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Reading Summary - The $6.50 Trade War.docx

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Western University
Geography 3422A/B
Milford Green

The $6.50 Trade War 1/19/2013 10:22:00 AM The $6.50 Trade War  There are plans to re-introduce legislation to punish China for its "currency manipulation"  Suggested by a paper out last month from the Asian  Development Bank Institute (ADBI), technically, the iPhone contributes to America's trade deficit with China o The basic explanation is that data on bilateral trade are calculated assuming that the entire value of a traded good is created in the exporting country  That doesn't make sense in a global economy marked by increasingly complex supply chains o iPhone:  The device was invented in America by Apple  The components are manufactured, either inside or out of China, by companies based in several other countries  The only part of the process that is "Chinese" is the final assembly, a process that adds only $6.50 to the $178.96 wholesale value  Yet that entire $178.96 value ends up attributed to China in official trade statistics  As a consequence, the iPhone contributed nearly $1 billion to China's bilateral trade surplus with America in
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