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Using a novel database on multinational production (MP), this article investigates the impact of preferential trade agreements on foreign affiliates’ production activities. We find that trade agreements with investment provisions have a positive effect on MP. On average, signing an agreement including investment provisions is associated with increased MP up to 26% in the manufacturing sector and 34% in the services sector. Our findings suggest that investment provisions increase MP by facilitating multinationals operations in foreign markets, especially for activities requiring the proximity of suppliers and consumers, and by helping multinationals joining global value chains.

ax revenues from multinational enterprises (MNEs) are an important source of public finance in developing economies. The research and policy debate so far have mostly focused on the “missing” part, i.e. the government revenues lost due to the tax avoidance practices of MNEs (Bolwijn et al., 2018). In this study, we take a different, but complementary, approach, looking at the taxes and other revenues actually paid by foreign affiliates of MNEs to developing-country governments. We present two alternative methodologies to estimate foreign affiliates’ fiscal contribution – the contribution method and the foreign direct investment (FDI) income method – and show that they lead to the same order of magnitude. The findings allow us to set a baseline for an informed discussion on tax avoidance by MNEs.

This paper explores the link between foreign direct investment (FDI) and the BEPS (base erosion and profit shifting) practices of multinationals (MNEs). It puts the spotlight on the outsize role of offshore investment hubs as major players in global corporate investment, a role that is largely due to MNEs’ tax planning, although other factors contribute. The paper shows that tax avoidance practices enabled by FDI through offshore hubs are responsible for significant leakage of development financing resources. In policy terms, these findings call for enhanced cooperation and synergies between international tax and investment policymaking.

Multinational Enterprises (MNEs) play an important role in host countries’ domestic value chains as part of the global activities of these companies in GVCs. MNE affiliates create directly large volumes of output, value added, international trade and jobs, and in addition they generate also important indirect effects. Foreign affiliates in host countries are not only sourcing locally produced inputs, tradeable as well as non-tradeable, but also produce final and intermediate products sold and used within the domestic economy. Based on the OECD Analytical AMNE database, this paper analyses the domestic linkages of MNE affiliates in host economies in order to get better insights in the role MNEs play across countries.

This paper investigates the impact of deep integration in preferential trade agreements (PTAs) on multinational production (MP), i.e. the production carried out by firms outside of their country of origin. Using a structural gravity model, we find that tariff reductions have a positive impact on MP of goods. This effect is stronger for foreign affiliates trading intermediate inputs or serving the final demand. However, while deep provisions have no significant impact on foreign affiliates that produce goods, we find that deep integration provisions positively affects foreign affiliates operating in the service sector. These results suggest that the proliferation of PTAs with deep integration provisions has contributed to the growth of multinational production and facilitated the participation of foreign affiliates in global value chains.

Because of their numerous and large activities across different countries, Multinational Enterprises (MNEs) are believed to be central and dominant actors in the global economy. In addition, it has been argued that the growing fragmentation of production within global value chains (GVCs) in the past decades is largely driven by MNEs. It is remarkable then that despite their acclaimed importance, empirical evidence on MNEs is not widely available and largely incomplete, with data only available for a subset of OECD economies. Based on the new OECD analytical AMNE database including information on MNEs across 43 industries and countries on a bilateral basis, this paper derives new insights on the importance of MNEs today. As the new database also allows the linking with the OECD TiVA database, the new evidence additionally discusses in detail the trade and investment nexus within GVCs and suggests that MNEs’ role in GVCs goes beyond trade and investment policy.

Using the OECD analytical AMNE database, this paper provides new evidence on the services activities of multinational enterprises (MNEs) and discusses the relationship between cross-border trade in services and the production of services through foreign affiliates (“mode 3” trade in services in the General Agreement on Trade in Services). An econometric analysis indicates that policies restricting trade in services (as captured in the OECD Services Trade Restrictiveness Index) are associated with a lower output of foreign affiliates not only in services industries but also in the manufacturing sector. Moreover, services trade restrictions also impact the choice of firms when it comes to engaging in exports or in foreign direct investment to serve foreign markets. Overall, the results in this paper demonstrate the intertwined nature of manufacturing and services activities in global value chains.

In order to better understand the interdependencies between trade and investment in global value chains (GVCs), the OECD has developed a new dataset on the Activities of Multinational Enterprises (AMNE). This dataset starts from official AMNE statistics and combines the information with Inter-Country Input-Output (ICIO) tables to provide new insights on the trade-investment nexus in GVCs. This dataset allows the contribution of domestic firms, multinational enterprises (MNEs) and their foreign affiliates to global trade and production to be assessed. This paper details the methodology that was used to create the data, as well as the main assumptions and challenges in the work.