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U.S. Changes Tariff Status of Some imported Goods from Developing Countries

July 19, 2010 Leave a comment

According to the article published June 30, 2010 in the New York Time Journal, it shows us how the United States tries to help those developing countries by allowing them exporting some product duty free.  President Obama has implemented a program to change tariff status of some goods in order to help developing countries such as Colombia Thailand and some African countries.

The program was created in 1974 and represent an opportunities for those developing countries to increase their exports and so does the trade balance. In 2009, the value of exports under the program reached $ 20.3 billion. For about 5000 types of products from 131 countries benefited from protection. Otherwise, if a country’s exports surpass a fixed value of $140 million, United States may waive this privilege.

I am not in the position of supporting Obama’s idea as president of United States which is members of G20. Because first of all increasing exports from developing countries to developed countries doesn’t necessarily mean that it will help them in some circumstance for an economic development if we look at the global economy. Second, most of developing countries don’t have a technology compared to developed countries. In my opinion, new technologies conduct a country to new industries and free trade lead to new markets.

In order to collect benefits of new technologies and a helpful market policy, those developing countries should set up a structural adjustment in their economy. The question that we can ask is how G20’ members can make trade works for developing country? My answer for this question in addition to my previous opinion is to let those developing countries to be open to the global market. Furthermore they have to cope from resistance in their own industries and workers which could not be as competitive as they should be.

After looking at those products that United States allow developing country to exports duty free, for example: frozen fruits and vegetables from Egypt and jewelry from some central African countries… in my point of view, those countries could do better if they improve their manufacturing industries in other words they have to set up a strategy  attracting Foreign Direct Investment. Instead of exporting raw material they could export many products using only one source. In this case there is an additional value to those developing countries which will help their own economy first in order to create more job opportunities and to improve their technology in order to see an economic growth.

However, such trade policy can create a losers as well as winners and from this paper I can argue that G20 help for developing countries is not enough for their economic growth.

“The value goes to where the knowledge is”

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Source: http://www.nytimes.com/2010/07/01/business/global/01trade.html?_r=1&scp=1&sq=U.S.%20Changes%20Tariff%20Status&st=cse

 

Written by: Redouane Boufous

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Categories: International Trade

Supply Chain for iPhone Highlights Costs in China

July 18, 2010 Leave a comment

It is important to understand how supply chain management can be costly for the best known companies worldwide. I picked an article from New York Time Journal published July 5, 2010 which on one hand, discuss how supply chain for iPhone highlights costs in China. On the other hand, the article shows up the Apple’s strategy to keep costs lower while Chinese wages increase by 20 to 30% in most parts of the country.

Manufacturing in China tend to be more expensive than usual. Worker wages and shortage start rising as well as Chinese currency, which makes exports more expensive and so does making devices like iPhone assembly in China.

Furthermore, Apple plans to move a big part of Chinese worker to other part of China where wages are still lower. Other electronic companies try to figure out how to reduce cost as well. But Apple generate more profit than its most important competitors like Dell and LG. because Apple has a 60% profit margins plus the high price of its products.

In my opinion, the change in supply chain of the iPhone 4 in China has a direct relation to the Apple global market strategy. Apple was designed in the United States and supported by high-tech components manufactured and shipped from others countries, assembled in China and shipped back to the United States.

The biggest part of value and profit is generated at the beginning and the end of supply chain process. According to the article and other public sources, Apple orders two of its major iPhone components from Singapore which are: the video processing and base-band communication. The most important source of Apple components comes from Taiwan where they manufacture six major part of the new iPhone 4. Some of these parts itemized as: Digital Camera, Connectors, Bluetooth Chipest, and Printed Circuit Boards. Only two components are made in the United States which are: Touch Screen Controllers and the Wi-Fi Technology. The previous information provided in this paper could help us to understand why Apple makes a $600 iPhone as a final price to sell.

From this point, I can argue that Apple is trying to reduce costs by sourcing majority of parts from only one country which is Taiwan because it keeps the supply chain to be more efficient and less costs adopted. It also had an important risk if The United States has political trouble with Taiwan it will block the bilateral trade and so does the supply chain which will causes of adding more additional costs. More often, Apple may lose its comparative advantage if a minor change occurs in the global market.

To sum up, I think that China tend to be more protective when it comes to its labor force by raising wages and building a more human economy. Basically, China will not be able to support the whole world economy by been a workshop place for the most knows companies like Apple, because it has a low profit value and as discussed in this article, the big part of the profit is included in the supply chain the beginning and the end of the process. I am also in the position of arguing that as wages rise overseas it become more significant for U.S. companies to keep some of its manufacturing in the U.S.

Written by: Redouane Boufous  – [White paper]


Categories: International Trade