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Richmans' Trade and Taxes Blog
American Production of the iPod? Setting the Record Straight
The iPod gets used as an example a lot in the discussion of global trade. Those who defend the current system of one-way 'trade' like to emphasize that although China assembles the iPod, the components (some of them anyhow) come from elsewhere. This is of course absolutely true. I heard this argument made again today, but it was accompanied by the false claim that many of the components come from the US. Perhaps a lot has changed in the last several years, but an article in 2007 by eminent economist Hal Varian in the New York Times sets the record straight on this, noting that at the time the U.S. produced portion of the iPod amounted to "$8 to various domestic component makers." Thus, if the ratios have stayed the same as those Varian cites, the iPod is roughly 1/20 manufactured in the United States, with most of the remaining 19/20 of its manufacture conducted in Asia.
Obviously there are also distribution costs that go to Americans when the iPod is sold in the US, and Apple earns a profit on the production too (much of which is probably kept 'outside' the US pending favorable tax treatment) but so far as production goes, the money doesn't go here. Almost none of it.
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