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Doing Business in France

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Doing Business in France is prepared by U.S. Embassy Staff in France once a year and contains information on Doing Business in France.

As the world’s fifth largest economy, centrally located within the European Union, there is strong competition for market share in all French industrial and service sectors. American exporters to France generally face more competition from European companies than from Asian ones. Positioned at the heart of the world’s largest market, France offers a favorable economic environment to potential exporters.

Country Commercial Guide 2014 Please contact Olivier.Collette@trade.gov

Market Overview

The U.S./French economic and political relationship is one of the United States’ oldest and closest bilateral alliances. Today, as has been the case for over 230 years, the United States and France work together on a broad range of trade, security and geopolitical issues. As befits two of the world’s largest economies with such a long and co-operative history, the trade and investment activity between France and the United States is substantial and vibrant. Current global economic conditions have only slightly impacted aggregate trade between the two nations and significant opportunity exists for both direct trade and foreign direct investment.

With a GDP of approximately $2.8 trillion, France is the world’s fifth-largest economy (2013). It has substantial agricultural resources, a large industrial base, and a highly skilled workforce. While manufacturing has declined from sixteen percent of GDP in 1999 to 12.5 percent today, 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 0.3 percent in 2013, after remaining flat in 2012 while the unemployment rate (Metropolitan France) remained unchanged, at 9.8 percent. France is struggling to revitalize its economy while at the same time reducing its national debt.

France is the second-largest trading nation in Western Europe (after Germany). In 2013, the country ran an $81 billion trade deficit of goods based on total trade of $1.2 trillion. The majority of this trade (58.7 percent) was with EU-27 countries. France is a member of the G-8 (and initiator of the G-20), the European Union, the World Trade Organization and the OECD, confirming its status as a leading economic player in the world.

France welcomes foreign investment. France has a stable and reliably safe 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 a well-educated population, excellent 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 systems, and efficient intermodal connections. 3G/4G telephony is nearly ubiquitous and over 85 percent of French citizens are connected to the internet with plans underway for nationwide high-speed broadband internet.

The investment climate in France, though complex, is generally quite conducive to U.S. investment, as evidenced by the fact that the United States is France’s largest source of foreign direct investment (FDI stock). The nearly 4,200 U.S. companies in France represent over 450,000 jobs. In total, there are more than 20,000 foreign-owned companies doing business in France. France is home to more than 30 of the world’s 500 largest companies. At number 21 in the World Economic Forum’s ranking of global competitiveness, France is one of 12 European countries in the top 25.

The legal and regulatory environment is relatively transparent and stable. In 2013, the French government continued to introduce new measures to encourage growth and investment. The implementation of a €20-billion corporate tax credit program (CICE – Crédit d’Impôt Compétitivité Emploi) and the elimination of a corporate social solidarity tax are part of a plan to attract local and foreign investors alike. The government maintains a generous research and development tax credit as well. The government has also recently implemented new labor laws, which strengthen vocational training and add elements of flexibility to the French labor market. Efforts are under way to simplify French tax and labor laws and administrative procedures.

France continues to support innovation in small and medium enterprises (SMEs) via its ten-year, €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 has further developed its tax incentives to spur research and innovation, such as the Research Tax Credit (CIR - Crédit Impôt Recherche) and tax incentives for innovative new companies (Jeune Entreprise Innovante).

There are, of course, reasons for caution as well. GDP growth in France last year was an anemic 0.3 percent and unemployment is stubbornly above ten percent. France has been subject to strict European Union macroeconomic surveillance due to a prolonged period of budget deficits exceeding the EU limit of three percent. The 2013 AmCham-Bain Barometer study on the morale of U.S. investors in France pointed to a growing pessimism due to a lack of clarity in the government’s agenda, red tape and burdensome regulations, a lack of predictability in legislation and a growing complexity of labor legislation. In recent years, the French government has selectively intervened in corporate mergers and acquisitions and it maintains a significant stake in a number of industries.

Trade and investment between the United States and France have remained strong. Statistically, the United States is France's fifth-ranked supplier and its sixth-largest customer. France ranks as the United States' ninth largest supplier of imported goods and eleventh-largest customer for U.S. exports. U.S.-France trade in goods, services and income receipts totaled nearly $149 billion in 2013, broken-down as 52.8 percent in goods, 23.4 percent in services, and 23.8 percent for income receipts from direct investment, and other private and government receipts and payments.

The main trading categories in goods 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 opportunities, all of which are particularly attractive to French importers.

The French market for food products is mature, sophisticated, and well served by suppliers from around the world. An increasing interest in American culture, younger consumers, and changing lifestyles contribute to France’s import demand for American food products. Generally, high quality food products with a regional American image could find a niche in the French market.

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 2012, France was the fourteenth largest host country for U.S. foreign direct investment abroad with investments valued at $83 billion, making the United States the largest foreign investor in France. France is the fifth largest investor in the United States on a historical cost basis. French-owned companies employ about half a million workers in the United States while more than 400,000 employees work for U.S. companies established in France.

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

Market Challenges

Foreign investors say they find France’s skilled and productive labor force, good infrastructure, technology, and central location in Europe attractive. France’s membership in the European Union (EU) and the Eurozone (as the 18 countries that use the Euro currency are known) facilitates the movement of people, services, capital, and goods. However, notwithstanding French efforts at economic reform, market liberalization, and attracting foreign investment, perceived disincentives to investing in France include the tax environment, high cost of labor (with the minimum wage, called the SMIC for Salaire Minimum Interprofessionnel de Croissance, at €1,445 per month), rigid labor markets, and occasional strong negative reactions toward foreign investors planning to restructure, downsize or close. The 2013 AmCham-Bain Barometer (an annual study conducted by the American Chamber of Commerce in France and Bain & Company), released in October 2013, details U.S. businesses’ concerns about some of France’s economic policies under President François Hollande (in office since May 2012), notably the lack of predictability in economic and budget policy and increased complexity of the tax and labor regimes, see http://www.amchamfrance.org to download the annual AmCham-Bain Barometer study.

One of the challenges for U.S. SME’s interested in breaking into the French Market is dealing with highly concentrated retail distribution chains and networks, as well as, in some cases, French global manufacturers/suppliers that have a strong control over the retail networks they are using. In many sectors, independent wholesale/retail outlets are disappearing rapidly and being replaced by leading retail distribution chains and networks that have significant make shares in France, but also in the other neighboring European Union territories and beyond. Many of these large retail networks have extremely well organized buying offices that have put in place very stringent selection processes for new suppliers and products and services distributed. High retail mark-up, ongoing competitive market innovation and creativity combined with a constantly changing theme designs approach are prerequisites to keep up with retail trends.

Market Opportunities

France is an economically developed nation with a large, diverse and sophisticated consumer base. It has a strong manufacturing sector that seeks out quality components from foreign suppliers. Finally, its comparatively affluent populace is a leading consumer of services, particularly in the educational and travel sectors. It should be noted that while the overall French market can be viewed as essentially similar to the U.S. market, the individual French consumer of products and services is very discriminating and care and planning are essential to success for U.S. exporters in this market.

There are significant market opportunities for consumer food/edible fishery products 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 (particularly salmon & surimi), innovative dietetic and health products, organic products, soups, breakfast cereals, and pet foods. In addition, niche markets exist for candies, chocolate bars, wild rice, kosher, and halal foods. Market opportunities for U.S. exporters also exist for oilseeds, protein meals and other feeds, as well as for wood products and grains. Socio-economic and demographic changes continued to alter food trends in France. French consumers desire innovative and more convenient foods offering quality image, better taste, and increased health benefits. France offers market opportunities for U.S. suppliers in a number of areas such as fish and seafood, processed fruits and vegetables (including fruit juices), beverages (including wine and spirits), dried fruits and nuts, but also confectionery products, wild rice, organic products, kosher and halal foods. Full report, prepared by the USDA’s Foreign Agricultural Service for U.S. exporters of food products can be viewed at: http://gain.fas.usda.gov.

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 United States, notwithstanding some significant differences in cultural factors and certain legal and regulatory restrictions. However, because the French market is sophisticated with the entrenched bias of a conservative market that sticks to known suppliers and therefore requires sustained market development, entry should be well planned. Competition can be fierce, but local partners are readily available in most sectors and product lines.

In addition to this Country Commercial Guide, the Commercial Service office in Paris offers many services and customized solutions designed to assist you in developing your market entry strategy and to facilitate your export experience in France. For a detailed description of these services please visit: http://export.gov/france/.

Links to web sites outside the U.S. Government or the use of trade, firm, or corporation names within U.S. Commercial Service web sites are for the convenience of the user. Such links and use do not constitute an express or implied official endorsement or approval by the United States Department of Commerce of any private sector web site, or of the products or services of specifically identified companies or of any of the private entities that may have contributed to a U.S. Commercial Service web site.