REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART III:
of TNCs have changed the structure and the way of performing of international trade.
Because of that fact, known as transnationalisation of international trade, our analysis and
understanding of trade flows must include also new forms of selling goods and services on
international market – forms of selling through foreign affiliates.
This is the main reason why we need to define and adopt new framework of foreign trade
statistics which will enable us to analyse international trade flows from a different angle
keeping in mind that transnational companies and investment flows are the backbone of
globalisation of international economy. The importance of transnational companies in
contemporary international trade we will present in the next part of our paper.
2. Transnationalisation of international trade
The main feature of contemporary international trade is its transnationalisation – the
growing role and impact of transnational companies and their affiliates. The second half
of the 20th century is characterized by the increasing number and impact of TNCs. TNCs
are the key drivers of foreign direct investments in the world economy and by increasing
undertaking of FDIs they expanded their activities all around the globe.
Global foreign direct investment (FDI) flows had upward trend during 1990s and reached
the peak in 2000 (with inflows of 1 411 billion USD). After the sharp decreases until 2003,
global foreign direct investment flows continued to grow for four consecutive years and
reached in 2007 the highest level ever recorded (with inflows of 1 833 billion USD, which
surpassed the previous record set in 2000 by 422 billion USD). Together with the continued
growth of FDI in all the three major groups of economies - developed countries, developing
countries and the transition economies of Central and Easter Europe, TNCs expanded their
activities and affiliates all over the world. The number and activities of TNCs and their
affiliates rose exponentially. Nowadays there are 78 817 TNCs (parent companies) with
794 894 foreign affiliates around the world (UNCTAD, 2008).
Undertaking direct investment abroad, TNCs establish affiliates abroad and conduct
production in them (international production) with aim of selling on local market and
other markets. Indicators of international production, such as sales, value added, assets,
employment and exports of foreign affiliates light up the importance of foreign affiliates
in the world economy. Their international production continues to grow. The estimated
sales, gross product and exports of foreign affiliates increased in 2007 by 20,7%, 19,4%
and 15,4% respectively (Table 2). The value added (gross product) of foreign affiliates
worldwide accounted for 11% of world GDP in 2007 (compared to 10% in 2006 and to
9% in 2005), sales amounted to 31 trillion USD, export exceeded 5 billion USD, and the
number of employees reached almost 82 million.
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