege in the marketplace,” Tim Worstall writes for Forbes. “Only a couple of weeks later this has been rethought and the differential rates collapsed down to just the one single rate. This is a good move: it accords with the basic ideas of the Washington Consensus.”

“Tariffs aren’t a good idea in themselves, but if you are going to have them then they should be at broadly equivalent rates across close substitutes. To do otherwise will privilege certain business structures above others,” Worstall writes. “And that’s really something that government shouldn’t be trying to do, micromanaging who has preferential access to a market and who does not. It has to be said that Apple’s privilege here was not all that great: but the rethink, the change, is still a welcome removal of a distortion in the market.”

“My own view of course is to have no tariffs on anything at all,” Worstall writes. “But… if there are going to be tariffs though they should be as they are now: general, relatively similar, and not tipping the market to privilege one particular method of production or producer. It’s fair enough for government to set general goals if that’s the way the people want it done. But trying to micromanage the process will always end in something between inefficiency and disaster.”

Read more in the full article here.

MacDailyNews Take: As Worstall points out, “The point being that what India is trying to do is gain some portion of that Chinese mobile [phone assembly] business.”

The less dependent Apple is on China for product assembly, the better.

Brazil, India, wherever. Spread out the assembly points (which might even end up benefitting on shipping costs eventually). It’s the matter of not putting all of your eggs in one basket, which we’re absolutely sure Tim Cook understands perfectly well.

SEE ALSO:
India rejects Apple’s plan to import and sell refurbished iPhones – May 3, 2016
Indian government panel paves way for wholly-owned Apple retail stores in India – April 28, 2016

8 Comments

  1. I agree that ideally Apple should not be so dependent on China for manufacturing. The problem as people like Tim Cook and Steve Jobs have pointed out, is not just the main manufacturing plants. It’s the manufacturing capabilities of all of the suppliers that exist around the main assembly plant.

    There’s a host of manufacturing expertise in China that is hard to replicate elsewhere, at least in the short term. It would take years to build up the manufacturing infrastructure anywhere else, not to mention recruitment and training of employees.

    It’s not impossible, but it is difficult, and would involve costs of time and money.

    1. And lets face it. china is a totalitarian society. However flawed the democracy in india and brazil is, the populist labor dominated leftist political environment is not compatible with getting value for your manufacturing money. China you can just shut up the poor/underprivileged people

  2. Oh, snore. Give it a break. The domination of China in the manufacturing sector isn’t due to the form of goverment. It is due to stupidity on the part of the US and other countries and brilliant long-range strategic planning by the Chinese.

    Think of it this way. If you say, “Wah-wah-wah, I don’t like their government”, there is nothing that can be done. Sucks to be you. But if you analyze business practices on both sides, then the US situation can be improved.

  3. interesting facts to note :

    Monthly Average Wage (International Labour ILO Stats):
    NOTE this are PPP dollars, i.e ADJUSTED for cost of living.

    USA: 3,200
    China: 656
    India: 295

    (I suspect in non adjusted dollars, the differences in China and India would be even bigger)

    Per Capita GDP
    (Gross domestic product of country divided by population)
    USA: 54,000
    China: 7590
    India : 1580

    QZ.com 2015 :
    “Once near equals, China and India have radically diverged in the past two decades”
    “When Li visited in 1991, per capita GDP for the two countries was practically equal. Although India’s economy is said to be growing faster than China’s at this moment, China’s has bested India for decades. Per capita GDP in China was $6,807.4 in 2013, almost six times India’s:”

    (Singapore which I’ve visited many times over the years is an interesting case I’ll put out here. It’s per capita GDP is 56,000. A small island it basically has no natural resources, not even sufficient water, but it has stupid high pc GDP. It ALSO has practically no tariffs. People from surrounding countries years back use to shop there as there were NO IMPORT tariffs . Singapore is a democracy but with practically no opposition. The country is very clean and safe but — to the west — legendary draconian laws. )

    ——-
    flamers: note I’m not making any Socialist vs Capitalist, Communism vs Whatever arguments. Just putting out facts. You can internet search yourself and make your own judgements on what system works.

    1. Interesting data, Davewrite. But I believe that it is worth pointing out that the ratio of GDP to MAW still favors the U.S. – roughly 150% of China’s ratio and over 300% of India’s. So productivity still trumps wage cost. In addition, advancements in automated manufacturing and assembly will continue to reduce the number of labor hours (and cost) required per unit product. As a result, cost of labor will become less important than other factors and SE Asia will become increasingly unattractive for U.S. corporations, especially since the cost of labor in China will continue to rise. The pursuit of low cost labor will lead corporations all around the world, only to end up back in the U.S. and other western countries where IP rights are protected, and democratic governments support a more stable business environment.

      1. I agree that in time automated manufacturing (robots) will become even more prevalent and largely replace any human labor. And yes, at that point the place of manufacturing becomes moot, because labor costs virtually disappear no matter where you are.

        I think one challenge the human race will have in the future is how to provide work for everyone. Increasingly, machines take over and reduce the number of workers needed. You had the agrarian age, then the industrial age, now the information age…but the problem with the information age is that it doesn’t require nearly as many employees. Apple has approx. 115,000 employees, and half of those are retail. That’s a fraction of the number of employees that other large corporate leaders have had at their times of dominance: GM, Ford,Walmart, GE, etc. It simply doesn’t take as many people to engineer and design stuff, and even those numbers are going down as the engineers and designers can rely more and more on computers.

        I think at some point we’ll have to transition to an economy that simply provides a healthy minimal standard of living for everyone, regardless. Otherwise you’ll have a world where only a relative few have anything, with the rest begging…and then that overwhelming majority will rise up and overthrow the ruling order.

        1. I agree with you both that important issues now are:

          — automation
          — IP rights. Without strong IP protection it’s hard for a country to advance over a certain point.
          A number of years ago a prominent Chinese film director said that piracy was wrecking the Chinese film industry and it was no longer worthwhile to make films (I believe they have since tightened and more strongly regulations since then).

          — the 600 pound gorilla over everything is to me overpopulation. I can’t remember exactly but it it’s something like the population will grow equal to 7 USA’s in the next 30 years or so. The world can’t sustain this. Rainforest like in Haiti and Madagascar gets cut down to near nothing, cities like Lima have no water etc. Overpopulation inevitably results in environmental problems.
          Chinese multi millionaire in smog filled Beijing said “What is the point of having all this money when you can’t breathe the air?”

          —–
          a whole bunch of other things I didn’t discuss: like national debt (another big problem) , that add color GDP figures etc.

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