GERALD K HELLEINER, INTRA-FIRM TRADE AND THE DEVELOPING COUNTRIES, The Macmillan Press Ltd, London and Basingstoke, 1981, pp 110, £15.
IT is not without reason that orthodox international trade theory has been called, to quote Galbraith, "the most depraved branch of neoclassical theory". Based on the assumption that world trade is "international", with competitive enterprises, linked solely through the market, transacting business with each other at "arm's length", its very foundations are undermined by the growing importance ofintra-firm trade. These transactions between different branches of transnational corporations (TNCs) take place at central command and at arbitrary prices rather than in response to market signals. The significance of intra-firm trade was such that the author decided to concentrate upon this aspect alone rather than explore the whole range of issues involved in the relation between developing countries and TNCs as he had originally intended. The book examines the magnitude and composition of intra-firm trade, its relevance in the debate on primary commodity agreements, prospects for the growth of manufactures export from the developing countries and the pattern of protectionism in the West.
Data on intra-firm trade being sparse, the author relies upon two estimates based on U S imports: (i) a sample survey of U S imports from majority-owned foreign affiliates (MOFAs) of U S companies; and (2) imports from "related parties".
The first set of figures indicates that imports from MOFAs of U S companies are rising as a proportion of total U S imports and that the proportion is higher in the case of imports from developing countries than from developed countries. The results are misleading however, due to the preponderant weight of petroleum (84 per cent in 1975) in U S imports from MOFAs in developing countries. Whereas the proportion of imports from Europe rose between -1966 and 1975, not only was the proportion initially lower in the case of imports from the developing countries, but it actually fell significantly. This partly reflects the break-up of the old order in the case of raw materials, with developing countries seeking to diversify their sources of capital and to assert themselves. A more important reason however is the , development of new forms of control by the TNCs based on minority ownership combined with contracts in technology, management and marketing. This is typical in the manufacturing sector and is