1. Relative French foreign trade performance (esp. vs Germany) BdF – CEPII WORKSHOP Paris, 25 / 11 / 2009 Hervé Boulhol

2. Three questions Q1: What do we know? Q2: Is it a French or a German issue? Q3: Export growth vs welfare?

3. Q1: What do we know? 1. The explanation is neither due to export destinations nor to sector specialisation 2. Offshore outsourcing to Eastern Europe has reduced production costs in Germany 3. French export performance has been particularly low in high-tech & high-quality products 4. Wage moderation has contributed to the competitiveness of German firms 5. Relative domestic demand dynamics

4. We know a lot Erkell-Rousse and Sylvander (2008) Relative export performance is explained by domestic demand (about 30%), offshore outsourcing (about 30%), world demand (10%), wages / mark-ups (25%)

5. Q2: A French or a German issue? French relative exports

6. Q2: A French or a German issue? French relative exports

7. Q3: Export growth versus welfare? France relative to Germany: is it an issue?

8. Q3: Export growth versus welfare? France rel. to Euro area (excl. GER)

9. Welfare: France vs Germany Private consumption … AND … investment

10. France vs Germany: export and competitiveness Export divergence preceded

11. Labour share (compensation of employees as % of GDP) Unsustainable wage moderation in Germany?

12. Bazaar effect? 1. Labour market rigidities 2. Distorted specialisation towards capital goods 3. Outsourcing of labour intensive jobs + rise in unemployment 4. Symptomatic export growth with sluggish demand Some interesting components, but many problems incl.: A. Labour market rigidites in France as well explain poor export performance (IMF) B. Bazaar effect is an equilibrium sequence whereas high trade surplus points to real exchange rate undervaluation, which suggests that wage moderation + sluggish demand is the result of disequilibrium

13. Bonus: Real GDP and Welfare accumulation abroad: from GDP to GNP Net primary incomes from the rest of the world (% of GDP)

14. Bonus From 2000 to 2008, real GNP grew in Germany relative to France 0.4% faster per year on average than real GDP

15. You liked it … and would really like to know how to refer to it: http://team.univ-paris1.fr/teamperso/boulhol/dt/bdf- cepii_workshop.ppt THANK YOU