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

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  • Yuqing Xing
  • Neal Detert

Abstract

In this paper, we use the iPhone as a case to show that even high-tech products invented by the 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, the development of cross-country production fragmentation, and low transportation costs all contributed to rational firms such asApple making business decisions that contributed directly to the US trade deficit.Global production networks and highly specialized production processes apparently reverse trade patterns 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 invented themselves. In addition, conventional trade statistics greatly inflate bilateral trade deficits between a country used as export-platform by multinational firms, and its destination countries.

Suggested Citation

  • Yuqing Xing & Neal Detert, 2011. "How the iPhone Widens the United States Trade Deficit with the People's Republic of China:," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 66(03), pages 339-350, September.
    • Handle: RePEc:usg:auswrt:2011:66:03:339-350
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    References listed on IDEAS

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    1. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    2. Willem Thorbecke, 2011. "The Effect Of Exchange Rate Changes On Trade In East Asia," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 85-102.
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    More about this item

    Keywords

    China; US Trade deficit; iPhone;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade

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