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Can We Evaluate the Non-Price Competitiveness of French Products Based on Export Data?

Julien Burton and Magdalena Kizior

No 64, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: France’s export market shares declined in the 2000s as in other advanced economies following the rise of major competitors among emerging economies. However, the fall has been more marked for France than for similar EU economies. Cost competitiveness was at first considered the main reason for the deterioration in export performance and the policy response was to introduce actions to lower labour cost. Although measures like the competitiveness and employment tax credit (Crédit d’impôt pour la compétitivité et l’emploi, CICE) lowered the unit labour cost, France’s export market shares stabilised but did not recover fully, especially for goods. The attention could then be shifted to other aspects of competitiveness. Non-price competitiveness (a proxy for “quality”) is intrinsically difficult to measure but can be approximated as the export sales that cannot be explained by the price and other controlled parameters (distance, economic size …). Our contribution is to apply a gravity model to an updated worldwide dataset of bilateral trade flows in goods and to assess the non-price component of exports at a detailed sectoral level, focussing on the case of France. Overall, France’s exports’ non-price competitiveness (a proxy for “quality”) is medium-high, ranking 11th among a set of 37 countries (OECD and EU countries) but it has deteriorated in the recent years. The fall in the aggregate indicator was among the most pronounced over the period 2003-2016, notably in the aftermath of the 2008 crisis. This evolution seems to have been driven by average and lower “quality” goods, while only the top of the distribution tended to improve their advantage over time. .Moreover, the performance in terms of non-price competitiveness is quite heterogeneous across the manufacturing sectors. France achieves very good results in sectors in which it specialises such as aeronautics, cosmetics and beverages, while it performs average in sectors like machinery, electrical equipment, vehicles (particularly the car industry) or pharmaceuticals, which are the most important sectors in volume in global trade. France has demonstrated its ability to produce goods of high quality or high perceived quality through innovation (aeronautics), know-how (agriculture, wines) and branding (luxury products). However this applies to a relatively small share of its exports. To regain competitiveness, several proposals, leveraging on non-price competitiveness aspects, can be suggested: e.g. develop the dissemination of innovation from public to private sector, invest in human capital through education and training, reduce barriers to investment and improve the business environment to boost firm growth.

Keywords: Can we evaluate the quality of French products based on export data?; Julien Burton; Magdalena Kizior; France; quality of exports; non-cost competitiveness; trade performance; bilateral trade flows; trade in goods (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2021-03
New Economics Papers: this item is included in nep-int
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