Is the iPhone made in China or not? You'd think the question would be easy enough to answer, but it's not. The iPhone has come to symbolise the paradox of globalisation: the more pervasive it becomes, the less we understand it by looking at trade statistics.
It doesn't seem that way. The Chinese make the iPhones, the Americans buy the iPhones, and the result is an increase in the US's trade deficit with China: by $1.9bn in 2009, says Yuqing Xing of the National Graduate Institute for Policy Studies in Tokyo, and Neal Detert of the Asian Development Bank.
The figure of $1.9bn comes from taking the manufactured cost of a Chinese-made iPhone (about $179), subtracting the cost of the US-made components ($11) and then multiplying by the 11.3 million iPhones sold in the US.
Xing and Detert reckon that the iPhone's components cost about $172.50, while the cost of putting all those components together in China is about $6.50. But all the components are imported into China from countries including the US, Germany, Korea and Japan. The Chinese merely assemble them, and in doing so add very little value to the whole package.
To see why this matters, assume that the Chinese currency appreciated by a more-than-hefty 25 per cent. For the $172.50 of components imported to China, assembled, and then exported to the US, the currency appreciation would all come out in the wash. The cost would remain $172.50. It's only the $6.50 of local Chinese costs that would be affected - adding a less-than-eye-watering $1.55 to the cost of the iPhone and barely shifting the US-China trade statistics. Olaf Storbeck, economics editor of Handelsblatt in Germany, concludes that policymakers' obsession with the US-China exchange rate looks misplaced.
Greg Linden, Jason Dedrick and Kenneth Kraemer of the University of California, Irvine, have been estimating the jobs created by Apple's iPod. Their study reckons that the iPod accounted for almost 41,000 jobs worldwide in 2006, of which only 30 jobs were in manufacturing in the US. But the iPod supported more than 6,000 engineering or other professional jobs in the US - as well as almost 8,000 lower-paid jobs. More than two thirds of all the wages paid to workers in the iPod value chain were paid to US workers, they estimate.
Many US workers have been hurt by the forces of globalisation. But iPhone and iPod show why the whole business is less clear-cut than it seems. Products that are made in China may actually be rewarding producers in Japan and California, not to mention consumers across the world.
And while the US trade deficit with the world as a whole is cause for concern, the US trade deficit with China is a pretty meaningless number.
Tim Harford is a Financial Times column and author of Adept: Why Success Always Starts With Failure (Little, Brown, £20).
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