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France Country Brief

Introduction

The Republic of France has a population of more than 64 million people. It includes four overseas departments in Martinique, Guadeloupe, Reunion and French Guiana. Metropolitan France in Western Europe accounts for just over 80% of the territory and 96% of the population of the French Republic.

France is an influential member of the European Union. It attaches a high priority to European integration and currently holds the office of the EU Presidency. France is a Permanent Member of the UN Security Council and fourth largest contributor to the UN budget. France is a nuclear weapon power. It is a member of the Group of Eight (G8) major economies and takes a leading role in contributing to the Middle East peace process and development issues in Africa.

Political overview

System of Government

The French political system is governed by the Constitution of 1958, which established the 'Fifth Republic', a Presidential system. The President is elected by universal suffrage. The current president is Nicolas Sarkozy who was elected in May 2007. The national legislature, which may be dissolved by the President, is composed of two Houses: the Upper House or Senate (321 members, who serve nine year terms) and the Lower House or National Assembly (577 members). Elections for the National Assembly are held every five years. There is a clear separation of executive and legislative powers. The Prime Minister and all other Ministers are appointed by the President, who also has the power to dismiss them.

Under the 1958 Constitution the President is the head of the armed forces, guarantor of national independence and responsible for signing international treaties. The government determines and implements national policy and the Prime Minister is responsible for national defence.

On 21 July 2008, both houses of the French Parliament (Congress) agreed to broad constitutional reforms which further define the president’s powers, including requiring consultation with parliament on appointments and military deployments, setting a two term maximum mandate and limiting discretionary powers. Under the reforms the president will be able to address both houses of parliament for the first time since 1875. The reforms also serve to reinforce the powers of the parliament and provide new rights for French citizens, including legal recognition of the right of equal access for men and women to high level positions.

Economic overview

France is the world’s sixth largest economy. It is an advanced industrialised country with a mature and sophisticated market economy. Per capita GDP in 2007 was US$41,511 and is estimated to rise to US$45,858 in 2008 (IMF/EIU forecast). GDP is dominated by the services sector (70 percent), while aerospace, automobile and agriculture industries are considerable and contribute significantly to export revenue.

Two thirds of France’s trade is with other European countries. It is the world’s second largest agri-food exporter, and the world’s foremost tourism destination. A substantial number of successful French multinational companies dominate market share across a broad range of global sectors.

In 2007 France was ranked third for attracting foreign direct investment (behind the US and the UK). Paris is a leading financial market in the Eurozone and is ranked second in the world for international financial institutions with 46 percent of market capital held by foreign investment institutions.

France has a long tradition of State intervention and participation in the private sector. This has continued under the Sarkozy administration which, despite its commitment to economic reform and modernisation, has continued to promote “national champions” and extend State support to ailing domestic companies. While a free enterprise economy, the Government owns several major public utilities and owns shares in key industries.

France has a relatively productive labour force and recent reforms to the traditional 35 hour working week have introduced new flexibilities into the market. French commentators suggest one reason for France’s relatively high labour productivity rate is the high level of training – seven percent of France’s GDP is spent on education and training. France is ranked second in Europe for the percentage of employees who hold a scientific or technical degree. France spends 1.5 percent of total GDP each year on employees’ training programs and apprenticeships.

Economy Minister Christine Lagarde said in July the Government expected overall growth for 2008 would reach 1.7 percent. Ms Lagarde said the government expected the economy would receive a boost, later in the year, from economic reforms implemented by the government. Reforms included new labour arrangements and measures to enhance consumers’ purchasing power. France’s National Institute for Statistics and Economic Studies forecasts growth for the economy in 2008 at 1.6 per cent, slightly lower than the official government forecast but higher than the 1.4 per cent forecast by the IMF/EIU.

French EU Presidency: 1 July to 31 December 2008

France assumed its six month rotation of the EU Presidency on 1 July 2008. President Sarkozy has identified EU immigration policy, energy security, the environment and defence as key areas for the focus of French efforts.

Bilateral relationship

Australia’s relations with France are positive and friendly. Dialogue and practical cooperation between the two countries have been strengthening on many fronts in recent years, including on key global security issues such as arms control and disarmament, non-proliferation and counter-terrorism. Australian and French officials meet regularly for political-military talks. The last talks were held in Canberra in March 2008. The Pacific region, where both countries have direct interests, continues to be an important focus of bilateral engagement. Commercial links are substantial and France is an increasingly important source of direct investment and technology, including in the defence sector. Cooperation in the surveillance of valuable fisheries resources is also an area of ongoing bilateral activity. Although Australia and France share many common interests important policy differences exist, notably in the area of agricultural trade liberalisation. People-to-people links between Australia and France are growing, as are science, research and cultural exchanges.

High Level Contact

High level contact and visits are important in promoting cooperation and understanding between Australia and France.

Pacific engagement

France has direct strategic and economic interests in the region through its Pacific entities of New Caledonia, French Polynesia and Wallis and Futuna. France is a member of the Pacific Commission (SPC) and the South Pacific Regional Environment Programme (SPREP), and has been a dialogue partner of the Pacific Islands Forum since 1989.

Australia and France cooperate on Pacific issues in areas of development assistance to Pacific island countries, including through such initiatives as the joint Australia-France HIV and STI programs for Pacific Islands, announced in July 2003. Cooperation is well established in some defence areas, including disaster relief coordination under the trilateral FRANZ arrangement with New Zealand, and maritime fisheries surveillance, also under trilateral arrangements with New Zealand. The latter cooperation was formalised under a joint declaration signed in Canberra in March 2006.

Defence Cooperation

Australia’s defence relationship with France is solid and continues to grow in terms of personal contact at high levels, frequent exchanges, single Service and Joint meetings, and major equipment procurement programs. In 2006 a new Defence Cooperation Agreement between the two countries was signed, providing a framework for further cooperation.

Australia and France regularly participate in combined force training exercises and France provided support to the Australian-led INTERFET operations in East Timor. Australian and French forces have co-operated in the Pacific and Southern Oceans, including for emergency and disaster relief and operations against illegal fishing.

In recent years Australia and France have developed a good working relationship in the counter-terrorism field, including as founding members of the Proliferation Security Initiative to combat the trafficking in weapons of mass destruction.France is a valuable partner in this area, with significant expertise and experience in combating and prosecuting terrorism, a system of specialist counter-terrorism judges, and global reach, including in regions where Australian knowledge is limited, e.g. North African countries.

Australia works closely with France in arms control regimes such as the Australia Group, the Comprehensive Nuclear Test Ban Treaty, Missile Technology Control Regime and the Proliferation Security Initiative, to strengthen export controls and non-proliferation norms.

As the fourth largest contributor to the United Nations and a P5 Member, France's positive approach to reform of the Security Council is important.The UN Peace Building Commission and Democracy Fund are reform initiatives where Australia and France share common views and together play a leading role.

The French company Thales has a major investment stake in Australian defence industries.

90th Anniversary Commemorations

The legacy of Australian involvement on French soil in the First and Second World Wars plays an important role in the bilateral relationship. Over 45,000 Australians lost their lives on French soil in the two conflicts – more than in any other country in the world. Each year many Australians travel to the Western Front to commemorate the thousands of Australians who were killed and injured there in World War 1.

French and Australians commemorated the 90th anniversary of the battle of Villers-Bretonneux on 25 April with a special Anzac Day Dawn Service at the Australian National Memorial at Villers-Bretonneux. The Minister for Veterans’ Affairs, the Hon Alan Griffin MP, represented Australia at the Dawn Service which attracted over 4,000 participants including many from 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 Australia’s 15th largest merchandise trading partner and 13th largest supplier of imports but is ranked only 24th as a destination for Australian merchandise exports.

Australia’s merchandise exports to France totalled A$1.4 billion in 2007, dominated by commodities, particularly coal and iron ore. Australia has made modest gains with added-value exports in the sectors of food, wine, new technologies and indigenous art. Imports from France in the same period totalled nearly A$4.7 billion, with major products including aircraft and parts, and medicaments.

Services

In 2007 Australia exported A$555 million in services to France. Services imports were valued at A$734 million. Tourist links between the two countries are significant, with over 400,000 Australians visiting France each year. Almost 98,000 visitor visas were granted to French nationals to visit Australia in 2005-06, making France our 10th largest source of tourists.

In 2005-06 1,867 student visas were granted. A working holiday-maker agreement signed between the two countries in November 2003 makes it easier for young French and Australian people to spend time in each other's countries. In 2005-06, 6,126 Australian working holiday visas were granted to French nationals, making France our 7th largest source of working holiday visitors. 483 working holiday visas were granted to Australians.

Investment

Australian firms have made significant investments in France in recent years and remain on the look out for new opportunities. In April 2007, Australian investment company, Challenger, acquired French company LBC Tank Terminals. The company has the largest tanker storage facilities for liquid bulk chemical products, holding the largest terminal capacity in France, and second largest in Europe.

An important initiative in 2007 to boost our trade and investment relationship with France was the establishment of the Australian Business in Europe (ABIE) Paris Chapter's Chairman's Club. The Chairman's Club has a high-level membership (pitched at CEO or MD engagement) of the main Australian and French multinationals involved in the bilateral trade and investment relationship. Its launch has already paid dividends, stimulating contact and collaboration between some of the participants. The initiative has also helped strengthen the Paris chapter of ABIE by bringing a number of the major multinationals into the organisation for the first time.

Australian investment in France received a significant boost in December 2005, with the French Government's announcement of Macquarie Bank's successful tender, with its French partner Eiffage, for the privatisation of the Autoroutes Paris Rhin Rhône toll road. Macquarie is expected to invest around A$3.9 billion in the project.

Total Australian investment in France in 2006 was valued at A$21.7 billion, including investments by the surf and sportswear companies Billabong and Rip Curl in the south west of France; Oceanis Australia Pty Ltd construction of the largest aquarium in France; VitaMan's launch of the first Australian grooming range for men in France; and Ingeus's involvement in the French employment services market.

France is the seventh largest foreign direct investor in Australia with a total investment of A$13.1 billion in 2006. There are now around 300 companies in Australia with a French association employing some 80,000 people, with an annual turnover of A$20 billion. Total Australian investment in France in 2006 was valued at A$21.7 billion.

A number of companies, such as AXA, have chosen to headquarter their regional operations in Australia or to build very substantial offices with considerable regional responsibilities, such as the hotel group Accor.

Major French investments have been made in the financial services, telecommunications, pharmaceuticals, energy, resources and agribusiness sectors. Some important examples include the acquisition of a 51 per cent stake in National Mutual by insurer AXA; Pernod-Ricard's purchase of the Orlando-Wyndham group; the participation of Vivendi in the successful bid for the A$1.5 billion project to manage South Australian Water; Transroute's participation in the construction consortium concerning the A$1.5 billion Melbourne City link toll-road; and Thales purchase of Transfield Holdings’ remaining 50 per cent interest in ADI (Australian Defence Industries).

Recent Notable Successes by Australian Firms in France

Recent notable successes by Australian firms in France include the consolidation and expansion of Servcorp, QBE and Ingeus. Following the opening of its second Paris office in 2007, Servcorp seems now well established in the competitive field of serviced office rentals and will shortly open a third office in the capital. Last year QBE celebrated the 10th anniversary of QBE France. The Queensland-based company Ingeus, which provides job placement services for long-term unemployed, has opened several new offices and won important employment placement contracts in Lille, Rouen and President Sarkozy's local area in Paris, Hauts-de-Seine.

Australian music, indigenous art and fashion exports to France continue to grow. In 2007, Australian cosmetics firm, Aesop, provider of high-quality skin-care products, opened a boutique on the Champs Elysees in Paris and the Sydney-based company ModelCo also secured new business. Australian fashion designers Martin Grant and Colette Dinnigan, are well established in France and in 2007 less well-known, younger designers and makers of specialist clothing including Material Boy, Seafolly, Simply Leather, Sally Jones Lingerie and Nicola Finetti also made inroads into the market.

Australian wine, food and agribusiness continues to sell in France and a notable recent development was the establishment of a new partnership between South Australian -based Kilikanoon wines and Maison Greffe (Jacques Savard), to produce an Australian Vouvray-style sparkling wine under the prestigious Kilikanoon label.

The Arts

Australia and France have a dynamic relationship in all fields of the arts, with Australian artists enthusiastic to work within the French cultural tradition, and many French counterparts keen to explore Australia's vibrant younger culture. Institutional links are encouraged within the framework of the 1977 Australia-France Agreement on Cultural and Scientific Cooperation. The Australian Embassy in Paris administers the Australia-France Foundation, which promotes cultural exchanges between the two countries and publishes a quarterly newsletter 'L'Australie en France' promoting Australian activities in France. The Department of Foreign Affairs and Trade's Cultural Awards Scheme has also helped promote cultural relations between Australia and France.

Australia has made a significant contribution to the Musée du quai Branly, a major international museum dedicated to the world's indigenous arts and cultures that opened in Paris in June 2006. A permanent installation of works by eight Australian Indigenous artists commissioned by the Australian Government has been incorporated into the structure of one of the main buildings of the museum.

Export opportunities

Information and Communication Technology

The French market for information and telecommunications (ICT) services is growing as France adopts technological innovations as part of the EU's Lisbon Agenda to lift EU productivity. Current growth trends indicate that France will continue to be one of the world's most attractive destinations for mobile infrastructure, satellite equipment, optical fibre, telephones, pagers and internet services. Australia and France signed an agreement on cooperation in Information and Communications Technology in 2002 to encourage greater two-way trade and investment in the ICT field.

Biotechnology

France is the third-largest market in Europe in biotechnology, behind the UK and Germany. Australia's reputation in research and development has gained prominence within the EU, including France. Over 80 per cent of French biotechnology companies are involved in the health sector, with a majority of the remaining companies in the agricultural and environmental fields. Opportunities for Australian biotechnology companies include pharmaceutical discovery, development and manufacturing, with potential to initiate collaborative research partnerships, technology transfer agreements or licensing ventures.

Food & Beverage

The main opportunities for Australian exporters in the French food and beverages area are in wine, seafood, meat, game meats, fruit and vegetables, and processed food.

Indigenous Art & Crafts

French interest in Australian Indigenous arts and crafts (including fine art, handcrafts, homeware and textiles) has been growing markedly in recent years. This has been further heightened by the opening in June 2006 of the Quai Branly Museum for international Indigenous art.

Last reviewed date: 08/08/2008