Trade and Jobs in Europe: Much Ado about Nothing?

By Mathias Dewatripont; André Sapir et al. | Go to book overview

6. Trade with Emerging Countries and the Labour Market: The French Case

O. CORTES, S. JEAN AND J. PISANI-FERRY


6.1 Introduction

France is one of the countries in which the trade and unemployment issue emerged at the forefront of public debate in the early 1990s, following the publication of a parliamentary report by Senator Arthuis ( 1993), which claimed that relocation of manufacturing and service activities in low-wage countries was the cause of massive job destruction in France. In the debate that followed, it became clear that this view was shared by a significant proportion of the 'practical men' (especially among industrialists and trade unionists), but that it was at odds with the conventional wisdom held by most policy-makers and researchers.'1

At that time, conventional wisdom was that trade with the LDCs had had a small but positive effect on French unemployment. It was mainly based on the results from factor content of trade (FCT) computations, like those carried out by Balassa ( 1986), Berthelot and Tardy ( 1978), and later confirmed by the more recent research of Vimont ( 1993). These results were rather intuitive, because French non-oil trade with LDCs was in surplus and because in the 1970s and the 1980s, this surplus had increased as a consequence of the oil shocks: in a standard FCT methodology, job losses arising from the product composition of trade were not significant enough to offset the overall impact of the surplus. However, they were also open to criticism, both on practical grounds and for theoretical reasons ( Cortes and Jean 1995).

The debate around the Arthuis report stimulated further research on the employment impact of trade, with the aim of finding out whether the 'practical men' were right or wrong. Bonnaz, Courtot and Nivat ( 1994) attempted to take into account departures from the law of one price by assuming that goods produced in the LDCs substitute domestic products in quantity, rather than in value terms as assumed in the FCT methodology (basically, they assumed that shoes produced in the LDCs substituted French-made shoes one-for-one, instead of franc-for-franc). This resulted in an estimation of the effect of trade in manufactures with the LDCs to be a net job loss of 330,000, a figure considered by the authors to be an upper bound. Mathieu and Sterdyniak ( 1994) relied on a similar assumption for their model-

____________________
1
Allais has, however, been a dissenting voice among the economists.

-113-

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