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Country Commercial Guides FY 2000: France Report prepared by U.S. Embassy Paris, released July 1999 Note*

CHAPTER I. EXECUTIVE SUMMARY

This Country Commercial Guide (CCG) presents a comprehensive look at France's commercial environment using economic, political and market analysis. The CCG's were established by 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 several U.S. government agencies.

The market in France has long been and will continue to be of importance to U.S. suppliers across a wide range of industrial and consumer goods, food & agricultural products, and services. France is the ninth-largest trading partner of the United States worldwide in terms of two-way trade, and the third-largest in Europe (after the United Kingdom and Germany). The United States and France share many trade similarities, in particular their status as the world's top 2 exporting countries in 3 key sectors: defense products, agricultural goods, and services. Franco-American trade is also remarkable for its symmetry, as the majority of the top 15 export products are the same each way. Nonetheless, France's major partners are within the European Union. France has the world's fourth largest industrial economy, with an annual GDP about one-fifth that of the United States. The disposable income of France's 60 Million population averages around $20,000 per capita, and memberships in the G-7, European Union, World Trade Organization and OECD confirm the status of France as a leading economic player in the world. In 1998, French GDP grew by 3.3% in real terms, an encouraging improvement over 2.1% real growth in 1997. The outlook for 1999 and 2000 is for continued growth, although at rates below that of 1998; the government projects growth in the range of 2.2%-2.5% in 1999.

France's Socialist government is concentrating on implementing a domestic agenda focused on economic growth and bringing down high unemployment, which stood at to 11.5% by the end of the year. Efforts to implement a reduction of hours worked from 39 to 35 hours per week, as a spur to create jobs are ongoing. January 1, 2000 is set as the date for such a reduction to take effect, for all but the smallest firms. The economic impact of the transition to the 35-hour work week is uncertain, depending on the outcome of negotiations over wages and work schedules, to conclude by the end of 1999. Government efforts to sell-off shares of French entreprises continues, but the government still controls 54% of GDP. In addition, the French concept of a "golden share" gives the government a virtual veto in strategic moves by key firms in the economy. Progress has been made in privatization and the reduction of budget deficits, but taxes remain the highest in the G-7 industrial countries, regulation of goods and labor markets is pervasive, and structural changes are likely to be spurred by world competitive pressures or by the European Union.

Both President Chirac and Prime Minister Jospin are strong advocates of European Union, as a way to strengthen France both politically and economically. France's adoption of the Euro as their single currency will also increase competitive pressures on French companies.

In general, the commercial environment in France is favorable for sales of U.S. goods and services. Marketing products and services in France is almost like marketing them in the U.S., notwithstanding some significant differences in cultural factors and legal restrictions. As reflected in the growth of direct marketing and franchising, American sales concepts tend to influence French marketing practices and distribution channels. While use of the Internet is rapidly increasing, electronic commerce in France is still dominated by the huge, but fading, installed base of France Telecom "Minitel" units. France is poised for an internet "revolution". The leading non-agricultural products considered to offer "best prospects" for U.S. business in France are (in order of market size): computer software, computers and peripherals, electronic components, security & safety equipment, textiles, aircraft & parts, telecommunications equipment, scientific laboratory equipment, medical equipment, environmental technology equipment and services, automotive parts and services equipment, automobiles and light trucks, and agricultural machinery. On the services side, the French markets for travel and tourism, employment services, franchising and telecommunications services hold the most export potential for American suppliers. Travel and tourism is the largest U.S. "export" earner.

French imports of U.S. food and agricultural products (including manufactured tobacco, spirits, and wood products) during Calendar Year 1998, were valued at $980 million, a 12 percent increase from 1997. French imports of U.S. food and agricultural products continued to increase for consumer-ready foodstuffs, and increased also this year in bulk commodities. In 1998, fresh and dried fruits (including nuts), were the leading U.S. agricultural exports to the French market valued at $118 million. Fish and seafood products (fresh or frozen), and processed fruits and vegetables (including fruit juices) were the second and third largest export items, valued at $107 million and $81 million, respectively. The French market for food products is mature, sophisticated and well-served by suppliers from around the world. 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 also exist for regional American foodstuffs (Tex-Mex, Cajun and California Cuisine), candies and chocolates, wild rice, and organic and health food products.

France offers a variety of financial incentives to American and other foreign investors, and its investment promotion agency, DATAR, provides extensive assistance to potential investors both in France and through its agencies around the world. Financial subsidies and tax incentives are offered to attract investment to the country's economically depressed areas. Foreign companies registered in France receive the same treatment with respect to participation in technology development programs sponsored by the French government and have equal access to R&D funding. Though some aspects of the investment climate could stand improvement, especially the tax structure, (there are over 100 taxes in France), France continues to offer attractive investment opportunities.

In support of U.S. commercial interests in France, the U.S. Embassy in Paris uses the combined resources of the various agencies to promote U.S. business interests and to remove barriers to increased exports of U.S. goods and services, to supply information on areas of trade and investment opportunity, and to advocate effectively on behalf of U.S. firms.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country commercial guides can be accessed via the World Wide Web at: HTTP://WWW.STAT-USA.GOV and HTTP://WWW.STATE.GOV and HTTP://WWW.MAC.DOC.GOV. They can also be ordered in hard copy or on diskette from the National Technical Information Service-NTIS at 1-800-553-NTIS. U.S. exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, trade information center by phone at 1-800-USA-TRAD (E) or by fax at (202)482-4473.