We set up a simple trade model with two countries hosting one firm each. The firms invest in cost-reducing R&D, and … R&D subsidies the lower the level of trade costs, even if the firms are independent monopolies. If firms produce …

The rising importance of multinationals in the world economy has been accompanied by a rise in trade between affiliates … of multinationals located in different countries, and by profits being shifted to low tax countries. The effect of trade … barriers on taxation, intra firm trade and profit shifting has largely been ignored by both the trade literature and the public …