Économie et Statistique n° 435-436 - Internationalization of French Business Firms
French Firms' Response to Lowering of Foreign Customs Duties
We estimate the response of French firms to the lowering of customs duties that occurred in the late 1990s, largely due to the signing of the Uruguay Round. Our analysis is based on French customs data and on tariffs provided by the WTO trade database (TRAINS). Because customs duties vary over time, we can take advantage of the data's panel structure. This strongly influences the firms' estimated response to a change in variable export costs. On cross-sectional data, we find that the reduction in duties impacted both the number of exporting firms (extensive margin) and exports by individual firms (intensive margin). On panel data, only the intensive margin responds to tariff cuts. The same data show that exporters active before the Uruguay Round signing account for 95% of the response of French exports to lower duties. Firms have responded to this cost reduction by raising export value per product rather than exporting new products.