Multinational firms are an increasingly important part of international economic integration.
In recent years, foreign direct investment has been increasing at a rate that exceeds both the rate of growth of international trade and that of income. For many countries, the sales of affiliates of multinational firms have long dwarfed the value of trade. Further, multinational firms play an important role in international trade. Intrafirm trade is international trade that occurs between different affiliates of the same multinational firm. Understanding the role of multinational firms in an environment of increasing international economic integration is therefore essential for policy-makers.