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

Yuqing Xing and Neal Detert

Trade Working Papers from East Asian Bureau of Economic Research

Abstract: In this paper, we 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$1.9 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. 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: Trade Deficit; The United States and the PRC; iPhone; global production networks; Unprecedented globalization (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2010-12
References: Add references at CitEc
Citations: View citations in EconPapers (92)

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