Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316943 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11829
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper examines how EU Technical Barriers to Trade (TBTs) reshape firms' global supply chains, extending Grossman et al. (2024) to incorporate adaptation costs between sourcing partners. To test the model's predictions, we construct a novel dataset linking EU TBTs to French firm-level import data, trade agreement depth, and a new text-based index of regulatory dissimilarity. We find that greater regulatory distance with the EU significantly reduces both the likelihood and volume of imports. EU TBTs trigger substantial trade diversion: firms shift sourcing toward harmonised suppliers (value +4.4%, quantity +2.1%, entry +2.1pp) and away from non-EU partners (quantity –4.3%, exit +1.3pp, entry –2.6pp). This diversion is significantly weaker for products with high relationship-specific investments, underscoring the role of switching costs in supply chain reconfiguration.
Subjects: 
NTMs
TBTs
sourcing decisions
trade diversion
economic integration.
JEL: 
F13
F14
F15
Document Type: 
Working Paper
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