A large corporation signs an agreement with the key country and gets things in return. This is perhaps how we summarize the “secret” agreement between Apple and China revealed by The Information. One in which Apple is said to have pledged to invest $ 275,000 million in the Asian country in five years ($ 55,000 million per year).
the scandal here it comes from some interpreted the agreement as a simple payment of money to the Chinese government. A sort of bribe to senior officials for permission to operate in the country. The fine print, as is often the case in these cases, makes it much less noticeable.
What is the agreement between Apple and China?
The company owes much of its success to CEO Tim Cook, who laid the groundwork years ago by secretly signing an agreement, estimated at more than $ 275 billion, with Chinese officials in which he pledged that ‘Apple would support the development of the Chinese economy and technology through investments, contracts and employee training.
So that it was not a bribe, but investments to get something in return: to be able to manufacture and sell products in the country. For this and according to the article, Apple committed and carried out the following:
- Helping to develop the most advanced manufacturing technology.
- Train high-level Chinese talents.
- Use components from Chinese companies.
- Sign agreements with Chinese software publishers.
- Collaborate in the development of technologies with Chinese universities.
- Invest in Chinese companies, like Didi, where Apple has invested $ 1 billion.
Apple’s investments in China benefit the company itself, directly or indirectly
Any further, Apple pledged to build more stores in the country. It currently has 50 stores in China, for a total of 504 worldwide (271 in the United States). It has also opened several research centers and made considerable investments in renewable energies.
Apple’s agreements with other countries
It is common for a company to decide to enter into a relationship with the government of a country that is important to it. Own Apple has signed agreements with other governments, investments, changes and promising works. He did it with Trump himself, when his administration asked American companies to manufacture in the country and not choose to take factories overseas. Apple has agreed to manufacture the Mac Pro in the United States. In return, Trump has avoided tariffs on Apple products in his trade war with China.
Other countries like India have also received special attention from Apple. The Asian country requires that companies wishing to operate in the country, manufacture some of their products within their borders. Apple has come to an agreement with Pegatron to manufacture various models of iPad and iPhone. And thanks to this, he opened several official stores. The deal took years to close, but it has paid off: it allowed Apple to double sales in India in Q4 2020.
Despite the importance of China as a market and manufacturing center, in Cupertino they know it is appropriate not to have the eggs in the same basket. So they asked Foxconn to move part of their MacBook and iPad production to Vietnam. Something that will undoubtedly be taken into account by the authorities.
The dilemma of facing a dictatorial government
It is shown that the agreement with China is not exceptional. It is a key country, both for its operations and for the size of the market. And it makes sense for a company to take an interest in it, signing agreements with its leaders. The problem lies with the Chinese government and its dictatorial regime. It is a country where human rights are not respected and those who defend them are persecuted.
A look at Human Rights Watch’s 2021 report highlights the significant violations of these rights to its citizens. There is no political, press, expression, religious or sexual freedom. In the case of the Uyghurs, China has been accused of crimes against humanity. Their detention in “re-education” camps, their use as forced labor, torture and forced sterilization are common charges against the Chinese government.
Tim Cook with CEO of Didi, after signing of the investment agreement.
What should a company like Apple do, which boasts of defending freedom and creativity of your products? Here’s a dilemma:
- Operate and sell in the country, which leads to inevitable collaboration with the authorities and respect for national laws, with the hope of being able to positively influence the country little by little.
- Close its stores and factories and abandon its customers and users to their fate in protest, renouncing all positive influence.
Apple went with the former, not just because it makes more business sense. But because is the only option in the dilemma that offers a long-term path to influence the country. If you chose to shut down and leave the country, there would be quite a stir for a few days, maybe weeks. Then silence would follow (and a zero on the income statement).
If Apple had opted for this position under the Trump administration, I would have fought upstream on questions other than economic. I would not have had as much weight when it came to defending the rights of dreamers, for example. The result would not have been very smart, because the United States, due to its political system, can undergo changes quickly and in just a few years, but what about China?
Decades can pass until significant progress is made on human rights. And this is where the big question lies. Is it worth the wait?
