Intra-Firm Trade and the Developing Countries

Abstract

The state of general empirical knowledge of the extent of and trends in intrafirm international trade are surveyed with attention concentrated on United States and Canadian data sources. Focus is on conceptual and definitional distinctions, U.S. trade with U.S. majority-owned foreign affiliates, U.S. related-party imports, international subcontracting and value added tariffs, aggregative data from individual developing countries, and customs documents as micro-level data soruces. In this effort to outline the reasons for the growing concern with the phenomenon of intrafirm trade and to summarize the most readily available data on its nature and growth, the following were among the important points made: 1) it is essential to arrive at clear and uniform definitions as to what is meant by "intrafirm trade"; 2) the share of U.S. non-petroleum imports from developing countries which originates in majority-owned foreign affiliates of U.S. firms is declining; 3) very high proportions of some U.S. imports from developing countries originate with "related parties," and there are frequently large differences between import unit values in related-party trade and those in non-related-party trade; 4) international subcontracting, as indicated by the usage of value added tariff provisions, continues to be a rapidly growing element in manufactured goods trade between the U.S. and developing countries; and 5) further data should be collected and empirical research conducted.