WSJ.com - Not Really 'Made in China'

WSJ.com - Not Really 'Made in China'

The iPhone's Complex Supply Chain Highlights Problems With Trade Statistics

 

"What we call 'Made in China' is indeed assembled in China, but what makes up the commercial value of the product comes from the numerous countries," Pascal Lamy, the director-general of the World Trade Organization. "The concept of country of origin for manufactured goods has gradually become obsolete."

Mr. Lamy said if trade statistics were adjusted to reflect the actual value contributed to a product by different countries, the size of the U.S. trade deficit with China—$226.88 billion, according to U.S. figures—would be cut in half.

The value-added approach, in fact, shows that sales of the iPhone are adding to the U.S. economy—rather than subtracting from it, as the traditional approach would imply.

Based on U.S. sales of 11.3 million iPhones in 2009, the researchers estimate Chinese iPhone exports at $2.02 billion. After deducting $121.5 million in Chinese imports for parts produced by U.S. firms such as chip maker Broadcom Corp., they arrive at the figure of the $1.9 billion Chinese trade surplus—and U.S. trade deficit—in iPhones.

If China was credited with producing only its portion of the value of an iPhone, its exports to the U.S. for the same amount of iPhones would be a U.S. trade surplus of $48.1 million, after accounting for the parts U.S. firms contribute.