Market Overview

An Expert's View about Business Environment in France

Last updated: 31 May 2011

Recent Developments

•As France is a member of the European Union (EU), its trade relations with Hong Kong/the Chinese mainland are affected by EU’s common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002.
•Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China had been established to monitor EU imports of Chinese textiles and apparel, which was scheduled to operate for one year, covering 8 out of the 10 previously restricted categories. Starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.
•The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2009, and will remain in force until 31 December 2011. While the Chinese mainland remains a beneficiary, certain products, including toys, textiles and textile articles, footwear, furniture, jewellery, electrical equipment and watches and clocks, will be excluded from preferential treatment.
•A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycle, ironing boards and certain saddles, which are of interest to Hong Kong exporters.
•Hong Kong’s total exports to France surged by 30% to US$1.1 billion in the first quarter of 2011, while its imports from France soared by 30% to US$1.2 billion.
•The total stock of French direct investment in Hong Kong amounted to US$3.1 billion (or HK$24.1 billion) as at the end of 2009.
•Among one of the first economies in the EU emerging out of the recession, the French economy resumed growth of 1.6% in 2010, after a plunge of 2.6% in 2009. On the back of the resilience of private consumption and the further recovery of the global economy, the French economy is forecast to grow at a faster pace of 1.8% in 2011, despite the lingering concern about the contagion risk of the European debt crisis.


Current Economic Situation


The French economy resumed growth of 1.6% last year, after coming out of the recession in the second quarter of 2009. Aside from the French government’s recovery plan which supported private consumption including through one-off social transfers and a car-scrapping premium, the nation’s structural features such as the resilience of private consumption (with substantial buffers due to historically high savings rates and a dynamic demography) and the limited size of the manufacturing sector were considered shields guarding the French economy through the global economic crisis. Meanwhile, the pick-up in world trade, combined with a weak euro, resulted in a positive contribution of net exports to growth for the first time in a decade.


On entering 2011, France’s resilient domestic demand, the major stimulus to growth, remains assets. Meanwhile, the rapidly increasing capacity utilisation has gradually triggered an acceleration of investment, especially for those projects on hold due to the global economic turmoil. This coupled with the expected increase in the labour force after the recent general pension reform and cancellation of exemptions to job search obligation will set to improve employment prospects and subsequently consumer sentiment. On the external front, while the lingering European sovereign debt crisis in the near-term continues to cast dark cloud on the growth of France’s exports, the further recovery of the global economy will be sufficient to help provide a silver lining. In all, the French economy is forecast to grow at a faster pace of 1.8% in 2011.


Trade Policy


France is a member of the EU, and it follows EU’s common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002.


Textiles and Clothing


Hong Kong’s textiles and clothing exports to the EU were previously subject to the World Trade Organisation (WTO) Agreement on Textiles and Clothing (ATC), under which quantitative restrictions on textiles and clothing were eliminated completely on 1 January 2005.


Likewise, the previous quotas imposed by the EU on textiles and clothing products originating from the Chinese mainland were removed on 1 January 2005. However, as a result of the EU-China agreement reached in June 2005, the EU imposed safeguard quotas on 10 categories of Chinese textile products for the period of 2005-2007. Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China was established to monitor EU imports of Chinese textiles and apparel for one year, covering 8 out of the 10 previously restricted categories.


Starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.


Non-textile Manufacturing Products


Previously, the EU also imposed Union-wide quotas on three categories of non-textile products originating from the Chinese mainland, including certain footwear, porcelain and ceramic tableware/kitchenware. But these quotas were liberalised on 1 January 2005.


Scheme of Generalised Tariff Preferences


The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2009, and will remain in force until 31 December 2011. The scheme classifies products into two categories, namely sensitive products that enjoy the benefits of reduced tariff rates by 3.5 percentage points, and non-sensitive products that enjoy total tariff suspension. Under the new GSP scheme, the Chinese mainland remains a beneficiary. But certain products, including toys, textiles and textile articles, footwear, furniture, jewellery, electrical equipment and watches and clocks, are excluded from preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since 1 May 1998.


Anti-dumping Measures


The EU has initiated anti-dumping (AD) proceedings against certain mainland-origin products. Currently, there are a number of mainland-origin items subject to EU’s anti-dumping measures, including bicycles, ironing boards and certain saddles, which are among the affected products of interest to Hong Kong. As at the end of April 2011, the EU did not apply any AD measures on imports from Hong Kong.


Other Measures


To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.


For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which will come into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.


On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006.


On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast WEEE Directive and the other for a recast RoHS Directive. As per the EC, the purpose of a recast WEEE Directive is to tackle a number of technical, legal and administrative difficulties since its entry into force. For the recast RoHS Directive, the EC aims to improve implementation by the Member States (e.g., by ensuring a more harmonised implementation), improve enforcement and increase understanding of the provisions.


On the heels of the WEEE Directive and RoHS Directive, the EU’s new Directive on the eco-design of Energy-using Products (EuP) is now in place. This EuP Directive does not directly introduce binding requirements for specific products, but does define conditions and criteria for setting via subsequent measures. On 24 September 2009, the Council of EU formally adopted a new Ecodesign Directive, following a first-reading agreement, in April 2009, with the European Parliament. The new Directive will extend the scope of the existing EuP Directive to cover, in principle, all energy-related products which have an impact on energy consumption during use.


Moreover, REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.


On 30 June 2009, Directive 2009/48/EC on the safety of toys (the "toy safety Directive") was published in the EU's Official Journal. The new toy safety Directive was voted through by the European Parliament in December 2008 and adopted by the Council in May 2009. The new Directive has updated existing measures to take account of technological developments and - following a number of high profile product withdrawals of dangerous goods - new safety concerns. All EU member states are required to bring into force the laws, regulations and administrative provisions necessary to comply with the Directive by 20 January 2011 and to apply those measures from 20 July 2011, although a further transitional period will apply in limited instances.

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Posted: 30 May 2011, last updated 31 May 2011

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