U.S. Commercial Service France: Executive Summary

This Country Commercial Guide (CCG) presents a comprehensive look at France’s commercial environment from economic, political and market perspectives. The CCGs were established by the recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of U.S. government agencies represented there.

France and the U.S. are long-standing, close allies. Despite occasional differences, the U.S. and France work together closely on a broad range of trade, security and geopolitical issues. In general, the U.S. and France agree on basics, even if they may sometimes differ on tactics.

France is the world’s fifth largest industrialized economy. Its recent impressive growth and projected continued expansion make this one of the foremost markets worldwide for American goods and services. With an annual GDP about one-fifth that of the United States (USD 1.3 trillion in 2001), France was our eighth largest trading partner, accounting for USD 38.2 billion of U.S. exports of goods, services and income receipts in 2001. France is a member of the G-8, the European Union, the World Trade Organization and the OECD, confirming its status as a leading economic player in the world.

Ensuring that France's business climate is attractive to foreign investors is a priority for French government officials who see foreign investment as an important way to create jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives for foreign investors is available. The United States is the largest foreign investor in France with the book value of U.S. firms representing 17 percent of the stock of direct foreign investment, according to French statistics. The market value of the stock of U.S. investment in France may be as much as double the USD 38.4 billion book value for 2001 reported in U.S. Department of Commerce data. About 1,200 affiliates of U.S. firms are established in France generating over 500,000 direct employment jobs.

The United States and France share many trade similarities, in particular their status as the world's top two exporting countries in three key sectors: defense products, agricultural goods, and services. In addition, France is currently “digitizing” its economy, embracing the Internet with accelerating rapidity. The beneficial effects of this transformation in terms of increased productivity; employment and growth are just beginning to be realized.

France’s population of 60 million people has a high disposable income of USD 23,000 per capita. In 2001, French GDP grew by 1.9 percent in real terms, following 4.1 percent growth achieved in 2000. The outlook for 2002 and 2003 is for moderate growth to continue. The French government projects 1.3 to 1.4 percent in 2002 and 2.5 to 3.5 percent in 2003. Inflation remains low and under control.

The French economy continues to function below its growth potential, which is currently estimated at around 2.5 percent. Reaching that potential will require continued deregulation and reduction of the role of the state in the economy. Progress was made during the 1990s, notably in privatization and reduction of budget deficits, but taxes remain the highest among G-8 countries and regulation of both goods and the labor market is pervasive. Although some reforms have been implemented to address structural rigidities in the labor market, experts question whether unemployment will drop below the presumed structural rate of an estimated 8.5 percent, absent further significant liberalization. The full economic impact of the implementation of the 35-hour workweek law (January 2000) is still not clear, as not all companies, notably small-and-medium sized companies, have switched to the shorter workweek. Large companies reported that related increases in labor costs were partially offset by increased productivity due to a reorganization of work toward more flexibility or annualization of work hours. Payroll taxes on low wages paid by employers have been significantly reduced as part of the 35-hour workweek. Based on preliminary Finance Ministry estimates, net job creation related to the measure amounted to 100,000 in 2001 (or 34 percent of new jobs) on top of 115,000 in 2000 and 15,000 in 1999. France’s final transition, along with ten other EU countries, to the Euro as their single currency has increased competitive pressures on French companies and the French economy. The June 16, 2002 legislative elections gave absolute majority to the center-right in the National Assembly, which may allow President Chirac more freedom to conduct reforms during a full five-year mandate (until 2007).

France has a tradition of highly centralized administrative oversight of its essentially market-based economy. In 2001, total general government outlays amounted to 52.7 percent of GDP, one of the highest ratios among OECD countries. Considerable progress has been made in privatization, although the government maintains a presence in industries such as aeronautics, defense, automobiles, and telecommunications, and can still exert control over privatized firms (see attached discussion of “golden share” provisions in section VII).

In general, the commercial environment in France is favorable for sales of U.S. goods and services. Marketing products and services in France bears similarity to the approach in the U.S., notwithstanding some significant differences in cultural factors, and certain legal and regulatory restrictions. But, as reflected in the continued growth of direct marketing and franchising, American sales concepts are increasingly impacting upon French marketing practices and distribution channels. Moreover, France, perhaps more than any country in Western Europe, is poised for the Internet “revolution” which is expected to drive further economic growth and establish even stronger commercial linkages with the U.S. economy.

In 2001 the five fastest growing sectors, as measured in real terms on the basis of 1995 accounting , were the automobile industry (6.6 percent), services to companies (3.4 percent), capital goods (2.8 percent), education and health (2.8 percent) and retail trade (2.6 percent). As measured in nominal terms these sectors represented 2.0, 15.9, 4.2, 11.4, and 10.9 percent of total value added, respectively (2001 figures).

The leading non-agricultural products considered to offer "best prospects" for U.S. business in France are (in order of market size): Aircraft & Parts, Computer Software, Security and Safety Equipment, Electronic Components, Computers and Peripherals, Telecommunications Equipment, Scientific Laboratory Equipment, Medical Equipment, Pollution Control Equipment and Services, Textile, Automotive Parts and Service Equipment, Plastics, Agricultural Machinery, Pleasure Boats & Accessories and Biotechnology. On the service side, the French markets for Travel & Tourism, Employment Services, Telecommunication Services, Education Services and Franchising hold the most promising export potential for American suppliers. Travel and tourism is the single largest U.S. “export” earner, but we are witnessing a decrease since September 11.

French imports of U.S. food and agricultural products in 2001, including manufactured tobacco, spirits, cotton and wood products, were valued at USD 574 million. Fresh/frozen fish and seafood were the leading U.S. high-value food exports to the French market with USD102 million. Fresh and dried fruits, and beverages including wines and spirits were the second and third largest export items valued at USD 71 million and USD 36 million, respectively.

The French market for food products is mature, sophisticated and well served by suppliers from around the world. Therefore, an increasing interest in American culture, younger consumers and changing lifestyles are contributing to France’s import demand for food products from the United States. Generally, high quality food products with an American image can find a niche in the French market, particularly if they can gain distribution through stores and supermarkets that specialize in U.S. or foreign foods. Niche market opportunities exist in France for regional American foodstuffs (Tex-Mex, Cajun and California Cuisine), candies and chocolates, wild rice, seafood and organic and health food products.

In support of U.S. commercial interests in France, the U.S. Embassy in Paris uses the combined resources of various U.S. Government agencies to promote exports of U.S. goods and services. It also supplies information on trade and investment opportunity, and serves as an advocate for U.S. firms.

Country Commercial Guides can be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-533-NTIS. U.S. exporters seeking general export information/assistance or country-specific commercial information should consult with their nearest Export Assistance Center or the U.S. Department of Commerce‘s Trade Information Center at (800) USA-TRADE, or go to one of the following web sites:

www.export.gov
www.buyusa.gov/france/en/

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Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of U.S. government agencies represented there. France and the U.S. are long-standing, close allies. Despite occasional differences, the U.S. and France work together closely on a broad range of trade, security and geopolitical issues. In general, the U.S. and France agree on basics, even if they may sometimes differ on tactics. France is the world’s fifth largest industrialized economy. Its recent impressive growth and projected continued expansion make this one of the foremost markets worldwide for American goods and services. With an annual GDP about one-fifth that of the United States (USD 1.3 trillion in 2001), France was our eighth largest trading partner, accounting for USD 38.2 billion of U.S. exports of goods, services and income receipts in 2001. France is a member of the G-8, the European Union, the World Trade Organization and the OECD, confirming its status as a leading economic player in the world. Ensuring that France's business climate is attractive to foreign investors is a priority for French government officials who see foreign investment as an important way to create jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives for foreign investors is available. The United States is the largest foreign investor in France with the book value of U.S. firms representing 17 percent of the stock of direct foreign investment, according to French statistics. The market value of the stock of U.S. investment in France may be as much as double the USD 38.4 billion book value for 2001 reported in U.S. Department of Commerce data. About 1,200 affiliates of U.S. firms are established in France generating over 500,000 direct employment jobs. The United States and France share many trade similarities, in particular their status as the world's top two exporting countries in three key sectors: defense products, agricultural goods, and services. In addition, France is currently “digitizing” its economy, embracing the Internet with accelerating rapidity. The beneficial effects of this transformation in terms of increased productivity; employment and growth are just beginning to be realized. France’s population of 60 million people has a high disposable income of USD 23,000 per capita. In 2001, French GDP grew by 1.9 percent in real terms, following 4.1 percent growth achieved in 2000. The outlook for 2002 and 2003 is for moderate growth to continue. The French government projects 1.3 to 1.4 percent in 2002 and 2.5 to 3.5 percent in 2003. Inflation remains low and under control. The French economy continues to function below its growth potential, which is currently estimated at around 2.5 percent. Reaching that potential will require continued deregulation and reduction of the role of the state in the economy. Progress was made during the 1990s, notably in privatization and reduction of budget deficits, but taxes remain the highest among G-8 countries and regulation of both goods and the labor market is pervasive. Although some reforms have been implemented to address structural rigidities in the labor market, experts question whether unemployment will drop below the presumed structural rate of an estimated 8.5 percent, absent further significant liberalization. The full economic impact of the implementation of the 35-hour workweek law (January 2000) is still not clear, as not all companies, notably small-and-medium sized companies, have switched to the shorter workweek. Large companies reported that related increases in labor costs were partially offset by increased productivity due to a reorganization of work toward more flexibility or annualization of work hours. Payroll taxes on low wages paid by employers have been significantly reduced as part of the 35-hour workweek. Based on preliminary Finance Ministry estimates, net job creation related to the measure amounted to 100,000 in 2001 (or 34 percent of new jobs) on top of 115,000 in 2000 and 15,000 in 1999. France’s final transition, along with ten other EU countries, to the Euro as their single currency has increased competitive pressures on French companies and the French economy. The June 16, 2002 legislative elections gave absolute majority to the center-right in the National Assembly, which may allow President Chirac more freedom to conduct reforms during a full five-year mandate (until 2007). France has a tradition of highly centralized administrative oversight of its essentially market-based economy. In 2001, total general government outlays amounted to 52.7 percent of GDP, one of the highest ratios among OECD countries. Considerable progress has been made in privatization, although the government maintains a presence in industries such as aeronautics, defense, automobiles, and telecommunications, and can still exert control over privatized firms (see attached discussion of “golden share” provisions in section VII). In general, the commercial environment in France is favorable for sales of U.S. goods and services. Marketing products and services in France bears similarity to the approach in the U.S., notwithstanding some significant differences in cultural factors, and certain legal and regulatory restrictions. But, as reflected in the continued growth of direct marketing and franchising, American sales concepts are increasingly impacting upon French marketing practices and distribution channels. Moreover, France, perhaps more than any country in Western Europe, is poised for the Internet “revolution” which is expected to drive further economic growth and establish even stronger commercial linkages with the U.S. economy. In 2001 the five fastest growing sectors, as measured in real terms on the basis of 1995 accounting , were the automobile industry (6.6 percent), services to companies (3.4 percent), capital goods (2.8 percent), education and health (2.8 percent) and retail trade (2.6 percent). As measured in nominal terms these sectors represented 2.0, 15.9, 4.2, 11.4, and 10.9 percent of total value added, respectively (2001 figures). The leading non-agricultural products considered to offer "best prospects" for U.S. business in France are (in order of market size): Aircraft & Parts, Computer Software, Security and Safety Equipment, Electronic Components, Computers and Peripherals, Telecommunications Equipment, Scientific Laboratory Equipment, Medical Equipment, Pollution Control Equipment and Services, Textile, Automotive Parts and Service Equipment, Plastics, Agricultural Machinery, Pleasure Boats & Accessories and Biotechnology. On the service side, the French markets for Travel & Tourism, Employment Services, Telecommunication Services, Education Services and Franchising hold the most promising export potential for American suppliers. Travel and tourism is the single largest U.S. “export” earner, but we are witnessing a decrease since September 11. French imports of U.S. food and agricultural products in 2001, including manufactured tobacco, spirits, cotton and wood products, were valued at USD 574 million. Fresh/frozen fish and seafood were the leading U.S. high-value food exports to the French market with USD102 million. Fresh and dried fruits, and beverages including wines and spirits were the second and third largest export items valued at USD 71 million and USD 36 million, respectively. The French market for food products is mature, sophisticated and well served by suppliers from around the world. Therefore, an increasing interest in American culture, younger consumers and changing lifestyles are contributing to France’s import demand for food products from the United States. Generally, high quality food products with an American image can find a niche in the French market, particularly if they can gain distribution through stores and supermarkets that specialize in U.S. or foreign foods. Niche market opportunities exist in France for regional American foodstuffs (Tex-Mex, Cajun and California Cuisine), candies and chocolates, wild rice, seafood and organic and health food products. In support of U.S. commercial interests in France, the U.S. Embassy in Paris uses the combined resources of various U.S. Government agencies to promote exports of U.S. goods and services. It also supplies information on trade and investment opportunity, and serves as an advocate for U.S. firms. Country Commercial Guides can be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-533-NTIS. U.S. exporters seeking general export information/assistance or country-specific commercial information should consult with their nearest Export Assistance Center or the U.S. Department of Commerce‘s Trade Information Center at (800) USA-TRADE, or go to one of the following web sites: www.export.gov www.buyusa.gov/france/en/