Understanding APEC: The Making of Global Value Chains
By Matthew Phillips and Rory Ainsworth
This is the second of a series of articles exploring APEC, the trajectory we have traveled, our current political conjuncture, and the way forward. Our first article was entitled “What is APEC?”
To understand our current political conjuncture involves understanding the neoliberalist trajectory that nurtured global value chains and how it triggered the current backlash culminating in Trump’s tariff extortion. Contrary to the claims of its proponents, neoliberal globalization was never about free markets. It always involved state intervention on behalf of corporations and investors. Through the IMF, WTO, and World Bank, the US-led global north empowered multinational corporations to exploit workers and resources in the global south by shielding them from democratic control, while dismantling the post-World War II social welfare gains within its own borders.
It was the economic stagnation of the 1970s—set-off by the decline in profitability of mass production, rising energy costs from OPEC’s oil policies, and the end of fixed exchange rates (after Nixon terminated the dollar’s gold-convertibility) — which propelled and freed corporations to spread their production across global value chains. As debt hollowed out its national liberation projects, the global south would supply the cheap labor. APEC itself emerged amidst the backdrop of a Japan massively increasing FDI to build regional value chains exploiting cheap East Asian, then Southeast Asian, and then Chinese labor after the appreciation of its yen following the 1985 Plaza Accord.
When Paul Volcker raised interest rates in 1979 to stave off US inflation (brought on by US military spending in the Vietnam War), he increased Third World debt into “catastrophic levels.” As the US exported its economic crises to Third World countries, it provided leverage for multinational corporations to pry open the labor and consumer markets of the Global South. More specifically, the IMF and World Bank restructured these economies as a condition for their crisis-of-payment and development loans. The IMF imposed structural adjustment programs to pry open global south economies to foreign direct investment; the World Bank created infrastructure to incorporate them into “global value chains.” Furthermore, technological and economic factors primed the conditions for neoliberal globalization such as the rapid advances in telecommunication, computerization, and container ships, which cheapened transport and coordination.
The iPhone's Unequal Profit Distribution
Apple's iPhone serves as a paradigmatic case study of how global value chains (GVCs) enable unprecedented efficiency and scale while reinforcing inequalities in profit distribution: while physically assembled by hundreds of thousands of Chinese workers, the vast majority of profits flow back to U.S.-based Apple, leaving suppliers and laborers with minimal compensation. This imbalance reflects the core logic of neoliberal capitalism, where intellectual property and brand power extract maximum value from globalized, low-wage labor pools.
By controlling product design, software development, branding, and services — Apple made 58.5% of profit on the sale of each iPhone 4.
The second tier of profit allocation goes to high-tech component manufacturers, primarily based in Taiwan and South Korea. These firms engage in capital-intensive, technologically advanced production yet earn significantly less than Apple. South Korea’s Samsung and LG supply OLED displays and memory chips but earn only 14% on the sale of an iPhone 4. Foxconn employs hundreds of thousands of workers to assemble iPhones but only receives 1.8% of the profit per device. At the base of this profit hierarchy are the Chinese assembly workers who physically construct iPhones. Often, Apple’s pursuit of maximum profits passes on the variability of production to the producers, forcing the latter’s employees to work long and intense hours to meet increased demand within a short time-frame. 250,000 workers assembled the iPhone 4. Despite the increasing wages in China, as of 2023, a Foxconn worker still made less than $3 per hour. Thus, China serves as the world's factory floor but captures minimal value from the final products. The lion’s share of profits flow to Apple, followed by East Asian suppliers, and then eventually trickle down to Chinese workers that bear the human costs of production.
Stable Investor Environments and Coups
The Global Value Chains were not simply built upon trade treaties and bank loans. Rather they were erected through U.S. imperialist interventions propping up countless authoritarian regimes to ensure "stability" for corporate profits and geopolitical dominance. From Latin America to the Middle East and Southeast Asia, Washington backed brutal dictators to maintain low wages, weak regulations, and open markets for U.S. capital.
In 1965, the US backed the brutal killing of at least 500,000 members of the Indonesian Communist Party, ensuring that US oil companies would not be nationalized. With Jakarta as a template, in 1973, the US backed Pinochet in overthrowing a democratically elected socialist government in Chile to protect American copper interests.
After the Cold War, the logic shifted to "investor confidence." The U.S. supported Hosni Mubarak in Egypt ($1.3 billion annually in military aid) and the monarchy in Saudi Arabia (where the arms sales are worth billions to American defense companies) to secure oil flows and suppress labor movements. In the 2009 coup in Honduras—endorsed by Hillary Clinton— the target was land grabs from agribusiness.
These regimes repressed unions, privatized public assets, and brutally repressed dissent to create "favorable" conditions for foreign capital. The result? Expanding inequality across the board, while entrenching corruption and anti-American blowback (e.g., 9/11 hijackers from U.S.-allied Saudi Arabia).
Today, Washington still trades democracy for profit, backing Egypt’s Sisi and Saudi’s MBS while touting "free markets." The lesson is clear: U.S.-enforced "stability" means stability for investors—not for the people living under US backed despots.
Deindustrialization, Union Decline, and the Rise of the Far Right
The shift of US production from domestic to global value chains led to its deindustrialization starting in the 1970s. The ensuing factory closures, offshoring, and decline of manufacturing jobs in industrial hubs like the Rust Belt reshaped the nation’s economy and politics. This economic upheaval was exacerbated by the repression of labor unions, which had secured living wages and benefits for workers.
As manufacturing jobs vanished, so did the social safety nets that cushioned economic blows. The resulting despair created fertile ground for the far right, which weaponized economic anxiety by scapegoating immigrants and ethnic minorities while leaving corporate greed and the bipartisan consensus that enabled it off the hook. Politicians like Trump channel working-class disillusionment into nationalist, anti-labor agendas that further enrich billionaires while offering hollow promises of revival.
Despite giving the lion’s share of wealth generated from the global value chains to the global north, the mouse’s portion has steadily accumulated in the global south, which is now asserting itself on the global stage. China’s rise as a multipolar power in the world, its Belt and Road Initiative, and BRICS stand up against the US’s unipolar hegemony. The rise of China presents a multipolar global order, which the US views as a threat to its global hegemony. Our next article will explore the rise of this multipolar order and the ensuing New Cold War.