Minister paints encouraging picture of France’s foreign trade
Foreign trade – Excerpts from the interview given by M. Jean-Baptiste Lemoyne, Minister of State attached to the Minister for Europe and Foreign Affairs, to BFM Business-BFMTV
Paris, 7 February 2019
Q. – The foreign trade figures were published this morning. As in the previous 15 years, they once again show a loss. Does that mean no economic policy is getting our foreign trade to recover?
THE MINISTER – (…) Excluding energy, we’ve got a trade deficit which is easing and has improved by 12%. I’m talking about this because energy, after all, represents two-thirds of our trade deficit and this means there are exogenous factors, beyond our control. Oil prices rose considerably last year and so this has an impact.
So what’s the good news? That our exports are continuing to grow, up roughly 3.8%, we continue to have a surplus as regards services, particularly thanks to tourism, which achieved record revenues of roughly €57 billion this year. For the first time since 2003 – 15 years ago – we have a record number of exporting companies: 125,300. (…)
Q. – (…) As always, the aerospace and automotive sectors are keeping this foreign trade more or less steady, even though we’re approaching a €60-billion deficit!
THE MINISTER – Not just aerospace; the automotive sector is indeed the sector with the largest surplus, but the luxury goods and chemicals sectors as well. It’s also interesting to see that sectors where we’ve been regarded as in the dumps for years – I’m thinking of the textile industry – are bouncing back. I don’t think anything is inevitable; look, for two years, the number of factories opened has been higher than the number of factories closed. These are signs that our competitiveness policy – which incidentally was set in train a few years ago now with the CICE [competitiveness and employment tax credit] and today with its continuation – is having an impact. We gained 4% in price competitiveness compared to our neighbours and it’s no coincidence that we’re taking back market shares in the European Union and reducing the deficit which existed vis-à-vis our European neighbours.
I want to say that France has many assets because, certainly, we’ve achieved good results in terms of exports, as I was saying, but we’ve also – and this is specific to France, including compared to Germany and Italy, which are major exporters –, we’ve got a presence on the markets themselves, abroad, through a number of subsidiaries. We’re the record holder, with 38,000 subsidiaries, whereas our German and Italian friends have more like 25,000. Above all, this foreign direct investment produces cash which is coming home. €69 billion is being repatriated, following the profits made on the foreign markets as well. This is how we have a balance of trade which, in the end, isn’t far off balance: it’s a deficit of just 0.7%, which is quite good. (…)
Q. – So are you saying that the current policy is starting to have an impact, particularly the CICE? There’s a whole debate about the CICE, which was created to lower costs and make exporting easier for some SMEs which, admittedly, are a bit hesitant about exporting.
THE MINISTER – There are several dimensions, the cost dimension which you’ve just mentioned, which is having an impact on competitiveness. There’s non-price competitiveness, because France is, after all, a champion of the research tax credit. You’ve seen that €10 billion is going to be allocated to innovation; it’s the fund Bruno Le Maire is promoting. All this is going to help us to be better.
There’s also the reform of the system of support for exporters. The Prime Minister announced this a year ago; it’s now come into effect.
Yesterday I was with all the teams: 200 export advisers from Business France and the chambers of commerce in the regions. It’s now a single team. Previously we signed agreements, we said we were going to work better together; today they’re physically in the same offices, there’s a one-stop shop, and I can tell you it simplifies things, it simplifies life, and I hope we’ll see results in 2019, with even more export businesses. The aim is to go and find promising companies which have export potential but aren’t currently exploiting it.
Q. – Is there a change of mentality? Do you feel it?
THE MINISTER – Yes. We should have been together yesterday, because the teams that are meeting have a very good mind-set; things are coming together.
Q. – I was thinking instead of businesses. There are two areas where they’re being held back: international trade, and innovation, technology. Those are the openings of tomorrow.
THE MINISTER – Regarding entrepreneurs, there are great stories: I’m thinking of the Perfumer M. Duriez, I’m thinking of Le Slip Français – in short, businesses which were launched not long ago and immediately went on the offensive internationally. That’s also the role of our schools, our higher education system: to ensure foreign languages are no longer foreign, and also ensure that, at some point, people acquire a culture of reaching out internationally. It won’t change overnight, but in any case I can tell you we’re doing everything to that end.
Q. – When will France Export be set up?
THE MINISTER – It’s been set up in 11 of the major regions.
Q. – Business France and all that, it’s disappearing, and everything is now going to be under your remit – in this case, the Foreign Ministry?
THE MINISTER – Business France still exists as a legal entity, the chambers of commerce still exist as legal entities, but the men and women who make up those teams on the ground, in practical terms, are together on the same premises. It’s a single team; they have the same business cards: “Team France Export”. (…)
Q. – You may have seen – the news broke this morning, as it happens – that the European Commission has issued its growth forecasts for the European Union, including for France, and it’s a mighty cold blast: 1.3% growth – it was 1.6% for 2019. I spoke to Bruno Le Maire, the Minister of the Economy and Finance, and he told me, “No, it will be 1.7% and we’ll do everything to ensure it”. The IMF and the Bank of France said 1.5% and now the Commission is saying 1.3%. Is the government insisting on 1.7%? (…)
THE MINISTER – You have to look at the 1.3% Brussels announced in its forecasts compared with the 1.1% announced for Germany, which had 1.8% forecasts, and you have to look at it by comparison with the 0.2% announced for Italy. France’s [economic] fundamentals are still relatively healthy compared to some of its neighbours. Moreover, it hasn’t escaped you that the large-scale plan aimed at ensuring that work pays, with the employment bonus – it was on 5 February, you saw that 3.5 million people have this rise in the employment bonus – will all help maintain purchasing power. I also think it’s no accident that the French result is higher, for example – at any rate, higher than the forecasts made for our German friends. But apart from that, this cold spell in Europe isn’t good, because Europe accounts for two-thirds of our French exports.
Q. – And Germany in particular.
THE MINISTER – If our neighbours sneeze, we risk catching a cold too. So it’s important to go and find growth drivers in areas like ASEAN, because it’s moving very quickly and very strongly, and Africa, because it too is moving very quickly and very strongly, and because it’s important to look increasingly hard at the wider world.
Q. – Let’s try and see a bit more clearly on Brexit. We know Theresa May is meeting Jean-Claude Juncker and Donald Tusk today to try and find a solution. That’s why she was sent by her party: to negotiate something else on the backstop, on the Irish border. It was “no way” from the European Union. Should we expect and prepare for a “no deal”? No one wanted to believe it; one gets the feeling we’re sliding into this no deal.
THE MINISTER – In any case, we in the government are preparing for every eventuality. And, importantly, we’re doing so with businesses, because it’s true we can’t rule out a hard Brexit. It’s not what we want. Anyway, by definition, Brexit is a lose-lose situation, so we too will lose out. A hard Brexit is even more lose-lose. So it’s important for us to be prepared to keep trade and people moving. And so every week, at every Council of Ministers meeting, we adopt decrees enabling those measures in the event of a hard Brexit. The British are now becoming aware, a few years later, of the consequences of one vote. It’s their sovereign choice, but let’s remember how the campaign was conducted at the time, and the British finally voted, too, on the basis of a number of peremptory assertions, rumours, sometimes fake news before its time. Sadly, everyone’s going to pay the price now. That’s regrettable.
Q. – But we’re well aware the government has adopted decrees, precisely to prepare for Brexit. It’s in 50 days’ time; things are moving very fast. Even so, let me ask my question again, because as we can see, MEDEF and more or less everyone, including the government, are expecting this no deal.
THE MINISTER – A withdrawal agreement was negotiated. It took two years. That agreement was accepted by the British government and the European Union. You can’t go back to the drawing board indefinitely. You can talk about the future relationship. And we want a future relationship with the United Kingdom that is strong and ambitious and has as few obstacles or brakes as possible. But the agreement is there, and there’s no better agreement than the one which is there on the table. Now we can see it’s all a matter of British domestic politics, where some majorities are managing to speak out against, but no majority manages to emerge in favour of very practically constructing, building things; but it’s not for the Europeans to make concessions to Britons who don’t manage…
Q. – So you don’t believe we should make any more concessions?
THE MINISTER – There’s an agreement; it was negotiated. A deal is a deal.
Q. – Yes, but it takes two to strike a deal.
THE MINISTER – In this case, the European Union and the British government struck a deal. What we can look at is the future relationship, and we can provide reassuring elements about the future relationship, but once again, we now have to prepare for everything. I also urge your viewers and listeners, who are entrepreneurs, not to hesitate to consult the website www.brexit.gouv.fr, because it gives a number of instructions about how to prepare for it; it’s important for them to know it.
Q. – Yes, absolutely. How do we prepare? The boss of MEDEF, Geoffroy Roux de Bézieux, has said it’s a very serious matter for French entrepreneurs and the French economy. Have you gauged the impact it could have, at any rate initially?
THE MINISTER – Initially, if we’re heading towards a hard Brexit, we’ll endeavour to minimize the impact. In other words, we’re taking measures unilaterally, either nationally or at European level, for example to avoid restoring a system of visas for British citizens. We know we have a lot of British tourists, and restoring a system of visas would penalize them; the same goes for vehicles. These are unilateral measures to allow that movement to continue for several months and conduct negotiations with the United Kingdom.
Q. – So there won’t be any visas, in France, for British citizens?
THE MINISTER – We’re currently working on this, because it’s decided at European level. Consensus is being built. It’s important, in the first few months, quite simply to maintain the movement of men and women. Afterwards, there will be time for negotiation, but initially we must lessen the impact.
Q. – Lessen the impact… Have you gauged that impact on the French economy? You’re right, everyone will be a loser. They’ll be losers…
THE MINISTER – They will be more so than us.
Q. – More so than us? But to what extent will we be?
THE MINISTER – They’ll be more so than us because 50% of their imports come from the European Union. So it’s important. I’m mindful that the United Kingdom accounts for our main trade surplus. So it’s not insignificant, and that’s why we too have an interest in ensuring that movement can continue in the best possible conditions. (…)
Q. – We can see above all that Europe is really in very bad shape. A few weeks ahead of the European elections… After all, the impression is that the Alstom-Siemens decision was a big slap in the face for Paris and Berlin. So everyone’s condemning the European Commission, which is complying with the law. After all, you have to recognize that the Commission implements regulations that were set by the governments. So Italy, Brexit…
THE MINISTER – Wait, let’s not lie to ourselves: Europe is at a crossroads. It’s all the result of a lengthy, patient enterprise that took decades, and it can clearly unravel at seriously high speed. So today it’s really important. I think we must also be able to ensure Europe reinvents itself. It’s very clear there are a number of policies that must be reviewed. Competition policy in 2020 isn’t the same as 30 years ago. [There’s] the emergence of Chinese and other champions, and so we have to review this. Likewise, fortunately we’re developing European trade policy and we must continue developing it, because previously it was a little clique, a little closed community which negotiated its free-trade agreements. Result: the people didn’t feel involved or concerned. Today, the negotiation mandates are transparent and are put online. We’re adding sustainable development because you must have consistency between our trade policies and our environmental policies. In short, yes, we must review from top to bottom a number of European policies, and from that point of view I can tell you we won’t leave it up to others to make proposals, because we’re convinced Europeans, but you also have to be able to perfect things and review certain policies. (…)