The «transfer prices» policy of the multinational enterprises: its determinants

Abstract

A large part of the international trade is today made inside the enterprises (between branches, subsidiary firms, etc.) and, specially, inside the multinational enterprises. As a matter of fact, some estimates of the worldly trade of manufactured products show that between 1/4 and 1/3 of this trade is made intra-firms. So there is a large variety of products and a huge volume of funds that are handled internationally, crossing the frontiers of different countries, without integrating themselves in the common mechanisms of the market and the price formation. Thus, prices for the goods and services transacted intra-firms internationally are established according to criteria and processes substantially different from those that determine the establishment of prices in a competitive market. One exactly calls «transfer prices» the prices practiced by the multinational enterprises in the import and export of goods and services inside the firm. In this article one examines the main factors that act on the «transfer prices» policy of the multinational enterprises and determine the largest or the straightest amplitude of the recourse to those prices. The use of «transfer prices» is, indeed, determined by different factors that have their roots in the internal activity of the enterprise itself, in the governmental policies, the international monetary conjuncture and the competitive position.