ABSTRACT
The spatial distribution of production is shaped not only by actions of national firms and governments, but also by decisions, customs and practices of foreign-owned (controlled) firms, as well as organisations that impose international rules. Some preferential trading or integration agreements such as common markets permit the free movement of factors among member countries on the condition that factors originating in partner countries are not subjected to discrimination. The promotion of geographical and sectoral factor mobility results in more efficient allocation of resources from the group’s standpoint. These improvements in the locational advantages of the group for business are due to the free internal factor flow from low-to highproductivity locations, businesses and professions and are most pronounced within the common market. Similar outcomes are also expected in a country that permits the location of TNCs. In this situation, factors respond to signals that include demand, higher productivity and higher returns within the group or a country.
