Apple And Its Critics

There's been a lot of hand wringing about Apple's contribution to our trade deficit with China. Actually both Apple and China get a bad rap from politicians of all political persuasion for stealing American jobs and exploiting Chinese workers. First, it's fact of life that the misery of being exploited is nothing compared to the misery of not being exploited. Now to Apple's case. Apple has kept most of its product design, software development, product management, marketing and other high-wage functions in the U.S. There is a petition circulating that has attracted some 40,000 signatures (an infinitesimal number considering Apple has sold 50 million iPhones) calling for an "ethical iPhone" 5. Taren Stinebrickner-Kauffman, whose online profile boasts of consulting for the DNC, MoveOn org. and the AFL-CIO states that many people are upset with Apple and the way its subcontractors treat the help. She would like to see Apple open its books to independent auditors. I'm sure Apple's competitors feel the same way so I wouldn't be surprised if Apple doesn't politely, but firmly, tell her to go to hell or to go audit the AFL-CIO's books.

Three economists have studied Apple and its effect on the trade imbalance with China. Their conclusion is that Apple's contribution to the trade deficit with China is at the worst marginal. Components for the iPhone and iPad are manufactured in the US, Malaysia, Japan, and various Pacific Rim countries and shipped to China where they are assembled at Foxconn. The assembly process uses about $10 worth of Chinese labor but when the iPhone is imported to the US all the component parts are priced into the final product for a total of $227 to $275. In the muddled thinking of both Donald Trump and Barack Obama China is perceived as an industrial dynamo, when as far as the iPhone is concerned, it is merely a bit player and a source of cheap but efficient labor and deserving of neither the scorn it receives from Trump nor the admiration it receives from Obama.

Getting back to the ethical iPhone lady, Stinebrickner-Kauffman tells us that if only Apple would add another 65 bucks to the price of an iPhone it could pay Chinese workers American wages. In the real world where demand curves slope downward there would be fewer iPhone sold and fewer Chinese working. What makes Stinebrickner-Kauffman think the jobs would stay in China? If not America, Japan or some other developed country would grab the jobs. Why stop with paying the Chinese more when this blessing could be passed all the way through the supply chain until an iPhone costs $1500 and Apple sells 40,000 of them each year? China doesn't want to be another Detroit not does Apple want to be the next GM.