ABSTRACT
The focus of Professor Jones’s paper is on the rapidly growing trade in intermediate inputs and its implications for standard trade theory and protectionism, including regional trading arrangements or free trade areas. While noting the rapid growth in recent years in world trade in intermediate inputs, it should be emphasized, however, that a large part of this trade in intermediate inputs is in the nature of intra-firm trade, often within the multinational or transnational corporations. About 30-40 per cent of world trade in manufactured goods is in the nature of intra-firm trade. To the extent that this is so, trade becomes closely interlinked with international investment, i.e., location across countries of enterprises owned by multinational or transnational companies. The factors which govern the pattern of international investment under these circumstances have a direct influence on the composition of trade, especially trade in intermediate inputs.
