How iPhone, gadgets "Deformation" of trade data (Wall Street Journal)

BEIJING – a popular solution for current economic woes of the U.S. is America's most successful high-tech gadgets sucks the rest of the world.

Associated press researchers estimated that iPhone added 1.9 billion for the trade deficit with China last year. Above, an Apple store in Palo Alto, California.

However, two scholars believe iPhone as Inc. Apple - a commodity technology U.S. bestseller - added really 1.9 billion for the trade deficit with China last year.

How is this possible? Researchers say traditional ways to measure global trade produced the number but fail to take account of the complexity of global trade where the design, manufacture and Assembly of products often involve many countries.

"A distorted image" is the result, they say, that exaggerates the trade imbalances between nations.

Statistics on trade in both countries consider the iPhone, a Chinese export United States, although it is entirely designed and owned by an American company and consists largely of exhibits in the country several European and Asian. China's contribution is the last step - mounting and telephone shipping.

All $178.96 approximately the amount will be credited with big costs phone shipped to China, even if the value of the work done by the Chinese to Hon Hai Precision Industry Co. workers represents only 3.6%, or $6.50, of the total, researchers calculated in a report published this month.

An Apple spokesman said that the company refused to comment on the research.

European Agency for the two University researchers have found that the Apple iPhone actually added 1.9 billion for the trade deficit with China last year.

The result is that, according to official statistics, "same hi-tech products invented by us firms will not increase u.s. exports," write Yuqing Xing and Neal Detert, two researchers at a think tank in Tokyo, Asian Development Bank Institute in their report.

This is not a problem with high-tech products, but with the way in which the exports and imports are measured, they say.

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Research adds to debate on traditional trade statistics which could have consequences for the real world. Conventional trade figures are the basis of political struggles leads to Washington and Brussels what China's currency policy and its business practices would have been unfair.

"What we call"Made in China"is indeed assembled in China, but what makes the commercial value of the product comes from many countries," Pascal Lamy, Director General of the World Trade Organization said in a speech in October. "The concept of country of origin of the manufactured products gradually became obsolete.

Mr Lamy said if trade statistics have been adjusted to take account of the actual value contributed to a product by the different countries, the size of the u.s. trade deficit with China - 226.88 billion, according to the figures in the United States – would be reduced by half.

To correct this bias is difficult because it requires a detailed how products are put together knowledge.

Unseat imports and exports of value added in different countries can lead to some controversial conclusions. For example, some U.S. lawmakers argue that China needs to let its currency increase significantly against the US dollar to reduce the trade deficit between the two countries.

The value-added approach shows, iPhone sales are added to the US - economy rather than the subtraction, the traditional approach would entail.

Based on the sales of U.S. iPhone 11.3 million in 2009, researchers believe iPhone Chinese exports to 2.02 billion. After deducting 121.5 million in Chinese imports parts produced by American firms such as chip maker Broadcom Corp., they arrive at the figure of Chinese trade surplus of $ 1.9 billion and the trade deficit - in iPhone.

If China was credited only its share of the value of an iPhone production, exports to the United States for the same amount of iPhone would be a trade surplus of U.S. 48.1 million, after U.S. parties business accounting help.

Other economists say that certain aspects of the methodology of researchers may have led to exaggerate their case. The study, for example, implies that companies like Toshiba Corporation and Samsung Electronics Co. are components for iPhone fully assemblies in their country of origin.

But many vendors Apple have facilities for manufacturing in China, it is likely only a portion of the components that they build for iPhone are manufactured in China as well.

The last results are generally similar analyses made by the Center for it staff at the University of California, Irvine, trade and the manufacture of another product Apple iPod. This research has also found that Chinese labour represented only a few dollars value of iPod, even if the statistics credited trade China to produce its full value.

In a speech delivered in September in New York, Chinese Prime Minister Wen Jiabao cited research to say that trade tensions between the United States and China are exaggerated. Many of China's exports are products which are manufactured in China on the contract for foreign companies, he said, they should not criticize China for execution of a large trade surplus.

"Companies foreign-funded, including United States, are the main beneficiaries" of this system, said Mr. Wen.

-Loretta Chao has contributed to this article.

Write toAndrew Batson at andrew.batson@wsj.com