Trade among parent and affiliates engaged in different stages of production shows that foreign direct investment and trade can sometimes be complements.

Question

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Trade between a parent company and its affiliates engaged in different stages of production, also known as intra-firm trade, is a common feature of foreign direct investment. This type of trade typically involves the parent company importing raw materials or intermediate goods from its affiliates located in other countries, and then exporting finished products back to those countries or other markets. This shows that foreign direct investment and trade can sometimes be complementary, as they can help firms to coordinate production and distribution across borders, generate economies of scale, exploit comparative advantages, and enhance competitiveness.

Trade Among Parent and Affiliates Engaged in Different Stages of Production