Tag Archives: trade

Apple’s Trade Embargo. Is it “racial” discrimination?

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I generally shy away from trendy stories of the day. They are covered elsewhere and the wonks are predictable. Columnists and bloggers add spin of their own camp, either liberal or conservative. My take on these stories would be similarly predictable. That’s why I hold out for something with meat on the bone—something to which I can lend a Wild Duck insight. After all, I want the ‘wild’ part to mean something.

But today, a story making news misses a very critical fact. One that changes the conclusion. Let me explain…

Sahar Sabet is a typical America teen. Although she comes from Iran, she is a US citizen. She looks, speaks, dresses and grooms like a typical, white, suburban girl. Of course, even if she looked, dressed or behaved as a foreigner or an immigrant (an absurd determination for a country filled with immigrants), you would expect that in a shopping mall, she would be treated like any other shopper.

This weekend, Sahar and her uncle browsed an Apple store at North Pointe Mall in Alpharetta Georgia. Choosing an iPad, the salesman overheard the couple speaking in Farsi. When Sahar explained that it is the language of Iran–also known as Persia–the salesman prohibited the sale, explaining “Our countries do not have good relations”. He stated that Apple enforces a trade embargo against Iran and several other countries and showed the would be customers a written Apple policy which, itself, cites US trade restrictions.

For consumers of mainstream media, the Apple salesman seemed racist or, at the very least, ignorant. What do trade relations have to do with a retail sale? And how could he miss the fact that Sahar is a citizen of the same county as himself and the late Steve Jobs?

Sitting outside her home and talking to a television reporter, Sahar explains that she left the store in tears. Zack Jafarzadeh had the same experience at the nearby Perimeter Mall. Perhaps more bizarre, he is born in Virginia of Iranian ancestry. In the video clip below, he states that the policy smacks of ethnic profiling. Of course, the Council on American-Islamic Relations (CAIR) protested the incident immediately.*

You will find a great many news stories about Sahar’s trip to the mall this week. But a few stories, like this firsthand account from an Atlanta television station include a fact that is critical and yet overlooked in the commentary. It makes all the difference in the world:

“The iPad was to be a gift for her cousin who lives in Iran.”

Wohah!…That changes everything! The US trade embargo law specifically mandates that the store shall not sell embargoed technology if they know that the product will be exported, transferred or re-exported to Iran. It’s not clear if the salesman was made aware of the intention to export the iPad, or if he was a closet racist, or perhaps he was expressing his own post-911 anxiety. But either way, this is valid trade law, and Apple would get into a lot of trouble if they violate this law.

Zack was born in Virginia. Both he and Sahar are as American as apple pie. So naturally, news reports slam the Apple salesman for profiling immigrants. They also question the role of a private company in enforcing a federal trade embargo at the point of sale. But again, they miss the point. To illustrate, consider this bump in the success story of Digital Equipment Corporation, the Massachusetts minicomputer manufacturer that rivaled IBM in the 1970s and 80s…

In the early 1980s, Digital’s flagship minicomputer, the VAX 780, had the distinction of being on the original list of embargo technology. Naturally, during the Cold War, sales of fast computers to the Soviet Union were restricted.

During the Cold War, selling fast computers to Soviets was illegal, even if transferred through an intermediary or neutral country.

Sellers of large, expensive computers generally know their buyers. Even if a deal is not initiated by the sales team, sellers defend price and competitive position. Engineers at buyer and builder talk nuts & bolts. This was no exception. But because Digital could not openly sell to Russians, they transferred the machine to an American shill organization, because an intermediary is more likely to fly under the radar while transferring the computer to the Soviets.

Bad move, Digital! The deal was discovered and the company faced an inquiry and stiff penalties. Most importantly, they were disgraced in the press.

Regarding the Apple iPad, one could question the law as it applies to a popular consumer item, one that is available in many other countries. But the law and its clear focus on export awareness by sellers restricted lends a different spin to the Apple salesman’s actions.

Just as with Miss Sabet, Mr. Jafarzadeh was purchasing the iPad for an Iranian friend who accompanied him to the store. He was in the United States on a student visa. If this fact were apparent to the salesman, then he would be compelled to deny the sale.

Incidentally, Sabet’s mother was able to purchase the iPad on a subsequent visit and an Apple spokesperson told reporters that it could also be purchased online to circumvent the policy (or at least the enforcement of the policy). While this may be the case, it might still violate US trade law. The law is clear. Certain products, services, technology and components are prohibited from being sold, directly or indirectly, if they are slated to be exported, transferred or re-exported to countries on a technology embargo list that includes Iran, Cuba, North Korea and Syria.

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* Despite the warm-fuzzy title, CAIR is a widely acknowledged front for terrorists, still operating, openly, within the United States. The group’s actions speak volumes about their agenda, posing as an NGO of tolerance and cultural bridges while seeking to use our western tradition of inclusion, tolerance and accommodation to make Islamic Sharia Law palatable in America. But I digress. We can cover that story in another post.

After years of buying from China, time to pay the bill

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I wrote this in April 2011 as feedback to this article in PC World.
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After decades of buying from China, it’s time we paid the bill.

Step back from rhetoric & ideology. What, exactly, do we expect the Chinese to buy with all the dollars that they’ve amassed? What happens if we try to dictate their options? –Making available just a few items at the bazaar?

Most Americans want balanced trade. Trade is balanced by encouraging foreigners to return dollars to America. That means purchasing goods & services or investing (purchasing equity or debt). But purchasing debt isn’t real balance. It postpones and magnifies a trade imbalance.

The Chinese have built vast quantities of products that we consumed for more than 30 years. For whatever reasons, they have built them cheaper and responded quickly to consumer demand, and with sufficient quality and style that we loved acquiring them.

Now China has pockets stuffed with dollars. There are so few places that want those dollars, the logical recourse it to spend before it depreciates. That’s logical. Getting them to use those dollars is what we want.

The US exports movies, airplanes, weapons & software, and we charge foreigners to attend our Universities. On the international stage, that about sums our brag sheet. But when we consume trillions from foreigners, do the promissory notes that we issue (“dollars”) limit them to these few commodities? What else can the Chinese purchase that isn’t manufactured closer to home, better, and in larger quantities? They export the really big ticket items themselves–like skyscraper contracting, oil drilling, nuclear technology!

When a foreign corporation or government wants to purchase something significant from the US, suddenly we stop yelling “Buy American” and we start yelling “Security Threat!”. Poppycock! If we create such enormous red tape that international telecom players cannot acquire or invest in one another, we reduce liquidity and further weaken our dollar. Face it: Our start up companies are commodities as certainly as a retail copy of Windows, a Boeing jet or a patent portfolio. When we turn up our nose at healthy interest in intellectual trade or infrastructure acquisition, we are not protecting our interests. We are simply informing trading partners that they were fools to trust us, and that the dollars they stockpiled can be redeemed only in Hollywood films.

It’s natural to be skeptical. China is controlled by an authoritarian dictatorship. Citizens lack social & political freedom. But don’t be misguided about their economy – both within and abroad. It is lubricated by capitalism and is more adaptive and free-wheeling than our own. Whatever their shortcomings, we accepted these when they were selling. We must also allow them to buy. Our technology plays are the only thing on our menu.

Conclusions:

  • A) If we refuse to allow the Chinese to repatriate dollars or offer them only the local goods of our choosing – typical of a Banana Republic – then they will dump our dollars and also stop buying our debt. It would crush our economy in a heartbeat.
  • B) If we allow those with large stockpiles of our dollars to use them as they see fit, the dollars will return to build factories, create jobs, and produce good, old fashioned innovation. But this won’t happen with newly printed dollars. It doesn’t work that way, because that weakens both parties and makes our factories unattractive. It must be the dollars that we willingly handed over for TVs, computers, shoes, toys and even building materials. We must accept that we owe China—big time! For decades, we passed off pictures of George & Ben in exchange for tangible goods. We knew the Chinese crafted high tech goods for less and that the political system was repressive. But we looked the other way. We really wanted those things! Whether you like their government or not, we promised to expend future time and resources supplying their children with commensurate goods.


Why does China say “America works for us”
Click image to learn why (video = 1min)

This video was commissioned in an effort to defeat Obama’s 2010 universal health care bill. It has terrific shock value. It depicts what China believes to be our economic weakness. I won’t comment here about health care or stimulus economics. It’s unrelated to my point. But the video also depicts what Chinese believe to be their imminent destiny, perhaps at America’s expense.

They deserve all of the positive things they have earned. Although it’s natural to whine and complain about an uneven playing field, and our past glory (Automobile assembly, television, the moon landing and the Internet), China is winning in the global economy and any trade in which we engage is, by definition, fair. In fact, the only uneveness in the playing field of international trade is just the opposite of popular perception: It has been tipped in our favor for the entire 20th century!

We must get it through our heads that capitalism is not a contest! This simple truth is often overlooked. The emergence of China as an economic superpower is a good thing. Not just for the Chinese, but for every American. If we keep our own ship in order, the result will be an abundance of goods and services from both sides because we will have affluent trading partners, broader access to labor and markets, and eventually, democratic trading partners.

– Ellery Davies|
Ellery clarifies law and public policy. He is a frequent columnist and TV commentator.