Global value chains and the "missing exports" of the United States

Many American multinational corporations have turned into factory-less. They outsource the production of their products to foreign companies and derive the largest share of their revenues from intellectual property and services embedded in physical products sold to international consumers. However, conventional trade statistics are compiled based on the value of goods crossing national borders, as declared to customs. The value added associated with intellectual property and services embedded in physical goods is not recorded as an export. Current trade statistics greatly underestimate US exports. In this paper, we use the case of Apple, the largest American consumer products company and a typical factory-less manufacturer, to illustrate the failure of conventional trade statistics to report actual US export capacity in the age of global value chains. According to our analysis of this case, if the value added of Apple intellectual property and services embedded in all Apple products sold to foreign consumers were counted as part of US exports, total US exports in 2015 would increase by 3.4%, and its trade deficit would decrease by 7.0%. In terms of bilateral trade, the value added under examination here would raise the US exports to China and Japan by 16.6% and 8.7% respectively, and lower its trade deficit with the two countries by 5.2% and 7.8% accordingly.