If you look at the back of an iPhone it says “Designed by Apple in California, Assembled in China.” The actual parts out of which it was assembled come from a whole bunch of different countries. Consequently, the actual value is dispersed to a whole bunch of places. But as Jacob Goldstein expalins, under current statistical rules “the entire manufacturing cost of each iPhone — about $179 for each iPhone 3G, as of 2009 — is counted toward China’s export totals” even though the China-located assembly process only accounts for about $6.50 per phone.
As Yuqing Xing and Neel Detert explain (PDF) in “How iPhone Widens the US Trade Deficits with PRC” the result is that what’s really a very successful American export product (the iPhone’s intellectual propert and industrial design characteristics are much more valuable than its manufactured components) ends up counting as a net import.
That’s a little primer in why it’s worth keeping in mind that objects in the balance of trade may not be exactly as they appear. Still fundamentally it strikes me as underscoring the fact that it’s a problem for the world when a major economy doesn’t let its currency float. There are a lot of different ways these trade statistics could be assembled, and a lot of different ways you can interpret them. What’s not open to interpretation is the fact that in an open exchange rate regime, currencies adjust in line with trade flows. When Americans start buying more stuff from Canada, that makes Canadian money more expensive; when Canadians buy more American stuff, the reverse happens. This is all nice and automatic, and doesn’t depend on any particular interpretation of the global supply chain. It’s a good system, and China and the world would benefit from moving in that direction.