This past week, there have been a number of posts and articles that address the continuing fascination with trade imbalances. But the three that follow are particularly helpful if you want your students to really understand the nature of trade.
First I present a pair of links that are related. The first is an article in The Wall Street Journal that connects the iPhone to the trade deficit. If you are a devotee of that particular piece of electronic hardware, examine it. You will notice it says "Assembled in China." What you may not realize is that is equivalent to "Made in China" for purposes of measuring trade. But the article explains that while, for statistical purposes, the last shipping point is what counts. The bulk of the cost of an iPhone is actually due to the U.S.
This is made even clearer if you look at this blog post on Carpe Diem. Mark Perry provides a clear explanation of how the Chinese actually are responsible for the smallest portion of the cost.
Don Boudreaux at Cafe Hayek provides another view of trade. Too often, our students think of trade as a tied to a single event or product. What they need is a clearer understanding of the concept of interdependence. They need to think beyond the initial exchange and examine what the consequences of that exchange. What other exchanges does it make possible?