International trade and face-to-face diplomacy

This paper examines the effects of foreign visits by public officials on international trade. Using an original database that gathers more than 13,000 visits of French officials abroad and of foreign officials in France over the 1977–2007 period, it is shown that a bilateral visit to a foreign country is associated with an increase in French exports by 8% on average. This average effect hides considerable heterogeneity across world regions. The paper provides some evidence on the underlying mechanisms and finds that face-to-face visits mitigate trade costs related to contractual enforcement, insecurity and information. Indeed, analysis at the sectoral level reveals that visits increase French exports of a large variety of products, but that their effect is larger for differentiated products, i.e., goods highly exposed to contractual risks. Furthermore, bilateral visits reinforce trade, particularly in countries characterized by weak contract enforcement, corruption and lower political proximity with France, as well as by a smaller number of French migrants.