Intra-Firm Trade: Patterns, Determinants and Policy Implications
AbstractThe emergence of global value chains and the expansion of activities of multinational enterprises have increased the value of intra-firm trade flows. Despite growing attention from policymakers, few data are collected on trade transactions between related parties. Available evidence suggests that intra-firm trade represents a significant share of world trade but differs widely across countries and industries. Trade statistics and firm-level data point out that intra-firm trade and vertical integration occur predominantly among OECD countries and that firm behaviour and relationships between buyers and suppliers explain the patterns of intra-firm trade. The report analyses the implications of intra-firm trade for trade liberalisation, transfer pricing and the transmission of macroeconomic shocks. It finds that for trade policymakers, the rise of intra-firm trade underscores the benefits of trade liberalisation when domestic firms have affiliates abroad and foreign firms are established in the domestic economy. Trade policy should remain neutral with respect to firms. sourcing strategies but trade agreements should increasingly take into account vertical relationships between buyers and suppliers. Analysing the role of intra-firm trade during the 2008-09 trade collapse, the report furthermore highlights that while the role of global value chains was questioned in the transmission of the crisis, vertically integrated production networks can be more resilient in the context of an economic downturn.
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Bibliographic InfoPaper provided by OECD Publishing in its series OECD Trade Policy Papers with number 114.
Date of creation: 24 Jun 2011
Date of revision:
trade liberalisation; transfer-pricing; vertical FDI; global production networks; foreign affiliates; sourcing strategies; multinational enterprises; global value chains; intra-firm trade; related party trade;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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- Lee, Il Houng & Park, Yung Chul, 2014. "Use of National Currencies for Trade Settlement in East Asia: A Proposal," ADBI Working Papers, Asian Development Bank Institute 474, Asian Development Bank Institute.
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