Why President Trump’s trade tariffs might not work, a post by J. Dedrick, G. Linden, and K. L. Kraemer

We estimate China only makes $8.46 from an iPhone – and that’s why Trump’s trade war is futile

Jason Dedrick, Syracuse University; Greg Linden, University of California, Berkeley, and Kenneth L. Kraemer, University of California, Irvine

The Trump administration’s tariffs on China have so far targeted mostly industrial goods like aircraft engines and gas compressors. But the administration has also threatened to slap tariffs on US$200 billion in other goods if the dispute continues.

No list of all the goods that might be subject to tariffs has been released, but it would have to include consumer electronics, such as smartphones, which is the largest single product category in China’s exports to the U.S.

One well-known product that might be affected is Apple’s iPhone, which is assembled in China. When an iPhone arrives in the U.S., it is recorded as an import at its factory cost of about $240, which is added to the massive U.S.-China bilateral trade deficit.

IPhone imports look like a big loss to the U.S., at least to the president, who argues that “China has been taking out $500 billion a year out of our country and rebuilding China.” One estimate suggests that imports of the iPhone 7 and 7 Plus contributed $15.7 billion to last year’s trade deficit with China.

But, as our research on the breakdown of an iPhone’s costs show, this number does not reflect the reality of how much value China actually gets from its iPhone exports – or from many of the brand-name electronics goods it ships to the U.S. and elsewhere. Thanks to the globe-spanning supply chains that run through China, trade deficits in the modern economy are not always what they seem.

https://datawrapper.dwcdn.net/U1BOU/3/

Who really makes the iPhone?

Let’s examine an iPhone 7 a little more closely to see how much value China is actually getting.

Start with the most valuable components that make up an iPhone: the touch screen display, memory chips, microprocessors and so on. They come from a mix of U.S., Japanese, Korean and Taiwanese companies, such as Intel, Sony, Samsung and Foxconn. Almost none of them are manufactured in China. Apple buys the components and has them shipped to China; then they leave China inside an iPhone.

So what about all of those famous factories in China with millions of workers making iPhones? The companies that own those factories, including Foxconn, are all based in Taiwan. Of the factory-cost estimate of $237.45 from IHS Markit at the time the iPhone 7 was released in late 2016, we calculate that all that’s earned in China is about $8.46, or 3.6 percent of the total. That includes a battery supplied by a Chinese company and the labor used for assembly.

The other $228.99 goes elsewhere. The U.S. and Japan each take a roughly $68 cut, Taiwan gets about $48, and a little under $17 goes to South Korea. And we estimate that about $283 of gross profit from the retail price – about $649 for a 32GB model when the phone debuted – goes straight to Apple’s coffers.

In short, China gets a lot of (low-paid) jobs, while the profits flow to other countries.

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The trade balance in perspective

A better way of thinking about the U.S.-China trade deficit associated with one iPhone would be to only count the value added in China, $8.50, rather than the $240 that shows up as a Chinese import to the U.S.

Scholars have found similar results for the broader U.S.-China trade balance, although the disparity is less extreme than in the iPhone example. Of the 2017 trade deficit of $375 billion, probably one-third actually involves inputs that came from elsewhere – including the U.S.

The use of China as a giant assembly floor has been good for the U.S. economy, if not for U.S. factory workers. By taking advantage of a vast, highly efficient global supply chain, Apple can bring new products to market at prices comparable to its competitors, most notably the Korean giant Samsung.

Consumers benefit from innovative products, and thousands of companies and individuals have built businesses around creating apps to sell in the App Store. Apple uses its profits to pay its armies of hardware and software engineers, marketers, executives, lawyers and Apple Store employees. And most of these jobs are in the U.S.

If the next round of tariffs makes the iPhone more expensive, demand will fall. Meanwhile Samsung, which makes over half its phones in Korea and Vietnam, with a lower share of U.S. parts, will not be affected as much by a tariff on goods from China and will be able to gain market share from Apple, shifting profits and high wage jobs from the U.S. to South Korea.

Put another way, research has shown globalization hurt some Americans while it made life better for many others. Putting globalization in reverse with tariffs will also create winners and losers – and there could be far more of the latter.

Why not make the iPhone in America?

When we discuss these topics with policymakers and the media, we’re often asked, “Why can’t Apple just make iPhones in the U.S.?”

The main problem is that the manufacturing side of the global electronics industry was moved to Asia in the 1980s and 1990s. Companies like Apple have to deal with this reality.

As the numbers we’ve cited make clear, there’s not much value to be gained for the U.S. economy or its workers from simply assembling iPhones here from parts made in Asia.

While it’s possible to do so, it would take at least a few years to set it up, cost more per unit than production in Asia, and require a lot of carrots and sticks from policymakers to get the many companies involved to do so – for example, like the potential $3 billion in subsidies Wisconsin gave to Foxconn to build an LCD factory there.

A flawed response to the challenge from China

There is, of course, plenty for the U.S. to complain about when it comes to China’s high-tech industry and policies, whether it’s the lack of intellectual property protection or non-tariff barriers that keep major tech companies such as Google and Facebook out of the huge Chinese market. There is room for much tougher and more sophisticated bargaining to address these issues.

But where trade is concerned, policies should reflect that manufacturing is now a global network. The World Trade Organization has already developed an alternate set of trade numbers that shows each country’s trade in value added terms, but the administration seems to have missed the memo.

Trump’s trade war is based on a simplistic understanding of the trade balance. Expanding tariffs to more and more goods will weigh on U.S. consumers, workers and businesses. And there’s no guarantee that the final outcome will be good when the dispute ends.

The ConversationThis is a war that should never have been started.

Jason Dedrick, Professor, Syracuse University; Greg Linden, Research Associate, University of California, Berkeley, and Kenneth L. Kraemer, Research Professor, University of California, Irvine

This article was originally published on The Conversation. Read the original article.

Networked publics: multi-disciplinary perspectives on big policy issues

https://policyreview.info/articles/analysis/networked-publics-multi-disciplinary-perspectives-big-policy-issues

The editors of the Internet Policy Review are pleased to announce the publication of our newest special issue, bringing together the best policy-oriented papers presented at the 2017 annual conference of the Association of Internet Researchers (AoIR) in Tartu, Estonia. The issue – on the broad theme of networked publics – was edited by guest editor William H. Dutton, Professor of media and information policy at Michigan State University.

The seven papers in the special issue span topics concerning whether and how technology and policy are reshaping access to information, perspectives on privacy and security online, and social and legal perspectives on informed consent of internet users. As explained in the editorial to this issue, taken together, the papers reflect the rise of new policy, regulatory and governance issues around the internet and social media, an ascendance of disciplinary perspectives in what is arguably an interdisciplinary field, and the value that theoretical perspectives from cultural studies, law and the social sciences can bring to internet policy research.

This special issue is the first major release of Internet Policy Review in its fifth anniversary year. The open access journal on internet regulation is a high-quality publication put out by four leading European internet research institutions: The Humboldt Institute for Internet and Society (HIIG), Berlin; the Centre for Creativity, Regulation, Enterprise and Technology (CREATe), Glasgow; the Institut des sciences de la communication (ISCC-CNRS), Paris; the Internet Interdisciplinary Institute (IN3), Barcelona.

The release of this special issue officially kicks off the Internet Policy Review anniversary series of activities, including both an Open Access Minigolf during the Long Night of the Sciences (Berlin) and the IAMCR conference (Eugene, Oregon) in June, a Grand anniversary celebration (Berlin) in September and a participation in the AoIR2018 conference in October (Montreal). For up-to-date information on our planned activities, please kindly access: https://policyreview.info/5years

Papers in this Special Issue of Internet Policy Review

Editorial: Networked publics: multi-disciplinary perspectives on big policy issues
William H. Dutton, Michigan State University

Political topic-communities and their framing practices in the Dutch Twittersphere
Maranke Wieringa, Utrecht University
Daniela van Geenen, University of Applied Sciences Utrecht
Mirko Tobias Schäfer, Utrecht University
Ludo Gorzeman, Utrecht University

Big crisis data: generality-singularity tensions
Karolin Eva Kappler, University of Hagen

Cryptographic imaginaries and the networked public
Sarah Myers West, University of Southern California

Not just one, but many ‘Rights to be Forgotten’
Geert Van Calster, KU Leuven
Alejandro Gonzalez Arreaza, KU Leuven
Elsemiek Apers, Conseil International du Notariat Belge

What kind of cyber security? Theorising cyber security and mapping approaches
Laura Fichtner, University of Hamburg

Algorithmic governance and the need for consumer empowerment in data-driven markets
Stefan Larsson, Lund University

Standard form contracts and a smart contract future
Kristin B. Cornelius, University of California, Los Angeles

Link to Special Issue
https://policyreview.info/articles/analysis/networked-publics-multi-disciplinary-perspectives-big-policy-issues

Frédéric Dubois | Managing editor, Internet Policy Review
 Alexander von Humboldt Institute for Internet and Society

 Französische Strasse 9 · 10117 Berlin · Germany · hiig.de ·

The Pleasures of Teaching

I am coming to the end of my first graduate seminar since moving to MSU, and finding the experience particularly rewarding. Perhaps many stars aligned, such as having a small seminar, or as I get more experience in the classroom, I simply enjoy the experience more, but this semester was terrific.

My class was on Media and Information Policy. It covered a wide range of broad topics, such as privacy and surveillance, intellectual property, access and more (850 Course-22JAN15). The students could then do presentations related to the topics of most interest, and write their paper on one particular topic, allowing them to go into depth on what interested them most. This is pretty standard, but what a pleasure to spend three hours a week talking about topics that I find valuable to my own work with students who are bright and engaged, and writing papers on such issues as interesting and diverse as the right to be forgotten, municipal broadband, copyright in the music industry, cybersecurity, and media concentration, focusing on the proposed Comcast-Time Warner merger? During the term, one of the students won a Presidential Fellowship to pursue these issues, while another arranged the music for a parody music video of the MSU basketball team that generated tens of thousands of views. Looking forward to seeing the completed papers this week. On top of that, I had a couple of doctoral students auditing, and a Visiting Fellow from Israel, Dr Avsha Ginosar, sitting in and adding to the mix of perspectives. Great to be back in the classroom.

Our class in the Quello Meeting Room
Our class in the Quello Meeting Room
A Blog from a student about a 'typical' class
A Blog from a student about a ‘typical’ class
Another blog from the classroom
Another blog from the classroom
Avsha Ginosar
Avsha Ginosar

Media and Information Policy: Syllabus for Spring 2015

I would appreciate any emailed or posted comments and suggestions on my syllabus for a master’s course at MSU’s Department of Media and Information, entitled ‘Media and Information Policy’. My aim is to be broad, covering a wide range of topics that will illustrate the range of policy research and issues in the field, and let student presentations and papers focus in more depth on a topic of particular interest.

I’ll attach the syllabus here, and again welcome feedback. I have not yet incorporated all the changes in response to comments to-date, but will do! Thanks.

850 Course-13JAN15

Politics and Policy of the Internet Seminar at Konstanz University

I have been spending the week keeping quite busy and engaged teaching a small seminar at the University of Konstanz, Germany. The seminar is entitled ‘Politics and Policy of the Internet’ and my 12 students are masters students in their faculty of politics and public administration. The first photo is of a subset of the class during one of our breaks.

Konstanz Students 2013

Preparing for, and giving the course, has been very useful in moving me along in completing a 4 volume set of readings for Routledge, entitled ‘Politics and the Internet’. Also it has been refreshing to hear the discussion of the readings. I’m impressed by the high standards the students have in the methodological rigor and argumentation of the various readings – excellent critics, but also in their ability to see the contributions of the work they review. The discussion of particular contemporary issues and cases has been the most interesting aspect, and I was pleased to be able to introduce the students to some of the ancient history of tele-democracy around interactive cable, videotex, and bulletin board systems. Sometimes it is useful to be older.