iPhone trade deficit called a myth
More than a few people have expressed disdain at the notion that Apple’s iPhone contributes significantly to the U.S. goods and services shortfall with China — a perennial hot button issue. No matter which sides of the debate you fall on, there’s no shortage of seemingly well reasoned spin.
A week before before Santa flew, Blorge ran a bit entitled iPhone adds $1.9 billion to U.S. trade deficit. In these tough times, China has become a byword for what ails the American economy.
According to the Wall Street Journal, the analysis that delivered the $1.9-billion figure is flawed, that the math behind is simplistic and lacking the subtlety of the thing being measure, international trade.
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, they arrive at the figure of the $1.9 billion Chinese trade surplus—and U.S. trade deficit—in iPhones.
However, that math doesn’t take into account parts manufactured in the U.S. Do that and the much-publicized $1.9-billion deficit turns into a $48.1-million surplus for the land of milk and Honey Nut Cheerios. Change the formula and the outcome glides neatly into the plus column.
A likely wrinkle is that the U.S. made components might actually have been manufactured or otherwise value added in the U.S. (i.e. China) — the study assigns component manufacturing value to the home countries of the listed makers.
Angels dancing on pinheads…
So, which methodology delivers the more accurate number? Well, as I like to tell the kids, complexity is the enemy of the truth and because we don’t have all of the data, or even a close approximation thereof, the best we can manage is a guess or, worse, act of faith.
Of course, the anti-China lobby is biased as is the pro-China lot. So, although the truth is out there whether China is a demon and Apple a saint really comes down to who you believe.
Perhaps the best measure of whether the iPhone is additive to U.S. economic activity should be judged more simply still — how many jobs it generates here and whether that figure grows or shrinks down the road. Honestly, the only dollars that truly matter are the ones we can pull out and count ourselves…
What’s your take?
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