| Abstract: |
More and more American multinational corporations (MNCs) are outsourcing the
production and assembly of their products to foreign companies. When they do
so, they derive the largest share of their revenue from the intellectual
property embedded in core technological innovation and brand names. However,
conventional trade statistics are compiled based on the value of goods
crossing national borders, as declared to customs. Generally, the value added
associated with intellectual property rights and embedded in physical goods is
not recorded as either export or import of any country. Hence, current trade
statistics greatly underestimate US exports and substantially exaggerate its
trade deficit. In this paper, we use the case of Apple, the largest American
consumer products company, to illustrate the failure of conventional trade
statistics to report actual US export capacity in the age of global value
chains. According to our analysis of this case, if the value added of Apple
intellectual property sold to foreign consumers were counted as part of US
exports, total US exports would increase by 3.7%, and its trade deficit would
decrease by 7.5%. In terms of bilateral trade, the value added under
examination here would lower the US trade deficit with the Greater China
region by 6.7% and that with Japan by 9.1%. |