Apple Caves on Audits

Photo Illustration by Newsweek (source photos): Dan Pearce / Future Publishing-Getty Images (ipad); Bettman--Corbis (assembly line)

"Those jobs aren't coming back." They weren't Steve Jobs's last words, but you could be forgiven for thinking they were. Jobs made the comment to President Obama months before he died, but it's mostly since his death that they've set off a debate. Can the world's richest corporation really not afford to build iPhones and iPads in the United States?

Apple says no, but of course it can: American workers build BMWs and Boeings, and they certainly could build all of an iPad's components. The real question isn't whether Apple can make products here, but whether it should.

Some people think so, and not just Occupy Wall Street types. "Apple has benefited enormously by dint of being an American company, and they do have some responsibilities to the United States," says Clyde Prestowitz, a top U.S. trade negotiator under Ronald Reagan.

Back in the 1980s, Apple was having trouble getting Japan to open its market to Apple products, and it wanted the U.S. trade negotiators' help. At the time, Apple espoused "the funny notion that the U.S. government had an obligation to help them," Prestowitz recalls. In the 1990s, when Apple was hurting, it sought tax breaks from the city of Cupertino and the state of California.

Even now, the company gets help from the U.S. in the form of protection of its intellectual property from cloners in other countries. Apple and other U.S. firms often find their products being counterfeited overseas and ask the U.S. government to press other countries to crack down on the copycats. "Whenever some executive says, 'I have a fiduciary responsibility to my shareholders and not to the U.S.,' I say, 'Well, OK, then don't come to me when you have problems with theft of intellectual property,'" says Prestowitz, who now leads the Economic Strategy Institute.

An Apple spokesman points out that the company is creating thousands of new jobs in the U.S., hiring people to work in its retail stores and its Cupertino headquarters. And the microprocessors used in the iPhone and iPad are, in fact, made in Austin, Texas. But here's the irony. Those chips get stamped out in Texas, then shipped to China, where they are put into an iPad and sent back to the U.S.

Does that even make sense? Not only does the excess transportation create lots of CO2 emissions but, as Prestowitz points out, the shipping lanes that Apple uses are protected by the U.S. military. That military protection isn't cheap, and American taxpayers are footing the bill.

Prestowitz says he's not so concerned about where final assembly of iPads and iPhones takes place. The more important thing, he says, would be to regain the manufacturing of essential components like screens and digital signal processing chips. By letting all that technology slip away, we are basically eating our seed corn. We are creating a situation where we make lots of money in the short term by selling expensive products built with cheap labor. But if we lose our expertise at making electronics components and fail to create jobs for engineers, over time we could become unable to compete.