Trade Policy of France

FRANCE

TRADE POLICY

OF

FRANCE

PREPARED BY

SHIRLEY SHEKHARAN

15013

SYBMS

PROJECT INCHARGE

PROF. SADNA

THE FRENCH REPUBLIC

France is a member state of the European Union located in its western region, with several overseas territories and islands located on other continents. France is a unitary semi-presidential republic with its main ideals expressed in the Declaration of the Rights of Man and of the Citizen.

The name "France" comes from Latin Francia, which literally means "land of theFranks" or "Frankland". There are various theories as to the origin of the name of the Franks. One is that it is derived from the ProtoGermanic word frankon which translates as javelin or lance as the throwing axe of the Franks was known as a francisca.

France is the largest state in the European Union by area and the third largest in Europe behind Russia and Ukraine.France is a developed country and possesses the fifth largest economy by nominal GDP and eighth largest economy by purchasing power parity. It is the most visited country in the world, receiving 82 million foreign tourists annually. France is one of the founding members of the European Union, and has the largest land area of all members.

It is also a founding member of the United Nations, and a member of the Francophonie, the G8, G20, NATO, OECD, WTO and the Latin Union. It is one of the five permanent members of the United Nations Security Council, possesses the third largest number of nuclear weapons in the world and the largest number of nuclear power plants in the European Union.

WHAT IS TRADE POLICY?

Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce or transaction. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals (poles, coins), bill, paper money. Modern traders instead generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and later credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade between more than two traders is called multilateral trade.Trade policy is a policy affecting international trade, including especially tariffs and nontariff barriers.

FEATURES OF TRADE POLICY

1. Trade policy is a key element of economic policy-making, and is critical to successful development.

2. Modern trade policy affects not only the international movement of goods and services, but also how domestic regulations are designed and administered.

3. There is compelling evidence that countries that have successfully integrated into the global economy have achieved more robust and sustained development than have countries that have remained outside.

4. The World Trading Organization lies at the heart of the multi-lateral trading system, and therefore having a basic understanding of how the institution works is fundamental to developing effective policies and providing good public administration.   

TRADE POLICIES OF FRANCE

1919-1928: France focuses on rebuilding its economy in the wake of World War I. Trade policy is largely protectionist. Exports are primarily of luxury goods, although poor harvests hamper wine production. With a weakening currency, France cannot afford many imports.

1929-1935: In the wake of the Depression, France maintains the gold standard. As other currencies decline in value relative to the franc, French exports become more expensive. Exports fall to less than two-thirds of imports. A reluctance to borrow to modernize equipment means an inefficient agricultural sector and increased agricultural imports.

1936-1939: France abandons the gold standard. A devaluation of the franc helps increase exports. The structure of exports shifts from light toward heavy industry and agricultural products, sold primarily to Western and Central Europe. The United States supplies imports of raw materials. France also trades heavily with its colonies, importing raw materials and exporting manufactured goods.

1940-1944: Trade collapses under the German occupation and the Vichy regime. Germany requisitions most of France's resources. Agricultural production is disrupted as young men go to war and fighting spreads throughout the country. The American and British markets are closed off.

1945-1948: Physical damage forces France to cast aside its traditional protectionist attitudes. Transportation networks and ships must be rebuilt. Poor harvests aggravate already low production on mine-infested agricultural land. France must import bulky coal, grain, and feed with high shipping costs, and imports rise to five times the level of exports. Loans finance the trade deficit.

1949-1957: With the passage of the General Agreement on Tariffs and Trade in 1948, France removes quantitative restrictions on half of its private trade with other European countries, despite strong resistance from groups that benefit from protectionism. Loans and a reduction in coal shortages and other industrial bottlenecks enable an increase in exports, which benefit from specific credits and subsidies.

1958-1961: The Treaty of Rome establishes the European Economic Community. Member states establish a common integrated tariff system. Duties are applied to non-EEC countries' imports. The franc's devaluation helps exports increase greatly. France must turn to expensive oil supplies, in part from Venezuela, when the Middle East refuses to supply oil after the Franco-British attempt to retake the Suez Canal.

1962-1969: Membership in the EEC and rapid decolonization change the pattern of trade. The EEC's industrialized nations provide a large market for France's agricultural products. By 1969, France provides 42 percent of the EEC's agricultural exports. The government, however, remains the principal buyer of high-tech products such as military aircraft, nuclear weapons, and nuclear power.

1970-1978: Industrial exports, particularly of cars, chemicals, pharmaceuticals, and aircraft, rise. France also sees an agricultural boom and becomes the world's second agricultural exporter after the United States. The 1975 Lomé Convention formalizes bilateral agreements in which European Community countries extend export concessions to their former colonies.

1979-1982: France's economic crisis does not spare its trade sector. OPEC's price increases and the overthrow of the Shah of Iran drastically reduce France's oil imports from the region. France builds up its nuclear power capacity, but still must import expensive oil from other regions.

1983-1992: Persistent inflation lowers the value of the franc against other major currencies and drives up the price of imports. The trade deficit grows dangerously until 1991. The global economic slowdown leads France to reduce its imports and thus regain a positive trade balance. Trade surpluses continue past the global recession.

1993-1997: The establishment of the European Single Market brings free movement of people, goods, services, and capital across Europe and opens up an area of 376 million consumers to French companies. A new ratification of the GATT includes agriculture, services, and intellectual property, but not cultural materials (such as films), long a controversial issue in France.

1998-2003: France represents 6 percent of world trade. In general, trade policies are determined by European Union agreements and practices. The government investigates ways to promote exports more aggressively, especially to markets in East Asia and Latin America. France continues to extend varying preferential tariff treatment to imports from the African, Caribbean, and Pacific developing countries.

France is one of the EU’s major importers and exporters

with everything from raw commodities to automobiles.

The economy of France has been carefully planned to provide support to international trade with a number of important products and commodities. Globally, the country holds an important position as the third largest trader in the European Union after Germany and the United Kingdom. 

France also exports a number of valuable commodities including machinery and transportation equipment, aircraft, plastics, chemicals, pharmaceuticals, iron, steel, consumer products, petroleum and cars & vehicles. A major part of this foreign trade is carried out with European partners including Germany, UK, Spain and Italy. 

France is the second largest exporter in the world of both services and farm products. It is justly famous for its cheese, wine, and wheat, being the world’s leading supplier of quality produce in these areas. 

The country is one of the major agricultural powers with almost 25% of the total agricultural products of the European Union being produced there. The contribution of the agricultural sector to the country’s GDP is almost 2.5%. The French government provides considerable subsidies to its agricultural sector so that it may continue to grow and contribute to the country’s GDP, a development that will further ensure increased export activities. 

The manufacturing industry is also a key exporter, contributing nearly 27% to GDP. France’s phenomenal export growth has been aided by structural reforms initiated by the government that promote every aspect of foreign trade. It is one of the five largest global exporters of durables. 

EXPORTS AND IMPORTSExport Goodsaircraft, plastics,chemicals, pharmaceuticalproducts, iron, steel,beverages, machinery andtransportationequipment.

Import Goodsvehicles, crude oil,aircraft, plastics,chemicals, machinery andequipment.

According to the CIA World Factbook, France exported US $490 billion worth of goods and services in 2006. Its main export partners as of 2005 were:

Germany (14.7%) Spain (9.6%) UK (8.3%) US (7.2%) Belgium (7.1%)

During 2006 French imports stood at US $529.1 billion.   Primary imports included cars and vehicles, machinery and equipment, crude oil, plastics, chemicals and aircraft. As of 2005, it imported from:

Germany (18.9%) Belgium (10.7%) Italy (8.2%) Spain (7%) Netherlands (6.5%) UK (5.9%) US (5.1%)

France imports different commodities from other countries. Some of the major import partners are represented in the chart (2005):  

In 2005, France imported goods worth US$471.36 billion and the exported goods worth US$439.22 billion. Within this same period, the services sector contributed a huge portion of its import and export activities.  

France imports different commodities from other countries. Some of the major import partners are represented in the chart (2005): 

Foreign Trade In France

A recovery is being marked in the economy as the exports sector grew by 3.2% in the year 2005 compared to 2.2% in the year 2004. The level of imports also grew by 6.5% compared to 6.1% in the last year. The following table gives a clear picture upon the growth rate of the exports and imports in the country. 

Exports and Imports In France (% Change)

  2003 2004 2005 2006**Exports Of Goods and Services -1.8 2.2 3.2 6.7Imports Of Goods and Services 1.3 6.1 6.5 7.9Net Exports* -0.9 -1.1 -1 -0.5

FRANCE RELATIONSUK

France and the UK are major economic and trade partners. France is the UK’s third largest export market (the second in Europe) and the UK's third largest supplier. Exports to France amount to some £20 billion per year and account for nearly 10% of UK visible exports worldwide. Manufactured goods represent 80% of exports, energy 12% and agri-food products 7%. The trade balance is in France's favour but the UK has substantial surpluses in the machinery, pharmaceutical and energy sectors.

France in IndiaFrance is India's 5th largest trading partner in the EU (after the UK, Belgium, Germany and Italy). The European Union is the second most important destination of India's exports and France accounts for 2.05 % in it. France's share in India's imports was 1.3% in 2004-05. 

India's exports to France increased from USD 1119.03 mln in 2003-04 (April-Feb) to USD 1443.06 mln in 2004-05(April-Feb), making a growth of 28.96 in one year. India's imports from France were USD 988.11 mln in 2003-04 million (April-Feb) and USD 1237.03 mln in the same period in the last fiscal representing an increase of 25.19%. 

French exports to India include electrical equipment, organic chemical products, aeronautical & space construction products, mechanical equipment, general & special usage

machines, and pharmaceutical products. Indian exports to France consist of both a)traditional items such as garments, leather, textiles, raw cotton and yarn, and marine products, and b) non-traditional items such as automotive components, electronic and rubber components, chemicals and dye-stuffs, pharmaceuticals, granite, and consumer durables are showing promising growth. 

India in FranceOn the other hand, India's presence in France is far from being significant. India doesn't emerge in the list of top 10 investing countries in France. Indian exports of software services to France are still at a low level. Therefore, a huge potential market remains open for the Indian software industry. Tata Consultancy Services (TCS) has a partnership with a French company in France, WIPRO is opening its own representative office in Paris, Sankhya Infotech has a commercial office in Toulouse, Satyam Infoway is also looking for business opportunities in France and new Indian companies like Netkraft Private Ltd. or Technova Information Systems are gaining a preliminary foothold in the French market. 

Also, the Indo French trade has remained modest in size from France's point of view and the agriculture sector is no exception. In 2002 France has exported only 70 million Euros worth of Agricultural Commodities & Processed Food to India. On the other hand, Indian exports to France during the same period touched 210 million Euros. 

AUSTRALIA (BILATERAL TRADE)

Commercial links, both trade and investment, between Australia and France are substantial but with the balance firmly in France’s favour. France is currently Australia’s 15th largest merchandise trading partner (excludes imports of aircraft since September 2008).

Australia’s merchandise exports to France totalled A$1.7 billion in 2008-09, dominated by coal (A$696 million) and iron ore and concentrates (A$122 million). Other major exports included aircraft and parts (A$119 million), and medical instruments (A$101 million) and oil-seeds/oleaginous fruits (A$83 million). Imports from France in the same period totalled A$4.6 billion, with major products including aircraft and parts (A$496 million), medicaments (A$750 million), perfumes and cosmetics (A$208 million) and alcoholic beverages (A$193 million).

In terms of Services

In 2008 Australia exported A$654 million in services to France. Services imports were valued at A$790 million, with the bulk of exports and imports comprising personal travel services. Tourist links between the two countries are significant, with Australia receiving approximately 85,600 French visitors in 2008, making France our 14th largest source of tourists. Over 400,000 Australians visited France over the same period (French Tourist Bureau). Australia and France signed a Working Holiday Maker Agreement

in 2003. In 2008 3,705 French students were enrolled in accredited courses in Australia.

ESTONIA

In 2007, the turnover of trade with France amounted to 343.4 million EUR. The balance of trade was negative for Estonia by 126 million EUR. In terms of the turnover, France as Estonia's trade partner placed 13th (1.8%).

In terms of exports, France was Estonia's 15th largest trade partner (108.7 mln EUR), in terms of imports 13the largest partner (234.7 million EUR), with the shares respectively 1.4% and 2.1%. Compared to 2006, exports increased by 10%, imports by 19%.

WORLD TRADE ORGANISATION (WTO)

The World Trade Organization (WTO) is an international organization designed by its founders to supervise and liberalize international capital trade. The organization officially commenced on January 1, 1995 under the Marrakesh Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1947. The World Trade Organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalising trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from theUruguay Round (1986-1994). The organization is currently endeavouring to persist with a trade negotiation called the Doha Development Agenda (or Doha Round), which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world's population. However, the negotiation has been dogged by "disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a 'special safeguard measure' to protect farmers from surges in imports. At this time, the future of the Doha Round is uncertain."

The WTO has 153 members, representing more than 95% of total world trade and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.

DONATIONS DONE BY FRANCE TO WORLD

TRADE ORGANISATIONFrance donates EUR 3 million to WTO development programmes for the period 2009-2011 and EUR 3 million to the Enhanced Integrated Framework for the same period.

Anne Marie Idrac, France’s Minister of Foreign Trade, stated at the Ministerial Conference that France welcomed the opportunity to support developing and least developed countries through its contributions to WTO trade related technical assistance and the Enhanced Integrated Framework.

France donates EUR 2 million to WTO development programmes

France has donated a total of EUR 2 million (about CHF 3 million) to the Doha Development Agenda Global Trust Fund (DDAGTF) and to the Enhanced Integrated Framework (EIF).

Theses donations are intended to build the capacity of

developing and least developed countries to negotiate effectively within the WTO and help implement WTO agreements. These are areas that are key to protecting the trade interests and development needs of the world’s poorest countries.

A first donation of EUR1 million (about CHF1.5 million) will be offered to the Doha Development Agenda Global Trust Fund. This contribution will be used to finance WTO technical assistance activities targeted especially at the needs of developing and least-developed countries as well as economies in transition. The aim is to better adapt their practices and laws to WTO rules and disciplines, improve the implementation of their obligations and enhance the exercise of their membership rights.

A second donation of EUR1 million (about CHF1.5 million) will be offered to the Enhanced Integrated Framework Trust

Fund to provide trade-related technical assistance to least developed countries. The aim is to assist LDC’s in identifying their trade development needs and to integrate these needs into the countries’ national development strategies and plans to ensure that they are appropriately addressed by the country and its development partners. This in turn will allow them to take more fully advantage of the multilateral trading system.

“I welcome France’s donations to the WTO trust funds. These contributions will allow developing countries to expand their markets, integrate in the global economy and take better advantage of the multilateral trading system. “declared the WTO Director General Pascal Lamy 

Permanent Representative of France to the WTO Philippe Gros stated “These contributions are an expression of France’s commitment to support the development of poorer countries, to improve the standard of living in these countries and to foster developing economies through trade. France intends to work hand in hand with Ms Tembo and her new team of the Enhanced Integrated Framework to launch ambitious programmes in favour of least developed countries without any further delay.”

France Trade Deficit December 2007

France's trade deficit widened in 2007 to the biggest ever after oil prices and the euro climbed to records in the past year.

The gap widened to a record 39.2 billion euros ($57.3 billion) from 2006's revised deficit of 28.2 billion euros, according to a ministry statement. The last annual trade surplus was 1.1 billion euros in 2003. The December shortfall was 4.3 billion euros compared to a revised 4.6 billion euros in November. Exports fell to 33.1 billion euros from 33.2 billion the previous month as shipments to the Americas dropped to 2.8 billion euros from 3.1 billion euros. Imports were 37.4 billion euros, compared with 37.8 billion. 

Shares of global total exports and imports of top largest

countries

Comparing between the shares of global total exports and imports of United States, Germany, China, Japan, France and United Kingdom between the periods of 1985-2007, USA has the highest amount of shares relative to others. USA’s shares peaked in the year 2000 with 34.5% of shares in global imports and exports. During that year, China has only 7.6%. However, that year also marks a reversal of trend where the shares of USA are on decline to 22.6% in the year 2007. On the other hand, China’s shares in the global total exports and imports have been surging rapidly from 3.5% in 1985 to 15.5% in 2007. China’s large pool of manpower and low cost of labor have provided the comparative advantage for this upcoming trend. China has already overtaken Japan, France and UK. It would not be surprising when China would be able to overtake USA and Germany in times to come. 

Below is the chart of export and import's shares of United States, Germany, China, Japan, France and United Kingdom amongst global total exports and imports from year 1985 - 2007:

CONCLUSIONThe main goal of this project is to make the complex relationship of international trade more understandable and accessible to policy-makers, non-governmental organizations and the public. The project also aims to dispel the idea that the relationship between, trade and development can easily be described as either negative or positive. It is an immensely complex interaction that varies from country to country, sector to sector, and firm to firm. There are both threats and opportunities in this relationship for countries, local communities and firms pursuing economic development and environmental protection.

The challenge is to exploit the opportunities and reduce the threats, and in so doing to maximize the net positive contribution that trade can make to sustainable development. A broader and clearer understanding of trade is a prerequisite for seizing those opportunities and reducing those threats.

The conclusions that can be drawn from this project are essentially about research and consensus-building, enhancement of international co-operation, and defining new and more balanced and participatory procedures for trade policy-making on these issues. In particular, formal assessments of trade liberalization will have to be undertaken. These assessments will have to take account of the interrelated economic and social effects of trade policies, through integrated assessment techniques.