"A Barbie doll costs $20, but China only gets about 35 cents of that."

It's important to keep in mind that lots of things that are "Made in China" are really just assembled in China.

NYT...But often these days, "made in China" is mostly made elsewhere — by multinational companies in Japan, South Korea, Taiwan and the United States that are using China as the final assembly station in their vast global production networks.

Analysts say this evolving global supply chain, which usually tags goods at their final assembly stop, is increasingly distorting global trade figures and has the effect of turning China into a bigger trade threat than it may actually be. That kind of distortion is likely to appear again on Feb. 10, when the Commerce Department announces the American trade deficit with China. By many estimates, it swelled to a record $200 billion last year.

It may look as if China is getting the big payoff from trade. But over all, some of the biggest winners are consumers in the United States and other advanced economies who have benefited greatly as a result of the shift in the final production of toys, clothing, electronics and other goods from elsewhere in Asia to a cheaper China...

..."Basically, in the 1990's, foreign firms based in America, Europe, Japan and the rest of Asia moved their manufacturing operations to China. But the controls and therefore profits of these operations firmly rest with foreign firms. While China gets the wage benefits of globalization, it does not get to keep the profits of globalization."

..."The biggest beneficiary of all this is the United States," said Dong Tao, an economist at UBS in Hong Kong. "A Barbie doll costs $20, but China only gets about 35 cents of that."

Because so many different hands in different places touch a particular product, Mr. Dong said, you might as well throw away the trade figures.

"In a globalized world, bilateral trade figures are irrelevant," he argued. "The trade balance between the U.S. and China is as irrelevant as the trade balance between New York and Minnesota."....(Thanks to Orrin)

Trade is confusing because we still think in Industrial Age terms. We still think of a Barbie Doll as the plastic figure in the box. But most of what a Barbie is is not a thing, but a collection of ideas. Ideas created by advertisers and designers and marketers and TV producers. The person who negotiates with Target about how many inches of shelf-space the newest Barbie will get at Christmas time probably is paid more than a thousand assemblers in China.

"In a globalized world, bilateral trade figures are irrelevant," Yes. As a person with an interest in Apple Computers, I occasionally notice brief mentions of this or that Korean or Taiwanese firm being chosen to build the latest machine. But no one remembers their names, because they are not very important. iPods and Macs are mostly "made" in Silicon Valley and other high-tech neighborhoods around the globe. And in the offices of designers and advertisers in trendy enclaves in New York or London or Los Angeles.

And the chip sets are mostly "made" by engineers staring at computer screens, laying out patterns of wires and transistors, and watching how they "work" in emulations that only "exist" on computers. And "made" by the engineers who design chip fabs. The actual manufacturing is almost an afterthought.

This is especially true in the case of small batches of specialty chips. The design is sent to the manufacturer via the Internet, then sent to the chip fab from there, and soon an air-freight package of chips shows up wherever the gadget is being assembled, which is then sent to company that specializes in distribution...And possibly the people who are designing and selling the gadget don't even know where on the planet any of these steps are physically located.