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

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Author Info

  • Yuqing Xing

    (Asian Development Bank Institute (ADBI))

  • Neal Detert

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.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 23280.

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Date of creation: Dec 2010
Date of revision:
Handle: RePEc:eab:tradew:23280

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Web page: http://www.eaber.org
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Related research

Keywords: Trade Deficit; The United States and the PRC; iPhone; global production networks; Unprecedented globalization;

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Cited by:
  1. Zhou, Jing & Latorre, María C., 2013. "The impact of FDI on the production networks between China and East Asia and the role of the U.S. and ROW as final markets," MPRA Paper 51384, University Library of Munich, Germany.
  2. Georgeta Ilie, 2013. "The Role of Value Added in the Assessment of National Trade Performances," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(Special 1), pages 61-65, December.
  3. Inomata, Satoshi, 2013. "Trade in Value Added: An East Asian Perspective," ADBI Working Papers 451, Asian Development Bank Institute.
  4. Joonkoo Lee & Gary Gereffi, 2013. "The co-evolution of concentration in mobile phone global value chains and its impact on social upgrading in developing countries," Brooks World Poverty Institute Working Paper Series ctg-2013-25, BWPI, The University of Manchester.

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