France

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					France




France's economy combines extensive private enterprise (nearly 2.5 million companies
registered) with substantial (though declining) government intervention (see dirigisme). The
government retains considerable influence over key segments of infrastructure sectors, with
majority ownership of railway, electricity, aircraft, and telecommunication firms. It has been
gradually relaxing its control over these sectors since the early 1990s. The government is
slowly selling off holdings in France Télécom, Air France, as well as the insurance, banking,
and defence industries.

A member of the G8 group of leading industrialised countries, it ranked as the fifth-largest
economy in the world in 2004, behind the United States, Japan, Germany, and the United
Kingdom. France joined 10 other EU members to launch the Euro on January 1, 1999, with
euro coins and banknotes completely replacing the French franc in early 2002.

According to the OECD, in 2004 France was the world's fifth-largest exporter of
manufactured goods, behind the United States, Germany, Japan, and China, (but ahead of the
United Kingdom). It was also the fourth-largest importer of manufactured goods (behind the
United States, Germany, and China, but ahead of the United Kingdom and Japan).

Yet according to the OECD, in 2003 France was the OECD country that received the most
foreign direct investment (Luxembourg excepted, where foreign direct investment was mostly
monetary transfers to banks located in that country). With 47 billion USD of foreign direct
investments, France ranked above the United States (39.9 billion USD of FDI received), the
United Kingdom (14.6 billion USD of FDI received), Germany (12.9 billion USD of FDI
received), or Japan (6.3 billion USD of FDI received).

At the same time, French companies invested 57.3 billion USD outside of France, ranking
France as the second most important outward direct investor in the OECD, behind the United
States (173.8 billion USD of outward FDI), but ahead of the United Kingdom (55.3 billion
USD of outward FDI), Japan (28.8 billion USD of outward FDI), or Germany (2.6 billion
USD of outward FDI).

France is also the second most productive country in the OECD (excluding Norway and
Luxembourg where productivity data are inflated by oil revenues in Norway, and by
investments in off-shore banks in Luxembourg). In 2003, the GDP per hour worked in France
was 47.2 USD, ranking France behind Belgium (48 USD per hour worked), but above the
United States (43.5 USD per hour worked), Germany (40.6 USD per hour worked), the
United Kingdom (37.7 USD per hour worked), or Japan (30.9 USD per hour worked).

Despite a higher productivity than in the US, France's GDP per capita is significantly lower
than the US GDP per capita, being in fact comparable to the GDP per capita of the other
European countries, which is on average 30% below US level. The reason for this is because a
much smaller percentage of the French population is working compared to the US, which
sinks the GDP per capita of France, despite its high productivity. In fact, France has one of
the lowest percentage of its population at work among the OECD countries. In 2003, 41.5%
of the French population was working, compared to 50.7% in the US, and 47.3% in the UK.
This phenomenon is the result of almost thirty years of massive unemployment in France,
which has led to three consequences reducing the size of the working population: about 10%
of the active population is without a job; students delay as long as possible their entry into
labour market; and finally the French government gives various incentives to workers to retire
in their early 50s, though these are now receding.

As many economists have stressed repeatedly over the years, the main issue with the French
economy is not an issue of productivity. In their opinion, it is an issue of structural reforms, in
order to increase the size of the working population in the overall population. Liberal and
Keynesian economists have different answers to that issue.

With over 75 million tourists in 2003, France is ranked as the first tourist destination in the
world, ahead of Spain (52.5 million) and the United States (40.4 million). It features cities of
high cultural interest (Paris being the foremost), beaches and seaside resorts, ski resorts, and
rural regions that many enjoy for their beauty and tranquillity (green tourism).

France has an important aerospace industry led by Airbus and is the only European power to
have its own national spaceport (Centre Spatial Guyanais). France is also the most energy
independent Western country due to heavy investment in nuclear power, which also makes
France the smallest producer of carbon dioxide among the seven most industrialised countries
in the world. Large tracts of fertile land, the application of modern technology, and EU
subsidies have combined to make France the leading agricultural producer in Europe.

Since the end of the Second World War the government made efforts to integrate more and
more with Germany, both economically and politically. Today the two countries form what is
often referred to as the "core" countries in favour of greater integration of the European
Union.

With a GDP of 1.57 trillion Euro (1.57×1012 €; 2003 data), France is the fifth largest
economy in the world and the third largest in Europe after Germany and the United Kingdom.
It has substantial agricultural resources, a large industrial base, and a highly skilled work
force. A dynamic services sector accounts for an increasingly large share of economic activity
(72% in 1997) and is responsible for nearly all job creation in recent years. GDP growth
averaged 2% between 1994 and 1998, with 3% recorded in 2000. Stagnant GDP growth,
creeping unemployment, and a trade deficit have characterised a malaise in the French
economy since the global economic downturn.

Government economic policy aims to promote investment and domestic growth in a stable
fiscal and monetary environment. Creating jobs and reducing the high unemployment rate has
been a top priority. In the 1990s, unemployment fell from 10% to 8-9%, although this has
since rebounded to double digits. France joined 10 other European Union countries in
adopting the euro as its currency in January 1999. Since then, monetary policy has been set by
the European Central Bank in Frankfurt.

Dirigisme and renouncement to dirigisme
Following the Second World War, and especially the Fifth Republic, France embarked on an
ambitious and mostly very successful program of modernization, under state impulse and
coordination. This program of dirigisme, mostly implemented by right-wing governments,
involved the state control of a minority of the industry, such as transportation, energy and
telecommunication infrastructures, as well as various incentives for private corporations to
merge or engage in certain projects.

However, dirigisme came to be highly contested in the 1980s, with complaints of bureaucracy
and lack of reactivity to new challenges. As a result the government largely retreated from
economic intervention; Dirigisme has now essentially receded. Despite significant reform and
privatization over the past 15 years, the government continues to control a large share of
economic activity: Government spending, at 53% of GDP in 2000, is the highest in the G-7.
Labour conditions and wages are highly regulated. The government continues to own shares
in corporations in a range of sectors, including banking, energy production and distribution,
automobiles, transportation, and telecommunications.

Current issues
The conservative governments of Jean-Pierre Raffarin, since Raffarin's first nomination in
2002, have had to face increasing budget deficits for the State and Social Security budgets. In
both cases, this government had reduced taxes or contributions. The government also
increased military spending.

The government and its supporters contend that longer-term prospects of the economy
demand that the retirement age should be raised, unemployment and retirement benefits
should be cut, and that the national health insurance regimes should be reformed to cut costs.

Opponents, mostly from left-wing parties but also, to a lesser extent, from the Union for
French Democracy (a centrist party in Raffarin's coalition), contend that the proposed reforms
are not good for the country and thus rightly opposed by the population. According to them,
Raffarin's reforms and spending choices hit hard on working-class people and those preparing
the future of the country, such as scientific researchers, while the government squanders
public money on special interests through subsidies and tax cuts. They also contend that the
alleged tax cuts are, in fact, effective transfers of spending from national to local taxes. In
March 2004, the regional elections were a severe blow to Raffarin.

The government has since announced that the reforms would be re-examined to heed the
concerns expressed by the population, though it is still unclear what it intends to do.



Workforce and social relations

The French government intervenes in workforce relations in two ways:
      through statutes and regulates issued by the national government, supplemented by a
       heavy body of jurisprudence;
      through the enforcement of collective conventions resulting from bargaining between
       employers' and employees' unions.

The government imposes a minimum wage (SMIC).

Unemployment is a permanent concern of French governments since the end of the 1970s.
Unemployment problem is the main topic of the 2007 presidential election in France.
However, some econmists think the unemployment will drop by itself when the baby boom
generation retires from 2009 to 2020.

Working Hours

Legislation passed in 1998 shortened the legal workweek from 39 to 35 hours effective
January 1, 2000. A key objective of the legislation is to encourage job creation, for which
significant new subsidies will be made available. It is difficult to assess the impact of
workweek reduction on growth and jobs since many of the key economic parameters, such as
the impact on labour costs and company's ability to reorganize work schedules, will depend
on the outcome of labour-management negotiations which should extend through 2000 and
beyond. See 35-hour workweek.

The conservative government of Jean-Pierre Raffarin is trying as of 2004 to enact more
exemptions from this law.

Unions and strikes

Membership in France's labour unions accounts for less than 10% of the private sector
workforce (in 2003, 8.2% of the workforce and is concentrated in the education,
manufacturing, transportation, and heavy industry sectors. Most unions are affiliated with one
of the competing national federations, the largest and most powerful of which are the CGT,
FO, and CFDT.

French unions are fairly weak in general, and strikes are uncommon in most of the economy
(see France: a nation of strikers?). On the other hand, unions are powerful in some parts of
the public sector. This is especially true of public transportation (SNCF national railways,
RATP Paris transit authority, air traffic control...), where strikes have an instant effect on the
general public and attract the attention of the national and foreign press.

In the case of the private sector, the weakness of the unions often leads to their calling for the
government to intervene in workforce conflicts. Another issue is that unions compete between
themselves; this occasionally leads to power struggles in some areas where they are powerful,
even degenerating into strikes.

Sectors of the economy
Industry

France has been very successful in developing dynamic telecommunications, aerospace, and
weapons sectors.
Energy

With virtually no domestic oil production, France has relied heavily on the development of
nuclear power, which now accounts for about 80% of the country's electricity production.
Nuclear waste is stored on site at reprocessing facilities.

Agriculture

France is the European Union's leading agricultural producer, accounting for about one-third
of all agricultural land within the EU. Northern France is characterized by large wheat farms.
Dairy products, pork, poultry, and apple production are concentrated in the western region.
Beef production is located in central France, while the production of fruits, vegetables, and
wine ranges from central to southern France. France is a large producer of many agricultural
products and is currently expanding its forestry and fishery industries. The implementation of
the Common Agricultural Policy (CAP) and the Uruguay Round of the GATT Agreement
have resulted in reforms in the agricultural sector of the economy.

France is the world's sixth-largest agricultural producer and the second-largest agricultural
exporter, after the United States. However, the destination of 70% of its exports are other EU
member states. Wheat, beef, pork, poultry, and dairy products are the principal exports. The
United States, although the second-largest exporter to France, faces stiff competition from
domestic production, other EU member states, and other third countries. U.S. agricultural
exports to France, totalling some $600 million annually, consist primarily of soybeans and
products, feeds and fodders, seafood, and consumer oriented products, especially snack foods
and nuts. French exports to the United States are mainly cheese, processed products and wine.
They amount to more than $900 million annually.

The French agricultural sector is heavily dependent upon subsidies from the European Union,
which account for €11bn. Specific government policies, such as the infamous reclassification
of French wine as a 'health food' to avoid VAT, also goes a long way to create a thriving
domestic sector.

Tourism

As France is the most popular touristic country in the world, tourism is a significant
contributor to the French Economy. In the 1960s the government heavily promoted the
development of skiing in the French Alps through the development of new high level resorts
including some of the world's most extensive.

Trade
France is the second-largest trading nation in western Europe (after Germany). Its foreign
trade balance for goods had been in surplus from 1992 until 2001, reaching $25.4 billion (25.4
G$) in 1998. However, the French balance of trade was hit by the economic downturn, and hit
$15bn in deficit in 2003. Total trade for 1998 amounted to $730 billion, or 50% of GDP--
imports plus exports of goods and services. Trade with European Union countries accounts
for 60% of French trade.

In 1998, U.S.-France trade totalled about $47 billion--goods only. According to French trade
data, U.S. exports accounted for 8.7%--about $25 billion--of France's total imports. U.S.
industrial chemicals, aircraft and engines, electronic components, telecommunications,
computer software, computers and peripherals, analytical and scientific instrumentation,
medical instruments and supplies, broadcasting equipment, and programming and franchising
are particularly attractive to French importers.

Principal French exports to the United States are aircraft and engines, beverages, electrical
equipment, chemicals, cosmetics, and luxury products. France is the ninth-largest trading
partner of the U.S.

Other statistics

GDP PPP & GDP Growth Rates 2002 - 2006 est.:

Year           GDP              % GDP Growth
       in billions of USD PPP
2002              1603.740               1.3
2003              1641.774               0.9
2004              1724.647               2.1
2005              1811.561               1.5
2006              1889.783               1.8

Industrial production growth rate: -0.3% (2003)

Electricity:

       production: 520.1 TWh(2001)
       consumption: 415.3 TWh (2001)
       exports: 72.6 TWh (2001)
       imports: 4.2 TWh (2001)

Electricity - production by source:

       fossil fuel: 8.2%
       hydro: 14%
       other: 0.7% (2001)
       nuclear: 77.1%

Agriculture - products: wheat, cereals, sugar beets, potatoes, wine grapes; beef, dairy
products; fish

Exports - commodities: machinery and transportation equipment, chemicals, iron and steel
products; agricultural products, textiles and clothing

Imports - commodities: crude oil, machinery and equipment, chemicals; agricultural
products
Currency: Euro (EUR) since January 1st, 1999 for all financial transactions, Euro_banknotes
and Euro_coins were introduced January 1st, 2002. Previously was the French Franc (FRF),
the official exchange rate was fixed at 6.55957 French Francs per Euro.

				
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