Nov 1, 2010 Report No：10-21
How iPhone Widens the US Trade Deficits with the PRC?
In this paper, we use the iPhone as a case to show that even high-tech products invented by American companies will not increase the US exports, but to the contrary exacerbate the US trade deficits. The iPhone contributed US$1.9 billion about 0.8% of the US trade deficit with PRC in 2009. Unprecedented globalization, well organized global production networks, repaid development of cross-country production fragmentation, and low transportation costs all contribute to rational firms such as Apple making business decisions that contributed directly to the US trade deficit. Global production networks and highly specialized production processes apparently reverse conventional trade patterns so that developing countries, such as PRC, export high-tech goods—like the iPhone while industrialized countries, such as the US, import high-tech goods they themselves invented. In addition, conventional trade statistics greatly inflate bilateral trade deficits between a country used as export-platform by multinational firms and its destination countries. Based on the value-added approach, the iphone trade would generate US$48 million trade surplus for the US.
|Keywords||China, US, Exchange Rates, Trade, iPhone|