Today's Date:

French foreign trade results: Communiqué from the Ministry Delegate for Foreign Trade.
Paris, August 18

The past decade has seen a remarkable adjustment of France's foreign trade, which, in particular, has made significant progress in the European market. After her substantial deficit on trade at the end of the 1980s, France has recorded surpluses since 1993. The French economy has opened up at least to the same degree as that of its partners, while maintaining its market shares. Her position in terms of market share makes France the world's fourth largest exporter of goods and third largest exporter of services. Against this background, the country's trade balance remained at a high level in 1999 EUR 17.2 billion, i.e. 1.3% of GDP, compared with EUR 22.26 billion in 1998) recording a surplus for the seventh year in a row. This result underlines the now structural nature of the country's positive trade balance, since this was achieved despite a number of adverse factors: an economic cycle out of step with those of its main European partners, heavier energy costs and a lower surplus on defense exports.

Success on world markets
EU: boosting French trade in the Single Market
Latest developments
An important support system for exporters
Key figures

 

Ability to compete

Opening up markets always gives rise to fears: fear of foreign competition for our businesses and of the constraints this places on our economic policy. Such fears have proved largely unfounded. Although between 1970 and 1999 the share of imports in domestic consumption doubled to about 40%, the proportion of French manufactured goods exported was up from 20% to 42%. In fact, our European partners saw a similar trend.

Concurrently, the balance of payments as a whole moved clearly into surplus and in 1997 the trade balance reached a record high of EUR 24.39 billion (i.e. nearly 2% of GDP). In 1999, despite adverse circumstances (low growth in Germany, higher oil prices), the trade surplus was still EUR 17.2 billion.

If the surplus on services is also included, the current account was in surplus by more than two percentage points of GDP over the last three years. The "external economic constraint" of the 1980s has thus disappeared and France has built a sizeable financing capacity which has enabled her actively to invest abroad. Whilst inward investment continues to grow EUR 35 billion - in 1999, 39% up on 1998, direct French investment abroad also reached a record in 1999: EUR 83 billion, i.e. more than 6% of GDP - up 127% compared with 1998.

Trade is above all a matter of geographical proximity. So it is not surprising that France's foreign trade, like the direct investment flows of French companies, is attracted first and foremost to the European market. However, the size of this movement also reflects the determining influence of the European enterprise, resulting in the European Union now being the main focus of France's international operations.

This movement towards Europe applies to both investment flows and trade:

- with the development of the Single Market, the first big wave of French investment abroad in the second half of the 1980s went mainly to other European Community countries. Other EU States have now become the destination of half of all our existing foreign investment, though it accounts for only 30% of GDP and 40% of world trade. Concurrently, other EU States are the source of two thirds of existing inward investment in France;

- our trade also goes primarily to other EU countries: 64% of French exports go to them and 61% of our imports come from them.

Since the advent of the euro, the European market has gradually been becoming one huge domestic market, whose stability effectively protects our economy against external crises (e.g. Asian crisis). Europe has also helped to raise the quality of our exports which now contain more upmarket products and to bolster some of our industrial strengths in areas such as the aerospace, automotive, beverages and pharmaceuticals industries.

Emerging markets and new technologies: the new "frontiers" of French competitiveness

While our concentration on certain geographical areas and sectors has reaped benefits in the recent past, French industry very probably needs once more to adapt. The challenge facing French companies is twofold: they must not only secure a foothold in sectors with good prospects of future expansion, but also strengthen their presence in foreign markets which, by virtue of their own specialist focus, have a strong potential for growth.

Indeed, in both these respects, discernible weaknesses still exist:

- apart from aerospace and pharmaceuticals, France has no marked specialization in the new technologies which are set to expand rapidly in both industry and the services sector. In 1997, for example, the United Kingdom replaced France as the world's second-largest exporter of services;

- moreover, France's market shares in Asia and Latin America are still 2-4% (compared with an average of close to 10% in her traditional markets of Europe and Africa). This is despite recent efforts to increase direct investment. If these countries' economies continue to develop faster than other economies, France's current strategic choices risk leading to an inevitable decline in her overall market share (now fluctuating around 5%). We can already see that Asia's economic recovery after the crisis has, since 1999, been more beneficial to some of our European neighbours than to French firms.

Whilst France's trade is growing steadily, it is undeniably affected by disruptions to the world economic cycle, caused, for instance, by fluctuations in our partners' economic activity, changes in the euro-dollar exchange rate and oil prices per barrel.

Overall figures

After a marked fall-off at the beginning of 1999, due to the slow-down in economic activity in Europe and the emerging markets, French trade picked up in the second quarter. It then increased sharply (+7.8% for exports in the second half of 1999 compared with the first half and + 8.4% for imports) as growth and world trade accelerated. This period saw exports again rise, this time by 5.9%. This continued dynamism of French exports may be explained by two factors:

- the strength of world demand for French goods;

- a greater competitive edge resulting from the rise in the value of the US dollar, British pound and Asian currencies in the second half of 1999 and early 2000.

This recovery was even more marked in the case of imports which rose by 8.6% in the first half of 2000, a similar rate of increase to the one recorded in the second half of 1999. It reflects the strength of home demand. Rising oil prices are also making our imports dearer.

Changes sector by sector

Exports of all civilian industrial sectors are healthy, with household consumption and business demand rising in France, as in our main European partner countries. Exports of capital goods were the most dynamic over the last business period. Automobile exports are still rising, reflecting both the buoyancy of the European market and good performance of French manufacturers. In contrast to trade in industrial goods, that of the agri-foodstuffs industry is more lacklustre: after doing extremely well at the time of the millennium celebrations, agri-foodstuffs exports were significantly down at the beginning of the year, although the sector began to see a recovery in May 2000.

Impact of the high energy bill

Since France has no significant fossil fuel resources, she is a net importer of energy. Consequently, the increase in her energy bill had a major impact on her trade balance in 2000, a far greater one than in 1999. In the past two years, decisions to cut the production of oil and the recovery in its consumption by Asian countries led to an oil price hike. This was less damaging to the French economy than the first oil crises, because since then France has reduced her reliance on energy imports by adopting a policy of controlling consumption and developing nuclear power generation. As a result of this twin policy, our energy imports as a proportion of total imports fell significantly from 28% in 1980 to 7% in 1999 (10% in 1990). Nevertheless, the rise in oil prices together with a stronger dollar combined to add a further EUR 2.30 billion to the energy deficit in 1999 and EUR 6 billion in the first half of 2000 (compared with the first half of 1999). This rise in the energy bill is only to a very small extent offset by the increase in our exports to the oil-producing countries of the Middle East, principally due to sales of the Airbus. Recently, this higher energy bill has accounted for our lower trade surplus.

Confirmation of French competitiveness

We must not focus our attention solely on our trade balance. It is encouraging to see the renewed dynamism of our trade, underpinned by the strength of world trade and France's enhanced competitiveness in 1999.

Less competitive in 1998, the prices of French products became far more so in 1999, an improvement due essentially to the fall of the euro in real effective terms. Containment of unit wage costs allowed French manufacturers to increase the profitability of their exports.

Against this background, in volume terms, our market shares are stable compared to those of our main competitors. Indeed, they remain at the average level seen in the 1990s. The decline in market shares in nominal terms (5.6% in 1998 to 5.3% in 1999) is in fact distorted by the movements in the dollar and oil prices. The only significant erosion is the fall in our market share in Asia, which can be explained by the delayed effects of the Asian crisis on the completion of big projects and the return to competitiveness of the area's emerging economies.

Even so, the total value of the big contracts signed with Asia is increasing again. Overall, in 1999 it was still at one of the three highest levels for the decade, thanks largely to the performance of the aerospace industry.

Backed by the French authorities, French companies are thus making a definite effort to increase their presence in the most dynamic world markets.

Three main levers are being used to facilitate the expansion of trade and investment abroad:

Multilateral trade talks

The European Union is conducting trade talks, aimed, inter alia, at defining the necessary rules for the harmonious development of trade, both at the World Trade Organization (WTO) and in regional frameworks.

Financial support

This is provided in particular to support SMEs operating abroad.

Information to companies

Information on foreign markets is available to companies through the French Foreign Trade Centre (CFCE - Centre français du commerce extérieur) and the worldwide network of Commercial Sections attached to Embassies and other diplomatic posts (known in French as PEEs - postes d'expansion économique), of which there are 161 to date. The cornerstone of the French system of support for foreign trade, PEEs brief and advise companies at two key stages of the export process: prospecting markets and gaining a foothold in them. To meet the increasingly specific and varied requirements of exporters (actual and potential), the work of the PEEs has been refocused. Keen to provide better-quality information rather than just more information, they now attach greater importance to helping initiate investments and partnerships. They also play an important role in promoting France's image and her products to members of their local business, financial and industrial communities. Another body, CFME/ACTIM (Agency for the International Promotion of French Technology and Trade), has a more specific responsibility for promoting French technology and companies abroad. To this end, for instance, it organizes seminars, provides official French participation in trade fairs and exhibitions, invites foreign decision-makers to France and ensures the publication in the foreign press of information on French technology and products.

(1999 figures - total FOB/FOB including defense equipment)
exports: EUR 282 billion
imports: EUR 266 billion
trade surplus: EUR 17.2 billion

Source: French customs

Further information may be obtained on the Internet via the following links:

- www.commerce-exterieur.gouv.fr/sommaire.htm
This is the website of the office of the Minister of State for Foreign Trade. Here you will find a description of the entire French system of support for international business expansion (with direct links to every PEE), French foreign trade performance indicators and a large number of background briefing notes. The site also has a section on working abroad and an address book of useful contacts.

- www.cfce.fr
The French Foreign Trade Centre (CFCE) coordinates information to companies on foreign trade and gives them access, through this site, to databases (information on prospecting a market, for example) and an on-line bookshop containing publications (4,000 titles) on world trade and related matters, produced by PEEs, the CFCE, UN and bodies such as WTO and FAO.

- www.cfme-actim.com
This website provides a calendar of events organized by the Agency for the International Promotion of French Technology and Trade (trade fairs, major exhibitions and seminars). You will also find an FAQ section telling you how to obtain export funding and how to exhibit at an international trade fair.

- www.coface.fr 
The French Foreign Trade Guarantee Company (Compagnie française d'assurance pour le commerce extérieur) is a government agency which helps businesses by providing export credit support and guaranteeing new investments abroad (cf. ECGD in the UK and the Export-Import Bank of the United States). The site has sections on what's new, networks (e.g. Credit Alliance - an international network of credit insurers), partners (local offices, Chambers of Commerce, etc.) and products (insurance products, publications, etc.). There is also a glossary in French and English which defines terms such as "government-owned buyer" and "mandate to act" and includes a questionnaire to assess projects' environmental impact (French only)./.