Working Paper: CEPR ID: DP1049
Authors: Olivier Cadot; Jaime de Melo
Abstract: The paper considers the effects of trade expansion between the EU and the Central and East European Countries (CEECs) on France. Taking a political-economy perspective, we attempt to detect potential demand for protection at the sectoral and regional level. Recent aggregate figures for trade and direct investment are reviewed, showing that French trade relations with the CEECs have as yet failed to expand by as much as a simple gravity relationship would predict, while French direct investment in the area remains small. The paper then considers disaggregated trade data; simple trade expansion simulations are carried out suggesting that job creation and destruction at the regional level is likely to be marginal. The paper closes by drawing a comparison with France's adjustment to the EU's 1986 Southern enlargement (to Spain and Portugal), showing that fears of job losses turned out in that case to be largely unfounded, while Spain attracted significant amounts of French direct investment.
Keywords: economic integration; trade protection; france; ceecs
JEL Codes: F14; F15; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade liberalization (F13) | job creation (J68) |
| trade liberalization (F13) | job destruction (J63) |
| trade liberalization (F13) | net effect on employment (J23) |
| CEECs' integration into the EU (F36) | adjustment costs for France (J32) |
| trade expansion (F10) | demand for protection against CEEC imports (F14) |
| historical context of France's adjustment to the EU's 1986 southern enlargement (F55) | job losses (J63) |