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Home / Business / China needs Apple in its trade war with the United States

China needs Apple in its trade war with the United States



Given the US-China trade war, one might think that Apple Inc., in violation of Chinese labor laws, will provide only the ammunition Beijing needs to crack down on the technology giant.

Still, there are good reasons why China might prefer not to crack the whip too violently on the iPhone manufacturer. Apple plays a major role in the local economy, but amid rising tensions with President Donald Trump's administration, the Cupertino, California-based firm has another important role: as a full-time attorney, Washington, DC lobbying for interests similar to China's . [1

9659003] Trump has imposed or threatened US $ 300 billion in customs value in Chinese imports. In response, China has targeted US farmers with retaliatory tariffs. So far, Apple has largely managed to stay out of line with Chinese authorities, even though local sales have struggled.

Much of Apple's production takes place in China, so there are tariffs off the table. But there are other steps Beijing can take to make the American company's life difficult.

Take the experiences of some of South Korea's largest companies. Such as Samsung Electronics Co., Hyundai Motor Co. and LG Electronics Co. is moving production out of China after facing increased local competition and regulatory headwinds, according to Nikkei. A spate over Seoul distributing a US missile defense system spurred Chinese boycott by South Korean companies. It prompted Seoul-based supermarket chain Lotte Mart to sell its Chinese business.

The nature of Apple's latest violation would seemingly make it easy for China to justify retaliation. Foxconn, Apple's largest contract manufacturer, used too many temporary workers at the world's largest iPhone factory in Zhengzhou, China Labor Watch said in a report.

They represented about 50% of the workforce in August, informs the non-commercial advocacy group; Chinese labor law limits temporary workers to 10% of the total.

The millions of jobs that Apple, Foxconn and other contract manufacturers and suppliers support in China have meant that any approach to the products will have a negative impact on the local economy. Hiring a higher than allowed percentage of seasonal staff weakens the argument. The smaller the financial benefit, the easier it is to guarantee to make Apple's life more difficult.

But Apple's lobbying business also benefits China.

I am not suggesting that Apple Chief Executive Officer Tim Cook works in cahoots with Beijing. Goodness knows that his company has endured its share of difficulties there. In 2016, it had to shut down the iBooks Store and iTunes Movies, and a year later it was required to remove hundreds of VPN applications from Apple's Chinese app store.

The reality is simply that when it comes to trade, Apple's interests often (though by no means always) align with China's. It has spent a decade cultivating a complex supply chain across the country's coastal regions, listing more than 350 Chinese manufacturing facilities as suppliers. In 2017, it said it has "created and supported 4.8 million jobs in China." The introduction of higher tariff damages harms both China and Apple. It would take a decade or more to recreate the Chinese operations in Vietnam, India or Indonesia.

Cook's value as a lobbyist was demonstrated at a dinner with Trump just last month. The president said Cook had made a "good case" that tariffs would handicap the company in competition with Samsung, whose smartphone production is more globally distributed.

The president had already postponed to mid-December a 10% tariff class that would have affected the iPhone during the crucial Christmas shopping season. The attitude of the execution also affected toys and laptops, which gave a greater benefit to the Chinese economy.

Apple said that its own survey later found that the percentage of temporary workers at the Zhengzhou plant also exceeded its own standard. But with provincial governments so dependent on the firm and its suppliers for local jobs, and the company's efforts in DC for the benefit of the national government, they have limited incentives to impose sweeping penalties.

To contact the author of this story: Alex Webb at awebb25@bloomberg.net

To contact the editor responsible for this story: Stephanie Baker at stebaker@bloomberg.net

This column does not necessarily reflect the view from the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist who covers Europe's technology, media and communications industries. He previously covered Apple and other tech companies for Bloomberg News in San Francisco.

© 2019 Bloomberg L.P.


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