Doing Business in France

A Hot Tip about Business Environment in France

Posted on: 4 Jan 2010

Market Overview

 

France and the U.S. are long-standing, close allies. Despite occasional differences of views, the U.S. and France work together on a broad range of trade, security and geopolitical issues. With a GDP of approximately $2.5 trillion, France is the world’s sixth-largest economy. 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 and is responsible for nearly all job creation in recent years. Real GDP increased by 0.8% in 2008. According to different sources, projections for 2009 GDP would show a decrease of 1 to 1.5 percent.

 

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. France is the second-largest trading nation in Western Europe (after Germany). France ran a record-setting $79 billion deficit in calendar year 2008. Total trade for 2008 amounted to $1,249.8 billion, 75.0% of which was with EU-24 countries.

 

Trade and investment between the U.S. and France are strong. On average, over 1 billion dollars in commercial transactions take place between France and the U.S. every day, with the U.S. being France's sixth-ranked supplier and its sixth-largest customer. France ranks as the United States' eighth trading partner for total goods (imports and exports).

 

“Although trade in goods and services receive most of the attention in terms of the commercial relationship, foreign direct investment and the activities of foreign affiliates can be viewed as the backbone of the commercial relationship. The scale of sales of U.S.-owned companies operating in France and French-owned companies operating in the United States outweighs trade transactions by a factor of almost five. In 2006, France was the eleventh largest host country for U.S. foreign direct investment abroad and the United States with investments valued at $65.9 billion was the number one foreign investor in France. During that same year, French companies had direct investments in the United States totaling $159 billion (historical cost basis), making France the fifth largest investor in the United States. French-owned companies employed some 473,000 workers in the United States in 2005 compared to 619,000 employees of U.S. companies invested in France.” 1

1 CRS Report for Congress. Order Code RL32459. U.S.-French Commercial Ties. Updated April 7, 2008 – http://www.fas.org/sgp/crs/row/RL32459.pdf

 

U.S.-France trade in goods and services totaled nearly $100 billion 2007 and is estimated at $ 105 billion in 2008, including one third in services and two thirds in goods. The main trading categories are 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.

 

The trade balance on all bilateral transactions between the United States and France can be viewed at: http://www.bea.gov/bea/international/bp

 

Market Challenges

 

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 through recovery-supportive policy has been a top priority. The unemployment rate in metropolitan France slipped to 7.4% in the fourth quarter of 2008. Unemployment is expected to increase in 2009.

 

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 2007, is among the highest in the G-7. Regulation of labor and product markets is pervasive. The government continues to own shares in corporations in a range of sectors, including banking, energy production and distribution, automobiles, transportation, and telecommunications.

 

Legislation passed in 1998 shortened the legal workweek from 39 to 35 hours for most employees effective January 1, 2000. Recent assessments of the impact of workweek reduction on growth and jobs have generally concluded that the goal of job creation was not met. The former administration under President Chirac introduced increasing flexibility into the law. Under President Nicolas Sarkozy's impetus, overtime work is exempted from income taxes and payroll taxes as of October 1, 2007, a move to encourage work and to increase work time. The business community welcomed government efforts to change the 35-hour workweek, but has complained that measures are difficult to implement. The government is taking measures to make the law less rigid and is seeking to introduce more flexibility in employment contracts.

 

Market Opportunities

 

Leading non-agricultural products considered to offer "best prospects" for U.S. business in France are (in order of market size): Travel and Tourism, Aircraft and Parts, Safety and Security Equipment, Computer Services, Computer Software, Industrial Chemicals, Computer and Peripherals, Telecommunications Equipment, Water Resources Equipment and Services, Medical Equipment, Automotive Parts Equipment, Plastics, Cosmetics, Education Services, Textile, Direct Marketing and E-Commerce Business to Consumer.

 

The French market for food products is mature, sophisticated and well served by suppliers from around the world. Additionally, 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. Significant market opportunities for consumer food/edible fishery products exist in a number of areas: fruit juices and soft drinks (including flavored spring waters), dried fruits and nuts, fresh fruits and vegetables (particularly tropical and exotic), frozen foods (both ready-to-eat meals and specialty products), snack foods, tree nuts, "ethnic" products, seafood (especially salmon and surimi), innovative dietetic and health products, organic products, soups, breakfast cereals and pet foods and treats. In addition, niche markets exist in France for candies, chocolate bars, wild rice and kosher foods that have shown rising demand. Market opportunities for U.S. exporters also exist for oilseeds, protein meals and other feeds, as well as for wood products and grains.

 

Market Entry Strategy

 

In general, the commercial environment in France is favorable for sales of U.S. goods and services. Marketing products and services in France is similar to the approach in the U.S., notwithstanding some significant differences in cultural factors and certain legal and regulatory restrictions. Local partners are readily available in most sectors and product lines, although competition can be fierce.

 

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 opportunities, and serves as an advocate for U.S. firms.

 

 

Read the full market research report


Posted: 04 January 2010

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