Christine Lagarde, Ministry for the Economy, Industry and Employment of France
Release Date: 2009-12-10
In the context of the current economic climate there is a lot of discussion about economic protection and France is often the subject. Where should France draw the balance between stimulating international trade and investment and protecting French jobs?France is not the most vocal when it comes to its openness, but it has one of the most open economies in the world. France is the country that receives the second highest volume of foreign direct investment in the world. It comes way before Germany, very shortly ahead of the UK, and second only after the US in 2008. Also, about forty four percent of the market capitalization of the forty largest companies listed on the CAC 40 is foreign owned, so nearly half of the major industrial and service base is owned by non-French capital. If you look at the volume of trade measured by import and export, again we rank in the top two in Europe. While we are front page news when we say “protect yoghurt” or “secure the shareholding of Arcelor and do not give up to Mittal”, those issues are almost incidental compared to the major basic trends and numbers about the French economy.
Just another example, foreign direct investment and sovereign funds are either welcomed or looked at with a bit of suspicion. Some countries have decided to restrict, submit to prior review, or submit to application, foreign direct investment. Back in December 2005, to avoid the obscurity of that kind of review and process, we decided to publish the eleven sectors in which the French government does not want foreign direct investment because of their highly sensitive nature. These eleven sectors that have been listed, a list that has now been vetted by the European Commission, represent all areas related to defence and security. That is just to restate the actual factual situation and numbers.
There is something almost romantic about the fact that we like things to be French. We do have the emotion about France being France and French being French, but the reality is that France has a very open economy and one that is largely dependent on foreign investors and foreign trade. In the main, we are open, we are very much prepared for international business, and we do stand for various strong positions. For instance, when it comes to agriculture and the agro-food business we do believe that there is value in making sure that geographical indication and origin are secured. We just want champagne to be produced in Champagne, and that is fair enough. In the same way, Parma ham has to be produced in Parma, and there is nothing wrong with that.
The relationship between France and China flourished under President Chirac, who was a champion of Sino-French trade and cooperation, but has experienced tension over the past year under President Sarkozy. Is there a unique French touch that has existed under both Presidents?
There is a very long history between France and China. France was the first country in the world to recognize the existence of the People’s Republic of China. General de Gaulle was the first world leader to say “Yes, China is China”. There is a long rooted old story that closely links France and China. I have been to China maybe fifteen or twenty times in my previous life as Chairman of Baker & McKenzie and then as Minister of Trade, and I am dying to go back to China. The last time I visited China was in 2007, but there has been a period of time when clearly there were tensions. There were discussions between the countries that did not allow for the free flow of visits as was the case in the past.
There is something very special between the countries and I think that history explains a lot. The Chinese very often see us as a romantic nation and associate us with very nice things. That forges relationships of a particular nature. I was absolutely overjoyed when I sat together with President Sarkozy last April during his meeting with President Hu Jintao, which was the acknowledgement that relationships were back on track and that France and China were restoring their partnership.
In the past few months we have seen former President Chirac, former Prime Minister Raffarin and Minister of Foreign Trade Idrac, amongst others, visit China to get bilateral relations back on track. When can we expect your visit to China?
I am going to Tianjin on June 23rd and I want to be on the inaugural flight of the first Airbus A320 manufactured in China. On the 24th of March there was a visit by Chinese business people that was hosted by UBIFRANCE, which is the trade agency of my Ministry. I went there and together with the Chinese ambassador opened the event. It was important for me to be there and show a strong sign of friendship, as well as my support for the UBIFRANCE initiative. As Montesquieu would have said in the past, “ou il y a du commerce, il y a de bonne mœurs“. I believe that trade can really provide the foundation for better understanding, and people who carry on trade with each other eventually do not argue too much about other things.
Three months ago Minister Chen Deming took a delegation of Chinese businessmen to Europe on a procurement trip and France was not on the itinerary, but now that the sky is clearing…
The sky is clearing, the sky is the limit.
…there is talk that a similar trade mission will visit France. If such a delegation will come to France how can you make sure that SMEs, in addition to the usual flagship companies, will be able to participate more in Sino-French trade?
Point number one, a lot of the big players are already in China and I do not think that they really need the visitation. They do not need to be stirred and stimulated, they have an active flow of business, trade and investment going back and forth, but there is always the institutional visit. What is far more important is to make sure that we strengthen medium size enterprises, because I do not think that we should engage very small companies in the dream that China is around the corner, that it is a piece of cake and that it is easy to access this huge market of over one billion consumers. We have encouraged big players such as EDF, TOTAL and VEOLIA, who have set foot in China many years ago and have big operations there, to open up their address book and take with them SMEs that are prepared to take up the challenge. We are encouraging the SMEs to advance in China particularly under the guidance, and under wings, of big French players who are already present there.
What is your perspective on the fact that technology transfer between France and China is rather limited in strategic sectors such as nuclear power?
It is the natural tendency of anybody who is leading the pack to be prepared to transfer, train and communicate, and I think both AREVA and EDF are doing a lot of that, but at the same time we are protecting our lead in the game by neither giving away their core advanced technology to the Chinese, Americans, or Brits nor to anybody else. We are working hard to keep our lead through research and development.
You will be travelling to China to be on the inaugural flight of the first Airbus A320 manufactured in China. Which contribution could the French aviation industry make to the development of China’s aviation industry in the longer term?
The Chinese aviation industry has a very bright future. There has been significant transfer of technology by way of setting up an assembly line and manufacturing site in Tianjin, which is the third largest site for Airbus after Toulouse and Hamburg and represents a more than €1 billion euro investment. We are encouraging and supporting China, which is likely to become the one of the leaders in the singly aisle aircraft segment, and that is terrific. I think there is great value in history. We started manufacturing aircraft about a century ago. China started manufacturing only half a century ago, so it is fabulous that China is already so advanced in the single aisle aircraft segment and I am sure that they will carry on and expand.
One of the things that surprised us is that German companies in the aviation and aerospace industry have been very interest in pursuing business in China and sharing their ambitions through clear messages to our Chinese audience. At the same time, French companies such as Safran and Thales, which are actively pursuing business opportunities in China, have been reluctant to directly communicate with our readers; does this say something about the French culture?
The companies that you have mentioned are partly civil and partly defence, which always generates a mindset and culture that is always very cautious. Simply because they are involved in defence supply contracts, manufacturing equipment, devices and electronics that are specifically dedicated to the defence activity and that is clearly confidential and very sensitive. That is, I think, the reason why they have this approach. Equally, Thales and Safran are present in China, so they are there.
The bilateral political visits that are scheduled between China and France illustrate the recent improvement in the bilateral relationship; however, potential dividing issues are ever present. China called for the acceleration of reform of international financial institutions such as the International Monetary Fund and World Bank, and the creation of a new financial system reflecting the new global financial hierarchy. What is your perspective on the respective future roles of the France and China in this new financial system?
China is a leading player and has emerged as a major financial power. The country has been funding global growth and development in the past few years because of its major surpluses, and that is a problem. It is a solution, but it is a problem as well. We were lucky that China was there to finance global economic development, but we cannot carry on with the huge imbalances that have been created in a world with major spenders and major savers.
The fact that China is stimulating the economy to restore a solid domestic market is a very good move, and I am very impressed by the economic policy and monetary policy that are deployed by the Chinese authorities. After having been an international financer, China is becoming an international economic power because it will be able to combine a strong domestic base that will be fuelled by internal consumption, while keeping in mind the absolute concern to preserve the environment which is high on the priority list, with an ability to export more and more sophisticated equipment. There is no doubt that China is, and will continue to be, a key player in the global economy and as a result will become more relevant in the international institutions. China will therefore need more taxation and more representation, it all goes together. There is no taxation without representation and no representation without taxation. President Sarkozy has been extremely vocal about it. I do not think that he has attended any G7 without complaining about the fact that China is not at the table, and he is pushing that very much.
If we are going to create seats for China someone will have to give up these seats. France would be ready to give up some of its seats?
I did not say that. It is not for me to sort out the arithmetics of that.
In anticipation of your upcoming visit to China, I would like to give you the opportunity to already send a direct message on behalf of France to your Chinese counterpart and the Chinese people…
Number one, I am personally delighted to return to China. Second, it is the continuation of a long standing and very friendly relationship between the two countries. And thirdly, as Minister of Economy for my country, I will indeed support the areas of business where we can participate in the development of the Chinese economy. I am thinking in particular of the aircraft industry, which will be the topics of one of the days of my visit, the railroad industry where we work hard as well, and anything related to energy, whether it is the production or saving of energy. I am very impressed with the way in which the Chinese authorities are determined on a sustainable basis. China will set standards and it is better if we can help them in that process.
| Company: | Ministry for the Economy, Industry and Employment of France |
| Position: | Minister |
| Country: | France |