IPhone Adds $1.9 Billion to U.S.-China Trade Deficit

One widely touted solution for current U.S. economic woes is for America to produce more of the high-tech gadgets that the rest of the world craves.
Yet two academic researchers have found that Apple Inc.’s iPhone — one of the most iconic U.S. technology products — actually added $1.9 billion to the U.S. trade deficit with China last year.
How is this possible? Though the iPhone is entirely designed and owned by a U.S. company, and is made largely of parts produced by other countries, it is physically assembled in China. Both countries’ trade statistics therefore consider the iPhone a Chinese export to the U.S. So a U.S. consumer who buys what is often considered an American product will add to the U.S. trade deficit with China.
The result is that according to official statistics, “even high-tech products invented by U.S. companies will not increase U.S. exports,” as two researchers at the Asian Development Bank Institute in Tokyo, Yuqing Xing and Neal Detert, write in a recent report.
This isn’t a problem with high-tech products, but with how exports and imports are measured, they say. Conventional trade statistics can provide only “a distorted picture” of a complex world where products are designed in one country and assembled in another country of parts made in yet another country.
The new research adds to a growing technical debate about traditional trade statistics that could have big real-world consequences. Conventional trade figures are the basis for political battles waging in Washington and Brussels over what to do about China’s currency policies and its allegedly unfair trading practices.
Article via THE WALL STREET JOURNAL