FAIR TRADE: Why Does My iPhone 7 Cost $1,164 In Brazil?

Written by Dan Perkins on March 29, 2017

This is an article on trade policy, specifically fair trade. It’s not an easy subject to simplify, so I wanted to find something that all of us could relate to, but that also could be an example of convoluted trade policies around the world. As the title says, why does an iPhone 7 cost $1,164 in Brazil, when the same phone costs $700 in the United States? Or why does a pound of lean ground beef cost $3.00 per pound here and $11.20 a pound in Paris?

I could have filled this page with hundreds of examples of wide price disparities between nations. The answer is, in many cases, not all products or foodstuffs are indigenous to a particular country. So, if you want to provide an iPhone 7 and your country doesn’t have an Apple factory, then the iPhone has to be imported from somewhere else. Fortunately, iPhones don’t take up much space in a shipping container, so you could ship tens of thousands in a relatively small package. That would mean that the price per phone shipping charges would be relatively small.

Therefore if shipping is not the culprit, there has to be another reason. One pound of beef in Paris costs $11.20, compared to $3.00 in the US. Let’s talk trade agreements, many negotiated decades or more ago. During the recent presidential campaign, Donald Trump said that he was going to renegotiate many of our trade agreements, because he said in some cases they were neither free nor fair. For too many years, I believe that America has been the free banker to the world, giving away our wealth to help other nations enjoy prosperity. This concept of free bankers may be foreign to most of you reading this column. What I mean by free bankers is that we send our money out of the country to purchase goods from another country, to try and help them to grow their economies. Under NAFTA the Mexican economy has doubled, and the same is also true for Canada, but now it’s time to make some adjustments. We let our American companies leave, closing down factories, putting people out of work, and relocating factories and service centers to other parts the world.

So, if you worked at a steel mill in Youngstown Ohio, or a textile mill in New England, you lost your job, the factory closed, and the company went overseas to make what you used to make for a lower price. That product is then shipped back into the United States duty-free. Some estimates state that from the year 2000 to now, 40,000 factories closed in America. Some economists have estimated that millions of jobs were lost in this transfer of work from the United States to foreign nations. Many Americans have lost not only their pride, but also the self-reliance that is accomplished through work.

Unemployment checks do not give the personal satisfaction, or the means of providing for yourself and your family through the process of work.

On the other hand, if a United States company wants to ship something manufactured in the United States to a foreign country, in many cases significant tariffs or taxes are levied on that product. These taxes can make it unprofitable for American companies to ship anything overseas.

If you’ve ever seen a balance scale, the way it works is you try to put the same amount of weight on both sides of the scale. If that is done, the result is a balance. The concept of both free and fair is what Mr. Trump is trying to achieve. He doesn’t want the United States to have an unfair advantage, but by the same token, he doesn’t want China or any other nation to have an unfair advantage over us.

These unfair trade practices have been around for a long time. In fact, the last time the United States had a surplus in a trade where we exported more than we imported was in 1975, 42 years ago. We are in the midst of the third generation of Americans who have been living with trade deficits. These deficits have been diminishing our personal dignity, our economy, and good paying jobs.

America does not have unlimited funds, and looking at trade policy after 42 years of imbalance is the right thing to do. We have $20 trillion in debt, so our resources are being stretched. President Trump has suggested a border tax for those countries that tax our exports in an unfair way. The President needs all the tools he can get to bring about a free and fair trade that benefits all nations. He is suggesting that if we impose the tax, perhaps those countries affected will come to the table and discuss their trade practices. If a nation offers a free and fair trade deal, then the border tax could go away.

We need tax reform so America can compete for companies bringing their business to America. We have some of the highest business taxes in the world and they make America uncompetitive in attracting new business. Last we need to provide global companies who leave their profits overseas because of high American tax rates an opportunity to bring the trillions of dollars of earnings back to America. The infusion of this cash will create good paying jobs and companies will pay their income taxes because of lower tax rates. These two proposals are a win for everybody for we will have both free and fair trade. You can’t expect a carpenter to build a house without proper tools; we can’t expect President Trump to work for us in bringing about free and fair trade without the right tools either.

Dan Perkins is an author, radio and TV talk show host, current events commentator, and philanthropist. His books are available on Amazon.com. More information about him, his writings, and other works are on his website: danperkins.guru.