Imported from China... Really?

On my way back from an International Tropical Timber Council (ITTC) meeting in Japan, I read an interesting article in the Wall Street Journal, titled, “Not really ‘Made in China.’”


The subject of the story is the Apple’s iPhone. The moral of the story is that although the iPhone is ‘Made in China,” it really isn’t (or at least most of it isn’t). The story cites an amazing statistic that the phone, popular with U.S. businesses and U.S. consumers alike, added $1.9 billion to the U.S. trade deficit with China in 2009. Anyone following the news understands the growing sensitivity toward the U.S. trade deficit and concerns about imports and U.S. jobs. So is buying an iPhone (or iPad for that matter) bad for the U.S. economy and jobs?

Not so fast says the research. Current U.S. Customs practice assigns the whole cost of a product. In the case of an iPhone $178.96 is attributed to China where it was manufactured. However, the cost of constructing an iPhone only accounts for 3.6% or $6.50 of the total cost. The rest of the cost comes from components manufactured in Europe and North America.

Pascal Lamy, who is the director general of the World Trade Organization, is quoted as saying, “What we call made in China is indeed assembled in China, but what makes up the commercial value of the product comes from numerous countries.” The concept of country of origin for manufactured goods has gradually become obsolete.”

Try this… next time you put on a shirt look at the label. One of my shirts, for example, says “100% Egyptian cotton, woven in Italy, manufactured in China.”

Flooring, furniture and other manufactured wood products are products made in similar processes, with value added at every stop and inputs from multiple countries.

This was certainly apparent during market discussions at the ITTO meeting in Japan. Participants highlighted the inter-connectivity and complexity of trade flows. For example, under ITTO standards the U.S is considered a consumer country. Yet according to statistics, in the first ten months of 2010, 2.1 million metric tons of logs and unfinished wood products were exported from the U.S. to China. Again, according to another Wall Street Journal article, the wood exported by the U.S. is used for housing construction and furniture for China’s growing middle class and, yes, some of it is also re-exported to global markets, including the U.S.

The overseas market for U.S. domestic woods is significant and lucrative. The value of these markets are sufficient for the American Hardwood Export Council, representing U.S. hardwood exports, to maintain offices in Europe, Mexico, Japan, Hong Kong and Shanghai. Wood species from the U.S. are shipped to China, India, Europe, the Middle East and the Far East and mixed with wood species from around the world to produce the full range of wood products from heirloom furniture to composite wood flooring.

This worldwide trade means a sawmill in Georgia depends upon the manufacturing capabilities and consumer appetites in the Far East. In the same way, IWPA’s U.S. members rely on an overseas manufacturing plant to produce flooring specified by an American designer. Access to both markets creates jobs and raises real income in the United States.

What’s the moral to this story? World trade makes the United States strong and keeps our standard of living high. World trade is creating new consumers for our “Made in America” trees. It’s opening up opportunities and funding for developing countries to sell their sustainable flooring, furniture, wood products to Americans whether they shop Rodeo Drive or WalMart.

It is in the best interests of the U.S. economy to expand our wood products exports; in the process, we must not place barriers to imports. Both add value, jobs and create consumer choice.