How the iPhone Widens the United States Trade Deficit with the People's Republic of China

12 Pages Posted: 22 Dec 2010 Last revised: 13 May 2011

Yuqing Xing

National Graduate Institute for Policy Studies

Neal C. Detert

SusDev Solutions Private Ltd.

Date Written: December 14, 2010

Abstract

In this paper, the authors use the iPhone as a case to show that even high-tech products invented by United States (US) companies will not increase US exports, but on the contrary exacerbate the US trade deficit. The iPhone contributed US$1.8 billion to the US trade deficit with the People’s Republic of China (PRC). Unprecedented globalization, well organized global production networks, repaid development of cross-country production fragmentation, and low transportation costs all contributed to rational firms such as Apple making business decisions that contributed directly to the US trade deficit reduction. Global production networks and highly specialized production processes apparently reverse trade patterns: developing countries such as the PRC export high-tech goods - like the iPhone - while industrialized countries such as the US import the 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.

Keywords: sino-US trade, Apple iPhone, world trade patterns

JEL Classification: F1

Suggested Citation

Xing, Yuqing and Detert, Neal C., How the iPhone Widens the United States Trade Deficit with the People's Republic of China (December 14, 2010). ADBI Working Paper No. 257. Available at SSRN: https://ssrn.com/abstract=1729085 or http://dx.doi.org/10.2139/ssrn.1729085

Yuqing Xing (Contact Author)

National Graduate Institute for Policy Studies ( email )

Japan
81-3-6439-6141 (Phone)
81-3-6439-6010 (Fax)

Neal C. Detert

SusDev Solutions Private Ltd. ( email )

Singapore

Paper statistics

Downloads
1,814
Rank
6,525
Abstract Views
6,584