Ken Kraemer testified before the U.S. International Trade Commission (USITC) on “The effects of U.S. company participation in global value chains” on December 16, 2010 in Washington DC. He presented the joint work done with Jason Dedrick and Greg Linden that has been reported in the New York Times and Wall Street Journal. Curiously, an article referring to the work appeared in the WSJ on the day of testimony. The research shows that Apple clearly garners the largest share of profits in the supply chain. The U.S. also gains from Apple’s R&D and product innovation, which creates high-paying engineering, technical and managerial jobs in Apple’s U.S. headquarters and jobs in Apple’s own retail stores and other retailers such as Best Buy.

The research also shows that U.S. bi-lateral trade data with China can be misleading. For example, China is charged with a $150 trade surplus on the $299 iPod, but that $150 mostly represents inputs from the U.S., Japan, Korea, Taiwan and other countries. China simply assembles the product for a few dollars. There are no Chinese firms providing inputs to the iPod.

Several articles provide more detailed information and can be found at the following URLs:

http://pcic.merage.uci.edu/papers/2008/WhoCapturesValue.pdf
http://pcic.merage.uci.edu/papers/2008/WhoProfits.pdf
http://pcic.merage.uci.edu/papers/2009/InnovationAndJobCreation.pdf

Also testifying with Kraemer before the USITC, which turned into nearly a four hour session with the Commissioners questions, were economists J. Bradford Jensen of Georgetown University and William Milberg of the New School for Social Research in New York. The testimony and questions and answers will be published by the USITC in the next few months.