WEB: CH. 1, Salvatore’s Introduction to International Economics, 3th Ed.

2. Only a Small Part of Many American Products Are Actually Made

in the United States

The following Table shows that of the total manufacturing cost of $860 for the IBM PC in 1985, $625
was for parts and components made abroad (of which $230 was from U.S.-owned plants). Although all
the parts made overseas could have been manufactured domestically, they would have cost more and
would have led to higher PC prices in the United State (and reduced the competitiveness of IBM PCs in
international markets). By 2004 (when IBM sold laptop business to China’s Lenovo for $1.75 billion),
even a larger proportion of parts and components going into the IBM PC were made abroad. Only 13 of
33 major components of the new Boeing 777-330ER jetliner are made in the United States, 7 are made in
Japan, and another 13 in other countries (England, Italy, South Korea, and Spain), and less than 30
percent of the parts and components of the brand new Boeing 787 Dreamliner jet that went into service in
2011 are made in the United States.

Distribution of Manufacturing Costs for the IBM PC in the United States and Abroad

Total Manufacturing cost $860

Portion made overseas $625
in U.S.-owned plants $230
in foreign-owned plants 395

Distribution of manufacturing costs:

Monochrome monitor (Korea) $ 85
Semiconductors (Japan) 105
(U.S.) 105
Power supply (Japan) 60
Graphics printer (Japan) 160
Floppy disk drives (Singapore) 165
Assembly disk drives (U.S.) 25
Keyboard (Japan) 50
Case and final assembly (U.S.) 105
Total manufacturing cost $860
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Source: “America’s High-Tech Crisis,” Business Week, March 11, 1985, pp. 56–67; “Outsourcing
to the U.S.,” The New York Times, December 25, 2005, p. C1; Boeing News Release, June 11, 2002;
“A Plastic Dream Machine,” BusinessWeek, June 20, 2005, pp. 32-35; and
http://forward.msci.org/articles/0308plane-thinking.cfm.