Banque de France Bulletin no. 236: Article 3 French goods exports and the challenge of the Covid 19 crisis

Thematic: Economy and international financing

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The Covid 19 pandemic that hit the world in 2020 demonstrated that, on an economic level, some countries may be more exposed than others to the impact of health restrictions by virtue of their particular trade specialisation. The analysis presented in this article relies on data on external goods
trade. A decomposition of export market shares is used to distinguish the contribution of sectoral and geographical specialisation effects from that of purely “performance” effects. The analysis shows that France’s exports were hit harder by the Covid 19 crisis than those of the other three major euro area economies, due to the country’s decision to impose a tighter lockdown during the first wave of the epidemic. France’s sectoral specialisation, and in particular the major role of its aeronautics sector, amplified the initial impact of the shock. It also weighed on the country’s subsequent export recovery.

The Covid 19 pandemic prompted a wide range of government responses aimed at limiting the spread of the contagion. The introduction of social distancing measures, which went as far as complete lockdowns of the population, slowed the spread of the epidemic and had a major impact on the economy. The restrictions affected supply by limiting agents’ ability to work or firms’ ability to organise production, with significant variations in impact across sectors. The measures also affected demand by limiting agents’ ability to consume, notably as a result of shop closures, but also due to restrictions on domestic travel.

These two shocks, to supply and demand, caused unprecedented disruption to international trade in goods (see Berthou and Stumpner, 2021). In France’s case, as for other countries, exports plummeted at the height of the health crisis as a result of the restrictions imposed at the domestic level (supply effect), as well as by partner countries (supply effect via imported inputs, or demand effect via the intermediate or final consumption of those partners). The impact of the measures varied widely across sectors, and specialisation therefore played an important role in determining export outcomes in 2020.

The analyses in this article show that, in 2020, France’s exports were more adversely affected by the public health crisis than those of the other major euro area economies (Germany, Italy, Spain). This overreaction can be explained by the fact that France imposed a stricter lockdown in spring 2020 than its closest partners (Germany), and by a more unfavourable trade specialisation due to the high weight of the aeronautics sector in France’s goods exports. While the effects of France’s more stringent lockdown have dissipated since the end of 2020, the difficulties in the aeronautics sector are tending to persist. The public health crisis is therefore having a more lasting impact on France’s exports as the country’s sectoral specialisation is proving unfavourable in the context of the Covid 19 pandemic. Travel restrictions and border closures have also caused major damage to the tourism industry, which is another of France’s stronghold export sectors.

1 A marked underperformance in French exports in 2020

Compared with the other large euro area economies, France’s exports fell more sharply and took longer to rebound

All large euro area economies saw a steep drop in exports at the height of the public health crisis, in the second quarter of 2020, followed by a marked rebound as of…