Tag Archives: iPhone

02.29.2012 | Apple Looks Unappetizing in Argentina

By Mira Korber, guest blogger.

While wandering the streets of Buenos Aires, I wondered why the shop windows seemed devoid of any new Apple products. Electronics stores touted the antepenultimate model of the iPod Nano as the new (overpriced) great thing. I was the only person I saw with an iPhone.

Regarding the iPhone, my Argentine homestay family even told me, “It just isn’t that big here.” Here’s the basic reason why, as illuminated by this fascinating Wall Street Journal article:

Argentina is currently employing protectionist policies. The “impuestazo,” or “Big tax” set in place by President Cristina Kirchner doubles the value-added tax (VAT) on electronics imported from other countries. The government has also significantly lowered industry taxes in Tierra del Fuego, where the non-Apple electronics are produced, to incentivize more growth.

The goal is to keep jobs and capital within Argentina, even if it means the price of electronics (domestically and internationally made) will skyrocket for consumers. Jobs in the electronics industry numbered 3,500 before the Big Tax; now the December employment peak clocks in at 13,500.

High prices for even domestically produced electronics result from inefficient assembly, storage, and transportation methods used in Tierra del Fuego, Ushuaia (the southernmost tip of South America). Component parts travel as follows: Asia –> Buenos Aires –> Ushuaia for assembly –> Buenos Aires for sale.

It also turns out that iPhones are now not only uncommon in Argentina, but banned from commerce. To get one, citizens have to buy them on their travels outside the country.

The Economic Lesson

Protectionism and tariffs (taxes on imported goods) prevent free trade. Read about the tariff of 1828 in the United States and the problems it caused.

And read here about how Argentine protectionism is affecting American exports.

An Economic Question: How would a tariff affect the curves on a supply and demand graph? What would happen to prices?

Posted by: adminEcon
Tags: Argentina, international trade, iPhone, iphone in argentina, iphone tariffs, iPhones, iphones in argentina, protectionism, protectionism in argentina, tariffs, tariffs in argentina
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11.09.2011 | “Tweakers”

Referring to Steve Jobs, most of us think of innovation and entrepreneurship. Like Thomas Friedman in “(Steve) Jobs, Jobs, Jobs, Jobs,” we imagine business starters and young Thomas Edisons.

Instead, in the New Yorker, Malcolm Gladwell tells us that Jobs was a “tweaker.” The mouse and icons? Jobs saw a version at Xerox in 1979. The iPod? Music players were horrible. The iPhone? Jobs thought phones were as bad as music players used to be. You can see where this is going. Each time Steve Jobs and his designers “tweaked” someone else’s idea until the design satisfied him.

To meet a host of “tweakers,” here, you can read Andy Kessler’s wonderful history of technology. More academic, here is the study cited by Gladwell about the “tweakers” of the British Industrial Revolution

The Economic Lesson

Mathematician Benoit Mandelbrot (1924-2010) was the father of fractal geometry and the idea that the closer you look, the more you see. From a distance, the British coastline will appear straight. However, looking closer and closer increasingly reveals indents and zigzags. Consequently, Dr. Mandelbrot believed that it was actually much longer and even infinite.

Similarly, innovations can be incremental. Or, as Albert Einstein has been quoted as saying, “The secret to creativity is knowing how to hide your sources.”

An Economic Question: Knowing that innovation is important for economic growth, how could educators develop “tweakers?”

Posted by: adminEcon
Tags: "tweakers", innovation, iPhone, Malcolm Gladwell, Steve Jobs
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06.14.2011 | Trading Places

A switch has taken place.

More than half of our imported goods used to come from the G-6 countries (Canada, France, Germany, Italy, Japan, the U.K.) Now, we import more from China, Mexico and Brazil.

Specifically, in 1987, 55% of U.S. merchandise imports came from Europe and Japan. Now the total is down to 31%. By contrast, China, Mexico, and Brazil send us 32% of the goods we purchase from abroad. (Scrolling down here, you can see where the remaining 37% is coming from.)

And, according to economist Michael Mandel, perhaps we are importing even more from China, Mexico and Brazil than the statistics indicate. If goods are now cheaper, then recent dollar totals may mask an even higher quantity.

According to another point of view, though, maybe we are importing less. Take the iPhone. Assembled in China, its components come from 9 countries, including the U.S. Should it count as a Chinese export in U.S. trade statistics if researchers have calculated that the value added by the Chinese is only $6.50 out of a wholesale price of $178.96?

The Economic Lesson

Called net exports, a nation’s trade balance is the value of exports minus the value of imports. Simply defined, exports are goods produced in the U.S. and sold abroad. Imports are goods produced abroad and sold in the U.S. When the U.S. sells domestically produced goods that are worth more than those it imports, it has a trade surplus. It runs a trade deficit when the opposite is true. So, if a country imports a car for $20,000 and exports a tractor for $100,000, it has a trade surplus of $80,000.

An Economic Question: Would you record the iPhone, with components that are made around the world but then assembled in China, as an import from China? Explain.

Posted by: adminEcon
Tags: Brazil, China, exports, G-6, imports, iPhone, Mexico
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12.26.2010 | Made in China?

True or false? Is Apple’s iPhone made in China? The answer is true and false.

True.

According to U.S. trade statistics, the iPhone is made in China. Consequently, the iPhone is recorded as a minus for us and a plus for China. It added to our trade deficit and China’s trade surplus with the U.S. by a whopping $1.9 billion during 2009.

False.

According to recent research, trade statistics can be misleading. Yes, the phones are assembled in China and then they are shipped to the U.S. However, researchers say that the value added by the Chinese is only $6.50 out of a wholesale price of $178.96. Instead, we should consider the value of parts that are sent to China but made by firms in 9 countries including Japan, Germany, South Korea and the U.S. In fact, using a value-added approach, the iPhone would add $48 million to U.S. balance of trade totals.

The Economic Lesson

However, based on the iPhone, you can see that calculating our trade statistics is much more complicated than seeing what enters and what leaves. According to the director-general of the World Trade Organization, “The concept of country of origin for manufactured goods has gradually become obsolete.”

Posted by: adminEcon
Tags: apple, balance of trade, China, exports, imports, iPhone, trade deficit
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