Current International Trade Theory Can't Explain Trade Within Multinationals

link here to video

This is a link to video interview of Dalia Marin who holds the chair in International Economics at the University of Munich. She argues that the new trade theory advocated by Paul Krugman and others does not explain the current trade regime in which there is extensive trade within multinational corporations for intermediate goods. That is a big and unexplained problem today. For example, Apple has the largest market capitalization of any corporation in the world. Ostensibly, it is a US corporation but it has 10 employees outside of the US for every domestic employee. Apple assembles the iPad, for example, in China but it sources many of the components from a variety of countries that export them to China. This is not easily explained by conventional international trade theory.

The interview touches on many topics, including CEO pay and rising income inequality as well as the transfer of corporate cultures across nations. She argues that the US corporate model is more decentralized and more productive than the European model. The European corporations are moving in the direction taken by US corporations.