"Doing business in France" is a 270-page booklet published in 1993 with a 50-page supplement from January, 1994. It is available free (sometimes) from Price Waterhouse, an accounting and consulting firm with offices in most countries.
Extracts from chapters 1 and 2 and table of contents:
French embassy, Canada
Agences de développement, business guides, various reports
Arthur Andersen - International Executive Services: Suggested Readings For France.
U.S. Chamber of Commerce, France (guide for sale)
Invest in France
Perspective from New Zealand
French-American Chamber of Commerce of No. Ohio, guides for sale,
links to other FACCs in the USA
Ile de France
Business contacts in France
Note from Price-Waterhouse
============================================================================ (Attention: faults due to scan/OCR) Chapter 1, France - A Profile Investor considerations o Stable government. o Educated work force. o Relatively high rate of unemployment. o Efficient national transportation system. o The rate of inflation is similar to those of other industrialized European countries. o Mineral resources are limited. o Capital investment in industry is needed. Geography and climate France, located near the geographical center of Western Europe, is bordered by the North Sea and the English Channel in the north, the Atlantic Ocean in the west snd the Mediterranean Sea in the south. It has common frontiers with Andorra, Belgium, Germany, ltaly, Luxembourg, Spain and Switzerland. Metropolitan France is the largest country in Western Europe. Its circum- ference is approximately 5,670 kilometers (3,000 miles) and its area 550,000 square kilometers (213,000 square miles). (The principal sources of statistical data are the Institut National de la Statistique et des Etudes Economiques (INSEE) and the Organization for Economic Cooperation and Development (OECD).) In 1968 France reserved its right to exploit the continental shelf. In 1971 it extended its territorial waters to 12 nautical miles, and in 1976 its economic zone (i.e., the right to explore and exploit the natural resources) to 200 nautical miles. France has an extremely varied topography, ranging from 4,807 meters (15,770 feet) high in the Alps to more than 2,700 kilometers (2,175 miles) of seacoast. The climate is temperate. The annual temperature varies from 9°C (50°F) to 16°C (61°F) and the annual rainfall measures between 410 and 1,200 millimeters (22 and 59 inches). Major French cities are Paris, the capital; Lyons; Marseilles; Lille; Bordeaux; Strasbourg; Toulouse; Nantes; and Nice. Political system The French government is republican in form. The current Fifth Republic was proclaimed in September 1958 by Charles de Gaulle. A new Constitution was introduced, limiting the power of the Parliament and making the president a powerful executive. Under the 1958 Constitution, as modified in November 1962, the president is elected for a seven-year term, renewable once, by direct popular vate. He appoints a prime minister and approves the prime minister's selection of other ministers. In the case of a national emergency, the president may assume extraordinary powers. The French Parliament is bicameral, composed of the National Assembly and the Senate. The Assembly is the more important chamber and its members are elected for five years by popular vote. Senators are elected for nine years by an electoral college. The major political parties are, on the right, RPR (Rassemblement pour la République) and UDF (Union pour la Démocratie Francaise) and on the far right wing, the National Front; on the left, the Socialist Party; and further left, the Communist Party. For two decades the president and the majority of Parliament were members of the same conservative coalition. In 1981 Francois Mitterrand, a Socialist, was elected president over the incumbent president, Giscard d'Estaing. The Socialists also controlled Parliament up to the 1986 parlia- mentary elections, when the conservative coalition regained control. For the first time in recent French politics, the majority in Parliament was not that of the president's party. President Mitterrand obtained operational political efficiency by naming one of the leading conservatives, Jacques Chirac, as prime minister, with a mixed cabinet from both the right and left, a situation the French call cohabitation. France is a former colonial power. In 1939 it had colonies in Africa, South America and Asia, uniting 110 million people over 12 million square kilo- meters. Most of the former French colonies obtained their independence in the years following World War II. France maintains privileged relations with its former colonies, particularly in the economic sphere. Legal system Civil law The civil law system is based primarily on codes and statutes that are intended to constitute the totality of the law. In theory, the role of courts is to interpret this body of law. When the law is not clear, the courts may look to the intent of the legislators. Although French court decisions per se do not have precedential value, the supreme judicial court has the power to effectively establish a rule of law (see below). Unlike the common law system, the French civil law system does not generally provide injunctive relief or specific performance. Arbitration either by the French courts or by international bodies, the best known being the International Chamber of Commerce of Paris, is available. Laws and regulations o Laws A bill submitted by the government becomes law only after it is approved by the National Assembly and the Senate, signed by the concerned ministers and the president of the Republic, and published in the Journai Officiel. o Decrees A decree is issued by the executive to implement laws and to exercise the regulatory powers granted it by the Constitution. o Ordinances The Parliament may authorize the executive to issue ordonnances on subjects normally within the exclusive competence of Parliament. Arrêtés, circulaires, instructions, and notes These are issued under the executive's rule-making authority. Laws may be contested before the Constitutional Court (see below). Decrees, ordinances, arrêtés, circulaires, instructions, and notes may be contested before the administrative courts (see below). Court system There are two principal types of courts, the judicial and the administrative There are also specialized high courts. o Judicial courts The two principal lower courts are the Tribunal d'Instance and the Tribunal de Grande Instance. These courts are presided over by professional judges and have both civil and criminal jurisdiction. In addition, there are specialized courts: the Conseil de Prud'hommes, a labor court (see "Unions" in Chapter 10), and the Tribunal de Commerce, or Commercial Court, presided over by judges elected from the business community and having exclusive jurisdiction over litigation between merchants and in matters involving commercial acts. The Commercial Court is also respon- sible for the Commercial Register (Registre du Commerce et des Sociétés). At the appellate level, there are 28 Cours d'Appel, which review both questions of law and of fact on decisions appealed from the Tribunaux d'Instance and de Grande Instance, as well as the Commercial and Labor Courts. The supreme judicial court is the Cour de Cassation which hears appeals from the appellate courts and final decisions of lower courts. The Cour de Cassation decides issues of law, not of fact. One of its principal purposes is to ensure the harmony of case law. Even though lower courts are free to apply their interpretation of the law to the facts, there is one instance where the lower court must apply the law as interpreted by the supreme judicial court. Where the Cour de Cassation reverses the decision of a lower court, it must remand the case to another court of the same competence, which reexamines both questions of fact and of law. Where this lower court holds in the same way as the first lower court, its decision may be appealed. If ihe Cour de Cassation reverses the second lower court's decision, it remands the case to another lower court, which must adopt the legal interpretation of the Cour de Cassation. o Administrative courts The lowest court is the Tribunal Administratif or Administrative Court, which has exclusive jurisdiction over all litigation to which the state is a party. An intermediate level-Cour Administrative d'Appel was introduced as from January 1, 1989. This court has appellate jurisdiction over both fact and legal issues. There are five Cours Administratives d'Appel: Bordeaux, Lyons, Nancy, Nantes, and Paris. The highest administrative court is the Conseil d'Etat. It has final jurisdiction over legal issues. It also has exclusive original jurisdiction to determine the legality of decrees, other administrative decisions, and income and other tax questions, except those regarding registration tax. The Conseil d'Etat must be consulted by the government to produce an advisory opinion on bills before submission to Parliament and may be consulted on certain governmental acts (e.g., decrees and ordinances) prior to Issue. Specialized high courts Of the specialized high courts, the Constitutional Court (Conseil Constitu- tionnel) merits specific mention. The Constitutional Court is composed of nine members who are named to nine-year terms of office and of former presidents of the Republic who are members of the Court for life. The purpose of the Court is to determine if proposed laws are constitutional. The constitutional issue may be raised only by the president of the Republic, the prime minister, the presidents of the National Assembly and the Senate, or a group of 60 senators or deputies. Legal profession The legal profession, reorganised in 1971, is currently divided into more or less distinct branches of activities. Notaires Notaires have a monopoly in the areas of transferring real property and testamentary and matrimonial acts, which by law must be in the form of an authentic document (acte authentique) that is verified and stamped by a notaire. French notaires play a far more important roie in the French legal system than American notary publics. o Avocats An Act dated December 31, 1990 provided that the professions of avocat and conseil juridique were to be merged into a single profession, that of avocat. Avocats will act as legal and tax advisers and represent clients before the courts. The unification took effect as of January 1, 1992. o Avoués à la cour Avoués are specialists in procedure and written pleadings before the Cours d'Appel. o Juges-commissaires and administrateurs judiciaires These are individuals appointed by a court to temporarily manage businesses that are in judicial receivership. o Huissiers de justice Huissiers de justice are specialized professionals who serve process, give official notice of documents, conduct execution of judgments and seizure orders by courts, and record facts for subsequent use in legal proceedings. Population and social patterns Population According to INSEE, at July 1, 1992 the population was estimated at over 57.35 million persons, compared with 56.3 million at the beginning of January 1989. The average population density was 103 inhabitants per square kilometer, but the density per department varies considerably: in 1991 there were 20,421 inhabitants per square kilometer in Paris, compared with 339 in the Bouches-du-Rhône and 91 in the Gard. At the beginning of 1991 Paris had over 2.1 million inhabitants and the greater Paris region (Ile de France) had 10.3 million, while the Lyons and Marseilles regions had over 1 million inhabitants each. According to 1991 INSEE statistics, the average age of the population is 36.9 years: the 65-years-or-over age bracket represents 14.3 percent of the population; the 20-to-64 age bracket, 58.6 percent; and the under-20 age bracket, 27.1 percent. Births dropped from 881,000 in 1971 to 759,000 in 1991. Life expectancy in 1991 was 81.1 years for women and 73 years for men. In 1991 the annual population growth rate was 0.4 percent for France, compared with - 1 percent for the United States and 0.04 percent for the United Kingdom. Foreign nationals account for approximateiy 8 percent of the population. Language The principal language is French. Many French business people speak English. Religion Under a 1905 law, church and state are separate. The principal religion is Roman Catholicism, but all major religions are represented in France. Education Noncompulsory preschool instruction is available for children aged two to five. For children between the ages of six and sixteen, school attendance is compulsory. Children between the ages of six and eleven attend primary schools and those between the ages of eleven and sixteen attend collèges. Upon completing collège, children may attend lycées, which provide either technical training or general education. After successfully completing three years of lycée, students are entitled to enter the higher education system. Higher education is provided by 78 state universities (the 16 universities in the Paris region account for 31 percent of the total student population), 7 university centers, 3 national technical institutes, and the grandes écoles. A major change is that more students than ever are enrolling in business schools, but 34 percent of university students pursue studies in the humanities. Instruction and education provided by the public school system are free of charge and the universities charge a nominal annual fee for the right to use facilities like the library or gymnasium. There are also private schools and universities, certain of which are bilingual. Living standards OECD comparative statistics show that for 1990 the average annual increase in hourly private industry waye rates in France was 3.2 percent, compared with 2.3 percent in West Germany and 11 1 percent in the United Kingdom. At current prices, OECD statistics show that per capita gross domestic product (GDP) in France was US$21,030 in 1491, compared with US$17,470 in the United Kingdom, US$24,130 in West Germany, and US$21,890 in the United States. According to INSEE, unemployment was at 2.9 million persons, or 9.4 percent of the labor force, on January 1, 1992, having increased from 9.1 percent on January 1, 1991. Over the last two decades, the level of comfort in French dwellings has increased enormously. While rents in France increased by 4.6 percent in 1991, the annual rate of increase has slowed from 13.5 percent in 1981. The standard of living of middle and upper-level management is approximately equivalent to those of similarly situated executives in other industrialized nations. Cultural and social life France is known as the world's culinary center and as the country of luxury goods. Major metropolitan centers abound with some of the world's greatest works of art, as well as with theaters, ballets and operas. France's varied topography allows for the exercise of nearly any land- or water-based recreational activity. The Economy General description A government-sponsored slogan summarized the underlying economic situation: "France lacks oils but not ideas." Deficient in most natural resources (see below), France has made a concerted effort to develop other sources of energy (e.g., nuclear power plants) and to modernise its industry in order to increase its export capacity and to supply its domestic market. It is evident that the French economy can no longer be considered in isolation. France's principal trading partners are other countries of the European Community. France was one of the six original signatories of the 1957 Treaty of Rome, which established the European Economic Community (EEC) (now often referred to as the European Community EC). The other signatories were Belgium, Germany, Italy, Luxembourg, and the Netherlands. In 1973 the United Kingdom, the Republic of Ireland and Denmark became members, as did Greece in 1981 and Spain and Portugal in 1986. The basic objective of the EC is the creation of a European union. The first major step in the unification of Europe will be the economic one, which will create a single market of over 320 million people. This will begin with the complete elimination of tariffs and duties between member states as of January 1, 1993. After this date, there will be few restrictions on the free flow of goods, services and capital. Following EC directives, France and the other member states have implemented new laws to achieve this objective. The extent to which political and monetary union will proceed is not entirely clear. At present the member states retain sovereignty in many areas. On December 1991 the Treaty of Maastrich was neciotiated between all the member states. It provides for a real economic and political union as from the date of ratification by all member states. This treaty was ratified in France by a referendum held in September 1992, which was won by a very slight majority. At the time of writing, the Treaty of Maastrich has not yet been ratified by several of the member states; thus, its future application in uncertain. The EC has its own Parliament, Council of Ministers, Commission, and Court of Justice, but these European institutions have limited competence and jurisdiction. For more information on the European Community, see the Price Waterhouse Information "Guide Doing Business in the European Community". French economy France has a balanced and highly diversified market economy in which industry accounts for approximateiy 27 percent of gross domestic product or GDP (produit intérieur brut), services account for more than 68 percent, and construction, transportation and agriculture play an important role. France has ranked for the past 20 years as the West's fourth economic power. Recently the rise in wage rates has slowed and inflation has been reduced to practically nil. Corporate profits, despite the worldwide economic downturn, have remained respectable. France's agricultural production substantially satisfies its basic food requirements. Aided by its favorable geographical location and its close ties with former French overseas territories, it is actively engaged in world trade, exporting principally manufactured and agricultural products. The French economy was significantiy affected by the oil crisis that accompanied the Gulf War, as well as by thc recession (although less than in the 1970s), because France's economy is still related to oil prices and France has few oil reserves and pays for imported oii in U.S. dollars. In order to reduce its dependence on imported enercly, after the first oil crisis at the end of 1973 France invested heavily in nuclear energy (from which it obtains 75 percent of its electricity), natural gas and hydroelectric power plants, but it still relies on imported energy. The annual expenditure in 1990 was F120 billion. Gross domestic product According to the OECD, for the year 1990 the average annual volume in growth of French real gross domestic product (GDP) at constant prices was 2.8 percent, whereas the West German average growth rate for the same period was 4.5 percent, the United Kingdom's 0.8 percent, and the United States' 1.0 percent. For composition of GDP in 1990, see Table I. Table I Gross Domestic Product by Sector, 1990 (In billions of francs) Sectors of origin Central government...................................................861,031 Corporate and quasl-corporate enterprises Nonfinancial ..........................................2,851,076 Financial.................................................(9,500) 2,841,576 Househoid and private unincorporated enterprises...................1,128,741 Owner-occupied housing Subsis~ence production Other Nonprofit institutions saving households..............................15,017 Subtotal : Domestic factor incomes...........................................4,846,365 Indirect taxes .....................................................971,116 Less - Subsidies ..................................................(145,822) Consumption of fixed capital.........................................812,450 Statistical discrepancy.............................................. - ========== Gross domestic product.............................................6,484,109 Source: OECD. In 1991 France's real GDP was US$1,191.4 billion, compared with US$1,553.8 billion for West Germany, US$1,008.8 billion for the United Kingdom, US$1,133.4 billion for Italy, and US$5,552.2 billion for the United States, representing 1990-1991 GDP growth of 1.3 percent for France, 3.2 percent for West Germany, - 1.9 percent for the United Kingdom, 1.1 percent for Italy, and 0.7 percent for the United States. GDP is forecast to increase in France by 2.1 percent in 1992 and 2.7 percent 1993 (see Graph I) [not included]. o Economic plans Since 1946 the modernization and expansion of capital facilities have been carried out under five-year economic plans. Rather than establishing specific directives, these plans establish a general framework for economic, social and cultural objectives to be achieved through public and private expenditures. The Tenth Plan covers the period 1989-1993. Concerning industrial policy, the Plan establishes a strategy of large-scale industrial re-employment in order to achieve one of its principal aims: the reduction of public funding of heavy industry. It aims to concentrate public support on high technology industries, such as computers, software, electronics, robotics, new communication technologies, aerospace, and biotechnologies. with fundamental and applied research receiving major emphasis. The Socialist government had aiready paved the way with the Ninth Plan by introducing in I982 and 1983 a series of five-year action plans for the major industriai sectors of the economy. For example in July 1982 the Filiere Electronique action plan established the horizontal and vertical integration and reorganization of Ihe electronics indusrry, regrouping 11 sectors to achieve the optimal allocation of human and material resources, research and development, production, and distribution, in order to reduce imports and to increase exports of new electronic prod- ucts and services. From 1986 to 1988, under the guidance of Prime Minister Jacques Chirac, France initiated a program to denationalize banks and insurance, computer and industrial companies that had been nationalzed at the end of World War I, after World War II (most importantly) or in 1982. One-half of the 65 businesses scheduled to be returned to the private sector were denationalized prior to February 1988, with the sale of shares generating almost F71 billion. Few public companies have been privatized since 1988. Inflation rate trends The trend in the inflation rate has been downward over the last ten years. For an illustration of this pattern, see Graph II [not included] Mineral and energy resources France is deficient in most natural resources except aluminum, of which it is the world's 12th-largest producer. France ranks 1Oth in world production of steel. Production of coal and iron ore has declined considerably because these minerals are not of high quality. France ranks fourth in world production of uranium. To compensate for its lack of petroleum, France has constructed nuclear power stations. Agriculture France, which has approximately 55 million hectares of land, of which over 35 percent is cultivated, ranks fourth in the world after the United States, the former U.S.S.R. and Japan in the number of tractors. In 1991 France was the world's largest producer of wine, fifth largest producer of wheat, eighth-largest producer of corn, and thirteenth-largest producer of beef and veal. France is the world's second-largest and the EC's largest exporter of agro-alimentary products. Over the iast 20 years the agricultural labor force has dropped by approx- imately 60 percent. Recent OECD statistics indicate that agricultural workers represent 7.1 percent of the total labor force. The agricultural sector of the French economy is markedly affected by the EC agricultural policy. The three primary principles of this policy are a unified market, Community preferences and financial solidarity. The principal result of this policy is a system of common prices. The price paid for virtually all agricultural products throughout the EC is determined both by market supply and demand and by decisions made jointly each year by the EC member states. The objective is to preserve a minimum living standard for farm workers and to promote steady growth in agricultural output. One consequence of this policy is that agricultural products from non-EC countries may not be sold in the EC at prices below prescribed minimum levels, which are being progressively reduced. In order to main- tain a minimum level of demand, the French authorities are financing research of "bio-oil": colza diester and sugarbeet ethanol. Manufacturing lndustry is an important sector of the French economy. In 1991 it accounted for an estimated 24.4 percent of GDP and employed an estimated 6.4 million persons. In 1989 French industry represented approximately 5.5 percent of OECD countries' industrial activity; this percentage was 8.2 in 1970. France's growth rate was 10.2 percent in 1990 and is estimated to be 6 percent in 1991. Productive investment currently accounts for 12 percent of GDP, whereas 15 years ago this figure was 15 percent. Corporations most frequently record growth through the acquisition of going concerns. Funds are either self-financed or obtained through the traditional financial markets. Economic plans have given the highest priority to industrial growth and re-employment. According to INSEE statistics, total industrial production (excluding construction and public works) was F997 billion in 1988 and F1,061.5 billion in 1989. As measured by the volume-of-production index, total industrial production (excluding construction and public works) increased by 2.5 percent in 1990. French industry is highly concentrated in a few areas, principally the Paris region, the coal-producing areas of Nord and Pas-de-Calais, the vicinity of the iron-ore deposits of Lorraine, and around Lyons in the Rhone valley. In recent years, there has been large-scale industrial development in and around certain coastal areas, primarily Marseiiles, Dunkirk and the lower Seine valley. The government encourages decentralization of industry in order to promote the development ol less-industrialized areas (see Chapter 4). Companies established in enterprise zones (see Chapter 4) are not eligable for any other government aid normally granted through the regional development program. High-tech industries France is a leader in the fields of aeronautics and space industries, professional electronics, software, and telecommunications. French multina- tional companies are acquiring and establishing joint ventures with EC and non-EC companies to better compete on the world market. Such French-based companies as Thomson, Airbus, Dassault, Rhone-Poulenc, Matra, Alcatel-Alsthom, Arianespace, and Cap Gemini Sogeti have gained worldwide recognition as leaders in their fields. Service industries The service industry, the most important and fastest-growing economic sector, employs 2.4 million people. Advertising, computer services, management consultancy, and other advanced business services are readily available and are of high quality. France does not have any special financial facilities, such as offshore banking or status as a tax haven, with the exception of special laws in the Principality of Monaco. Transport France has a railroad network of over 35,000 kilometers (21,125 miles). This network is operated by the Société Nationale des Chemins de Fer Francais (SNCF), a state company. Reliable turbo-trains (TGV), with a speed of over 200 m.p.h., continue to be introduced between major French cities. For example, the trip from Paris to Lyons now takes two hours; Paris-Grenoble, three and one-half hours; and Paris-Marseilles, four and one-half hours. In addition to the TGV lines to Switzerland and to Belgium (completion date 1993), France is linked to other European countries by the Trans-Europe Express trains. Among the other cities currently served by the TGV lines are Avignon, Bern, Besancon, Bordeaux, Chambéry, Dijon, Geneva, Lausanne, Le Mans, Lille, Montpellier, Nice, Rennes, St. Etienne, Toulon, Toulouse, and Tours. Agreements have been signed that will enable the extension of TGV lines to Brussels and Cologne. At the beginning of the next decade, TGV traffic will represent 40 percent of the passengers carried by the SNCF. The SNCF is modernizing its rolling stock for both passengers and freight. France ranks seventh in the world for the number of passengers carried and eighth in terms of the tons of freight carried. On July 28, 1987 French President François Mitterrand and English Prime Minister Margaret Thatcher signed a treaty for the construction and operation of a tunnel connecting the two countries across the English Channel. Scheduled to be opened in 1993, the tunnel will permit automobiles and freight to be transported by means of a rail-ferry. High-speed TGV trains will link Paris and London; travel time will be three hours, with a 35-minute passage in the tunnel. o Subway systems Paris has had a subway system, known as the Métro, since 1900. The subway network and cars are being modernized to provide greater pas- senger comfort and security. A high-speed subway network, the Regional Express Railway (RER), connects the center of Paris with major suburbs. Lille, Lyons and Marseilles also have subway networks, and construction is under way for a new system in Toulouse. Aviation, roads and waterways France has three national airlines: Air France, UTA and Air Inter. In 1986 France ranked fifth in the world for passengers and freight carried. The French road network consists of over 362,100 kilometers (225,000 miles) of national and departmental highways and expressways. France has over 8,500 kilometers of navigable waterways over which more than 6 billion metric tons of freight were transported in 1989. In terms of tonnage, the most important port is Paris. France's merchant marine ranks twentieth in the world. Telecommunications In 1990 the French Post Office had 524 telephone lines per 1,000 inhabit ants and over 27 million subscribers. It has developed some of the most modern digital switching equipment in the world. Under the impetus of France Télécom (formally Direction Générale des Télécommunications - DGT), the most important division of the French Post Office, France introduced professional videotex services in 1982 and generalized public videotex services in 1983. Now, all of France receives videotex services on over 5 million low-cost Minitel terminals. The French videotex software developed by the DGT has been licensed for use in many countries, including the United States and Japan. In 1984 France launched its first telecommunications satellite, Telécom 1, which has transponders to provide digital communications between businesses and analog videoconferencing between France and other countries. Télécom 1B was launched in May 1985, but became inoperative at the beginning of 1988. Télécom 1C was launched in March 1988. Second-generation satellites, Télécom 2, are scheduled to be launched. France has also launched direct broadcasting satellites (TDF). In preparation for high-definition television (1,250 lines), compact-disc-quality sound and simultaneous transmission in all European languages, France and the other European countries have developed D2-MAC, which will be the transmission standard for the TDF satellites. There are currently six television channels in France; two are government operated (A2, FR3), one has been sold to the private sector (TFI), one is a pay channel serving approximately 2 million subscribers (Canal +), and two are private stations (La5 and M6). Paris and other major French cities are being wired for cable and offer a wide range of programming from other European countries. Space and military Arianespace, a company held by European companies, is one of the world's major commercial rocket launchers. The Ariane-5 rocket will be used to launch the Hermes, the European version of the U.S. and Soviet space shuttles, assuming EC budgets permit the continuation of this project. France, one of the world's leading suppliers of arms, sold its highly sophisticated military communications systern RITA, to the U.S. military. Its supersonic airplanes and armored ground equipment have been purchased by numerous countries. Foreign trade and balance of payments Successive French governments have attempted to encourage exports and reduce imports. Since 1980, however, French exports have declined in most sectors, wth the exception of cheese, wine, perfume, and cosmetics. The trade deficit was US$14 billion in 1990: France exported over US$206 billion of goods, mostly food and agricultural products, business equipment and automobiies, and paid over US$220 billion for imports. The single largest import was energy. Other major imports were business equipment and chemical products. France's principal trading partners for both imports and enports are Germany, Italy and Belgium. In 1991 foreign trade improved significantly due to the industrial sector, except for consumer products (textiles, clothing, leather and shoes. and jewelry). After four years of economic growth (1987 to 1990), the agrobusiness excess has been reduced to F44 billion. France's 1991 balance of payments deficit for current transactions was over F33.4 billion, compared with a deticit of F53 billion in 1990. Table II [not included] shows the change in the balance of trade for the period 1989 to 1991. Chapter 2 Business environment Investor Considerations o Denationalization program has been suspended. o Investment aids are available for foreign businesses. o Favorable conditions pertain in enterprise and free-trade zones. o Significant decrease occurred in industrial investment in the period 1972-1984; increasing annually thereafter. o Reduction in taxes on business is under way. o Export incentives are available to foreign-controlled French companies. Industrial climate The French economy is a free market system, even more so as a result of the recent denationalization and price liberalization programs. The economy is being enhanced by further investment in new, efficient technologies, a retrained work force and a simplified regulatory scheme. Following the first oil crisis, industrial investment diminished in France for over a decade. Only since 1984 has such investment begun to increase annually. France is one of the world's technological or competitive leaders in a variety of manufacturing sectors, including aeronautics and space industries, professional electronics, software, telecommunications, trains, nuclear energy, and chemicals (see Chapter 1). Framework of industry In 1982 the socialist government nationalized and reorganized leading French companies (e.g., Thomson, Saint-Gobain, Rhône-Poulenc, Péchiney, and Companie Générale d'Electricité). This program was reversed four years later under the conservative government, see "Political system" in Chapter 1, but was suspended by the Rocard government (see below). Family-held enterprises continue to be an important part of the French industrial structure, but, increasingly, companies are going public. Aims of government policy Economic development plans Since World War II, successive governments have introduced five-year plans that define economic objectives. The economic situation was favorable when the Tenth Plan was initiated despite the Stock Exchange crisis in 1987. Economic growth was steady and inflation decreased. The Plan establishes a strategy of large-scale industrial reemployment. The objectives of the Plan are as follows. o Growth in competitiveness. o Adaptation to the European market. • o Preparation to confront increased competition. o Education and employee training. o Research and development. Denationalization In 1986 the conservative government of Prime Minister Jacques Chirac detailed its denationalization plan for more than 65 state-owned or controlled banks and financial institutions, industrial and insurance companies, and one telecommunications company. Before the suspension of denationalizations in early 1988 (see "French economy" in Chapter 1), the government raised almost F71 billion from the sale of shares. The last group to be denationalized during this period was Matra. The present policy of halting denationalizations does not mean that nationalized companies are maintaining a status quo. There is significant activity in the buying and selling of subsidiaries and divisions so as to consolidate and increase economic and industrial strength to be more competitive in the EC and other world markets. Regional and special industry development The French government, through the Délégation à I'Aménagement du Territoire et à I'Action Régionale (DATAR), actively promotes foreign investment in France. Aid is available for industries setting up in most parts of western and southern France, including Corsica, and in some traditionally industrial areas of the north, east and southwest. Both subsidies and grants are available. In addition to its head office in Paris, DATAR has branch offices in the United States, Japan and certain Euro pean countries. (For further information, see Chapter 4.) Enterprise zones There are three enterprise zones. Businesses establishing therein are eligible for tax holiday benefits. See Chapter 4 for details. Free-trade zones There are two free-trade zones offering duty-free imports. See Chapter 4 for details. Financial services The French government provides some special financial services to industry in the form of export loans, credits and insurance. See Chapter 4 for details. Public-private sector cooperation There are no special legal vehicles for cooperation between the public and private sectors. However, in 1988, for nonmilitary, high-tech research and development, the government contributed 54 percent of the total F130 billion, approximately the same amount spent in the United States and United Kingdom, but much lower than that spent in Japan and West Germany, and private enterprise contributed the balance. Labor-management relations The labor force is, in general, educated and highly trained. Managerial talent and skilled and unskilled labor are readily available, particularly given the high rate of unemployment. Businesses won a significant battle when the government eliminated the prior authorization procedure for discharges (see "Termination of employment" in Chapter 10). It is estimated that approximately 10 percent of the labor force is unionized. There is a noticeable decrease in social conflicts and the influence of labor unions has decreased in the last decade. Due in part to the closing of a large number of industrial companies, the Confédération Générale des Travailleurs (CGT) has lost approximately one-third of its members in the last ten years. With its decline in membership, it has lost some ofits former influence. (Also see "Unions" in Chapter 10.) lmplications of European Community membership One of the major achievements of the EC was to establish a common customs and tariff system for the EC member countries. Until 1992 countries that consider that their economies are being affected by dumping can petition the Commission for a temporary halt to the imports in question. At the end of January 1988 France and the Netherlands were authorized by the Commission to stop the import of color televisions from Hong Kong having 60 percent Japanese-origin components. After 1992 the protective rights of individual EC countries will be substantially reduced. For further information regarding EC institutions and policy, see the Price Waterhouse Information Guide "Doing Business in the European Community". Overseas trade relations Membership in trade blocs France is a member of the EC (see above) and the Organization for Economic Cooperation and Development (OECD), and is a signatory to the General Agreement on Tariffs and Trade (GATT). To the extent that France is a member of both the EC and GATT, its ability to impose customs barriers or other impediments to free trade is significantly reduced (see above) . Exports Seventeen percent of French exports are classed as high-technology goods and France holds 7 percent of the global market in such goods. Foreign- controlled campanies based in France are entitled to receive the same export incentives as French companies. There are two main programs, both of which are based on tax considerations and depend upon prior administrative approval. (See Chapter 4 for more information.) Imports Over the past ten years France has witnessed a trend of Increasing imports. This trend has been reinforced by the strength of the franc. In 1975 22 percent of the goods on the French market were of foreign origin whereas in 1988 that percentage reached nearly 42 percent. Trade barriers Trade barriers within the EC are being eliminated (see above). Other trade considerations are discussed in Chapter 8. ====================================================== Table of contents (only main titles are shown here) 1 France, a profile 2 Business environment 3 Foreign investment and trade opportunities 4 Investment incentives 5 Restrictions on foreign investment and investors 6 Regulatory environment 7 Banking and finance 8 Exporting to France 9 Business entities (corporate forms) 10 Labor relations and social security 11 Audit requirements and practices 12 Accounting principles and practices 13 Tax system 14 Tax administration 15 Taxation of corporations 16 Taxation of foreign corporations 17 Taxation of shareholders 18 Taxation of foreign operations 19 Partnerships and joint ventures 20 Taxation of individuals 21 Taxation of trusts and estates 22 Value-added tax 23 Other indirect taxes 24 Tax treaties 25 Introduction to Price Waterhouse Appendices The first chapter describes briefly the Legal System with subtitles: Civil law, laws and regulations, court system and legal profession. This is included along with a short survey of the French business environment in the file DO_BIZ, available from Law-France.