The US trade deficit could technically be halved if statisticians were better able to capture the value of the software developed in Silicon Valley and embedded in smartphones worldwide, according to Hal Varian, Google’s chief economist.
Trade economists have long argued that current methods of collecting data do not reflect the complexities of modern global supply chains, with the iPhone’s physical product an often-cited example.
While US import data reflect the retail cost of a phone as coming entirely from China, only a small portion of its value is actually added in the country, as the phones are assembled in Chinese factories from products sourced from across the world. Most of the profits also go to Apple, a US company, rather than its Chinese suppliers.