OUTWARD-PROCESSING TRADE BETWEEN FRANCE AND CENTRAL AND EASTERN EUROPEAN COUNTRIES

Abstract

France outward-processing trade (OPT) with the Central and Eastern European countries (CEECs) and Maghreb developed with a high momentum from 1993 to 1997, higher in the former than in the latter area. A crowding out effect of France OPT with Maghreb by France OPT with the CEECs is evident. A substitution relationship between French foreign direct investment (FDI) and OPT is statistically tested, and detrimental to OPT in the case of the CEECs. In Maghreb, French FDI is crowded out by the development of France OPT. The substitution of French FDI to OPT in the CEECs is explained by a number of factors like the abolition of tax privileges for OPT in the EU-CEEC relations, a market-seeking FDI, a non significant impact of labour costs on both FDI and OPT, a determinant role of institutional reforms and lower country-risk in attracting FDI instead of OPT.