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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

  • Xing, Yuqing

    (Asian Development Bank Institute)

  • Detert, Neal

    (Asian Development Bank Institute)

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.

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File URL: http://www.adbi.org/files/2010.12.14.wp257.iphone.widens.us.trade.deficit.prc.pdf
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Bibliographic Info

Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 257.

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Length: 12 pages
Date of creation: 14 Dec 2010
Date of revision:
Handle: RePEc:ris:adbiwp:0257

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Keywords: sino-us trade; apple iphone; world trade patterns;

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Cited by:
  1. Willem THORBECKE, 2012. "Investigating China's Disaggregated Processed Exports: Evidence that the RMB matters," Discussion papers 12003, Research Institute of Economy, Trade and Industry (RIETI).
  2. Xing, Yuqing & Pradhananga, Manisha, 2013. "How Important are Exports and Foreign Direct Investment for Economic Growth in the People’s Republic of China?," ADBI Working Papers 427, Asian Development Bank Institute.
  3. Xing, Yuqing, 2012. "Processing trade, exchange rates and China's bilateral trade balances," Journal of Asian Economics, Elsevier, vol. 23(5), pages 540-547.
  4. Wolf-Heimo Grieben & Fuat Sener, 2012. "North-South Trade, Unemployment and Growth: What’s the Role of Labor Unions?," Working Paper Series of the Department of Economics, University of Konstanz 2012-06, Department of Economics, University of Konstanz.
  5. Meng, Bo & Wang, Zhi & Koopman, Robert, 2013. "How are global value chains fragmented and extended in China's domestic production networks?," IDE Discussion Papers 424, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  6. Brendan Coates & Dougal Horton & Lachlan McNamee, 2012. "China: prospects for export-driven growth," Economic Roundup, Treasury, Australian Government, issue 4, pages 79-102, December.
  7. 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.
  8. Meng, Bo & Fang, Yong & Yamano, Norihiko, 2012. "Measuring global value chains and regional economic integration : an international input-output approach," IDE Discussion Papers 362, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  9. Christopher F Baum & Marketa W. Halova & Alexander Kurov, 2013. "Does Regular Economic News from Emerging Countries Move Markets? Evidence from Chinese Macro Announcements," Boston College Working Papers in Economics 834, Boston College Department of Economics, revised 28 Feb 2014.

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