> Leaving aside all the technical details about accounting for
> intermediate products like parts, there's no currency exchange
> involved in moving a part from IN to IL to NY; there is if it's
> between the US and Mexico. National borders still count.
The national borders are important for tax puposes, too.
Transfer prices are adjusted to account for money like pesos, yuan, yen, dinar. Real profits of MNCs pile up in low tax places like Singapore, Cayman Islands, British Virgin Islands, Bermuda and the tax-haven formerly known as Hong Kong.
http://ideas.repec.org/p/dgr/uvatin/20000054.html
http://bush.tamu.edu/content/research/working_papers/leden/tpm.pdf
http://www.ipeer.ca/papers/Diewert-Alterman-Eden-June4th-2004.pdf
Bush et al. recently declared a tax holiday for corporations to repatriate funds to the US. There is a whole world of eurodollars, singa-dollars, cayman-dollars, bvi-dollars, bermuda-dollars, etc.
Chris