SSRN Electronic Journal · 2010 · 156 citations · 1 references
Social SciencesEconomicsInternational BusinessGlobalizationInternational EconomicsInternational TradeComparative AdvantageCross-border TradeGlobal Production NetworksGlobal TradeGlobal Trade NetworksTrade PolicyCross-border Production FragmentationCross-border Trade EffectsGlobal Production Networks TheoryInternational Trade EconomicsNet ExportsSpecialized ProductionTrade Diversion EffectsTrade Inequality
Globalization and highly specialized production networks have reversed traditional trade patterns, causing developing countries like China to export high‑tech goods such as the iPhone while industrialized nations import the products they invented. The study uses the iPhone as a case to demonstrate that high‑tech products invented by U.S. firms can worsen the U.S. trade deficit rather than boost exports.
In this paper, the authors use the iPhone as a case to show that even high-tech products invented by United States (US) companies will not increase US exports, but on the contrary exacerbate the US trade deficit. The iPhone contributed US$1.8 billion to the US trade deficit with the People's Republic of China (PRC). Unprecedented globalization, well organized global production networks, repaid development of cross-country production fragmentation, and low transportation costs all contributed to rational firms such as Apple making business decisions that contributed directly to the US trade deficit reduction. Global production networks and highly specialized production processes apparently reverse trade patterns: developing 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 themselves invented. In addition, conventional trade statistics greatly inflate bilateral trade deficits between a country used as export-platform by multinational firms and its destination countries.
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