“The Economic Role of France and Europe"
Speech given by Consul general of France in Chicago,
Jean-Baptiste Main de Boissière, at the 2007 Gala evening of the French-American Chamber of Commerce of Greater Cincinnati.
Cincinnati, May 10, 2007
France’s contribution to the European economy is based on several important points :
• The globalization of corporate France is an important part of the transformation of European capitalism :
In the last 25 years, a vibrant form of capitalism has emerged from worldwide political and economic transformations.
For France, a major driving force has been the privatization process which has changed the face of French capitalism.
It has resulted in the creation of powerful international companies, well managed, financially robust and well regarded by the markets : AGF, BNP Paribas ; EADS ; Gaz de France, EDF, France Telecom, Renault, ST Microelectronics, Sanofi-Aventis, Societe Generale, Suez, Thomson, Veolia, Vivendi.
Together these companies currently represent a significant part of French market capitalization.
Another important factor shaping the face of modern French capitalism has been the role of entrepreneurs. The list of major companies with strong family roots is impressive : Bouygues, Carrefour, L’Oreal, Lagardère, LVMH, Pernod Ricard, Peugeot, and PPR.
These companies also are great success stories. They have strong corporate cultures and very dedicated staff. They underline the lasting contribution of family based capitalism to the prosperity of our country.
Also, the French economy is extremely open. Like most other European countries, France derives a significant part of its GDP from external trade -significantly more than in the United States or Japan. In absolute terms, France ranks 5 th in the world in terms of exports and 4th in terms of imports.
Other indicators also point to the fact that France has become a truly internationalized business place.
Behind the UK, the United States and China, France is the fourth destination in the world for foreign direct investment. In practical terms, 18,000 thousands subsidiaries of foreign companies are implanted in France. Together, they represent 1.9 million jobs, an increase of 90% over a 10year period.
• The attractiveness of France as a business location is also a major plus for the European economy :
France is a European hub for many multinational corporations. Paris ranks 2nd in the world for hosting the headquarters of these companies, after Tokyo and before London and New York. Therefore, Paris solidifies the presence of Europe in the world.
Another telling indicator is that 45% of market capitalization in France is held by non-French residents. This number raises to 70% for transactions made on the stock exchange. Foreign investors hold 56% of French sovereign bonds.
With a market capitalization of 1.4 trillion dollars in 2006, France ranks 4th in the world behind the United States (9.9), Japan (2.2), the UK (2.1) but before Germany (0.8).
• As a stable, well managed economy, France (AAA rating) is contributing to the stability of the European economy and the success of the Euro zone
France’s openness to the global economy, as measured by the ratio between international trade and GDP, rose from 11% in 1960 to 22% in 2005. During this time, France opened up to the global economy and foreign capital, and major French companies acquired European and even international enterprisesstanding.
Over the same period, the UK ratio rose from 16 to 20% and that of the United States from 3 to 10%. The comparison with the United Kingdom, always presented as the most open economy in the Old World, is particularly revealing. It shows both the French economy’s high degree of openness and its rapid transformation during the time in question. France is not standing still, as she is too often thought to be.
France has received AAA rating by Moody’sStandard and Poors, and is one of the few European countries to receive such a high mark on the index of performance, a sign of great stability.
Foreign investment is a sign of good health and is indeed imperative in an increasingly open world.
• France also contributes to the emergence of a post-industrial society - a knowledge based economy - in Europe (R&D, sciences, healthcare, culture and tourism)
France is an active European partner in the fields of R&D, sciences, mathematics, healthcare, and technology.
Launched in 2004, France’s competitive clusters consist of an association of companies, research centers and educational institutions, working in partnership under a common development strategy to generate the collaborative execution of innovative projects targeting one or more given markets.
There are currently 66 clusters in France, in fields ranging from biotech to aerospace, from agribusiness to sustainable development. A wide range of actors have been mobilised, companies, research centers and universities through a ‘bottom up,’ collaborative approach. And the first results of the cluster policy are encouraging.
France is also a central point in Europe for its cultural assets and it’s prominent position as a tourist destination. France is the number one tourist destination in the world, with 78 million foreign visitors in 2006 (+ 3% compared to 2005). International tourism revenue has also risen by 2.5% reaching 35 billion euros in 2006.
The French public road and rail infrastructures, with the high speed trains as well as telecommunications are notoriously excellent.
France’s economic future is highly dependant on Europe
France can’t be economically successful without Europe.
• Our prosperity relies on the creation of a highly integrated market of 500 million consumers
The EU is one of the largest economic entities in the world with 500 million consumers. Significant efforts have been made to create harmonized standards to bring economic benefits through creating larger, more efficient markets.
Today, the EU is the largest exporter in the world and the second largest importer.
• The same can be said for the Euro
In 2002, France gave up it’s original currency of many centuries, for the Euro.
There is no turning back.
Since its inception in 1999, the Euro has been a stabilizing force in the European economy.
Today, the 13 countries that are part of the Eurozone benefit from a fiscal stability.
The Euro has brought monetary coherence thanks to a clear and common monetary policy.
It is become a major currency for international trade that can compete with the dollar and the yen.
• European policies are needed to create critical mass in areas such as R&D, high level education, energy policy
The objectives of the European Union to boost spending on R&D to 3% by 2010 and to become a leading knowledge-based economy cannot be achieved without common policies.
R&D at the European level has a positive effect on productivity and growth. If Europe is to become a successful integrated research area, able to attract investments from all over the world it must develop wide-ranging European-level programs over national programs with little coherence.
France must work hand in hand with its partners on key issues such as : R&D, sciences, high level education through multilateral cooperation between institutions, and energy regulations.
In that area, much has to be done : controls on production, energy management and efficiency, as well as market legislation. The increase of renewable energy programs, including nuclear energy, needs to be addressed as global warming has become a top priority particularly in France.
France and the European Union have to meet important challenges
• The financing of our system of social protection and the functioning of the labor market are two critical issues which have to be addressed
The French social system is characterized by two major factors :
The first is financial : France already has a high taxation rate, which would be hard to increase without affecting the economy.
The second factor is that the French are deeply attached to their solidarity system and it will remain one of the pillars of our society.
To insure the future viability of the social welfare system, a series of reforms are being implemented to guarantee its long term financing in an economically and socially sustainable way. A number of steps have already been taken in the last 5 years : the number of contribution years for retirement has been extended to account for the longer duration of life and measures have been successfully implemented to curb the cost of medical expenses.
Such changes have been well accepted by the French population.
Improving the functioning of our labor market is another major challenge.
An efficient labor market is a primary condition to create jobs and thus reduce unemployment. France is actively engaged in reforming its system, and is finding inspiration from other European countries who have been successful in bringing social partners to agree on improving labor market regulation.
• A stronger coordination is needed between countries of the Euro zone
Policy coordination among the members of the Eurozone and the non-members must be strengthened even if macroeconomic management in Europe has improved significantly since the beginning of the European Monetary Union.
Such a coordination will lead to a greater convergence of the economic and budgetary policies within the group and will facilitate dialogue in a more open and efficient manner with the ECB (European Central Bank).
• Ultimately, the cohesiveness of the European economy is dependant on the achievement of a political Europe.
To create a zone of prosperity in a post-industrial economy, we must achieve a political Europe and a highly performing economy well-adapted to the Europe of today and in the spirit of the Lisbon Strategy.
The political dimension is extremely important. It opens the way to a more complete integration in the future.
As one of the largest economic and political entities in the world, the EU has to continually adapt its policies to the ever changing issues of the world.
France and Europe must separately and together address the important challenges of the 21st century. /.