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Economy of France

From Academic Kids

Template:Economy of France table With a GDP of 1.57 trillion Euro (1.57×1012 €; 2003 data), France is the fourth-largest Western industrialized 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 (72% in 1997) and is responsible for nearly all job creation in recent years. GDP growth averaged 2% between 1994 and 1998, with 3% recorded in 2000. Stagnant GDP growth, creeping unemployment, and a trade deficit have characterised a malaise in the French economy since the global economic downturn.

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 has been a top priority. In the 1990s, unemployment fell from 10% to 8-9%, although this has since rebounded to double digits. France joined 10 other European Union countries in adopting the euro as its currency in January 1999. Since then, monetary policy has been set by the European Central Bank in Frankfurt.

Contents

Dirigisme and renouncement to dirigisme

Following the Second World War, and especially the Fifth Republic, France embarked on an ambitious and mostly very successful program of modernization, under state impulse and coordination. This program of dirigisme, mostly implemented by right-wing governments, involved the state control of a minority of the industry, such as transportation, energy and telecommunication infrastructures, as well as various incentives for private corporations to merge or engage in certain projects.

However, dirigisme came to be highly contested in the 1980s, with complaints of bureaucracy and lack of reactivity to new challenges. As a result the government largely retreated from economic intervention; Dirigisme has now essentially receded. 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 2000, is the highest in the G-7. Labour conditions and wages are highly regulated. The government continues to own shares in corporations in a range of sectors, including banking, energy production and distribution, automobiles, transportation, and telecommunications.

Current issues

The conservative governments of Jean-Pierre Raffarin, since Raffarin's first nomination in 2002, have had to face increasing budget deficits for the State and Social Security budgets. In both cases, this government had reduced taxes or contributions. The government also increased military spending.

The government and its supporters contend that longer-term prospects of the economy demand that the retirement age should be raised, unemployment and retirement benefits should be cut, and that the national health insurance regimes should be reformed to cut costs.

Opponents, mostly from left-wing parties but also, to a lesser extent, from the Union for French Democracy (a centrist party in Raffarin's coalition), contend that the proposed reforms are not good for the country and thus rightly opposed by the population. According to them, Raffarin's reforms and spending choices hit hard on working-class people and those preparing the future of the country, such as scientific researchers, while the government squanders public money on special interests through subsidies and tax cuts. They also contend that the alleged tax cuts are, in fact, effective transfers of spending from national to local taxes. In March 2004, the regional elections were a severe blow to Raffarin.

The government has since announced that the reforms would be re-examined to heed the concerns expressed by the population, though it is still unclear what it intends to do.

Workforce and social relations

The French government intervenes in workforce relations in two ways:

  • through statutes and regulates issued by the national government, supplemented by a heavy body of jurisprudence;
  • through the enforcement of collective conventions resulting from bargaining between employers' and employees' unions.

The government imposes a minimum wage (SMIC).

Unemployment is a permanent concern of French governments since the end of the 1970s.

Working Hours

Legislation passed in 1998 shortened the legal workweek from 39 to 35 hours effective January 1, 2000. A key objective of the legislation is to encourage job creation, for which significant new subsidies will be made available. It is difficult to assess the impact of workweek reduction on growth and jobs since many of the key economic parameters, such as the impact on labour costs and company's ability to reorganize work schedules, will depend on the outcome of labour-management negotiations which should extend through 2000 and beyond. See 35-hour workweek.

The conservative government of Jean-Pierre Raffarin is trying as of 2004 to enact more exemptions from this law.

Unions and strikes

Membership in France's labour unions accounts for less than 10% of the private sector workforce (in 2003, 8.2% of the workforce [1] (http://www.lemonde.fr/web/article/0,1-0@2-3208,36-386056,0.html)) and is concentrated in the education, manufacturing, transportation, and heavy industry sectors. Most unions are affiliated with one of the competing national federations, the largest and most powerful of which are the CGT, FO, and CFDT.

French unions are fairly weak in general, and strikes are uncommon in most of the economy (see France: a nation of strikers? (http://edition.cnn.com/2000/WORLD/europe/08/31/france.striking/)). On the other hand, unions are powerful in some parts of the public sector. This is especially true of public transportation (SNCF national railways, RATP Paris transit authority, air traffic control...), where strikes have an instant effect on the general public and attract the attention of the national and foreign press.

In the case of the private sector, the weakness of the unions often leads to their calling for the government to intervene in workforce conflicts. Another issue is that unions compete between themselves; this occasionally leads to power struggles in some areas where they are powerful, even degenerating into strikes.

Sectors of the economy

Industry

France has been very successful in developing dynamic telecommunications, aerospace, and weapons sectors.

Energy

With virtually no domestic oil production, France has relied heavily on the development of nuclear power, which now accounts for about 80% of the country's electricity production. Nuclear waste is stored on site at reprocessing facilities.

Agriculture

France is the European Union's leading agricultural producer, accounting for about one-third of all agricultural land within the EU. Northern France is characterized by large wheat farms. Dairy products, pork, poultry, and apple production are concentrated in the western region. Beef production is located in central France, while the production of fruits, vegetables, and wine ranges from central to southern France. France is a large producer of many agricultural products and is currently expanding its forestry and fishery industries. The implementation of the Common Agricultural Policy (CAP) and the Uruguay Round of the GATT Agreement have resulted in reforms in the agricultural sector of the economy.

France is the world's sixth-largest agricultural producer and the second-largest agricultural exporter, after the United States. However, the destination of 70% of its exports are other EU member states. Wheat, beef, pork, poultry, and dairy products are the principal exports. The United States, although the second-largest exporter to France, faces stiff competition from domestic production, other EU member states, and other third countries. U.S. agricultural exports to France, totalling some $600 million annually, consist primarily of soybeans and products, feeds and fodders, seafood, and consumer oriented products, especially snack foods and nuts. French exports to the United States are mainly cheese, processed products and wine. They amount to more than $900 million annually.

The French agricultural sector is heavily dependent upon subsidies from the European Union, which account for €11bn. Specific government policies, such as the infamous reclassification of French wine as a 'health food' to avoid VAT, also goes a long way to create a thriving domestic sector.

Tourism

As France is the most popular touristic country in the world, tourism is a significant contributor to the French Economy. In the 1960s the government heavily promoted the development of skiing in the French Alps through the development of new high level resorts including some of the world's most extensive.

Trade

France is the second-largest trading nation in western Europe (after Germany). Its foreign trade balance for goods had been in surplus from 1992 until 2001, reaching $25.4 billion (25.4 G$) in 1998. However, the French balance of trade was hit by the economic downturn, and hit $15bn in deficit in 2003. Total trade for 1998 amounted to $730 billion, or 50% of GDP--imports plus exports of goods and services. Trade with European Union countries accounts for 60% of French trade.

In 1998, U.S.-France trade totalled about $47 billion--goods only. According to French trade data, U.S. exports accounted for 8.7%--about $25 billion--of France's total imports. 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.

Principal French exports to the United States are aircraft and engines, beverages, electrical equipment, chemicals, cosmetics, and luxury products. France is the ninth-largest trading partner of the U.S.

Other statistics

Industrial production growth rate: -0.3% (2003)

Electricity:

  • production: 520.1 TWh (2001)
  • consumption: 415.3 TWh (2001)
  • exports: 72.6 TWh (2001)
  • imports: 4.2 TWh (2001)

Electricity - production by source:

  • fossil fuel: 8.2%
  • hydro: 14%
  • other: 0.7% (2001)
  • nuclear: 77.1%

Agriculture - products: wheat, cereals, sugar beets, potatoes, wine grapes; beef, dairy products; fish <p>Exports - commodities: machinery and transportation equipment, chemicals, iron and steel products; agricultural products, textiles and clothing <p>Imports - commodities: crude oil, machinery and equipment, chemicals; agricultural products <p>Currency: Euro (EUR) since January 1st, 1999 for all financial transactions, Euro_banknotes and Euro_coins were introduced January 1st, 2002. Previously was the French Franc (FRF), the official exchange rate was fixed at 6.55957 French Francs per Euro.

See Also


fr:Économie française

es:Economía de Francia lt:Prancūzijos ekonomika

pt:Economia da França

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