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.

International subcontracting with outward-processing trade (OPT) is characterized by the exportation (from a European Union's country) of intermediate goods or spare parts linked to a re-importation of finished or semi-finished products. The regulations and tariffs applying to OPT with Eastern European countries (EECs) as well as the pros and cons for both home and host countries for this sort of trade are studied along with the determinants underlying European firms' strategies for relocating production in the East and the temporary nature of OPT as a means for penetrating Eastern European markets. The empirical evidence exhibits - for the whole EU - that OPT with the EECs has declined from 1993 to 1997, and has concentrated on four host countries and a few industries (above all textile and clothing). Beyond the overall trend of developing OPT in low-tech and labour-intensive industries, a statistical analysis reveals deeper differences in OPT specialisation depending on the specific EEC.

The article starts with a macroeconomic, quantitative study of outward-processing trade (OPT) between France and Eastern European countries (EECs) on the one hand, and Maghreb countries on the other hand : geographical distribution, industry concentration (namely textile and clothing), revealed comparative advantages and disadvantages of the different France's partners in OPT. It exhibits several specific features of France OPT compared to European Union OPT with the EECs. Then, we observe, from 1993 to 1997 a substitution relation of the EECs to Maghreb in OPT export from France, and a crowding-out effect of Maghreb by the EECs in France OPT re-importation. French foreign direct investment (FDI) substitutes to OPT in the EECs while OPT export crowds out FDI in Maghreb countries. The FDI-OPT substitution in the EECs is tested to be determined by an improved institutional framework and a diminishing country-fisk, rather than a decreasing unit labour cost in the EECs.