Today I read a truly interesting paper on the trade balance between China and the US "How the iPhone widens the United States Trade Deficit with the People's Republic of China" by two economists Yuqing Xing and Neal Detert from the Asian Development Bank.
Their claim is that while China is only exporting 6.5 USD of added value per iPhone into the United States 178.96 USD are accounted in official trade statistics, making up a trade deficit of 1.9bn USD for the US instead of a true trade surplus of about 48m USD. An appreciation of the RMB would in this case be nearly meaningless.
Following their analysis most parts of the iPhone are imported into China, i.e. of the 178.96 USD production costs Japan's Toshiba accounts for 60 USD (memory chips and display), German Infineon for 29 USD, Korean Samsung for another 23 USD and US companies for 11 USD. Chinese companies only perform the assembling and are therefore only responsible for about 6.5 USD of value add.
So is the US actually exporting to China? Well this would pretty much make sense judging from a perspective of traditional trade theory. Since the US has both comparative and absolute cost advantages in developing high-tech products like iPhones against China they should also likely be exporting those to China.
So who is to blame for this distorted perception? The accountants? Globalization? Or yet the ignorant populists?
Well it's just "Designed by Apple in California - Assembled in China". Quite simple.
The original article can be found under:
Xing, Y., and N. Detert. 2010. How the iPhone Widens the United States Trade Deficit with the People’s Republic of China. ADBI Working Paper 257. Tokyo: Asian Development Bank Institute. Available: http://www.adbi.org/working-paper/2010/12/14/4236.iphone.widens.us.trade.deficit.prc/
http://blog.renren.com/blog/bp/QmaYQMjqLD
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