There have been several length analysis on this topic. Most of these use the iPhone as the example. The conclusion is that most of the profit goes to Apple even though from a trade deficit perspective most of the gain is counted in China. Here is one of the many articles I've seen on the topic that was in Forbes:
There was also an analysis in The Economist that came to a similar conclusion.
"Trade is no longer bilateral, it's global."
Lamy is right, but the implications are still making themselves felt. Consider the emerging discipline of supply chain management, which has evolved to deal with precisely the increasing decentralization of product manufacture. The parts that make up the finished product may come from all over the world, and sourcing them and insuring they are where they need to be when they need to be to *make* the finished product is a critical skill for anyone involved in that sort of manufacture.
The world is flat, the economy is global, and *everyone* is in the process of finding out what that means.
Don't all the parts flowing 'into' China before the iPhone is assembled get counted in the balance equations ??
Seems like if they did only the 4% assembly value add would be counted once all the flows are accounted for.
Maybe 50% (or ?) of the 'parts' in the phone are made in China so maybe they are just transfered from the chip vendor factory inside the country to foxcomm so not ever an import or export. That would make it more than 4% local value added in the example given, just not all in the apple manufacturing step.
The only possible long-term solution is a general synchronization of tax policy, particularly on corporations and the very wealthy. Anything else, and accountants and lawyers will find ways to route money through whatever tax havens exist.
The other possibility - everyone racing to the bottom and trying to BE the tax haven - can only lead to banana republics where the rich are essentially untaxed and control nearly the entire economy.
Well ... I don't buy this argument entirely, any more than I buy the argument that US corporations are taxed very little, *when that tax is compared with GDP*. That doesn't tell the whole story.
A company does not make hiring and manufacturing decisions based on any theoretical comparison of local and federal taxes with GDP. The company worries only about how much *it* will be taxed. And a country's economy does not depend solely on high value added content. As we've discussed on here in other articles, manufacturing brings with it all manner of support industries too.
The bottom line is always going to be the flow of real money. Put it this way. It would be difficult to support a country's economy with work only going to nuclear physicists and lawn care companies (a "slight" exaggeration to make the point).