Losing the manufacturing edge

When you buy a $30 shirt in a department store, the majority of the cost (I've always believed) benefits the American economy because the actual cost of the shirt (raw materials and labor) is only about $5 to manufacture. The rest of the value is captured here.

This story about the breakdown of the costs of an iPod made me rethink my sang-froid.

$163 of the iPod's $299 retail value in the United States was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Japan contributed about $26 to the value added [...] The unaccounted-for parts and labor costs involved in making the iPod came to about $110.

I would imagine that much of the "unaccounted-for parts and labor costs" is Chinese. So which countries' economies benefit from an iPod sold in the US? The technical knowhow and design are American (54%) and Japanese (9%). Yet, Chinese manufacturers receive about 37% of the benefit.

Don't tell me that American competitiveness is not reduced when a product designed in the US has to be produced at a 37% cost.

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