Protectionists Must Have Nightmares about the iPod

From Mark Perry comes even more proof that the iPod is a protectionist's worst nightmare.  I've already documented the growing number of iPod (and iPhone) studies which show that the modern global economy isn't, as our President and many other politicians claim, some sort of ruthless, zero-sum, "us versus them" competition among nations.  (Think Thunderdome without the bungee cords.)  The earlier "iPod studies" analyzed the iPod's and iPhone's global design and manufacturing processes and showed how, even though the gadgets say "Made in China," it's America, not China, that gets most of the profits from their sale.  The studies thereby demonstrated how modern global supply chains (i) have turned bilateral trade statistics into worthless measures of trade policy and (ii) can provide huge benefits for Americans beyond the obvious cost savings, even when the product at issue is wholly assembled abroad.

Now comes a new study published in the Journal of International Commerce and Economics which shows the dramatic benefits that the iPod's global manufacturing process - and American innovation more generally - deliver to the American workforce.  The abstract gives the study's basics:

Globalization skeptics argue that the benefits of globalization, such as lower consumer prices, are outweighed by job losses, lower earnings for U.S. workers, and a potential loss of technology to foreign rivals. To shed light on the jobs issue, we analyze the iPod, which is manufactured offshore using mostly foreign-made components. In terms of headcount, we estimate that, in 2006, the iPod supported nearly twice as many jobs offshore (27,250, see chart above) as in the United States (13,920). Yet the total wages paid in the United States ($746 million, see chart above) amounted to more than twice as much as those paid overseas ($318 million). Driving this result is the fact that Apple keeps most of its research and development (R&D) and corporate support functions in the United States, providing thousands of high-paid professional and engineering jobs that can be attributed to the success of the iPod. This case provides evidence that innovation by a U.S. company at the head of a global value chain can benefit both the company and U.S. workers.

Cool.  Perry also provides a great table to demonstrate the authors' topline data point:

The study's authors then conclude:

When innovative products are designed and marketed by U.S. companies, they can create valuable jobs for American workers even if the products are manufactured offshore. Apple’s tremendous success with the iPod and other innovative products in recent years has driven growth in U.S. employment, even though these products are made offshore. These jobs pay well and employ people with college degrees. They are at the high end of what might be considered middle class jobs and appear to be less at risk of vanishing from the United States than production jobs.

In short, even when an American-designed product is made overseas, it can - and often does - support tens of thousands of American jobs at pretty great pay.  And, oh, yeah, other countries benefit too.  Very, very cool.

So much for that ruthless competition, eh?

p.s. For those of you who might claim that we could have even more jobs if we lobbied the US government to force Apple to produce and assemble their gadgets in the United States, you'd be wrong: the devices would necessarily cost more to produce - maybe a lot more.  Thus, these "American iPods" would, at best, result in fewer sales and fewer support jobs (and R&D into new, supercool Apple stuff), and, at worst, they wouldn't exist at all when priced entirely out of the market.