Wallis and Futuna – KnowYourCountry

The French economy is diversified across all sectors. The government has partially or fully privatized many large companies, including Air France, France Telecom, Renault, and Thales. However, the government maintains a strong presence in some sectors, particularly power, public transport, and defence industries. With more than 84 million foreign tourists per year, France is the most visited country in the world and maintains the third largest income in the world from tourism. France’s leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that mitigate economic inequality.

France’s real GDP increased by 1.1% in 2015. The unemployment rate (including overseas territories) increased from 7.8% in 2008 to 9.9% in the fourth quarter of 2014. Youth unemployment in metropolitan France decreased from a high of 25.4% in the fourth quarter of 2012 to 24.3% in the fourth quarter of 2014.

Lower-than-expected growth and high spending have strained France’s public finances. The budget deficit rose sharply from 3.3% of GDP in 2008 to 7.5% of GDP in 2009 before improving to 4% of GDP in 2014 and 2015, while France’s public debt rose from 68% of GDP to more than 98% in 2015, and may hit 100% in 2016.

Elected on a conventionally leftist platform, President Francois HOLLANDE surprised and angered many supporters with a January 2014 speech announcing a sharp change in his economic policy, recasting himself as a liberalizing reformer. The government’s budget for 2014 shifted the balance of fiscal consolidation from taxes to a total of $24 billion in spending cuts. In December 2014, HOLLANDE announced additional reforms, including a plan to extend commercial business hours, liberalize professional services, and sell off $6.2-12.4 billion in state owned assets. France’s tax burden remains well above the EU average and income tax cuts over the past decade are being partly reversed, particularly for higher earners. The top rate of income tax is 41%. The government is allowing a 75% payroll tax on salaries over $1.24 million to lapse.

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

machinery, chemicals, automobiles, metallurgy, aircraft, electronics; textiles, food processing; tourism

Exports – commodities:
machinery and transportation equipment, aircraft, plastics, chemicals, pharmaceutical products, iron and steel, beverages

Exports – partners:
Germany 15.9%, Spain 7.3%, US 7.2%, Italy 7.1%, UK 7.1%, Belgium 6.8% (2015)

Imports – commodities:
machinery and equipment, vehicles, crude oil, aircraft, plastics, chemicals

Imports – partners:
Germany 19.5%, Belgium 10.7%, Italy 7.7%, Netherlands 7.5%, Spain 6.8%, US 5.5%, China 5.4%, UK 4.3% (2015)

Investment Climate  –  US State Department

France welcomes foreign investment and has a reliable business climate that attracts investment from around the world. The French government devotes significant resources to attracting foreign investment, through policy incentives, marketing, its overseas trade promotion offices, and investor support mechanisms. France has an educated population, first-rate universities, and a talented workforce. It has a modern business culture, sophisticated financial markets, strong intellectual property protections, and innovative business leaders. The country is known for its world-class infrastructure, including high-speed passenger rail, maritime ports, extensive roadway networks and public transportation, and efficient intermodal connections. High speed (3G/4G) telephony is nearly ubiquitous and over 85% of French citizens have internet access.

The investment climate in France, though complex, is generally quite conducive to U.S. investment, as illustrated by the fact that the United States is France’s largest source of foreign direct investment (FDI stock). Around 1,200 U.S. companies in France (affiliates with assets, sales, or net income greater than $25 million) are responsible for over 450,000 jobs. (Note: Business France (a French government agency) counts smaller firms and arrives at 4,800 American firms employing 460,000 people in France. End note.) In total, there are more than 20,000 foreign-owned companies doing business in France. It is home to more than 30 of the world’s 500 largest companies. This year, France moved up one place to number 22 in the World Economic Forum’s ranking of global competitiveness.

The 2014 and 2015 American Chamber of Commerce France-Bain Barometer surveys on the outlook of U.S. companies in France have expressed a degree of pessimism on France’s business climate, specifically citing challenges such as lack of clarity in the government’s agenda, red tape and burdensome regulations, unpredictability in legislation, and the complexity of labor law. In recent years, the government has selectively intervened in corporate mergers and acquisitions and it maintains a significant stake in a few industries. Research suffers from insufficient collaboration between the public and the private sectors. Factors that can impede inward foreign investment include France’s weak economic growth (0.2% GDP growth in 2014; 1.1% in 2015), unemployment stubbornly above 10%, unpredictable economic and budget policies, the complexity of tax regimes, and the fact that France has been subject to strict European Union macroeconomic surveillance due to a prolonged period of budget deficits exceeding the EU limit of 3% of GDP.

Key sectors that have historically attracted significant foreign direct investment in France include manufacturing industries (notably the pharmaceutical, chemical, and automobile industries); financial sector; trade and repairs; information and communication; and construction and real estate. France continues to support innovation in small and medium enterprises (SMEs) via its ten-year, EUR 35 billion “Investments for the Future” (Investissements d’Avenir) program targeting green technologies, the digital economy and industrial sectors such as aeronautics, space, transportation, and shipbuilding. It developed tax incentives to spur research and innovation, such as the Research Tax Credit (CIR – Crédit Impôt Recherche) and for innovative new companies (Jeune Entreprise Innovante). Key sectors with high potential include aerospace, food products, pharmaceuticals, microelectronics, logistics, and healthcare equipment. Call centers, biotechnology, and environment are other sectors with potential. The government has announced partial privatization of state-owned firms and plans to use proceeds to reduce indebtedness and increase investment in some sectors; it has not yet provided a detailed plan but may further reduce its stakes in electricity, gas, rail transport, and postal services.

Key issues to watch include the government’s ability to plan and implement structural reforms to boost competitiveness and employment. The government has already initiated an increase in the number of Sundays businesses can open and the deregulation of some sectors. In 2015, the government continued to introduce new measures to encourage growth and investment. In particular, it implemented the Responsibility and Solidarity Pact designed to lower firms’ labor costs by EUR 30 billion by 2016, reduce corporate taxes and simplify administrative formalities. In tandem with the CICE corporate tax credit program (Crédit d’Impôt Compétitivité Emploi), the government expects the Responsibility Pact to spur the creation of approximately 500,000 jobs over the coming years. It has also recently implemented new labor laws, which strengthen vocational training and add elements of flexibility to the French labor market. In early 2016, the government unveiled – but has not yet passed into law – a package of labor market flexibility measures that would streamline legal and regulatory requirements through a revision of the labor code. One element of the 2016 labor bill (still under revision as of this writing) proposed to give companies more flexibility to set aspects of workers’ workweeks or working hours at the company level, subject to employer-employee accord.

Foreign investment represents a significant percentage of production, exports and employment in many sectors. Foreign firms employ two million individuals, account for one-third of French exports, and undertake more than 20% of corporate R&D expenditures. Rapid growth in new technologies has given way to renewed growth in traditional sectors: automobiles, metalworking, aerospace, capital goods, consultancy and services. France rejoined the top 20 largest recipients of foreign direct investment (FDI) inflows in 2014, at number 19 in annual FDI rankings published by UNCTAD (United Nations Conference on Trade and Development). FDI inflows accounted for 0.5% of GDP in 2014. According to the government agency Business France, investment projects in France were 5% lower in 2015 than the year before, but remained higher than the ten-year average. The United States accounted for 4.9% of FDI inflows in 2014, down from 18.5% the previous year. The U.S. FDI stock represents 10.4% of FDI in France or USD 76.8 billion. Based on 2013 estimates, U.S holdings of French securities totaled USD 196 billion, down from the 2011 level of USD 217 billion. Those figures likely understate U.S. investment in France, as the U.S. investments tend to be considerably older than those of other countries, and U.S. firms often finance expansions and acquisitions on domestic French capital markets or through subsidiaries in third countries. As a result, much U.S. investment in France is not recorded in balance of payments statistics, even though it may ultimately be controlled by U.S. citizens.

Country Links

Autorité des marchés financiers (France) (AMF)

Registre unique des Intermediaires en Assurance, Banque et Finance (France) (ORIAS)

Autorité de Controle Prudentiel (France) (ACPR)

Bank of France

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