The competitiveness of french exports of animal products: A comparative analysis

Abstract

The animal products sector is at the heart of the debates on the world's capacity to feed its population, on the strong heterogeneity of production costs across countries, on the environmental footprint of human consumption, as well as on human health and animalwelfare. Animal products are an important source of high-quality nutrients and provide revenue for over 1.3 billion people worldwide. The demand for animal products is expected to expand due to population growth and increased affluence, especially in the developing world. The importance of animal products is particularly strong for the European Union (EU), where they account for one third of agricultural and food exports. Trade in animal products is highly concentrated geographically. More than a half of the animal products traded internationally originate from EU countries. The EU market is highly protected against non-European competitors and therefore strongly dominated by imports from EU partners. France is an important supplier of animal products, both worldwide and within the EU. It has a large trade surplus in this sector, mainly driven by its exports of dairy, cattle and beef products. However, recent works and international trade data reveal a loss of competitiveness of French animal industries since the beginning of the 21st century. Many European countries do not follow the same trajectory, although they all face the same economic environment (liberalization of markets, stronger competition from emerging countries, wide use of public and private standards, etc.). It is thus important to better understand what lies behind the evolution ofFrenchmarket shares in animal products. The present paper measures the competitiveness of French exports of animal products, relative to foreign competitors, using a shift-share approach. We adopt a definition of competitiveness that relies on countries' export performance and evaluate competitiveness by the evolution of export market shares net of structural effects. The geographic and sectoral structure of exports affect a country's market share through the evolution of demand of specific importers and for specific products, and should not be attributed to exporter's competitiveness. Accordingly, we decompose market share evolutions into a sum of a competitiveness term specific to the exporting country, and two structural terms, reflecting the orientation of exports to destinations with a strongly (or weakly) increasing import demand and the country's specialization in products with a rapidly (or slowly) increasing global demand. The competitiveness term captures all country-specific factors that affect directly the country's ability to sell in foreign markets, such as production costs, the cost of inputs, the efficiency of the value chain organization, as well as factors reflecting the country's capacity to charge higher prices (due to higher markups or a higher quality of its products). We find that, from 2000 to 2016, France lost half of its market share in animal products, considerably more than other European countries. The deterioration of France's competitiveness explains only half of its market share losses, both on the global and on the EU market. On the global market, the other half ismostly due to the orientation ofFrench exports to destination markets with a declining or slowly growing demand. On the EU market, the strong share of Italy and other importers with a weak evolution of demand, and the low share of products with a strongly growing demand in French exports are equally responsible for the rest of themarket share loss. This indicates that French exports of animal products are less adapted to the demand of European consumers than to the global demand. Comparing results across different groups of animal products,we find thatFrance suffered the largestmarket share losses in poultry and pork products. These sectors also registered the highest drop in competitiveness. The dairy sector shows the strongest resilience, with France conserving 9% of the world market, more than the double of its share in other animal products. Lastly, since agricultural and food products are marked by a relatively high variability of prices,we use data on trade unit values to analyze how much of the observed changes in market share and competitiveness can be attributed to price evolutions. Although price evolutions are generally less important than changes in trade values, our results reveal a strong heterogeneity in unit value evolutions, both across destination markets and traded products. We find that price evolutions explain about one fifth of the French market share loss in the animal sector. Most of this effect comes from the slow evolution of import prices of France's main trade partners, while the price evolution intrinsic to French producers and the global evolution of prices for the exported products have only a marginal contribution.