Trade Within and Between Corporations

Trade Within and Between Corporations

A common misconception about international trade is to consider that nations are the trading units. In reality, the great majority of trade flows concern corporations exchanging parts and goods with other corporations. Nations are simply the unit used to record accounts since trade flows crossing borders are usually subject to customs procedures and declarations. About one third of what is considered international trade actually concerns elements (production plants, distribution centers, warehouses, etc.) of the same multinational corporation exchanging goods. This figure can even go above 50% if only advanced economies are considered, such as the trade between Canada and the United States, or trade within the European Union. Global trade has thus gradually shifted from an inter-industrial to an intra-industrial structure of exchange, a trend favored by the emergence of global supply chains.