Factoryless Manufacturers and International Trade in the Age of Global Value Chains

The emergence of factoryless manufacturers in the world economy has given rise to a new mode of exporting services of intangible assets by multinational corporations, which has challenged the reliability of conventional trade statistics for the measurement of value chain trade. This study finds that even though Apple, the largest factoryless manufacturer in the world, sells billions of dollars products in the Chinese and Japanese markets, the official trade statistics do not count any of the sales as US exports to those two countries. The same is true for Nike, the largest seller of athletic footwear and apparel in the world. Using a hypothetical case of iPhone trade, the study provides an intuitive illustration of the failure of official trade statistics to record trade in intangible assets by factoryless manufacturers. For an appropriate evaluation of the contribution of factoryless manufacturers to international trade, this study estimates the exports in services of intangible assets by the American factoryless manufacturers, Apple, Nike, AMD, Cisco and Qualcomm. The estimation shows that in 2018 the five companies exported $70.3 billion in intangible asset services, equivalent to 8.2% of US exports in services as reported by official trade statistics. From the perspective of US-China economic relations, in 2018 Apple, Nike, AMD and Qualcomm sold to Chinese customers $27.9 billion services of intangible assets, equal to 48.9% of US service exports to China as reported by official trade statistics. Counting those exports as part of US exports to China would reduce the US trade deficit with the country by 7.3%.